ENGINEERING MANAGEMENT

(ME 2501)
UNIT - 2

Dr. Vimlesh Kumar Soni

Associate Professor
Dept of Mechanical Engineering
MANIT Bhopal
 Course Content
Unit 1. Principles/Functions of Management, Measure of
Productivity and ways to enhance Productivity.
Management challenges for Engineers.
Unit 2. Operations Management and its scope, Production
Systems, Facility Location, Facility Planning & Plant
Layouts.
Unit 3. Industrial Design, Product Design, Product / Project Life
Cycle, Quality Control and Quality Management,
Forecasting Methods, Introduction to Supply Chain
Management.
Unit 4. Material Management – Purchasing, Inventory & JIT
Systems, Material Resource Planning, Scheduling, Project
Management, PERT and CPM, Project Crashing.
Unit 5. Introduction to Financial Management, Financial
Statements and Analysis, Operations Decision making -
Break Even Analysis & Decision Trees
Unit 6 Fundamentals of Marketing Management, Organizational
Behavior and Leadership, Strategic Management, Statutory
and Legal Issues.
OPERATIONS MANAGEMENT
&
ITS SCOPE
Factory: Two products P1 & P2
Profit/piece of P1 = Rs.3/-
Profit/piece of P2 = Rs.5/-
Time Constraint:
Time required/piece of P1 = 3 hrs.
Time required/piece of P2 = 2 hrs.
Max. time available = 18 hrs.
Material Constraint:
Max. Material available for P1 = 4 pieces.
Max. Material available for P2 = 6 pieces.
Linear programming Model
Annual demand = 18,000 units
Production rate = 2500 units/month
Setup cost = $800
Annual holding cost = $18 per unit
Lead time = 5 days
No. of operating days per month = 20

Inventory Models
Activity Description Duration (in Immediate
weeks) predecessor
A Obtain the budget 2 -
approval
B Obtain the machine 5 A
C Hire the operator 1 A
D Install the machine 1 B
E Train the operator 6 C
F Produce the goods 1 D,E
 A fast food chain wants to build four stores. In the
past, the chain has used six different construction
companies and, having been satisfied with each,
has invited each to bid on each job. The final bids
(in thousands of rupees) are shown in the following
table. Since the fast food chain wants to have each
of the new stores ready as quickly as possible, it
will award at most one job to a construction
company. What assignment results in minimum
total cost to the fast food chain?
 Construction Companies
1 2 3 4 5 6
Store 1 85.3 88 87.5 82.4 89.1 86.7
Store 2 78.9 77.4 77.4 76.5 79.3 78.3
Store 3 82 81.3 82.4 80.6 83.5 81.7
Store 4 84.3 84.6 86.2 83.3 84.4 85.5
An oil company has recently acquired rights in a certain area to
conduct surveys and test drillings to lead to lifting oil if it is found in
commercially exploitable quantities.

The area is considered to have good potential for finding oil in

commercial quantities. At the outset, the company has the choice to
conduct further geological tests or to carry out a drilling programme
immediately. On the known conditions, the company estimates that
there is a 70:30 chance of further tests showing a success.

Whether the tests show the possibility of ultimate success or not or

even if no tests are undertaken at all, the co. could still pursue its
drilling programme or alternatively consider selling its rights to drill in
the area. Thereafter, however, if it carries out the drilling programme,
the likelihood of final success or failure is considered dependent on the
foregoing stages. Thus:
Ø If successful tests have been carried out, the expectation of success in
drilling is given as 80:20.

Ø If the tests indicate failure , then the expectation of success in drilling

is given as 20:80.

Ø If no tests have been carried out at all, the expectation of success is

given as 55:45.
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12
Concept of Production
Scope of POM
Framework of Managing Operations
Goods V/s Services
Production Systems
Classification of Production Systems
 Facility Location,
Facility Planning & Plant Layouts
Facility Location - Introduction
What all factors affect the Facility Location Decisions:-

1. Internal factors
(i) Technology Used
(ii) Capacity
(iii) Financial Position
(iv) Work Force Required

2. External Factors
(i) Economic, Political and Social Condition
(ii) Fixed and Variable Cost
(iii) Efficiency & Effectiveness
(iv) Productivity & Profitability
 Facility Location - Introduction
When does a facility Location decision arise:-

1. New Facility is to be established

2. The facility or plant operations and subsequent expansions are

restricted by a poor site, necessitating the setting up of the facility
at a new site

3. Establish additional facilities at new site

4. Industrial Policy of Central and State Govt., Direction from court

5. Advantages of new site in comparison to old site.

Disadvantages of Poor Locations

— Constant source of higher cost

— Higher Investment
— Difficult Marketing and Transportation
— Dissatisfied and less trusted employees &
consumers
— Frequent Interruption of production
— Abnormal wastages , delays
— Deprived of advantages of geographical
specialisation
Identification of Location
— Economic – Total Cost
Profits
Availability of Raw Material
Availability of Labour
Availability of Power
Availability of Transportation Facilities
Availability of Market
— Social Employee welfare
Employment opportunities
— Political Decentralization
Regional & Developmental Planning
— Security Risk of Military Invasion
Sabotage from antisocial elements
— Natural Calamities Floods / Earthquakes.
— Policy Antipollution
Where to locate a plant ? – Weber Theory…

— Basis – Type of Raw Materials

1. Ubiquitous :- Available everywhere like sand,
water etc,
2. Localise RM :- Specific Locations only

𝑾𝒆𝒊𝒈𝒉𝒕 𝒐𝒇 𝑳𝒐𝒄𝒂𝒍𝒊𝒔𝒆𝒅 𝒎𝒂𝒕𝒆𝒓𝒊𝒂𝒍 𝒖𝒔𝒆𝒅 𝒊𝒏 𝒕𝒉𝒆 𝒇𝒊𝒏𝒊𝒔𝒉𝒆𝒅 𝒑𝒓𝒐𝒅𝒖𝒄𝒕

Material Index =
𝑾𝒆𝒊𝒈𝒉𝒕 𝒐𝒇 𝒕𝒉𝒆 𝒇𝒊𝒏𝒊𝒔𝒉𝒆𝒅 𝒑𝒓𝒐𝒅𝒖𝒄𝒕
 Weighted Factor Rating Method
Factors Wt. A B C

Score Wtd Score Wtd Score Wtd

Score Score Score
Availability of 0.30 80 24.00 65 19.50 90 27.00
Work force
Proximity of 0.20 100 20.00 91 18.20 75 15.00
Suppliers
Prevailing Wage 0.15 60 09.00 95 14.25 72 10.80
Rates
Social 0.15 75 11.25 80 12.00 80 12.00
Environment
Proximity of 0.10 65 06.50 90 09.00 95 09.50
customers
Shipping 0.05 85 04.25 92 04.60 65 03.25
Modes
Air Services 0.05 50 02.50 65 03.25 90 04.50
Total Weighted Score 77.50 80.80 82.05
 Weighted Factor Rating Method
Factors Wt. A B C

Score Wtd Score Wtd Score Wtd

Score Score Score
Availability of 0.30 80 24.00 65 19.50 90 27.00
Work force
Proximity of 0.20 100 20.00 91 18.20 75 15.00
Suppliers
Prevailing Wage 0.15 60 09.00 95 14.25 72 10.80
Rates
Social 0.15 75 11.25 80 12.00 80 12.00
Environment
Proximity of 0.10 65 06.50 90 09.00 95 09.50
customers
Shipping 0.05 85 04.25 92 04.60 65 03.25
Modes
Air Services 0.05 50 02.50 65 03.25 90 04.50
Total Weighted Score 77.50 80.80 82.05
 Center of Gravity Method

1. The center of gravity method is used for

locating single facility that considers
Ø The existing facilities
Ø The distances between them
Ø The volumes of goods to be shipped
between them.

2. This method involves formulas used to

compute the coordinates of the two-
dimensional point that meets the distance
and volume criteria stated above.
3. The center of gravity method is used to find the optimal location
for a distribution center that minimizes total transportation
costs. This method takes into account factors such as markets,
cost of goods, and cost of transportation. The center of gravity
method aims at minimizing the total shipping cost, i.e. cost
incurred for shipping from the distribution center to the different
shipping points.

4. If the shipping quantities for all destination points are equal, the
location at which the transportation cost will be minimum can
be identified by taking the arithmetic averages of the X and Y
coordinates of the destination. But if the shipping quantities are
unequal, the location can be found using a weighted average
approach (the quantities to be shipped are taken as weights).

5. The center of gravity of a geographical location can be identified

by calculating the X and Y coordinate values of the location that
would minimize transportation costs.
The coordinates of the center of gravity can be identified
by

Where,
Xc= X coordinate of the center of gravity
Yc = Y coordinate of the center of gravity
Vi = Volume of items transported to and from location i
Xi = X coordinate of location i
Yi = Y coordinate of the location i
 Illuastration
Figure shows the X and Y coordinates of seven retail locations of a retail chain.
Information regarding the quantity to be shipped to each of the seven
locations is given in Table 1. Using the center of gravity method, identify the
coordinates of the optimal location for the warehouse.

Retail Outlet Xi Yi Volume (Vi) ViXi ViYi

A 4 10 80 320 800
B 3.5 15 100 350 1500
C 4 6 120 480 720
D 10 2 130 1300 260
E 16 6 100 1600 600
F 8 5 150 1200 750
G 14 13 90 1260 1170

Volume-weighted X Volume-weighted Y
coordinate = Xc= coordinate = Yc =

The X and Y coordinates of the point of

center of gravity are 8.45 and 7.53.
Location Break Even Analysis Method
Load Distance Method
 Illuastration
Figure shows the X and Y coordinates of seven retail locations of a retail
chain. Information regarding the quantity to be shipped to each of the
seven locations is given in Table 1. The coordinates of three options A, B
and C for a new facility are (13, 8), (6, 8) and (12, 5). Using the Load
Distance Method, which of the three coordinates shall serve as optimal
location for the warehouse.

Retail Outlet Xi Yi Load (li) A B C

A 4 10 80 738 226 755
B 3.5 15 100 1180 743 1312
C 4 6 120 1106 339 967
D 10 2 130 872 937 468
E 16 6 100 361 1019 412
F 8 5 150 875 540 600
G 14 13 90 459 849 742
Load Distance Score 5591 4653 5256

Load Distance Score = li x ∑ √ [(Xi– X)2 + (Yi –Y)2]

Facilities Layout

— Layout: the configuration of departments, work centers, and

equipment, with particular emphasis on movement of work
(customers or materials) through the system
Importance of Layout Decisions

— Requires substantial investments of money and effort

— Involves long-term commitments
— Has significant impact on cost and efficiency of short-term
operations
Basic Layout Types

— Product layouts

— Process layouts

— Fixed-Position layout

— Combination layouts
Basic Layout Types

— Product layout
— Layout that uses standardized processing operations to achieve
smooth, rapid, high-volume flow
— Process layout
— Layout that can handle varied processing requirements
— Fixed Position layout
— Layout in which the product or project remains stationary, and
workers, materials, and equipment are moved as needed
Product Layout

Raw Finished
Station Station Station Station
materials 1 2 3 4 item
or customer
Material Material Material Material
and/or and/or and/or and/or
labor labor labor labor

Used for Repetitive or Continuous Processing

Advantages of Product Layout

— High rate of output

— Low unit cost
— Labor specialization
— Low material handling cost
— High utilization of labor and equipment
— Established routing and scheduling
— Routing accounting and purchasing
Disadvantages of Product Layout

— Creates dull, repetitive jobs

— Poorly skilled workers may not maintain equipment or
quality of output
— Fairly inflexible to changes in volume
— Highly susceptible to shutdowns
— Needs preventive maintenance
— Individual incentive plans are impractical
A U-Shaped Production Line

In 1 2 3 4

Workers

Out 10 9 8 7
Process Layout

Process Layout
(functional)

Dept. A Dept. C Dept. E

Dept. B Dept. D Dept. F

Used for Intermittent processing

Job Shop or Batch
Product Layout
Figure 6.7 (cont’d)
Product Layout
(sequential)

Work Work Work

Station 1 Station 2 Station 3

Used for Repetitive Processing

Repetitive or Continuous
Advantages of Process Layouts

— Can handle a variety of processing requirements

— Not particularly vulnerable to equipment failures
— Equipment used is less costly
— Possible to use individual incentive plans
Disadvantages of Process Layouts

— In-process inventory costs can be high

— Challenging routing and scheduling
— Equipment utilization rates are low
— Material handling slow and inefficient
— Complexities often reduce span of supervision
— Special attention for each product or customer
— Accounting and purchasing are more involved
Cellular Layouts

— Cellular Production
— Layout in which machines are grouped into a cell that can process
items that have similar processing requirements
— Group Technology
— The grouping into part families of items with similar design or
manufacturing characteristics
Functional vs. Cellular Layouts

Dimension Functional Cellular

Number of moves many few
between departments
Travel distances longer shorter
Travel paths variable fixed
Job waiting times greater shorter
Throughput time higher lower
Amount of work in higher lower
process
Supervision difficulty higher lower
Scheduling complexity higher lower
Equipment utilization lower higher
Other Service Layouts

— Warehouse and storage layouts

— Retail layouts
— Office layouts
 STRING DIAGRAM
— IT IS A SCALE PLAN OR MODEL ON WHICH A THREAD OR
STRING IS USED TO TRACE AND MEASURE THE PATH OF
WORKERS/ MATERIALS DURING A SPECIFIED SEQUENCE OF
EVENTS.
— LENGTH OF THE THREAD/STRING MEASURES THE DISTANCE
MOVED.

67
 STRING DIAGRAM

68
69
 EXAMPLES
1. STORING TILES (ORIGINAL)
2. STORING TILES (IMPROVED)

70
FLOW DIAGRAM

— It is a FLOOR-PLAN showing the path of travel of the operator or

the material, through the plant.

— It ALSO indicates the direction of travel by means of arrows,

drawn on the diagram.
— EXAMPLE: INSP & MARKING INCOMING PARTS (ORIG)
— EXAMPLE: INSP & MARKING INCOMING PARTS (IMPROVED)
— EXAMPLE: MEALS SERVING IN HOSPITAL WARDS (ORIG.IMPR)

71
TRAVEL CHART ( or, FROM-TO CHART)

— It is a tabular record of quantitative data about movement of

workers/materials/equipment between any number of places over
a given period of time. It is always in the form of a SQUARE,
having within it the squires.
EACH SMALL SQUARE REPRESENTS A STATION.
Along the TOP, squares from left to right represent the stations
FROM where movement or travel occurs.
Along those DOWN THE LEFT HAND, the squires represent the
stations TO which the movement is made.

72
 EXAMPLE I

73
74
 EXAMPLE II

Eight mixing machines are used to mix materials in different proportions, the final
mixtures being taken to an inspection bench (station 6). The mixes were transported
in 25 litres cans, which were placed on pallets and moved by a low lift truck

RECORD –
Movements are recorded on the shop floor on a study sheet of the type shown in the
next slide.

The entries show not only the journeys made but also the number of cans carried on
each trip.

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80
Design Product Layouts: Line Balancing

Line Balancing is the process of assigning

tasks to workstations in such a way that
the workstations have approximately
equal time requirements.
Cycle Time

Cycle time is the maximum time

allowed at each workstation to
complete its set of tasks on a unit.
Determine Maximum Output

OT
Output capacity =
CT

OT = operating tim e per day

D = Desired output rate

OT
CT = cycle tim e =
D
Determine the Minimum Number
of Workstations Required

(D)(å t)
N =
OT

å t = sum of task times

Precedence Diagram

Precedence diagram: Tool used in line balancing to

display elemental tasks and sequence requirements
0.1 min. 1.0 min.
A Simple Precedence
a b Diagram

c d e
0.7 min. 0.5 min. 0.2 min.
Example 1: Assembly Line Balancing

— Arrange tasks shown in the Figure into three workstations.

— Use a cycle time of 1.0 minute
— Assign tasks in order of the most number of followers
Example 1 Solution

Revised
Time Assign Time Station
Workstation Remaining Eligible Task Remaining Idle Time
1 1.0 a, c a 0.9
0.9 c c 0.2
0.2 none - 0.2
2 1.0 b b 0.0 0.0
3 1.0 d d 0.5
0.5 e e 0.3 0.3
0.3 - - 0.5
Calculate Percent Idle Time

Idle time per cycle

Percent idle time =
(N)(CT)

Efficiency = 1 – Percent idle time

Line Balancing Rules

Some Heuristic (intuitive) Rules:

— Assign tasks in order of most following tasks.
— Count the number of tasks that follow
— Assign tasks in order of greatest positional weight.
— Positional weight is the sum of each task’s time and the times
of all following tasks.
Example 2

0.2 0.2 0.3

a b e

0.8 0.6
c d f g h
1.0 0.4 0.3
Solution to Example 2

Station 1 Station 2 Station 3 Station 4

a b e
f g h
c d
Parallel Workstations

30/hr. 30/hr. 30/hr. 30/hr.

1 min. 1 min. 2 min. 1 min.

Bottleneck

30/hr. 1 min. 30/hr.

60/hr. 60/hr.
1 min. 1 min. 1 min.
30/hr.
1 min. 30/hr.

Parallel Workstations
Designing Process Layouts

Information Requirements:
1. List of departments
2. Projection of work flows
3. Distance between locations
4. Amount of money to be invested
5. List of special considerations
6. Location of key utilities
Example 3: Interdepartmental Work Flows
for Assigned Departments

30

170 10
1 3 2
0

A B C
Process Layout

Milling

Assembly
Grinding
& Test

Drilling Plating
Process Layout - work travels
to dedicated process centers
 Assembly line balancing: Example
— An activity consisting of three tasks: A, B and C.
ü Task A is first, and takes 0.5 minutes
ü Task B is next, and takes 0.3 minutes
ü Task C is the last, and takes 0.2 minutes.

— Since, all the tasks must be performed to complete one part,

total time required to complete one part is
0.5+0.3+0.2 = 1 minute.

96
 Assembly line balancing: Example
— Suppose that one worker performs all three tasks
(sequentially).
— Then in an 8-hour shift, the worker could produce –
480 parts/day.

— How?

97
 Assembly line balancing: Example
— Now suppose, three workers are assigned for the line, each
performing one of the tasks.
— The first operator can produce 120 parts per hour, since the
task time is 0.5 min. Thus, a total of 960 parts/day.
— The second worker takes only 0.3 min to finish the tasks
and hence can produce 1,600 parts/day.
— Lastly, the third worker can produce 2,400 parts/day.
— However, the second worker cannot produce 1,600 parts
because the first worker has a lower production rate. So the
second worker is idle some of the time waiting on
components to arrive from the first operator.

98
 Assembly line balancing: Example
— Same thing happens for the third worker.
— So the maximum output of this three-operator assembly
line is 960 parts/day.
— That is, the workstation 1 performing task A is a bottleneck
in the process.

99
 Assembly line balancing: Example
— Now suppose that two workers are assigned to the
assembly line.
— The first operator performs task A; and the second operator
performs tasks B and C.
— Now, since each operator needs exactly 0.5 min to complete
the assigned duties, the line is said to be balanced and the
production is 960 parts per day.
— Thus, we have achieved the same output (of 960 parts)
using just two operators.

100
 Assembly line balancing
Cycle time
— The interval between successive outputs coming off the
assembly line.
— In the previous example, if we use only one operator, the
cycle time is 1 minute. One completed assembly per
minute.
— If two workstations are used, the cycle time is 0.5 minutes.
— Finally, if three workstations are used, the cycle time is still
0.5 minutes. Task A is the bottleneck. Thus, the line can
produce only one assembly every 0.5 minutes.

101
 Assembly line balancing: Cycle time
— The cycle time cannot be smaller than the largest operation
time, nor can it be larger than the sum of all operation times.
Max. operation time £ CT £ Sum of operation times.

— Cycle time is related to the output rate (R ):

CT = A/R,
where A = available time to produce the output.
— The output rate is typically a demand forecast.
— So for a given output rate we can calculate the cycle time.

102
 Assembly line balancing: Cycle time
— However, if the required cycle time (based on the required
production rate) is smaller than the largest task time, then
the work content must be redefined by splitting some tasks
into smaller elements.
— Alternatively, R = A/CT.
— That is, for a given cycle time, we can determine the output
rate that can be achieved.
In the example, the shift has 480 minutes.
— So for one-station configuration, R = 480/1.0 = 480
parts/shift
— And for a two-station layout, R = 480/0.5 = 960 parts/shift.

103
 Assembly line balancing: Equations
Sum of task times
Min. # of workstations required =
Cycle time

=
å t
CT
Total time available = (# workstations)(CT ) = N ´ CT
Total idle time = N ´ CT - å t

Assembly line efficiency =

åt
N ´ CT

Balance delay = 1 - Assembly line efficiency.

104
 Product layout and work allocation problem
— Standard services can be divided into sequence of steps that
all customer have to go through.
— Resembles manufacturing assembly line.
— The job requiring most time per customer is the bottleneck.
— A well-balanced line would have all jobs of nearly equal
duration.
— Grouping of activities (operations) should focus on line-
balancing and avoiding bottlenecks.
— Additional stations at the bottleneck could also be
considered.
— e.g. Himalaya mess layout.
105
Work allocation at an airport

Activity Average time, seconds

1. Deplane 20
2. Immigration 16
3. Baggage claim 40
Bottleneck operation
4. Customs 24
5. Check baggage 18
6. Board domestic flight 15
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 Work allocation at an airport
1 2 3 4 5 6
(20, 180) (16, 225) (40, 90) (24, 150) (18, 200) (15, 240)

3 2, 4
(40, 90) (40, 90)

1 5 6
(20, 180) (18, 200) (15, 240)

3 2, 4
(40, 90) (40, 90)

107
 Facility design
— Direct correlation between operations and facility design.
— Design and layout represent the supporting facility
component of service package.
— Factors influencing facility design: Nature and objective of
organization; land availability; flexibility; security;
aesthetics; community and environment.

— Community and environment: Design of facility has the

greatest important where it directly affects the society.
e.g. A prison in a locality?

108
 Facility design factors
— Nature of organization: The core service offered should
dictate the parameters of design. Appropriateness of design
also important.
e.g. Physician’s office should give patients privacy while
undergoing medical check-up.
Would you open an account in a bank which operates out of a
tin-shade?

— Land availability: Space constraints, zoning rules are a

reality which a good design should accommodate.
e.g. Franchise for Reid and Taylor in India should have
certain minimum sq. feet area.

109
 Facility design factors
— Flexibility: Design should be dynamic to allow for future
growth and changes in services.
e.g. Parking lot for a restaurant.

— Security: Airport design of today needs to consider space

for passenger and luggage screening.

— Aesthetics: Service providers delivering essentially same

service could be perceived different because of aesthetics.
e.g. Staff canteen and Tifanis?

110
Cellular Manufacturing Layout

Heat Gear
-1111 Lathe Mill Drill -1111
treat cut

Heat
222222222 Mill Drill Grind - 2222

Assembly
treat

Heat
3333333333 Lathe Mill Grind - 3333
treat

44444444444444 Mill Drill Gear - 4444

cut