PLANT LAYOUT

SYBBA PRODUCTION & OPERATIONS MGT.

3/28/2022
SDJIC VESU
MILIND H PAREKH
 CH. 3 PLANT LAYOUT
Topic to be covered:

Topic 1: Meaning & Definition of Plant Layout

Topic 2: Factors affecting Selection of a Plant Layout

Topic 3: Types of Plant Layout

a. Product Layout / Repetitive Processing

b. Process Layout / Non-Repetitive Processing
c. Fixed Position Layout
d. Cellular Layout
e. Combination Layout / Hybrid Layout / Group Technology

Topic 4: Difference between Product Layout & Process Layout

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Topic 1: Meaning & Definitions of Plant Layout

Once the facility location is selected, it is necessary to place / arrange the machineries at
different places, to find out the location of different departments, to locate the space for
inspection, cabins, tool rooms, maintenance, canteens and various material handling
equipments. The question of arrangement of all these facilities arises because the efficiency
of production majorly depends on the arrangement of all these and how smoothly and
uninterruptedly the production process runs.

In general sense plant layout is the overall arrangement of the production processes,
storerooms, tool rooms, and material handling equipments, racks and sub-stores,
employees and all other accessories required for facilitating the production in the factory. It
makes the production process smooth without any interruption.

Definitions of Plant Layout

 “Plant Layout refers to the arrangement of machinery, equipments and other

industrial facilities for achieving quickest and smoothest production.”
 “A good layout is one which allows materials rapidly and directly for processing, this
reduces transport handling, clerical and other costs down per unit, space
requirements are minimised and also it reduces idle time of machine and workers.”
– F. G. Moore
 “Layout refers to the configuration of departments, work-centres and equipments,
with particular emphasis on movement of work (customers or materials) through the
system.”

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Topic 2: Factors affecting the selection of Plant Layout

There are several factors which affect selection of a plant layout viz:

1. Materials
 Materials need to be taken into consideration before selecting the plant layout
because it is necessary to provide for storage of raw materials as well as the
movement of raw materials until they are converted into finished goods.
 Factories used to orders for raw materials and buy the raw-materials economically
and as and when they are needed. The reason behind that is they should be stored
properly and moved through production facilities efficiently so that production
process runs smoothly without any interruption.
 And this storage and movement requires properly placed storage rooms and
material movement or handling equipment as a part of plant layout.
 The type & size of storage depend upon:
o The type of raw materials used i.e. whether raw materials are solid or liquid,
light or heavy, small or large
o The availability or scarcity of raw materials

2. Product
 A layout is designed with the ultimate objective of producing a product. Four things
affect the plant layout decision as far as Product is concerned.
o Type of Product (Heavy or Light, big or small, solid or liquid)
o Product’s position affects plant layout decision
o Size of the product
o Demand for the product
 Type of the product
o The type of the product i.e. heavy or light, big or small, solid or liquid
determines type of machines and equipments, storage space etc. and this will
in turn determine the plant layout.
 Position of the product
o Normally product moves from one work centre to another work centre and
machines and materials remain stationary.
o In some cases product remains stationary and workers and machines moves.
E.g. Manufacturing of locomotives or ships or aircraft.
 Size of the Product
o The size of the product (i.e. Heavy and light) also affect the design of plant
layout. The layout for producing heavy products is different from the layout
for producing light weighted products.

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 Demand for the product
o The sales / demand for the product also determine type of layout. The
demand will determine the volume of production and the volume of
production will determine quality and size of equipments, area of storage
space etc., and this will in turn influence the type of plant layout.
o E.g. A product with inelastic demand are produced on a mass scale basis and
standardised equipments are used for this but luxurious products are
produced on small scale bases with less standardised equipments.

3. WORKERS
 Three things influence plant layout as far as the workers are concerned.
o Type of workers
o Position
o Requirements
 If women workers are employed, the layout must be planned after keeping in mind
their particular requirements. The position of the employees, i.e. they are stationary
or moving, affects the plant layout decision. Facilities / Requirements such as health
and related services, locker rooms, common room, lavatories etc. influence the
layout decision.

4. MACHINERIES
 The Type of Product, The Volume of Production and The Type of Process; together
determines size and type of machinery to be used; which in turn determines type of
layout.
 We know that the process of production is the combination and adjustment of men,
material and machines. These elements are combined in various ratios. Before
selecting a plant layout it is necessary to determine that which of these elements are
stationary and which of these are mobile. It may be one of the following alternative
combinations.
o Product and workers will move from WC to WC.
o Product will move from WC to WC but machines and workers will remain
stationary.
o Workers and machines will move to product, and product will remain
stationary.

5. TYPE OF INDUSTRY
 The type of industry also affects the layout decision. There are basically 4 types of
industries. The layout is framed by looking into the structure of the industry.

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  Synthetic
o Various / different elements go into manufacturing process and make end
product
o E.g. Chemical Industry and Paper Industry
 Analytical
o Converts raw material into its various elements or constituent parts
o E.g. Oil refinery yields Naphtha, gasoline, paraffin, tar, petrol and kerosene
o E.g. Sugar mills gives sugar, baggase and molasses
 Conditioning
o Change in one form of raw material into another form of raw material
o E.g. Leather processing industry
 Extractive
o Separation of one element from another
o E.g. Metal from Ore

6. LOCATION
 Following location factors are important to analyse before selecting a plant layout.

o Size of land determine the type of building which in turn determines layout

o Mode of transportation

o Storage of Fuel and power generation

o Future Expansion

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Topic 3: Types of Plant Layout

 Product Layout / Repetitive Processing
 Process Layout / Non-Repetitive Processing
 Fixed Position Layout
 Cellular Layout
 Combination Layout / Hybrid Layout / Group Technology

TYPE 1: PRODUCT LAYOUT / REPETITIVE PROCESSING

� Product Layout is also called the ‘Straight Line Layout’ or ‘Layout for Serialised
Manufacture’

� A Product Layout involves the arrangement of machines in one line / in sequence

depending upon the sequence of operations.

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� In other words, in product layout, machines are arranged in sequence as required by
the particular product. E.g. If a portion of a manufacturing operation requires the
sequence of cutting, sanding and painting; the appropriate pieces of equipment
would be arranged in that same sequence.

� In product layout, one product passes through all the machines lined up in the
sequence required by production process. Materials are fed into first machine and
finished product comes out of the last machine. In between partly-finished goods
(semi-finished goods) travel from one machine to another machine.

� The output of one machine becomes input for another machine.

� It is very amazing for the eyes to watch sugar canes are fed into first machine and
sugar comes out from the last machine.

� Product layout is used for highly standardized products or service that allows highly
repetitive processing. E.g. Automatic Car Wash Service follows the process of soap,
water and scrub for all the cars

� Product Layout is more suitable for the continuous flow- production.

� Here once machines are set up they don’t require frequent changes in machine set
up.

� Each item follows same sequence of operations, it is often possible to utilise fixed-
path material handling equipments such as conveyors.

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Explanation:

From the above diagram, we can see that product A once enters in receiving department, it
passes from all the machines like milling, cutting, milling, finishing and shipping machines. It
has to pass from all the machines. Same way product B also passes from receiving, lathe,
pressing, cutting, milling and finishing department in a continuous pattern.

 Advantages of Product Layout

� High rate of output

� Low average cost

� Labour specialisation

� Low material handling cost per unit

� Smooth accounting, purchasing and inventory control

� Better Production Planning and control

� Quality control becomes better

 Disadvantages of Product Layout

� Inflexible (Permits very less changes)

� Work becomes monotonous for workers

� High interdependencies of machines

� Maintenance cost is very high

� Expansion is difficult

TYPE 2: PROCESS LAYOUT / NON-REPETITIVE PROCESSING

� This layout is also known as ‘Functional Layout’, ‘Layout for Job Lot Manufacture’ or
‘Batch Production Layout’.

� ‘Process layout involves grouping together of like machines in one department.’

� ‘Process layouts are designed to process items or provide services that involve a
variety of processing requirements.’

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� All the machines which perform similar type of functions are grouped together at
one location. E.g. Machines performing drilling functions are fixed in drilling
department; machines performing casting functions are fixed in casting department
and so on.

� Here the departments are created and jobs are processed / products are produced in
a customised manner i.e. the job will pass from those machines only which require
the processing of those machines and vice-a-versa. In other words, unlike product
layout, raw materials need not to pass from each machine to complete their process.

� Here, the quantity of raw material is issued to a machine which performs first
operation. This machine may be situated anywhere in the factory. Now, for the next
operation, quantity is provided to different machine which may be situated in same
factory or say in other part of the factory. The material may needed to be
transported to this another part of machine. This is the reason why we need variable
path material equipments like trolleys, handcarts, cranes etc.

� This layout creates departments or functional groupings in which similar type of

activities are performed.

� Process layouts are designed to process items that involve a variety of processing
requirements. The variety of jobs that are processed requires frequent adjustments
to equipment. This will result in discontinuous work flow / intermittent production
system.

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 � A manufacturing example of process layout is machine shop where there are
separate departments for milling, grinding, drilling and so on.

� Here production is done in the batch or in the lot.

� In process layout, variable-path material handling equipments (forklift, trucks, jeeps

etc.) are needed to handle the variety of items. E.g. In hospitals there are many
departments in hospitals like General Ward, Casualty, Special Rooms, ICCU, and
Operation Theatre etc. Patient will be admitted in that department only where he
needs a particular service rather than going in all the departments.

� Process layout is more suitable for the services like hospitals, colleges, universities,
banks, auto-repair shops, malls, supermarkets etc.

� In process layout, production system is not much vulnerable to shutdowns, as

machines are arranged by types rather than by sequence.

� Items are processed in batches (lots) so there is less inter-dependence between

successive operations.

Advantages

� The system can handle a variety of processing requirements.

� Flexibility in production is facilitated.

� The whole system may not shut down, if one machine doesn’t work.

� It is possible to use individual incentive system for workers.

� Machines are less costly and easy to maintain as compared to in product layout.

Disadvantages

� Inventory cost can be high if batch processing is used

� Equipment utilisation rate is low

� Accounting, inventory control and purchasing becomes a bit difficult as compared to

product layout.

� Supervision becomes more difficult.

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TYPE 3: FIXED POSITION LAYOUT
‘Fixed Position Layout involves the movement of men and machine to the product which
remains stationary.’

� In this type of layout, the material or major component remains in a fixed location
and other tools, equipments, machineries, men as well as other pieces of materials
will be brought to this location.

� Here, product remains stationary because cost of moving the product would be too
high and as compared to cost of moving of men, material and other equipments.

� Sometimes weight, size and bulk of the product or some other factors make it
undesirable or extremely difficult to move the product. Hence, products have to be
static in this type of layout.

� This type of layout will be useful for the large construction projects (like dam, over
bridges, power plants), bulky and heavy products like locomotives, ships, boilers, air-
crafts, generators etc.

� Here the focus should be on timing of raw material and equipments deliveries so as
not to hurdle the work-site and to avoid having to relocate materials and
equipments around the work site.

� The best example is construction of the building wherein men, cement, sand, bricks,
steel, wood and other construction related material (men, machine and materials)
are taken to the site of building (product).

� In service industry, best example is of hospital, wherein doctors, nurses, equipments,

medicines (men, machine and materials) etc. are taken to the patients for their
recovery (service).

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Advantages of FPL

� Men and machines can be utilised for variety of operations by producing different
products.

� The investment on layout is small as compared to product and process layout.

� The high cost of and difficulty of transporting heavy and bulky material is avoided.

TYPE 4: CELLULAR MANUFACTURING LAYOUT

‘In Cellular Manufacturing Layout, machines are grouped into cells, and these cells
function somewhat like Product Layout within a larger shop.’

� Each cell in the CM layout is formed to produce a single parts family – a few parts, all
with common characteristics, which usually means that they require the same
machines and have similar machine settings.

� Here groupings of cells are determined by operations needed to perform work for a
set of similar items, or part families, which require similar processing. The cells over
here are smaller versions of product layouts.

� The flow of parts within the cells may take any form. They may go in same line flow
pattern or they may take different routes through the cells because of differences in
the design of the two parts.

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Advantages of CM Layout

� Lower work-in-process inventories

� Reduced material handling costs

� Shorter flow times in production

� Simplified production planning

� Improved Visual Control

� Overall performance improves

Disadvantages of CM Layout

� Reduced manufacturing flexibilities

TYPE 5: COMBINATION / HYBRID LAYOUT

‘Combination Layouts refer to combination of product layout and process layout and
emphasis is put on either of them.’

� Generally in industrial establishment plant layouts are not prepared in their absolute
form (100% Product Layout or 100% Process Layout) but rather they tend to be
combination of each of them.

� When the nature of product is such which is manufactured somewhat in a same way
and somewhat in a complex form, then it is possible to have the layout in a
combination form of product and process.

� Examples of MIXED / COMBINATION / HYBRID LAYOUT

� Some parts which are manufactured through process layout, and if they are
faulty, then they may require their reproduction by process layout.

� Malls and supermarkets are an example of process layout but still they use
fixed-path material handling devices such as roller-type conveyors in the
stock rooms, belt type conveyors at billing centres.

� Hospital though is an example of process layout but still it uses fixed position
layout in treatment of a patient by keeping patient at its fixed place and
doctors, nurses, medicines etc. are moving at the place of patients.

� Product Layout and Process Layouts are at the extreme ends of a continuum. Process
layouts are suitable for manufacturing customised products and wider variety of
products and this is again good from the view point of consumers but on the
contrary it is less efficient as compared to product layout in a sense that it cannot

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 produce products in large quantity and hence the average cost of the company may
rise. So to take an advantage of both and to remove the deficiency of both a firm
normally uses combination layouts.

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Topic 4: Difference between Product Layout & Process Layout

1. Product
 In product layout the product is standardized, large amount of volume is produced
and output is produced at stable rate.
 In process layout the product may be diversified, in varying quantity and production
is done at varying rate of output.
2. Type of Process
 In product layout, continuous production system is followed and mass production is
done.
 In process layout, intermittent / assembly line production system is followed.
3. Work-flow
 In product layout, straight line / same sequence of operations is followed for each
unit.
 In process layout, production flow is variable or it is not pre-determined. Each order
may require unique / different flow of operations.
4. Human Skills
 In product layout, workers should be able to perform routine tasks or repetitive
tasks at fixed placed. Here worker can become highly specialized but sometimes
work may become monotonous too.
 In process layout, mainly skilled workers are required to perform tailored and
customised order of customers. Here the worker should be able to perform the
function without close supervision.
5. Material Handling
 In product layout material flow is uniform (predetermined) so fixed path material
handling equipment may be used.
 In process layout material flow is variable or not fixed so variable path material
handling equipments can be used.
6. Inventory
 In product layout there is high turnover of raw material and work in process
inventories so high amount of stock is to be kept.
 In process layout there is low turnover of raw material and work in process
inventories so not so large amount of stock may be kept.

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 7. Space Utilisation
 In product layout, large output per unit space is needed.
 In process layout, small output per unit space is needed.
8. Capital requirements
 In product layout, large amount of money is invested in machineries.
 In process layout, capital investment is low as compared to product layout.
9. Product Cost
 In product layout, there exist high fixed cost, low per unit costs and low direct labour
and material cost.
 In process layout, there exists relatively low fixed costs, high per units cost and high
labour and direct material and material handling costs.
10. Flexibility
 In product layout, there is no flexibility to readjust the machines once they are set up
or installed.
 In process layout, there is relatively flexibility of readjusting machines once they are
set up or installed.

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 2022
MATERIAL HANDLING

MILIND H PAREKH
SYBBA PRODUCTION MANAGEMENT-1
3/28/2022
 CH: MATERIAL HANDLING
Topics to be covered:

Topic 1: Definition of Material Handling

Topic 2: Functions of Material Handling

Topic 3: Factors affecting selection of material handling equipments

Topic 4: Principles of Material Handling

Topic 4: Types of Material Handling Equipments

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Topic 1: Definition of Material Handling

“Material Handling is the art and science of moving, packing and storing of substance in
any form.” – American Material Handling Society

 Material handling is defined as control or movement of materials in any form from one
place to another.
 It includes lifting, shifting, placing, holding, releasing, conveying, dropping of materials.

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Topic 2: Functions of Material Handling

Functions of
Material
Handling

Storage &
Transportation Pallatising
Preservation

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 1. STORAGE & PRESERVATION

Storage means keeping physical custody of material whereas preservation means keeping
physical custody in such a way so that quality and quantity of product remains as it is. The
design of warehouse storage facilities, racks, cupboards, boxes and other equipments are
required for internal storage of material.

2. TRANSPORTATION

The basic need of transportation of material arises because most manufacturing process are
made on multiple operations in different departments and different machines. Theses
transportation need must be satisfied in such a way that material can be transported safely,
economically and in proper time from one department to another department.

3. PALLETISING

Palletising is the activity of converting small piece of product to make larger ones. The
purpose is to do safe, fast and economical transportation.

E.g. suppose a company is manufacturing soaps, then small pieces of soaps are put into
bigger box. Again these boxes are transferred from one place to another, say a big container
or trucks.

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Topic 3: Factors affecting selection of material handling equipments

Major 3 things are to be considered before selection of material handling equipments:

[1] Production Problem

[2] Capabilities of material handling equipment

[3] Human element involved

Let us see these in details.

1. PRODUCTION PROBLEM

Production problems include following factors before selecting material handling

equipments.

a. Volume of production to be attained

b. Type of material to be handled
c. Layout of plant and building facilities

2. CAPABILITIES OF THE HANDLING EQUIPMENT AVAILABLE

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 a. Adaptability: Load carrying and movement characteristics of the equipment should
fit the material handling problem
b. Flexibility: Equipment should have the flexibility to handle more than one type of
material
c. Load capacity: Equipment selected should have enough load-carrying capacity to do
the job effectively.
d. Speed: The speed of movement of the handling equipment should be high as
possible
e. Space requirements: The space required to install or operate material handling
equipment is also an important consideration.
f. Ease of maintenance: Equipment selected should be capable of easy maintenance at
reasonable cost
g. Environment: Equipment selected must conform to any environmental regulations.
h. Costs: The following costs must be kept into the mind before selecting material
handling equipments. These costs are:
i. Operating costs
ii. Installation costs
iii. Maintenance costs
iv. Power requirements
v. Insurance requirements
vi. Space costs
vii. Depreciation charges
viii. Salvage value
ix. Time value of money
x. Opportunity cost

3. HUMAN FACTORS
a. The capacity of the manpower to operate the equipment
b. Safety of workers / employees who operate the material handling equipment

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Topic 4: Material Handling Principles

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Topic 5: Types / Classification of Material Handling Equipments

CLASSIFICATION OF MATERIAL HANDLING EQUIPMENTS

Equipment Oriented Material Oriented Method Oriented
Overhead Systems Unit Handling Manual Systems
Conveyor System Bulk Handling Mechanised Systems
Truck Systems Liquid Handling Mass Production Handling Systems
Underground Systems Gaseous Material

Functions Oriented Energy Oriented Path Oriented

Moving Functions Manual Energy Fixed Path Equipments
Transporting Functions Electronic Based Variable Path Equipments
Holding Functions Fuel Based
Dropping Function Gravity Based

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Elevating Functions
Types of material handling equipments can be classified as follows:

A. Cranes, Hoists and Elevators

B. Conveyors
C. Trucks, Trailers (Dumpers) and Tractors
D. Rails
E. Ropeways and Cableways
F. Pipelines

[A] CRANES, ELEVATORS & HOISTS

– Cranes lift and move the loads of varying size.

– Cranes are devices mounted on overhead rails or ground level wheels or rails. They
lift, swing & transport large and heavy materials.

– Elevators are a type of cranes that lift materials usually between floors of buildings.

– Hoists are devices which move materials vertically and horizontally in a limited area.

CRANES

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HOISTS

ELEVATORS

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[B] CONVEYORS
• Conveyors primarily perform the movement of uniform loads between fixed points.

• There may be fixed conveyors or portable conveyors, straight conveyors or circular

conveyors.

• Materials are fed to the conveyors from the source point; they are carried by
conveyors to the point of the destination.

• They are most suited when the flow of materials is continuous.

Types of Conveyors

1. BELT CONVEYORS
 They may be flat or elevated upward or downward flow of materials.
 The material on the belt should be suitable to the material to be moved.
 They are mainly...
o Rubber covered canvas
o Steel
o Plain fabric
o Woven wires

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 2. ROLLER CONVEYORS
 They may be flat, circular or spiral
 Generally materials having flat bottoms (like boxes or pallets) are used on roller
conveyors.

3. BUCKET CONVEYORS
 Mainly used to move powdered or liquid material.
 The movement may be vertical or flat.
 They are generally power driven.

[C] TRUCKS, TRACTORS AND TRAILORS

TRUCKS

• Trucks are used to move the heavy materials over the varying paths.

• They are hand driven or power driven.

• Generally two-wheeler, three wheeler or four or more wheeler trucks are used to
carry or move the heavy materials.

• Two Wheeler Trucks (Fork Lift Trucks)

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TRAILERS

• Trailers containing materials are attached to trucks or tractors and move along with
them.

• Trailers are nothing but large sized pallets or buckets.

• Dumpers are special types of trucks with flexible base. The base is elevated to unload
the material.

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Trailer

Dumper

[D] RAILS
 Used for the transportation of heavy materials inside the plant area locomotives are
used as the material handling equipment.
 The two fixed points are joined by railway tracks. The wagon or trolleys containing
the material are moved by locomotive between the two fixed points.
 Used in Steel industries.

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[E] ROPEWAYS & CABLEWAYS
• Materials move with the help of rope or cable tracks.

• The trolleys hanged on the rope, move vertically between two fixed points.

• It is an overhead device and used in hilly or rocky areas.

Ropeway

Cableway

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[F] PIPELINES
• Mainly used for moving liquid material.

• Pipelines are installed between two fixed points. They are concealed inside floors or
walls.

• Pipelines are sometimes also installed inside the machines too.

• They are popularly used in dairy industries, oil refineries, fertilizer industries, water
supplies etc.

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 INVENTORY CONTROL
Topics to be covered:

Topic 1: What is Inventory? (Definition, Types of Inventory, Functions of Inventory, &

Definition of Inventory Control)

Topic 2: Inventory Classifications System (ABC Analysis, VED Analysis, FSN Analysis, ABC x
VED Matrix)

Topic 3: Costs associated with Inventory Control

Topic 4: Some important concepts like Reorder Point, Safety Stock, Lead Time, Internal Lead
Time and External Lead Time, Maximum Level

Topic 5: Basic EOQ Model, Assumptions and Formula Derivation

Topic 6: Basic ERL Model for Non-Instantaneous Supply, Assumptions and Formula
Derivations

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Topic 1: What is Inventory?

The word ‘Inventory’ originated from the words ‘Inventaire’ (French) and ‘Inventariom’
(Letin).

 Definitions:

 “Inventories are idle resources that posses economic value.” - Joseph Monks
 “The term inventory includes raw-material, work-in-process, finished goods and
stores & repairs.”

 Types of Inventories:

1. Production Inventories

They include raw materials, parts and components which enter into the firm’s product in by
passing through the production process. E.g. Compressor in Refrigerators, Motor, Processor
in Computers, Picture Tube in Televisions etc.

2. MRO Inventories

MRO inventories stand for Maintenance, Repair and Operating Supplies which are
consumed in production process but they do not become part of final product.

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 3. In-Process Inventories

They include semi-finished items found at various stages in the production process.

4. Finished Goods

They are completed products ready for shipment.

 Functions / Objectives of Inventory OR Need to keep Inventories

1. To meet anticipated customer demand

2. To smoothen production requirements
3. To be protected against stock-outs / shortage in inventories
4. To be protected against price increases
5. To take advantages of quantity discounts

 Inventory Control

“Inventory Control involves administration, policies and procedures to reduce inventory

cost.”

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Topic 2: Selective Inventory Classification

[A] ABC Analysis

 Introduction
 ABC Analysis is also known as Always Better Control method.
 ABC analysis is one of the widely used methods for controlling / classifying the
inventory.
 ABC Analysis tells us how to arrange inventory as per their importance.
 ABC analysis is used to have a proper control over inventory because when an inventory
is classified, it becomes easy for the manager to decide where more emphasis is to be
placed and where less emphasis is needed.
 ABC analysis is based from the principle of Vilfredo Pareto who had given an idea of
segregating “Vital Few” from “Trivial many” on the bases of his famous 80:20 rule. ABC
analysis indicates that large number of items accounts for small inventory value, and
very few items account for very high amount of inventory value.
 Definition
‘ABC inventory control technique divides inventory into three categories A (Very important),
B (Moderately important) and C (Least important) on the bases of their annual consumption
value.’

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 Various categories of Items

Among three classes of items, ‘A’ items generally account for 15 to 25 percent of the
number of inventory items but about 65 to 75 percent of total annual inventory value.

‘C’ items generally account for 65 to 75 percent of number of inventory items but about 15
to 25 percent of total inventory value.

 Control required over various categories of items

 ‘A’ categories of items should receive close attention and high supervision and
control, frequent reviews of amount on hand and control over withdrawals too.
 ‘C’ categories of items should receive loose control over inventory items.
 ‘B’ categories of items should receive moderate control or control between the two
extremes of ‘A’ items and ‘B’ items.

 Example
% of total
Inventory
Inventory Usage
Item Annual = (Annual Usage ÷
No. Usage 100000) X 100 Category
101 3000 0.3
102 40000 4 B
103 2000 0.2
104 10000 1
105 5000 0.5
106 400000 40 A
107 7000 0.7
108 9000 0.9
109 8000 0.8
110 300000 30 A
111 1000 0.1
112 50000 5 B
113 15000 1.5
114 20000 2 B
115 90000 9 B
116 8000 0.8
117 7000 0.7
118 11000 1.1
119 9000 0.9
120 5000 0.5
TOTAL = 20 items 1000000

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 Items A Items B Items C
10% of 20 items = 2 20% of 20 items = 4 70% of 20 items = 14
So, 106 & 110 So, 102, 112, 114 & 115 So, all the remaining 14 items

[B] VED ANALYSIS

In VED analysis, the inventory is classified on the bases of criticality of inventory i.e. vital,
essential and desirable.

This classification is usually applied for spare parts to be stored / stocked for maintenance of
machines and equipments based on criticality of spare parts.

“VED analysis is done to determine the criticality of an item (generally spare parts) and its
effect on production and other services.”

 V – Vital

If the inventory is very vital i.e. very important, it is given as ‘V’ classification. These items
can cause stoppage of production if not available. And large amount of stock is kept for such
items. Spare parts supplied by foreign supplier may also be called as Vital items because the
lead time to procure them may be very long.

 E – Essential

If the inventory is essential, ‘E’ classification is given. ‘E’ items are those items whose non-
availability may adversely (badly) affect the production process. These spare parts are such
which may be available throughout the country but procurement lead time may be very
long. For such items, very low amount of stock is required.

5
 D – Desirable

If the inventory is not much essential, ‘D’ classification is given. They are such items which if
not available, can be manufactured in-house or can be ordered from local vendor. Hence,
usually no stocks of such items are held.

[C] FSN ANALYSIS

In FSN analysis, F stands for Fast Moving items, S stands for Slow Moving items and N stands
for Non-Moving items.

 Items which are usually / frequently drawn from the stores are classified as fast
moving items.
 Items which are drawn only once, twice or thrice a year from the stores are classified
as slow moving items.
 Items which are not drawn for past two to three years are classified as non-moving
items.
 This classification is useful for raw-materials, components and spare parts.

[D] ABC x VED MATRIX

ABC X VED MATRIX
V E D
A AV AE AD
B BV BE BD
C CV CE CD

AV – Constant control & Follow up AE – Moderate stock AD – Nil Stock

BV – Moderate Stock BE - Moderate stock BD – Low Stock

CV – High Stock CE – Moderate Stock CD – Very Low stock

 The ‘V’ class of items by their critical nature needs to be held in large quantity in the
inventory. The stocks out cost associated with such materials are very high and
therefore, the inventory / service level should also be very high for such items.
 The service levels for the subsequent ‘E’ and ‘D’ class material will be lower and the
lowest respectively.
 ‘A’ class of items are always put under the review and follow up of the management;
they can be kept in smaller quantities in inventory.
 ‘C’ class of items contribute very little to the total annual consumption value; so they
can be produced or ordered in the large quantity. Hence, service levels for ‘C’ class of
items will be very high.

6
  ‘B’ class of items fall somewhere between in terms of service level.
 The service level of inventory increases from ‘D’ to ‘V’ and from ‘A’ to ‘C’.
 This suggests that maximum service level should be for CV class items and the lowest
service level should be for the AD class of items.

***************************************************************************

Topic 3: Costs Associated with Inventory Control

There are mainly 3 costs which are associated with inventory control:

1. Carrying Costs / Holding Costs

2. Ordering Costs
3. Stock Out Costs

Let us see all the three in details.

1. Carrying Costs / Holding Costs [Calculated on Average Inventory Level]

 They are denoted as ‘Cc’
 Carrying costs are the costs to carry an item in inventory for a length of time, usually
a year.
 Carrying costs generally relate to costs related to physically putting items in storage.
 These costs include...
 Interest costs
 Insurance
 Taxes
 Depreciation
 Obsolescence
 Deterioration
 Spoilage
 Pilferage
 Breakage
 Warehousing costs (Electricity, rent, watchman salary etc.)
 It also includes the opportunity costs of funds blockage which could have been
invested somewhere else which are blocked in inventory.
 Remember that Carrying costs are function of amount of inventory i.e. Cc = f(Q). In
other words we can say that carrying costs are variable portion of total costs. It
increases with increase in amount of inventory and vice-a-versa.
 Therefore, curve of Annual carrying cost is downward sloping.

2. Ordering Costs [Calculated on Number of Orders]

 They are denoted by ‘Co’
 Ordering costs are the costs of ordering and receiving inventory.

7
  These costs change with the actual placement of an order. They don’t have any
relation with amount of inventory.
 These costs include cost of preparing quotations, comparing quotations, negotiation
costs, shipment cost, transportation costs, courier charges etc.
 When company itself produces raw materials, a machine set-up cost becomes
analogous to ordering costs.
3. Stock-out Costs / Shortage Costs
 Stock Out costs are also known as Shortage Cost.
 Shortage costs arise when demand exceeds supply of inventory on hand.
 These costs include opportunity costs of not making a sale, loss of customer
goodwill, late charges etc.

***************************************************************************

Topic 4: Some important terminologies in Inventory Control

[A] Reorder Level / Reorder Point

 EOQ answers the question of ‘how much to order?”, whereas Reorder level answers
the question of ‘when to reorder?’
 The reorder point occurs when the quantity on hand drops below to a
predetermined amount.
 That amount generally includes expected demand / units to be used during lead time
& perhaps an extra cushion of stock, which serves to reduce the probability of
experiencing a stock out during lead time.
 Re-order Level = Average Usage X Lead time = AU X LT
 Reorder Level (When demand and lead time both are constant) = d X LT

[B] Safety Stock

Prediction of average daily usage and lead time is difficult. Lead time may vary in certain
instances and in such cases the firm may face the problem of stock out. To avoid this, firm
may require maintaining safety stock.

[C] Maximum Level

Maximum level of stock is that level beyond which a firm need not to maintain the stock. If
the firm maintains the stock beyond the maximum level, it is called as overstocking. If the
firm maintains the stock beyond the maximum level, then it may have to incur extra storage
cost, carrying cost, obsolescence cost etc.

8
[D] Minimum Level

Minimum stock is that level which must be maintained always for smooth production. While
determining minimum level; lead time, consumption rate, material nature etc. must be
considered.

[E] Lead time

Lead time is the time gap between placing of order with supplier and receiving it by
customer.

**************************************************************************

Topic 5: What is EOQ? Explain basic EOQ model with assumptions.

Also explain the formula derivation in EOQ.
 Meaning of EOQ
 EOQ is known as Economic Ordering Quantity. It is also known as ELS (Economic Lot
Size). EOQ gives the answer of the question “HOW MUCH TO ORDER?”
 Economic Order Quantity is that ordering size that minimizes total annual cost.

 Basic EOQ Model

Meaning

 EOQ models identify the optimal order quantity by minimising the sum of certain
annual costs which vary with the order size.
 Basic EOQ model is the simplest model in inventory control that is used to identify
the fixed order size that will minimise the sum of the total annual costs of carrying
(holding) the inventory and ordering the inventory.

Assumptions of Basic EOQ Model

 Only one product is involved.

 Annual demand (D) is known.
 Demand is spread evenly throughout the year so that demand rate is constant.
 Lead time is known and it does not change.
 Each order is received in single delivery and replenishment is instantaneous.

9
Inventory Usage Cycle

 The above diagram indicates the inventory ordering and inventory usage.
 This cycle begins with the receipt of an order of 500 units (Q) which is Economic
Ordering Quantity and which is used / depleted at constant rate (say ‘d’ = amount
used per unit of time like per day or per week or per month).
 As and when inventory is being kept on depleting / using; at one point of time
inventory level reaches at the point where inventory is only sufficient enough which
may be consumed during lead time and at this point order is placed with supplier.
This point is known as Reorder point.
 After 2 weeks we are receiving the order. Hence time gap between order placement
and order receipt is known as Lead time.

EOQ Balances between Carrying Costs and Ordering Costs

 The optimal ordering quantity reflects balance between ordering costs and carrying
costs.
 Because if a manager orders the inventory in large amount, then ordering cost may
decrease but simultaneously carrying / holding cost may increase.
 On the reverse side if a manager orders the inventory in small amount, then carrying
/ holding cost may decrease or even it may become nil but then ordering costs will
increase because number of orders will increase.
 Hence there must a balance between both these costs. So the best solution is EOQ
where ordering costs are not too much as well as carrying costs are also not very
much large in amount.
 A manager should therefore order that amount where Carrying Costs and Ordering
Costs are equal and this will minimise the Total Annual Cost.

10
 Formula Derivation in EOQ
o FORMULA DERIVATION WITH SIMPLE METHOD
 Annual Carrying Costs are always calculated on Average Inventory Level.

So Annual Carrying Costs = Q/2 X Cc

 Annual Ordering Costs are calculated on Numbers of Order placed in a year.

So Annual Ordering Costs = D/Q X Co

 We know that total annual costs = Annual Carrying Costs and Annual Ordering Costs

Total Cost (TC) = Annual Carrying Costs + Annual Ordering Costs

TC = (Q/2 X Cc) + (D/Q X Co)

 Here, we know that at EOQ, annual carrying costs and annual ordering costs are
equal.

So, Q/2 X Cc = D/Q X Co

Q2Cc = 2DCo

Q2 = 2DCo / Cc

11
o FORMULA DERIVATION WITH DIFFERENTIATION METHOD

***************************************************************************

12
Topic 6: Explain the situation of supplying inventory at uniform rate non-
instantaneous supply because of in-house manufacturing. Also explain ERL
model of EOQ and derive equation for ERLQ.

 Introduction
 In the basic EOQ model, we made an assumption that order quantity is received
instantaneously in fixed one lot when lead time ends. This situation will not be
preferred by organisation because when requirement of the item is provided at
some uniform rate then why should they buy large quantities in one lot? So material
here is received gradually at some uniform rate rather than at one time.
 ERL model is useful for the situation when production is done in the batches and
company itself produces raw material rather than demanding them from outside. So
here producer himself produces raw material as well as finished goods.
 Sometimes what happens is that the capacity to produce items is greater than usage
rate or demand rate of that inventory. So it will be advisable to produce inventory in
batches or in lots rather than producing inventory continuously.

 Assumptions of ERL Model

 Only one item is involved
 Annual Demand / requirement (A) is known
 The usage rate is constant
 Usage occurs continuously but production happens gradually / periodically
 Production rate (p) is constant
 Lead time does not change

13
 Explanation
 Here as long as production continues inventory level will continue to grow at the
rate (speed) of difference between production and usage (p-d)
 E.g. If daily production rate (p) is 20 units and daily usage / demand rate (d) is 5
units, then inventory level will grow at the rate (speed) of 20 – 5 = 15 units per day.
 As long as production goes on, inventory level will continue to rise and when
production ceases (stops), the inventory level will start depleting (decreasing).
 Here inventory level will be maximum at the point where production stops.
Production level is fast and usage is slower than production rate so difference
amount of inventory will be used during production.
 Finally, when amount of inventory will exhaust, production will again start and this
cycle will continue again and again.
 Here set-up costs are analogous to ordering costs.
 In EOQ, the maximum level was Q itself if there is no safety stock but this will not be
the case in ERL. In ERL, maximum inventory level will be somewhat lower than ERLQ
because usage rate of inventory is slower than production rate. Hence Maximum
Level of Inventory = Total Production During One Production Run – Amount Used
during production Run

 Formula Derivation of ERLQ

14
15
 Production Planning
Topics to be covered:

Topic 1: Definition of Production Planning

Topic 2: Three Levels of Production Planning

Topic 3: Master Production Schedule (MPS)

Topic 4: Material Requirement Planning

[Process, Flow Diagram, Inputs & Outputs, Bill of Material (Meaning & Types)]

Topic 5: Capacity Requirement Planning (CRP)

[Process with Flow Diagram, Methods of Capacity Adjustments]

*********************************************************************************

Topic 1: Definition of Production Planning

“Production Planning is that function of management , which decides about the resources that will
be required for future manufacturing, operations & allocating these resources to produce desired
output at right time, in right amount, at right quantity and at least cost”

*********************************************************************************

Topic 2: Levels of Production Planning

Levels of Production
Planning

Strategic Tactical Operational

Planning Planning Planning

1. Strategic Planning

 Strategic Planning is a process of linking production planning with mission and overall
strategic planning of the business.
 The time horizon of Strategic Planning is of 4 to 5 years.

1
  It includes various aspects like decisions on production capacity, locations of manufacturing
units, types of machines & material handling system and technology forecasting.
 These are long term decisions i.e. once taken then difficult to alter. E.g. Once the location of
production plant is selected, it is difficult to alter / change.
 These decisions require less mathematical skills, they are more unstructured and hence
require high degree of skills, experience and creativity.

2. Tactical Planning

 It is medium term planning.

 Time horizon for this is usually 6 to 8 months or up to 1 year.
 It is concerned with the best utilisation of existing facilities rather than creating new
facilities.
 It including costing & value analysis, make or buy decisions design of inventory policies.
 It includes preparing Aggregate Production Plan.
 E.g. For paint industry, it can be prepared for total quantity of paint to be manufactured
during this year.
 For refrigerator manufacturer, it can be prepared for number of units of refrigerator to be
manufactured during the year. Here in APP; color, size, thickness etc are not decided.
3. Operational Planning

 It is known as Shop Floor Planning.

 The time horizon of operational planning is 1 to 3 months.
 In other words it is a short range planning.
 The immediate sales forecast, availability of material and capacity, stock of finished
products, pending purchase orders, requirement of fresh raw material etc are the scope of
operational planning.
 MPS, MRP and CRP are prepared for the Operational Planning purpose.

******************************************************************************

Topic 2: Master Production Schedule

 Definitions of MPS

“Master Production Schedule (also known as Master Schedule or MPS) formalizes the aggregate
production plan and converts it into specific material requirement and capacity requirement plan.”

“MPS is a process of deciding amount & timing of all the items (end items) to be produced over a
specific planning horizon.”

 General Idea of MPS

Master Schedule is completely derived and prepared from Aggregate Production Plan. Here a
production manager decides monthly or weekly production of units of end products. MPS is
prepared for immediate planning horizon i.e. next coming month, coming quarter. MPS is the next
step after Aggregate Production Planning. The major difference between Aggregate Production

2
Planning is that Aggregate Planning determines the total output in units to be produced over a
specific time horizon (6 months to 18 months) whereas MPS determines the unit of each end items
to be produced over a specific planning horizon.

E.g. aggregate planning determines what total quantity of paint is going to be produced during next
year.

Whereas, MPS reveal that what quantity of Yellow Oil paint is to be manufactured + what quantity
of white exterior paint is to be manufactured?

 Objectives of MPS

1. To schedule end items to be completed promptly and as & when promised to customers.
2. To avoid overloading & under loading of production facility.

3
 Procedure for Developing MPS

Step 1: Consider the sale projections and probable demand

 The total demand for the end items (to be produced) is gathered from APP, market &
demand forecasts.
 For Standardized products, MPS should be made for ‘Few Outputs’ produced from ‘many
Inputs’. And for Intermittent production system, MPS should be made for ‘few inputs’ which
will produce ‘many outputs’

Few Output
Prepare Many Outputs
MPS here

Prepare
MPS here
Few Output
Many Raw Materials

Step 2: Prepare tentative Master Schedule (Rough Cut Capacity Planning)

 After gathering the information related to the demand and sale projections, next step is that
orders are now assigned to various production slots (Work centres and machines) and
delivery promises are made to customers tentatively.
 As orders are slotted in the MPS, the effect of the production work centres is checked. This
process of preliminary checking of MPS is called as Rough Cut Capacity Planning (RCCP).
 The main purpose of RCCP is to identify any week in the MPS where under loading or
overloading of the production capacity occurs & then to revise MPS if required.

Step 3: Check tentative MPS (RCCP) for material availability by MRP and capacity adequacy by CRP

The prime purpose of MPS is to prepare MRP and CRP. Tentative MPS will check whether adequate
material are available or not and adequate capacity is available or not by comparing tentative MPS
with material and capacity requirements.

4
Step 4: If material and capacity requirements are not adequate, again MPS shall be revised and try to
prepare modified MPS.

Step 5: When both material and capacity requirements are adequate enough, MPS will be finalised
at this stage.

SPECIMEN OF MASTER PRODUCTION SCHEDULE

Week Number
End Item
1 2 3 4 5 6 7 8 9 10
A 200 200
B
C 300 300

 Functions of MPS

1. Translate Aggregate Production Plans

2. Evaluate alternative Master Schedules
3. Generate Material Requirements
4. Generate Capacity Requirements
5. Facilitate Information Processing
6. Maintain Valid Priorities
7. Effectively utilize capacity

Let us see all these function in brief.

1. Translate Aggregate Plans

The master schedule translates APP into specific number of end items to be produced during specific
time periods. In short it means conversion of aggregate plan into specific end items plan.

2. Evaluate alternative Master Schedules

Master Scheduling is a trial and error, work and rework activity. Nowadays there are many
computerised software are available in the form of simulation capabilities that provide many
alternative Master Schedules and help production managers to “trial-fit” the schedule. So, it is
advisable for a production manager to evaluate as many as possible MPSs.

5
 3. Generate Material Requirements

MPS is the first input for MRP. MPS shows end items to be produced and this becomes signal for
MRP to generate further dependent items requirements of purchasing and producing them on or
before the due dates.

4. Generate Capacity Requirements

MPS becomes prime requirement for capacity requirement planning. It reflects the determination of
labour and equipments requirement. If capacity requirements are inappropriate, MPS needs to be
revised.

5. Facilitate Information Processing

MPS also determines when deliveries are to be made both for make-to-order & for make-to-stock
items.

6. Maintain valid priorities

Priorities reflect absolute priorities or relative (ranking i.e. J4, J3, J1 & J2) priorities. This means that
due date specifies the actual time when the order is to be delivered. But, sometimes it so happens
that customers may change their orders, customers may change their time, raw material are not
available at last moments etc. In all such cases revision of MPS will be helpful in determining the new
& valid priorities.

7. Effective utilisation of Capacity

By specifying the end items requirements, the master schedule also establishes the load and
utilisation parameters for labour and equipments.

*********************************************************************************

6
Topic 3: Material Requirement Planning
*********************************************************************************

Before going to study the concept of MRP, let us first understand the concept of Dependent Demand
Items and Independent Demand Items.

Independent Demand Items

Independent Demand Items are those finished goods, service parts and other end items whose
demand arises more directly from uncertain market environment. Independent demand items need
careful forecasting for demand estimation.

Dependent Demand Items

Dependent Demand Inventory consists of raw material, components and subassemblies that are
used in the production of parent item/finished product. E.g. Demand for computer keyboards,
mouse, and mother boards depend on the demand of the parent item computer. The demand for
dependent demand item can be calculated.

In short demand for items that are subassemblies and components parts to be used in
manufacturing final products are dependent demand items.

********************************************************************************

 Definition of Material Requirement Planning (MRP)

Material Requirement Planning (MRP) is a technique for determining the quantity and timing for the
acquisition of dependent demand items needed to satisfy master schedule requirements.

 Introduction

MRP is a computer based information system that translate the finished product requirements of
MPS into time phased requirements of assemblies, subassemblies, components and parts & other
information to determine when to order and how much to order. Hence requirements of end items
generate requirements of further lower level components, which are broken down by planning
periods. E.g. Requirements of ‘n’ units of Wheelbarrows (end-item) generates the lower level
requirements of Handle Assembly, Wheel Assembly, Box and Paints.

 Objectives of MRP
1. To improve customers service by meeting delivery schedule on or before promised dates.
2. To reduce inventory costs by reducing inventory levels
3. To improve operating efficiency and capability of productive resources (man and machines)

7
 Inputs & Outputs of MRP System

Inputs to MRP Outputs to MRP

Modifcation in MPS
MPS
(if needed)

Product Structure File / BOM Order Relaeses Information

Order Relaeases & Planned Order

Inventory Status File
Releases

Inputs to MRP:

Mainly there are 3 inputs of MRP.

1. Master Production Schedule

 MPS specifies what end items are to be produced and when. Remember, MPS is a
production plan not necessarily a sales forecast.
 MRP system accepts whatever the MPS requirements are and translates MPS end items into
specific component and parts requirements. Then with the help of simulation trial and error
method proposed master schedule requirements can be satisfied.
2. Product Structure File / Bill of Material
 To plan for the production of an end item, an MRP system must plan for all the dependent
demand items i.e. materials, parts, components, subcomponents and parts that will go into
manufacturing final product.
 The bill of material is the computer system that provides this information of all sub-
products. The BOM file identifies each part and sub-part by a unique number and facilitates
further explosion of end-item requirements. There are mainly two types of Bill of Materials:
Single Level BOM and Multi Level or Indented BOM.
PRODUCT STRUCTURE TREE (SPECIMEN)

Filing
Cabinet

Case Drawer
Lock
Assembly Assembly
(1) (3)
(1)

8
 3. Inventory Status File

Week Number 0 1 2 3 4 5 6 7 8
Items:
Gross Requirements
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases

 The inventory status file gives complete information regarding on-hand inventory, gross
requirements, scheduled receipts, and planned order releases for the item.
 Moreover, inventory status file also includes information such as lot sizes, lead times, safety
stock levels and scrap allowances.
 Inventory status file should be updated on regular bases i.e. as & when changes occur.
 Let us first understand the each and every particular which is mentioned in inventory status
file.
(a) Gross Requirements: The total quantity of an item needed at the end of a period to meet
the planned output levels. Remember, it will not consider any availability of the item in on-
hand inventory or scheduled receipts.
(b) Scheduled Receipts: The quantitiy of an item that will be received at the beginning of the
time period to meet the net requirement for that time period.
(c) On-Hand Inventory: The quantity of a material, physically held in inventory at a point of
time. It may include safety stock plus allocated inventory.

On hand Inventory for ‘n’ period = (On hand inventory for the period ‘n-1’) + (Scheduled
Receipts for ‘n’ period) – (Gross Requirements for ‘n’ period)

(d) Planned Order Release: Number in planned order release row when (in which week) the
order should be placed to meet the requirements for the item. Time period at which the
order should be placed can be found out by subtracting the lead time from the time of ‘net
requirement’.
(e) Net Requirements: The amount of net requirements in any period can be found out by
subtracting the gross requirements for that period and any scheduled receipts for that
period and any quantity of on-hand-inventory.

Net Requirements for period ‘n’ = (Gross Requirement for period ‘n’) – (Scheduled receipts
for period ‘n’) – (On hand inventory at the end of period ‘n-1’)

Outputs to MRP:

(a) Planned Orders: It is the schedule indicating the amount & timing of future orders.
(b) Order Releases: It shows implementation of planned orders.

9
(c) Performance Control Reports: It is report showing evaluation of system operation, including
deviations from the plan and cost information
(d) Exception Reports: Shows attention to major discrepancies like late and overdue orders,
excessive scrap rates, reporting errors and requirements of non-existence parts.
(e) It facilitates modification in MPS if needed.

10
Topic 4: Bill of Material
 Definition of BOM

A Bill of Material contains a listing of all the assemblies, sub-assemblies, parts and raw materials that
are needed to produce one unit of a finished product. Thus each end-item has its own Bill of
Material.

 Meaning

The listing in the bill of material is hierarchical; it shows the quantity of each item needed to
complete one unit of the following level of assembly. Bill of material shows visual depiction in the
form of A Product Structure Tree. The BOM file defines product in very precise and unambiguous
way so that component requirements are clearly determined.

A SPECIMEN OF BILL OF MATERIAL

B
C
(2)

D E F
E
(3) (2) (2)

E
(4)
 The BOM are of 2 types:
(a) Single Level BOM
(b) Multi-Level / Indented BOM

(a) Single Level Bill of Material

 A single level Bill of Material specifies the requirements for only the immediate or next level
components that are needed to assemble a parent / end item.
 E.g. A firm produced wheelbarrows that are produced from a box, a handlebar assembly and
a wheel assembly and some paint.

11
 The single level BOM will contain only one level under the parent item as depicted in the
following diagram.
 Numbers inside the boxes represent the quantity of that particular part or sub-part to be
manufactured. And number outside the box represents the unique identity of that particular
part or assembly.
 By giving the unique identity number to components and parts; it will be advantageous in
the case when the subcomponents are repeatedly used. At that time a computer will
identify the part or sub part from its unique identity number, if at all it is repeated.

Wheel
Barrow

Handle Wheel
Box Paint
Assembly Assembly
(1) (1)
(1) (1)

BILL OF MATERIAL
Part No. W099: Wheel Barrow

Part No. Description Quantity Units

1011 Box: Deep Size, Aluminium 1 Each

1020 Handle Assembly 1 Each

1030 Wheel Assembly 1 Each

1042 Paint: Blue 1 Pint

(b) Indented / Multilevel Bill of Material / Explosion of Bill of Material

 Many finished items/end-items are too complicated that it cannot be properly described
with single level Bill of Materials and in such cases Multi level or Indented Bill of Materials
are used. There may be hundreds of raw materials and parts are needed sometimes to
manufacture an end item and at such times it is advisable to prepare Multilevel Bill of
Material.
 Indented BOM are structured to show the manufacturing sequence of the parent item.
 In Indented BOM, parent item stays at zero level and all that parts and components that go
into manufacturing zero level item, are assigned to Level 1, all that parts and components
that go into manufacturing Level 1 items, are assigned to Level 2, all that parts and
components that go into manufacturing Level 2 items, are assigned to Level 3 and so on.

12
 Suppose, if one component is such which is required at more than one level (i.e. level 2 and
level 3), then it would be assigned at lower level i.e. Level 3.

Wheel
Barrow

Handle Wheel
Box Paint
Assembly Assembly
(1) (1)
(1) (1)

Bearings
Bars (1) Grips (2) Axle (1) Wheel (1)
(2)

Tyre
(1)

INDENTED BILL OF MATERIAL

Part No: W099 Wheel
Barrow
Part No. Description Quantity Units Level
1011 Box: Deep Size, Aluminium 1 Each 1
1020 Handle Assembly 1 Each 1
2022 Aluminium Bars 2 Each 2
2025 Grips: Neoprene 2 Each 2
1030 Wheel Assembly 1 Each 1
2031 Axle 1 Each 2
2032 Bearing 2 Each 2
2035 Wheel 1 Each 2
3026 Tyre: Size A 1 Each 3
1042 Paint: Blue 1 Pint 1

Why BOM is known as The Heart of MRP?

Bill of Material shows the full manufacturing sequence of the product. One can easily identify what
components are needed to manufacture parent items or item at level 1 or at any level; and in what
quantity they are needed by just seeing at the bill of material. Hence, it is known as the Heart of
MRP.

*******************************************************************************

13
Topic 5: Capacity Requirement Planning
 Definition of Capacity

Capacity is a measure of the productive capacity of a facility per unit of time.

 Definition of Capacity Requirement Planning (CRP)

CRP is techniques for determining what personal and equipment capacities are needed to meet the
production objectives mentioned in master schedule and material requirement plan.

 Overview of the CRP Process

1. End-items requirements are reflected in and extracted from APP and MPS.
2. The CRP system (computer system) will then convert orders to be released and processed
into standard Labour Hours and Machine Hours of load. This information is given in work
centre status and shop routing file. In short CRP system will convert orders into standard
time of load on Work Centre.
Here, one point is to be remembered is that, when the orders are initially converted into the
loads, it will consider Infinite Loading for the initial loading process. The process of loading
work centres with all the loads when they are required without seeing the actual capacity is
known as infinite loading. Infinite loading is important for planners because it provides idea
for capacity adjustments like using overtime, using alternative routings, delaying selected
orders etc.
3. The output will be a Load Projection Report by a work centre. If work centre capacities are
adequate then planned order releases are verified by MRP system and released orders
become purchase or shop orders (Remember: Purchase Order from vendor and shop order
for in-house production).
4. Workload Reports are also made for use in Capacity Control. (In case of Finite Loadings)
5. If Load Projection Reports reveal inadequate capacities, either capacity must be adjusted or
MPS should be revised.

14
15
Inputs of CRP

1. Planned orders and Planned order releases from MRP system.

2. Loading information from work centre status file.
3. Routing information from Shop Routing File
4. Changes which will modify the capacity either by adjusting capacity or by making changes in
MPS.

Outputs of CRP

Major output of CRP system is the verification that....

1. They are complete i.e. they have both planned and released orders
2. They are based on valid priorities
3. They facilitate for future planning

Methods for Capacity Adjustments

1. Overtime of Existing Workers

2. Work during vacations
3. Hiring casual workers
4. Outsourcing or Subcontracting some jobs
5. Adjustments in quantities during vacation season or peak season
6. Expansion of Capacity

16
IMPORTANT NOTE:

 Master Production Schedule

o If asked in 10 to 12 marks. ................... Write down Full Content given in material
o If asked in 7 to 8 marks. ................ Write Definition, Objectives, Flow Chart,
Procedure and only points of functions
o If asked in 5 marks. ........................ Definition, Flow Chart and Process
o If asked in 2 marks. .................... Only definition
 Material Requirement Planning
o If asked in 10 to 12 marks ................... Write down Full Content given in material
o If asked in 7 to 8 marks. ............... Definition, Objectives, Inputs and Outputs (brief
only) & Flow Chart
o If asked in 5 marks. ..................... Definition, Only Points of Inputs and Outputs, Flow
Chart
o If asked in 2 marks ................ Only definition
 Bill of Material
o If asked in 10 to 12 marks. ............. Full Content
o If asked in 7 to 8 marks. ........... Definition + Only example of BOM + Types + Why it is
known as Heart of MRP
o If asked in 4 to 5 marks. ............. Definition + Only Example of BOM
o If asked in 2 marks. ........................ Only Definition

17
 WORK STUDY
Topic 1: Introduction
Work study may be defined as “the analysis of a job for the purpose of finding the preferred
method of doing it and also determining the standard time to perform it by the preferred (or
given) method”.

Work study, therefore, consists of two areas of study: method study (motion study) and
time study (work measurement).

*************************************************************************
Topic 2: Definitions of Work Study
 “Work Study is a generic term used for those techniques, particularly method study
and work measurement which are used to examine human work and material
resources in all contexts and which lead to systematic, objective and critical
investigation of all factors which affect the efficiency and economy of the situation
being reviewed for the purpose of achieving improvement.” – British Standard
Institute
 “Work study is the analysis of a job for the purpose of finding the preferred method
of doing it and also determining the standard time to perform it by the preferred
method.”
 “Work study is the systematic examination of the methods of carrying on activities
so as to improve the effective use of resources and to set up standards of
performance for the activities being carried out.”

**************************************************************************

1
Topic 3: Importance of Work Study
1. Work study helps in increasing the productivity of an organisation by studying the method
of the work and time taken for performing it. Work study is a method that normally involves
little or no capital expenditure on facilities and equipment.

2. It is systematic. This makes sure that each and every factor affecting the efficiency of an
operation is considered in the study of work.

3. It is the most accurate means of setting standards of performance. Based on this

standard, the effective planning and control of production is done.

4. It can contribute to the improvement of safety and working conditions at work by

exposing hazardous operations and developing safe methods of performing operations.

5. The savings resulting from properly applied work study start at once and continue as long
as the operation continues in the improved form.

6. It is a “tool” which can be applied everywhere. It can be use with success wherever work
is done or plant is operated, not only in manufacturing shops but also in offices, stores,
laboratories and service industries such as wholesale and retail distribution and restaurants
and on farms.

7. Work-study is relatively cheap and easy to apply.

8. It is an excellent weapon for removing inefficiency in any organization.

**************************************************************************

METHOD STUDY
Topic 4: Definition of Method Study
Method study is the technique of systematic recording and critical examination of existing
and proposed ways of doing work and developing an easier and economical method.
**************************************************************************

Topic 5: Objectives of Method Study:

1. Improvement of manufacturing processes and procedures.
2. Improvement of working conditions.
3. Improvement of plant layout and work place layout.
4. Reducing the human effort and fatigue.
5. Reducing material handling

2
6. Improvement of plant and equipment design.
7. Improvement in the utility of material, machines and manpower.
8. Standardization of method.
9. Improvement in safety standard.
**************************************************************************

Topic 6: Basic Procedure for Work Study / Method Study

1. SELECT
 Firstly, select the job or process or operation to be studied.
 The basic objective behind selecting the job / process / operation for the study is to
get maximum economic advantage, scope for work improvement through reduction
of excessive material handling & fatigue of workmen, scope for improving the
working conditions and improving the utilisation of resources.
 Before selecting the job for the study, following factors should be taken into
consideration:
(a) Economic Factors

Work study will be useful only if the money saved by studying and improving the method is
more. Generally job is selected on the bases of following factors.

 Operation having bottlenecks (which affect other production activity badly)

 Operations which are done repetitively
 Operations having more manual work
 Operations where materials are moved for a long distance

(b) Human Factors

Work study will be successful only with the cooperation of all people concerned like
workers, supervisors, trade unions etc. If they do not accept work to be studied, it cannot be
successful. They may resist work study because of –

 The fear of unemployment

 The fear of reduction in wages
 The fear of increased work load

(c) Other factors which induce work study are –

 High operation cost in an operation or job

 High wastage and scrap in an operation or job
 Excessive movements of workers and materials

3
 Excessive rejections and rework
 Complaints about quality
 Complaints about poor working conditions
 Increasing number of accidents
 Excessive use of overtime

2. RECORD
 Once the job under study is selected, all the details about the existing method are
recorded. This is done by directly observing the work.
 To record the work, one can prepare various charts and various diagrams. These
charts and diagrams are as follows:
a. Operations Process Chart: Records operations and inspection
b. Flow Process Chart:
a. Man Type: Activities of men are recorded
b. Material Type: Activities of material are recorded
c. Equipment Type: Activities of equipment or machine is recorded
c. Two Handed Process Chart: Motions of both hands are recorded
d. Multiple Activity Chart: Simultaneous activities of workers and machines are
recorded
e. Flow Diagram: Path / Flow of material is recorded
f. String Diagram: Movements of workers is recorded

3. EXAMINE
 In this stage, the recorded facts and data are examined critically by putting and
analysing number of questions. This is also known as questioning technique. The
following sequence of questions may be used:
a. Purpose – What is actually been done?
i. Why it is done?
ii. What else could have been done?
iii. What should be done finally?
b. Place – Where is it being done?
i. Why it is done here?
ii. Where else could it be done?
iii. Where should it be done?
c. Sequence – When it should be done?
i. Why is it done then?
ii. When could it be done?
iii. When should it be done?
d. Person – Who is doing it
i. Why does that person do it?
ii. Who else can do it?

4
 iii. Who should do it?
e. Means – How is it done?
i. Why is it done that way?
ii. How else could it be done?
iii. How should it be done?

By doing this questioning

 Unwanted activities can be eliminated

 Number of activities can be combined
 Method can be simplified
 Time can be reduced to perform work

4. DEVELOP
 Once critical examination of activities is done, next step is to develop the most
economic and improved method by generating several alternatives out of all
circumstances, various production techniques and contributions of managers,
supervisors, workers and other specialists and selecting the best alternative.
 Following factors are to be considered while developing the method.
o Cost of implementation
o Expected savings in time and cost
o Feasibility
o Producibility
o Acceptance to design, production planning and marketing department
o Reaction of employees
5. INSTALL
 The next step after developing the method is installing the selected method. In this
step, acceptance is taken from various parties. Install stage consists of –
o Getting acceptance of the change by supervisor
o Getting approval of management
o Getting acceptance from workers and trade unions
o Giving training to operators who are involved in this new method
6. MAINTAIN
The last step in the process is to maintain new method to ensure that it functions well; by
monitoring the results, by periodic checks, and verifications at regular intervals and by
proper controlling techniques. Any defect or difficulty should be corrected by the work
study man. Suggestions from workers and supervisors should be taken.

***************************************************************************

5
Topic 7: Symbols Used in Process Chart with Examples:
The recording of the facts about the job in a process chart is done by using standard symbols
as shown in the figure below:

 Operation - ⃝
 A large circle indicates operation. An operation takes place when there is
some amount of work done on anything. For example, an assembly or
disassembly is an operation. When information is given or received or when
planning or calculating takes place it is also called operation.
 Example - Reducing the diameter of an object in a lathe.

 Inspection - □
 A square indicates inspection. Inspection is checking an object for its quality,
quantity or identifications.
 Example - Checking the diameter of a rod. Counting the number of products
produced.

6
  Transport - →
 An arrow indicates transport. This refers to the movement of an object or
operator or equipment from one place to another. When the movement takes
place during an operation, it is not called transport.
 Example - Moving the material by a trolley; Operator going to the stores to get
some tool.
 Delay or temporary storage - D
 A large capital letter D indicates delay. This is also called as temporary storage.
Delay occurs when an object or operator is waiting for the next activity.
 Example - An operator waiting to get a tool in the stores. Work pieces stocked
near the machine before the next operation.
 Permanent storage -
 An equilateral triangle standing on its vertex represents storage. Storage takes
place when an object is stored and protected against unauthorized removal.
 Example - Raw material in the store room.
***************************************************************************

Topic 8: Recording Techniques used in Method Study

Charts
• Operation Process Chart
• Outline Process Chart
• Man Type Flow Process Chart
• Material Type Flow Process Chart
• Man Machine Chart
• Travel Chart
• SIMO Chart

Diagrams
• Flow Diagram
• String Diagram

Photographic Techniques
• Cyclograph
• Chrono-Cyclograph
• Still Photography
• Micro-Motion Photography

7
1. VARIOUS CHARTS USED AS RECORDING TECHNIQUES OF
METHOD STUDY
[A] Operation Process Chart:
 "An operations Process Chart is a graphic representation of the sequence of all the
operations and inspections involved in a process or procedure"
 An operation process chart provides an overview of the whole process or activity.
 In an operations process chart all the operations and inspections involved are recorded.
 The chart does not indicate where the work takes place or who performs it.
 The delays, transport and storages are not indicated. But the entry points of materials are
indicated.
 Where the process is long and complicated, this chart provides an overall picture and gives
enough information for critical examination.
 This chart is especially useful for recording maintenance and other indirect type of work.
Often operation process chart is known as Outline process chart.
***************************************************************************

[B] Outline process chart:

 Sometimes operation process chart is considered same as outline process chart.
 “Outline process chart is an overall view of the job under study that can be obtained by
recording only the important operations and inspections without going into all the other
activities like delays, movements and storages."
 Such a chart is known as an Outline Process Chart. This chart is particularly useful for large
projects for getting a broad outline.

8
***************************************************************************

[C] The Flow Process Chart (Material Type)

 A flow process chart (material) is a detailed chart, showing all the activities involved in a
process.
 "A flow process chart (material)), is a process chart setting out the sequence of the flow of
a product or a procedure by recording all events under review in terms of the material
being processed, using the appropriate symbols”
 In a flow process chart (material), the subject of the chart is material. Since all the activities,
operations, inspections, movements, delays and storages are recorded; all the five symbols
are used.
 A flow process chart (material) is more detailed than the operation process chart.
 All the factors in the process must' be recorded. The distance and time values are also
recorded whenever appropriate. Since all the movements are recorded very clearly, the flow
process chart is a very useful chart for analyzing and improving layout and handling
problems.

9
  This chart is also useful for presenting new proposals to the management. Figure below
gives an example of be flow process chart (material).

***************************************************************************

10
[D] The Flow Process Chart (Man-Type)

 The flow process chart (man) is one of the basic charts to record the method of work. It is
used to record the work of Individual operators/worker.
 It gives a graphic representation of all the activities performed by the operators in the
sequence in which they occur.
 "A flow process chart (man) is a chart setting out the sequence of the flow of a product or
a procedure by recording all event in terms of the worker by using the appropriate process
chart symbols."
 Flow process chart (man) is a useful recording technique to chart the method of
performance rather than the process. Once the process has been examined and all possible
improvements have been made, then the analysis and improvements in methods would be
necessary.
 Existing methods when clearly recorded through this chart, would be helpful in developing
new methods.
 This chart can also be used as an operating instruction for use by supervisors and workers.
An example of the flow process chart (man) is shown in Fig below.

11
***************************************************************************

[E] The Multiple Activity Chart / Man-Machine Chart

 This kind of process chart records the activities of the operator as well as the machine on the
same chart against a common time scale.
 Separate vertical columns (in the form of bars) are used for both; workers and machines.
 The chart clearly indicates the IDLENESS (or UTILISATION) of operator as well as the
machine.
 On the basis of the recorded events in the chart, one can rearrange the process so that IDLE-
TIME is reduced, or BETTER UTILISATION of the operator/machine is achieved.

12
  It is used for balancing the work between man and machine; proper utilization of
maintenance staff etc.
 EXAMPLE: following chart shows chart representing 3 workers and 1 machine performing
activities;

***************************************************************************

[F] The Two-Handed Process Chart

 Jobs that are completed at a single work place often consist of number of activities of the
worker's two hands.
 The two-handed process chart records the sequence of manual activities in such jobs in a
graphical manner.
 "The two-handed process chart is a process chart recording the work of the operator's
hands (limbs) in relation to another.”
 A two-handed process chart is made up of two columns in which the activities of the left
hand and right hand and the appropriate symbols are respectively recorded in sequence.
 The activities of the two hands are inter-related by aligning the symbols on the chart so that
simultaneous movements by both hands appear opposite to each other.
 Additional columns can be designed to record the activities of the other parts of the body
whenever necessary.

13
  The two-handed process chart generally uses the same symbols as the other process charts.
 In practice only four of the five symbols are used to any extent. "Inspection" is rarely used
since "inspection" is a combination of hand movements and operations.
 The storage symbol implies "hold" instead of storage.
 The transport symbol represents movements of hands, the operation symbol, pick up,
positioning, etc., and the delay symbol denotes the waiting of one hand for the completion
of work by the other.
 There is no time scale on this· chart and the exact duration of various activities is usually
unknown.
 This chart is usually applicable only to the individual workplace and after, the broad methods
have been decided and thus most suitable at the later stages of methods improvement.
 Work of a short duration is suitable for recording on this type of chart. The following
example shows the movements of two hands of a worker recorded in a chart.

***************************************************************************

[G] Simultaneous Motion Cycle Chart (SIMO Chart)

 The SIMO Chart is an improvement of the two-handed process chart.

 SIMO chart is a two handed process chart in which simultaneous micro motions, called as
‘Therbligs’ or group of Therbligs of different body parts (usually hands or legs), of one
worker or more than one worker are recorded.

14
  When the movements are so fast that they can not be measured or recorded with naked
eyes, a cine film is prepared and then studied by slow projection and finally a chart is
prepared for the body movements.
 The activities recorded are in terms of "Therbligs"; which are very fine basic human motions.
 Such a chart can be prepared only with the help of photographic aids. Short cycle and highly
repetitive jobs are suited for this type of recording.
 By an analysis it will be possible to identify and remove the idleness and increase the
utilization of both the hands.

LIST OF THERBLIGS
Symbol THERBLIGS Abbreviation Colour

Search Sh BLACK

Find F GREY

15
 Select St LIGHT GREY

Grasp G RED

Hold H GOLD OCHRE

Transport Load TL GREEN

Position P BLUE

Assemble A VIOLET

Use U PURPLE

Disassemble DA LIGHT VIOLET

Inspect I BURNT OCHRE

Pre-Position PP PALE BLUE

Release Load RL CARMINE RED

Transport Empty TE OLIVE GREEN

Rest for Overcoming Fatigue R ORANGE

Unavoidable Delay UD YELLOW

Avoidable Delay AD LEMON YELLOW

Plan Pn BROWN

***************************************************************************

16
[H] Travel Chart

 When the movement patterns are complex, the Travel Chart is a quicker and more
manageable recording technique. The figure below shows a typical travel chart.
 "A Travel chart is a tabular record for presenting quantitative data about the movement of
worker, materials or equipments between any numbers of places over any given period of
time."

 Explanation of Travel Chart

 The travel chart is always a Square, which contains smaller squares inside. Each small square
represents a work station (a machine).
 For example, if there are 10 work stations then the travel chart will have 10 x 10 = 100 small
squares.
 The squares from left to right along the top of the chart represent the places from where
movement takes place & those down the left hand edge represent the stations 'to which'
the movement is made.
 The travel chart can also be made to indicate the weight/material moved per trip. This is a
particularly useful technique for plant layout and materials handling analysis studies.
***************************************************************************

17
2. VARIOUS DIAGRAMS USED AS RECORDING TECHNIQUES OF
METHOD STUDY
[A] The Flow Diagram

 In any production shop, repair shop or any other department, there are movements of men
and material from one place to another.
 Process charts indicate the sequence of activities but they do not show the frequent
movements of men and material. If these movements are minimized, a lot of savings can be
achieved in cost and effort.
 If the path of movement of material is not frequent and simple, a flow diagram is used for
recording the movement.
 A flow diagram showing the movement of a paper in an 'office is given in Fig. 15. The
corresponding FPC is partly shown in Fig. 16.

18
The flow diagrams are used for the following purposes:

1. To remove unwanted material movement.

2. To remove back tracking.

3. To avoid traffic congestion.

4. To improve the plant layout.

***************************************************************************

[B] String Diagram

 The term 'String Diagram' comes from the way the diagram may be created with a
scale drawing, pins and a piece of string and we can then measure the string to see
how far the movements are.

19
  The String Diagram is a simple tool for analyzing and designing work spaces such
that movement can be minimized. The basic diagram simply consists of a map of
the work area, with the actual movements drawn on top.

 Distance can be measured with the help of length of string used.

3. PHOTOGRAPHIC TECHNIQUES FOR RECORDING WORK

1. STILL PHOTOGRAPHY
 It includes taking photos of existing situation of a worker or machine at work or at a
lay out. It is much quicker than models and templates and gives accurate picture of
situation.
 The requirement is that the work study person should be trained in photography.
Also, the cost is higher than conventional / traditional recording technique.

2. MICRO MOTION PHOTOGRAPHY

 It means making film by taking photos at the rate of 16 or 24 or 32 or even 64 frames
per second.
 This film will then be projected in slow motion and studied frame by frame.

20
  It is used where work elements are too fast for naked eyes to visualise, cycle times
are too short and activities are repetitive.

3. CYCLE GRAPH
 This is the technique for analysing the paths of motion made by an operator.
 Here, the path of movement is traced by a continuous source of light (small bulbs)
attached on the body parts (whose movements needs to be recorded) of worker,
taken by a still camera, for one single cycle of the work performed.
 The graph will be seen in the form of a white line.

HOW TO PREPARE?

 A small electric bulb is attached to the finger or hand or any other part of the body
whose movement is supposed to be recorded.
 By using still photography, the path of light of bulb (ultimately the path of body
movement), as it moves through space for one complete cycle, is photographed.
 After the film is developed, the resulting picture will be seen as cyclograph.
 Resulting picture shows a permanent record of the motion pattern employed in the
form of a closed loop of white continuous line with the working area in the
background.
 A cycle graph does not indicate speed or direction of motion.

USEFUL FOR

 Improving the motion pattern

 Training purpose in that two cycle graphs may be shown with one indicating a better
motion pattern than another.

21
4. CHRONO CYCLE GRPAH
 The Chrono-cycle graph is similar to the cycle graph but here the power supply of the
bulb is interrupted (i.e. ON and OFF) regularly by using an electric circuit. Hence, the
bulb is made to flash.
 Chrono-cycle graph is a special type of cycle graph in which path of movement
traced by a suitably interrupted source of light attached on the body parts of a
worker by a still camera for a single cycle of the work performed.
 The procedure for taking photographs is same as it is in cycle-graph.
 The resulting picture (Chrono-cycle graph) shows short dashes or dots of line spaced
in proportion to the speed of the body member photographed, instead of showing
continuous line of motion.
 Wide spacing would represent fast moves / speed whereas close spacing would
represent slow moves / speed. The jumbling dots at one point indicate fumbling or
hesitation of the body member.
 It is used to measure speed as well as the direction of the body movements.

22
 TIME STUDY / WORK MEASUREMENT
Topics to be covered:
Topic 1: Meaning & Definition of Work Measurement

TOPIC 2: DIRECT METHODS OF TIME STUDY

Topic 2A: Procedure of Direct Method Time Study / Stop Watch Time Study

TOPIC 3: INDIRECT METHODS / TECHNIQUES OF TIME STUDY

Topic 4: Various ways to classify or to break job / operation into time Elements

Topic 5: Various types of allowances that we need to consider while converting Normal time
into Standard time

***************************************************************************

Topic 1: Meaning & Definition of Work Measurement

Once the method study reduces the work by eliminating repetitive elements on the part of
material or operatives and substituting improved methods for poor ones, now work
measurement starts investigating and eliminating ineffective time in the improved method
and measures time taken in performance of the same identifying and then eliminating
ineffective time.

Definition of Work Measurement given by ILO (International Labour Organisation)

“Work Measurement is the application of techniques designed to establish the time for a
qualified worker to carry out a specific job at a defined level of performance.”

Techniques of
Time Study

Direct Indirect
Method Method

Stop Watch Work Synthesis from Analytical

PMTS
Time Study Sampling Standard Data Estimating

**************************************************************************

23
Topic 2: DIRECT METHODS OF TIME STUDY
Topic 2(A) Time Study Procedure / Procedure for conducting Stop Watch
Time Study / Process of Direct Method Time Study / Direct method of Time
Study
STEP 1: SELECTING THE JOB

 First step in the process is to select the work / job to be studied.

 A job / work are selected for the time study under following circumstances.
o A new job which is recently introduced
o Change in the material or method
o Appearance of bottleneck in a particular operation
o Need for preparation of an incentive scheme for the job
o Any equipment involved in production process having excessive idle time
o Excessive cost associated with the job
o When new standard time is required
o To check correctness of existing standard time
o When two methods are to be compared
 Any one or more of above listed criteria make(s) one job eligible for selection as a
job to be studied.

STEP 2: RECORDING THE INFORMATION

 After selecting the job, next step is to obtain and record all the available information
about the job, operator and the surrounding conditions. The following groups of
information need to be recorded:
a. Information about the study: Study number, Sheet number, Number of
sheets, Name and initials of the work study man, Date of study, Name of
persons who approves the study (Head of Work study dept., Production
department or other appropriate executive)
b. Information about the product: Name of product, Materials used, Quality
requirements
c. Information related to process, method, plant and machine
d. Information of workers
e. Duration of Study: Start time, finish time, elapsed time (Finish time – Start
time)
f. Working Conditions: Temperature, Humidity, Adequacy of Lighting

STEP 3: BREAKING DOWN JOB INTO ITS ELEMENTS

 An element means a distinct part (activity) of a specified job selected for time study.

24
  In this step each operation is divided into a number of different elements. This is
done for easy observation and accurate measurement.

The various elements are as follows:

i. Repetitive Element

It is an element which occurs in every work cycle of the job. E.g. Loading and unloading the
machine, picking up a material from a tray, keeping aside a finished part etc.

ii. Occasional Element

It is an element which does not occur in every work cycle but takes place at regular interval
or irregular interval. E.g. adjusting or resetting the machine, sharpening of a tool

iii. Constant Element

It is an element for which basic or normal time remains constant whenever it is performed.
It may be occasional or repetitive. E.g. Switch-on and switch-off the machine, measuring the
dimension, screw on and tighten the nut etc.

iv. Variable Element

It is an element for which the basic time varies depending upon the characteristics of the
product, equipment or process. E.g. Sawing (Cutting) the log of wood [here time varies with
hardness and diameter of wood], pushing the trolley [time varies with distance of weight]
etc.

v. Foreign Element

It is an element, observed during the study, which after analysis not found to be an essential
part of the job. E.g. breakage of tool

vi. Manual Element

It is performed by worker.

vii. Machine Element

It is performed automatically by a machine and that does not require the influence of a
worker. E.g. pressing a part, cutting, throwing waste material etc.

viii. Governing Element

It is an element which occupies longer time than that of any other element during a cycle.

25
STEP 4: DETERMINATION OF SAMPLE SIZE

Here, the sample size of observations i.e. the number of observations required for each
element is determined by statistical formula or traditional method.

STEP 5: MEASURING TIME (TIMING ELEMENTS BY STOP WATCH)

Time taken by each element is measured by a stop watch. Time can be measured by either
of two principal methods.

 Cumulative Method
 Fly Back Method

In Cumulative Method, stop watch runs continuously throughout the study. It is started at
the beginning of the first element of a cycle and is stopped only after the study is
completed. Here, total time of study is recorded.

In fly back method, stop watch is started at the beginning of the first element. Once the
element is completed, time for that element is noted in the sheet, and at the same time, the
stop watch hand is back to zero. This is done by pressing down the knob. This method
measures the time for each element.

STEP 6: ASSESSMENT OF RATING FACTOR

 Rating is the measure of efficiency (usually speed) of a worker.

 The worker’s rating is found out by comparing his actual speed of work with
standard performance.
 The standard rating is taken as 100. If the actual rating is less than 100, worker
seems to be slow and if it is more than 100, worker seems to be fast.

STEP 7: CALCULATING THE BASIC TIME

 Basic time is calculated as follows by applying the rating factor.

Basic Time = Observed Time X Actual Rating / Standard Rating

STEP 8: DETERMINE THE ALLOWANCES

 A worker cannot work all the day continuously. He will require time for rest, going to
drink water, going to toilet etc. Also unavoidable delay also may occur because of
tool breakage or any such incident. So always extra time should be added to basic
time. This extra time is known as allowances. There are various types allowances
which are as follows:
o Rest and Personal Allowances
o Process Allowances
o Contingency Allowances

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 o Special Allowances
o Policy Allowances

STEP 9: COMPILE THE STANDARD TIME

The standard time is the sum total of basic time and allowances. It is also known as allowed
time.

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Topic 3: INDIRECT METHODS OF TIME STUDY

[A] Work Sampling Method / Activity Sampling / Ratio Delay Method / Snap
Reading Method / Observation Ratio Method
Stop watch time study becomes costly and time consuming process when the work follows
long and irregular cycle. To remove this limitation, L.H.C. Tippet of British Cotton Industry
Research Association in 1934, developed the idea of work sampling.

“Work sampling is the method of finding the percentage occurrence (or non-occurrence) of
certain activity of one or more workers by statistical sampling and random observations.”

Work sampling technique enables the analyst to obtain the information about an activity or
machine by simply making random observations of worker or machine without the use of
stop watch.

In this method a time study person makes a large number of observations of a worker or
machine in terms of activities defined i.e. working or idle, activity occurring or not occurring
etc. In short, percentage of occurrence of the activity is measured and percentage of delay
being happened in that activity is measured.

Then he finds the result in proportion of occurrence and non-occurrence with total output
during the total observed time is noted.

Find Normal Time using following formula.

Normal Time = [(Total Number of observations) x (Duration of each observation) x

(proportion of occurrence)] / Number of units produced during observed time

Advantages:

1. It is simple method and giving quick results.

2. Lower cost than stop watch time study.

Limitations:

1. Not suitable for short cycle jobs and not much economical for single worker

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 2. Operator may change his pattern of work when he finds that he is being observed
3. When method changes, work sampling needs to be done again.

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[B] SYNTHESIS FROM STANDARD DATA

 Synthesis is a work measurement technique to work out standard time for a job by
totalling the elemental times already obtained from previously done time studies.
 Hence, it avoids carrying out time studies (stop watch time study process).
 It is most suitable when the job involves elements which are common in other jobs
in the organisation.
 Many operations in an industry have several common elements e.g. starting the
machine, stopping the machine etc. Whenever these activities occur, they take same
duration of time. They are called as constant elements. Time for these constant and
some other variable elements are collected from the previously made time studies.
 They are being recorded in a file and this file is known as Standard data catalogue.
These data usually contains in the form of:
1. Tabulated standard time for constant elements
2. Charts and Graphs
3. Formulae etc.

Advantages / Merits

1. Time and cost of carrying out time studies are being saved
2. Reliable data can be built up because catalogues are prepared on the bases of large
number of observations
3. Consistency is maintained in standardising the times
4. It is useful in finding cost estimates of jobs, determining prices, designing incentive
schemes etc.

Limitations / Demerits

1. Any error in standard data is carried forward

2. Sometimes it is viewed by workers with suspicion
3. The data cannot be used when conditions change

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[C] ANALYTICAL ESTIMATING

 It is a work measurement technique in which time required to carry out a job at a

defined level of performance is obtained from knowledge & experience of
concerned elements wherever possible, and also by the use of synthesis data.

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  Here knowledge & experience of concerned person is used in standardising the time
as well as synthesis data are also used so it is the combination of estimation and
synthesis.
 And that is why success of this method depends upon competency, intelligence and
experience & analytical ability of the estimator.
 Setting time standards for long and repetitive operations by stop watch method are
uneconomical and time consuming. So this method is useful in such cases.
 How to estimate Standard Time using this method
o Breaking the job into its elements
o Times are set for those elements for which synthesis data are available
o Experience and estimation is done for those elements for which synthesis
data is not available
o Allowances are added
o Standard time is achieved

Advantages / Merits

1. Time & cost of carrying out time study is saved

2. Reliability increases when experienced persons are involved

Disadvantages / Demerits

1. It cannot be used by other organisations as situations in every organisations may not

seem to be same, hence it lacks universality
2. Errors in estimation may be carried forward
3. It may be viewed by workers with doubt

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[D] PMTS (PRE-DETERMINED MOTION TIME SYSTEMS)

 PMTS is a work measurement technique where by times, established for basic

human motions (classified according to the nature of the motion and the conditions
under which it is made) are used to build up the time for a job at a defined level of
performance.
 In this method, that time is used which has already been established for basic human
motions (like move, reach, grasp, eye movements, leg movement, feet movement
etc.) are used to measure the time.
 Procedure in PMTS
 Observe the job
 Break down job into elements
 Locate the elements with specified conditions in the standard time tables &
find out basic elemental time
 Add allowances

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  Obtain standard time
Few well-known systems using this concept are
1. M.T.M. : Method Time Measurement.
2. W.F.S. : Work Factor System.
3. M.T.A. : Motion Time Analysis.
4. D.M.T. : Dimensional Motion Times.
5. B.M.T. : Basic Motion Times.
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Topic 4: Various ways to classify or to break job / operation into time

Elements
Element:

An element is defined as a “distinct part / activity of a specified job (or an operation)

selected for convenience of observation, measurement and analysis.”

There are various types of elements viz.

i. Repetitive Element, which occurs in every work cycle of the job.

ii. Occasional Element, which does not occur in every work cycle but takes place at
regular interval or irregular interval.
iii. Constant Element, for which basic or normal time remains constant whenever it
is performed.
iv. Variable Element, for which the basic time varies depending upon the
characteristics of the product, equipment or process.
v. Foreign Element, which is observed during the study but after analysis, not found
to be an essential part of the job.
vi. Manual Element, which is performed by worker.
vii. Machine Element, which is performed automatically by a machine
viii. Governing Element, which occupies longer time than that of any other element
during a cycle.

After recording the information regarding the job to be studied, now the time comes for
breaking the total job into its various parts so that next activity i.e. timing the various
activities can be done with ease.

How to Break Job into its Elements?

1. Elements should be having definite beginning and ending (Break Points)

 Elements should be easily identifiable and should be having definite beginning
and ending.
 These beginning and ending can often be recognized by a particular sound or by
a change in direction of the hand or an arm.

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  And these are known as break points.
 Break point is the instance when one element in a work cycle completes and
another begins.
2. Elements should be as short as possible
 Elements selected should be as short as possible so that they can be measured easily
by trained observer.
 Duration equal to or more than about 0.04 minutes (2.4 seconds) is generally
accepted as smallest practical element that can be measured reliably.
 Lowest limit range for trained observer is 0.07 minutes to 0.10 minutes.
3. Manual elements should be separated from machine elements.
4. Constant elements should be separated from variable elements.
5. Occasional and foreign elements which do not occur in every cycle should be timed
separately.
6. Elements should be measured in terms of time.

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Topic 5: Discuss various types of allowances that we need to consider while

converting Normal time into Standard time

OR

Topic 5: Various types of allowances given to workers

Various types of allowances which are given to workers are as follows.

1. Relaxation Allowances
 Relaxation allowances are addition to the basic time intended to provide the worker
with the opportunity to recover from the psychological and physiological effects of
carrying out certain specified work under specified conditions and to allow attention
to personal needs.
 Relaxation allowances are usually 10% of normal time.

2. Contingency Allowances
 Contingency allowances are the extra time given to meet legitimate (genuine / valid)
and expected items of work delay which cannot be measured precisely because of
infrequent or irregular occurrence.
 Such allowances are very infrequent and irregular so precise measurement of these
become very difficult.
 They are usually 5% of normal time.

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3. Process Allowances
 Process allowances are the extra time to compensate for enforced idleness of
operator due to nature of process or operation. This means worker is not able to
work because process or machine takes its own part of cycle. E.g. Worker working on
automatic machine
4. Interference Allowances
 They are extra time for a worker attending two or more machines and the worker is
busy on one of the machines resulting in idleness of other machines. E.g. if a worker
is handling two or more machines, so when he is working on a particular machine,
other machine(s) may remain idle at that time.
 It is actually to compensate for the loss of earnings by a worker due to interference.

5. Start up Allowances
 They are extra time given to compensate for time taken for starting a job.

6. Cleaning Allowances
 They are extra time given to clean a machine or a workplace.

7. Set-up Allowances
 They are extra time for preparing a machine or process for production.

8. Policy Allowances
 They are the extra time given by either management’s discretion. They are used to
provide satisfactory earnings by worker by enhancing performance.

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