INIT

Operation Management

Syllabus
Operation Management: Introduction to e
Operations Management-Principles and Types of PlantLayout
Methods of Production (Job Batch and Mass
-

Production) Method Study and Work Measuremen

-

Management- iM-ix Sigma Deming's Contribution

-

Analysis JT System-Business Process

-
to Quality Inventory
Management- EO-A
-

Re-engineering (BPR)

LEARNING OBJECTIVES

Concept, Objectives, Scope and Approaches of Operations Management.

Concept, Principles and Types of Plant Layout.
Concept and Methods of Production -

Job, Batch and Mass Production.

Method Study and Work Measurement.
Concept of Quality, TQM, Six Sigma and Deming's Contribution to Quality

Concept, Objectives and Procedure of Inventory Management.

Concept of EOQ, ABC Analysis, JIT and BPR.

INTRODUCTION

which converts raw materials or information into goods/

Operations management is the set of processes
inventory management, work study,
service. It involves decisions related to plant layout, plant location,
marketing strategy and concepts.
facilities like machinery, equipment
A plant layout is defined as planning and arranging the manufacturing
production is carried out using different methods such as
and services in a systematic manner. In plant,
a

To improve productiviry and to reduce wastage of labour, different

job shop, batch and mass production. used.
method study and work measurement are
techniques such as work study,
act of ensuring consistent quality in the products
customer expectations. Ihe
or exceeding
Quality is meeting is an important concept that foauses
known as quality management. TQM
and services of an organization is
on customer satisfaction and quality.
of policies, systems and procedures which
management involves
development and administration
Inventory decisions and functions like customer
service requirements, production
will in turn reduce total inventory cost
scheduling, purchasing and traffic.

maM alldN-RNE 194RNAL FOR ENGINEERING STUDENTS s

 VTU-HYD
YDERABAD
(JNT
FOR
ENGINEERS
(-3 Operaton Management 3.3
MANAGEMENT
FUNDAMENTALS
OF aut the differences between method study and work measurement.
SOLUTIONS
Model Paper4, 01(e)
3.2 WITH
Answer:
QUESTIONS
differences between method
SHORT
The
ew study and work measurement are as follows,
ART-A
importance.
about
its Method Study Work Measurement
Management.
Explain briefly S.No.
01. Define Operations Method study deals wiun recording, monitoring and carefully Work measurement is the application
Answer
asses ssing the current methods of pertorming work with an | designed to establish the time for alevel
qualified worker u
Definition of Operations Management that
studies
all the
processes and sve
systems that ate aim improving the
of methods
current and creating new and
cOst effective method which minimizes the cost.
carry out specified job at desired ot peron
a a
"the branch ofmanagement
management can
be defined as, u deals with elimination ofunnecessary work content of a It deals with the investigation of unnece
with
perations
into value added outputs" is the
held
concerned
manag
undertaken for converting inputs developmenthg
job (or) operation. involved in a job/operation.
production
management to
"Operations those relating
of Education, time standards.
work load on the basis of
particularly
to the Department organization It usually reviews the methods, layout and equipment. It measures
HCCording functions ofa fim
or
.
andor technical
directing the physical time study.
Method study is also known as method of engineering or Work measurement is also called as
and manufacturing 4. method of work design.
Importance of Operations Management and
conro
in, It determines the analysis techniques which deal withIt is considered as essential for planning
important role
operations management plays
an
The effective improvement of men and machines. operations.
Improving better supplier management. management.
.
Q5.
Differentiate between conventional quality management and total quality
Eliminating unproductive resources/wastes. Model Paper-1, 01(0)
2.
Answer:
Increasing the productivity.
.
TOM differs from conventional/traditional quality management in the following ways,
over the competitors
4. Gaining competitive advantage
customers
Conventional/Traditional Quality Total Quality Management
which satisfy the Area
.Producing efficient products/services S.No. Management
aims at achieving customer
Developing the production plan in advance.
Mission and| lts mission and objective is to maximise TQM primarily
best quality products and
the pronts and returns on investment of an satisfaction by providing
objectives
Q2. What is the need for carrying inventory ? organization. services.
Model Paper-il, 01fe)
customer satisfaction and
Answer: It basically emphasizes upon management's TQM emphasizes upon
2. Focus quality.
inventories for the following reasons, requirement.
Every firm should carry suficient stock of network
hold some reserve been vertical in TQM emphasises on building up a
The materials are not immediately available whenever an
order is placed for fresh stock,
a firm should
3. Structure of Traditional structure has and functions.
nature i.e., top down management. organization across departments
stockin order to allow production operations
to continue if delay occurs in procurement. organization
a_ the
TQM considered quality management
Due to the variation in the demand, changes may occur in the manufacturing
program. In order to meet the increased 4. |Management| The traditional quality management doesn't| and integral part of the organizational
. and making use | significant
demand, the company must have enough inventories stock allow
to the production without interfërence. perspective of | focus much on developing It
Stock-out occurs, when a firm has little inventory. The stock-out of essential materials means interruption in the production
quality of quality control tools and techniques. | system.
basically makes the quality department to be |
3.
which may affect production cost and delivery of goods to customers. Thus, suficient inventory must be maintained. held responsible for the quality issues.
considers customer
A TQM organization usually
4. The men and machinery will remain idle, if there is a stock-out of materials. Hence, for better utilization of men and Attributes for |The traditional quality managementconsiders and
5.
ROls satisfaction and production ofgood quality goods
machinery, the company must keep enoughstock ofinventories. success sales growth, increased profits and quick |
the organisational services as the key attributes for the organization's
Q3. Briefly discuss various factors affecting plant layout. asthe important keys for success.
success
Answer Model Paper-ll, a1(0 of production.
Q6. Explain briefly different methods
The various factors effecting the plant layout are, Model Paper-4, 01{)
Answer:
1 Production capacity, production method and production process.
Different methods of production are,
2. Type of industry i.e., analytic, extractive, synthetic or conditioning . Job Production
the other in terms of
is different from
3. Type of product and fiow patterm of material. of various small jobs. Here, every job
Job order production involves performing could consume a lot of time and money.
This method
materials. Hence, production design
Storage, work area, space needed for machines. 1anure, cost and consumption of raw labour.
may also involve special machinery and skilled
5. Grouping of machines.
and other small workshops.
shops
Example: Tailor's shop, vehicles repair
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 JNTU-HYDED
OERABAD ratlon Management
UNIT3 Operati
FOR ENGINEERS
MANAGEMENT
3.4 OF
FUNDAMENTALS
2. Batch Productlon
in lots (1.e.,
butches) at reguh PART-B ESSAY QUESTI 3.5
are
manufacturcd
ndopled in phur Va NS WITH UTIONS
Ype of production, wo or more types of productsreceipt oforders. This Is generaily
erent

n s
a
products are manufactured and stocked and then
sold o n eutien INTRODUCTION TO oPERATIONS
3.
companies.
machines, sheet metal presseis
operatlons Management. What aro its MANAGEME MENT
ple: Drugs, paints, clothes, forging objoctives? Discuss the scope of nent.
3. Mass Production
AnSwer i
operatlons h
stages
from process to rocess. There i
proc eaition of Operations Managem
eontinuous
In mass type of production, items or products produced in
are
the subsequent
operation. This 1 tions management
y
now
of materials. Output of one operation
becomes the input for
1ype of can be defhned as, "the branch of
for converting inputs into value added
outna management
production is preferred where bulk production is required. undertak nagement that studies
studies all the fproccsses and systems that are
rding to the U.S
Accordin
Department of
cars, two wheelers, generalors, Waucne elc. sical aand/or technical
physical Education, "Operations
Dpie: Air conditioners, TV sets, directing the funetions of a firm
or
management is the field concernea w
and
Q7. Write briefly about,
undmanulacturing"
organization particularly those relating o Oduciion
0
oT Operations agement
(a) EOQ Objectives
The objectives ol
(b) ABC Analysis.
operauons management are,
Model Papor-4, Q14 o minimize manufacturing costs.
Answer
To ensure product quality.
(a) EOQ To maintain manuiacung scnedule ior
3 shipment, operating cycle time, inventory turnover rate, repair and
make the best use of the nim s resources, taki
time, capacity utilization etc. maintena
Conomic order quantity refers to the amount of material to be ordered to King
nto consideration factors such as shelf life of the material, space required and space available tor warehousing, price breaks lo acquire utilize and replace machinery and equipment.
4.
ordering quantity etc. To keep materials in terms of units, rupee value and space
5. requirements.
(b) ABC Analysis To maintain manpower effectively by keepingg in mind factors such as
6.
industrial relations and absenteeism etc. employee turnover rates, safety measuremens
ABC analysis is the most popular technique used for inventory control. ABC stands for Always Better Control. ABC analysis
To install important facilities such as power, water supply etc.
was developed on the basis of the Pareto's principle or Pareto's law by H.Ford Dickie. The concept ot ABC analysis depends o 1.
he annual consumption of items (i.e., not the cost of units). Scope of Operations Management
Production or operations management has a wider scope and it requires decisions on several areas as discussed below,
1 Long Term/Strategie Decisions
The various long term (or strategic) decisions are,
(a) Product Design and Selection
The product mix is chosen keeping in mind the overall mission and objectives of the fim. Design of product is important
and value engineering helps to achieve the cost-effective design.
(b) Process Selection and Planning
in optimum
Process selection involves taking decisions about technology, machines and equipment. Process planning helps
automation and mechanisation.
Facilities Location
considered
Location choice should, as far as possible, cut down
on production or distribution cost, diverse factors should be
for evaluation of location.
d) Facilities Layout and Material Handling
in such a way that
of machines and plant facilities. The arrangement should be
Layout of plant deals with arrangement way that the cost
of material handling is
the flow of production remains smooth.
The departments are laid out in such a
minimum.
(e) Capacity Planning
over a period of time. This is planned
for short-term as well
of the convèrsion process
Capacity refers to a level of output
as long-term. MA
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 FOR
3.6 FUNDAMENTALS OF MANAGEMENT
Transformation Approach DENASA NIT-3 Operation Management

Process Model
Operationa/Short Term Decisions perceives OM as a he Core
Traditional approach 0 The following table depic 3.7
The various operational (or short term) decisions are, the
traditional view, OM is
the nalion e core
system.
As per
manages
tnar arca of business whilich businesi process model.
) Production Planning function which

aw
materials and
other
inpurs (such material Deed.
as
into finished produet
conveng
eeds of
Core Processes

Cing customer Keeping

aims at setting goals or targets and allocating erc) Supporting Business Processes
services,
information
Identifyin a
customers,
track
on competitive | Market
n e resources viz., men, materials, machines, In simple words, operations management

nverts the i sidered: needs. product

products and
environment. offering after sale Evaluating customer Understanding
which converts
services, among varied production operations so Lhat system inputs of
ther best
a
transformation

other resources into outputssof goods ane

ofgoods and services. satisfaction. customers, market
abou
set goals.
possible use can be made in the light of the materials and
pertorms the task of r s
service segments and competitive
Operations management needagana product ASSessing product |
Building produ
environment.
Production Control operating the system
wihich manutactures the gand Developing new
of the outputs to be manuf strategy. concept. Eveloping new product|
product Developing and testing
The detailed description the expected d design. | Bu
Building new producis o

prototypes.
Pro tecting
It aims to In order to produce
see that the activities are caried out in-line
with the predetemined standards and schedules
ofpro-
the initial point.
details of inputs
and quality of inputs
has to be deci
and other inputs into
a n dm a processesPerations|
rials to
meetplanning Managing product | Managing business| Managng
and
control processes. transformation
product improvements.
>***
ductions. OM converts the
raw materials
manner that the finished ose
demand. processes.| logistics. process.
and services in such a
goods
(c) Iaventory Control services have higher
value than the sum ofinputs and in Managing strategic Managing human |
planning processes. resources. Managing information Managing financial
It deals with the control of costs. systems. Organisation management
materials, work-in-
raw
performs several func resources. and business support
progress, finished products, suppliers, tools etc. and Operations management
(or transforming)info activities.
their effective storage. executing the process ofconverting t
The functions of OM includes different roles Table: Core Process Model
output. can
(d) Quality Control into the following fîve headings, The core process model' consists
be categorized of four core business processes which explain the
The four core business processes are, working of a business organisau
Various statistical techniques are used for effective Plant
quality control. The success of the company depends For manufacturing the product, plant and equipmens (a)ldentifying customer needs.
on its ability to maintain quality standards
which are needed. OM has to ensure tnat plant matches with
the (b) Building product strategy.
prescribed in terms of specifications like size, colour, specifications and is as per the requirements.
shape etc. Quality control is maintained by testing the (c) Protecting processes and materials to meet demand.
(b) Program
actual production and (d) Managing strategic planning process.
by ascertaining whether they Production programme makes sure that production
conform to the set standards.
schedules are met. (a) Identifying Customer Needs
(e) Method Study
(c)Product It is very essential for an enterprise to
identify the needs of customers for supporting the company's demand,
With the help of time study and motion study, standard requirements and product design and development activities. For this purpose, the organisation has to keepforecasting
a frack on
The role ofoperations management in the transformation
competitive environment, market products, offer after sale services, evahuate customer satisfaction, understand the customers
methods are devised to reduce time. process is to make sure that product is produced
and market segments.
according to the plan and specifications made.
Maintenance and Replacement
()People (b)BuildingProduct Strategy
This deals with preventive methods to avoid machine
Production relies upon the individuals involved in the For producing products as per the customer's requirements, marketing, operations and engineering activities are perfomed.
breakdowns, scheduled and breakdown maintenance For this purpose, the organisation must have a capability to assess product concepts for designing product or initiating
manufacturing process, their skills and their motivation
policies regarding repair and replacement decisions. levels. It is the responsibility of OM to make sure that product improvements. It should also have the capability to develop and test prototypes and produce new products or make
Cost Reduction and Control workers with required skills and motivation levels are product improvements.
available for production.
Value (c) Protecting Processes and Materials to Meet Demand
engineering, budgetary control, etc., help us to
(e) Process finished products/services
keep our costs optimal. All production decisions are Management activities deals with acquiring raw materials from suppliers and delivering the transiormation
subject to control measures, after proper feedback. It is the responsibility of OM to select the best method to the consumers. These activities involve operations planning and control processes, managing product
and managing supply chain processes.
for manufacturing the product. processes, managing business logistics
09. Explain the approaches to operations
management. 2. Modern Appreach d) Managing Strategic Planning Processes
outlines what the firm has to do
The second approach to operations management is a in all organizations. Strategic planning process
Answer Supporting business processes are required management of human
value driven approach. It begins with an idea that business
for achieving the organizational goals. The management of strategic planning processes requires
and management of business support activities.
There are two consists of a set of processes and each individual management
approaches of operations management, process resources, financial resources, information system, enterprise model. In
and third core processes of core process
includes inputs, outputs and structure. Each individual
process activities are engaged in the second
. Transformation (Traditional) approach and Most of the operations management various activities which the organisation
has a job which has to be
management is defined as a collection
of
performed and each process must be the value delivery approach, operations
assessed for determining to what extent the
2. Moden approach. process is successnu undertakes for delivering value to
its customers.
in attaining the
expected outcomes. ENGINEERING STUDENTS
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 EERS (JNTU HY
MANAGEMENT
rOR
ENGINE

DERARA
hesn ias
FUNDAMENTALS
OF
uniple,
irle, the
1he est iayeit
tho
3.8 Argaring

titely weri
PRINCIPLE6 XN CONCEPT.| anl
efeu
u i e m l e

mitet Sotlkfnefioh
a n d Safety
ie
charweteee
Piip othet thinj eing rqua the
m e t ere e this.
satisfyvin
D i n e Plent 4.ayot. to wrtk
Q10
a n d prineiples of pond p a t layoun
Acrmding

ie 1he
me
nbih
makes
mak
pies*
Iny fw
w r k e

asfe
Anewer and
Prinetpe o f F e r i b i l y

which can
Deleston od lent ayout
the lest layot
18 omc

cost and wilh

and dopned
mney. matia en
minimum

menns
men, at A
is piare where
A Net hrrght and aranprd
ar
lpre end
rearrangcd

types of plant ayout

er.,
maxhinern, g u i h e n t a c a n be defne

fw manua Taring
A plant lev r n
pndun
i n c a n e e n c e

differer rent
the manufa Turing
fashties iik
List
out the and fix
and fixed plant lay
a plannne and arranging mannes, " 011. f u n c t i o n a l

a d aen uer na **atemaix Explain

mach quptnn
method
prdear gmds in the moat nonamK
detai Model Paper
of prdntr
layot deendh e n thr tye of rohn1 n e
Aswer
layout are a s folloows,
ari the volune nf prmdution Tayou
p m Types
of PMant
of plant
types
haracterstkes of eod Plant iayont The
vanous
(Process layout)
layout
good plant layout.
Functional
charactersts ofa
Following are the (Static layoul)
retum on Fined layout
ar layout)
capacrty
tpro iden enough prnductien Product layout (Line
mvestment s of prme impaIKt layout) o r Cellular ia
Combination layout (Group
costs 4
t reduces matenal handing
Functional o r
Process Layou
and faciltates
movemen men of layout involves grouping ther of
f
() reduces congrstion
hazards and accidents to
Functional/process
department.
For example, mach
and matcrals thereby reducing in
machines
one
grouped at one plac
cmployres
similar
operations
are and
the performing drilling Milling machines, Grinding mach
achines
() faciltates the cficient use of labour and utilizes similarly Lathe machines, or function are
availabe space effectrvely a particular
type of operation
required for In functional layout, stress uld
location.
flexibility and placed in one
() t provides basts for volume and production factors such as,
of be laid on the to be minimun
of supen 1sion and allow case work centres neced
(vi) provides case
Distance between
(a)
maintenance should be arranged according to the
Work centres
production (b) and
(vi) t provides proper ventilation and reduces of operations
sequence
inspection.
cycle time. be convenient for
(C) Layout should
Principles ofa Good Plant Layout Raw matenals stores

there are six basic principles ofa

According to Muther, Heat treatment
good plant layoun. They are, Lache Drilling machines
machines
1. Primciple ofOverall lategration
machines (XY)
which ---0-
According to this principle, the best layout is one
integrates the men, matcrials, machinery, and supporting
AX
activities. Milling Grinding Finishing )
machines machines
Principle of Minimum Distance machines

the
According to this principle, other things being
best layout is one in which men and materials dom't have
equal,
to move long distance between operations.
(YX
Principle of Flow Finisbed goods stock -(X)) Inspection
room (Y) department
Muther said that, other things being equal, the best layout
is one which aranges the work area for each operation or
process in the same order or sequence that foms, treats Product (X), Product (Y)
or assembles the materials. Figure: Funetional Precees Layout Showing Product Movements
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 THODS OF PR
S.10
FUNDAMENTALS OF MANAGEME
(b) CombinatlonLayout

is a layoul formed h
3 METHODS

pefine Production. Explali ODUCTION ((OP 3.11

Combination
layout
advantanges
o f functional
lavo kin
inlg
dpproduer a13.
Ntforent methods of AND MASs PRODUCTION)
consideration

Io
the

this lnyout,
machines

these
are grouped intn
cells functiaon
s
AnSweri
nition o fProductlon
production.
layout. layout
and on the Moded Paper, 04a)
to that of
process
within a large shop
floor. Each cell prod line Det

Production
19 an aciivity that transfo
" C l y

raw
ofproduct
layout
1The
machines are aaranged
incs are
acco
is a
orocess adopted to transBorm a selmaterials into finished
ucts and services products by usung
production

ofa family. of machines, men, tools etc. In

other
requirca quantily and input elenents
an in
single part like men, materials, proce
products
words,
a

the
similatity
of
operations,

ctc., and these. ike

finisncd

specified KC materials, capital

caprtal and
2 energy into set o1
a
ouipan
quality to achieve the objectives laid down by the orgamizaion. c
ments
to
Casting, milling, welding
consideration the
Prlso aiy objectrves
Operating Unt
Example:
family are
o fproductlayout.
assembled taking into
advantages Inputs
Land
Men Ouap us
- Goods
Macrial
Money Converso
Process Services
Utilities

Figure: Production
Funetion in a
(ethods o f Production Manufacturing Concer
Mehe different methods of production are,
order production
1. Job
3 2. Batch production
3. Mass production.
Job Order Production
Tob order production involves performing of various small jobs. Here, every iob is different from the
hre, cost and consumption of raw materials. Henc other in
naen involve special machinery and skillednCe,production
labour.
design could consume a lot of time and money. 1s n

nle: Tailors shop, Vebhicles repair shops and

other small
Advantages of Product/Line Layout jnoAE iso0id workshops.
Characteristics of Job Production
Some of the advantages of product/line layout are as O Oo Important characteristics of job production are,
follows, Ajob shop can produce a variety of jobs in small batches.
. It is
Welding machines (a)
ideally suitable for a
standard product where Milling machines h) It utilizes general purpose equpment which can be outfitted with special tools, fixtures and thus different jobs can be naac
production requirement is high. M
with the same basic machinery.
. It avoids bottlenecks.
C Casting machines
The material-in-process follows different processing patterns in batches
F = Finishing machines through the shop facilsties.
3. Better production control can be achieved. () The work does not flow in serial fashion i.e., not serially
utilized in 1-2-3-4-5... route).
Advantages of Combination Layout facility (Not
4. ( ) I t normally employs overtime and has a flexible layout.
Work-in-process will be minimum, so less in-process Some of the advantages of combination layout are
inventory is required. 2. Bateh Production
It requires less work-in-process.
or more types of products are manufactured in lots (i.e, batches) at regular
In of
5.
Itrequires less foor space compared to functional layout. It reduces handling costs. this type production, two
Different products are manufactured and stocked and then sold on receipt of orders. This is generaly adopted in pharmaceutical
intervals.
Disadvantages of Produet/Line Layout 3. It improves or enhances production control.
companies.
Tt increases the responsibility of workers.
Disadvantages of product/ine layout are, Example: Drugs, paints, clothes, forging machines, sheet metal pressers etc.
Disadvantages of Combination Layout
1 There is no flexibility of work. Characteristics of Batch Production
2. It is
Combination layout has the following disadvantages, Some of the characteristics of batch production are,
quite ckpensive as
special purpose machines It reduces the
required.
are manufacturing flexibility (a) Articles are manufactured in batches as per the specific order procured.
2. It increases the machine idie time.
3. (b) Division of labour is possible and flow of materials is intermittent.
Expansion of this layout is difficult. 3. It requires huge capital expenditure. Plant layout is of process type.
Suitability of Product/Line Layout Suitability of Combination Layout
(d) Automation of processes and mechanization of material handling can be adopted.
Product/line layout is employed in industries Combination layout is useful where an item or
product ()Proper maintenance ofmachinery and equipment is essential.
ontinuous production of goods such as cars, involving manufacturing
is being made in
different types and sizes. This
layout is mostly
nd chemical industries. used in industries where manufacturing of products is caried ( Process and product planning is done for each batch.
out first and
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of this book is a CRIMINAL act Anyone found
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proceedings. SPECTRUMALUIN-ONE JOURNAL FOR ENGINEERINGSTUDENTS
 FOR ENG
|JNo-YDERA
3.12

Mas Preductioa
FUNDAMENTALS OF
MANAGEMENT

Suitabiliy of Job
Order

Job oner analysis appropnate

is
Production
in situatie
its dishinct pracesSing requiremen"h
OERABA
here ee
WT3 OperationManagement
Suitability of Mass Produetion
is
Sys
n mass hR of production, items or praducts are has Mass production suitableiin the
the herreceip
eim
job 1s carried out on 3.13

n u o a s and steady fow

custmizrd production
sequencing of the production a
d
following situalions,
of maierials Output of o onders
rocess standardi1zation.
perabon omes tbe input for the
suhsequent
Batch Production Syste where production is carmied out
of praducton is preferred where bulk operai s
in
Ths ype b)
of Batch Production Syste large volumes
requred pradachon Advantages Where the special purpose machin.
production has the following
Example: Air conditioners
Batch
machinery are optimally utilized
dvantages, aterials, compornents
Where matertals, componens and na
are used
which have
nave the m
TV sets Cars
Two-wheeers.() Plant and ana parts have higher higher productio capacities and
Generators, Watches etc.
()
to
When compared job
order production, co
015.
Compare and contrast, continuous flow withoutproduction output rates
batch production is
less. any backward
Characteristics of Mass Production in h
Order movemen
in plant. Production and
b)Job OrderProduction and Mass
investment
barchproduction,
(a)
Mas production
system has following characteristics(u)
h
is also low. Production
Batch Production.
Machinery is laid as per the
sequence of v)Batch production
Is
fiexible n
ure to
nature to
follow a
(6) Matenal handling is minimum and
production process
and nurmber of products.
Answer:

balanced. the fiow of workIS Operators enjoy greater job

satisfaction. Job Order Production and Mass Prodn Model Paperd4, Q7(a)
Disadvantages of Batch Production System
(c) WIP (Work-In-Progress) is small as compared to Following are the disadvantages of batch Drod.
Aiference between job prouction and mass
intermittent production. Due to irregular and longer fiows, material ha production are as follows,
(d) Procedures (methods), tools and material
handling need dificult. handling is SNo.
Point
Difference Job Order Production
proper attention. Production planning and Tol
control is also
is also Mass Production
(e) Plant layout and facilities are
(i)
batch production. complicated in
comn
. fethod of|it is an intermittent
type of
designed to suit production in
Production wherein, only one production It is acontinuous
requirements. repetitive modifications provided at a time. product or service is producionpo
set
(i) Due to up, it
results jin
higher set up costs.
Output of one operation becomes the input for the Design Design varies from product to
(iv) Work in process inventory' iS higher when comr
hen compared to 2.
subsequent operation. continuous production.
Layout
product. | It has small vanation in its design and production process.
Q14. List out the
It requires process layout.
advantages, disadvantages and Suitability of Bateh Production System
Cost of |It requires product layout.
suitability of, Following are the situations wherein batch produe
4. |Injob production, cost of handling materialIn mass
(a) Job order production system system is used. bduction handlingequipment
materials/
is high. production,
equipment is low.
cost of handling materau
(b) Batch production system In case ofshort production runs and when there is g
is greater equipment
fexibility in plant and machinery.
(c) Mass production system. 5. Planning Ordinary level of planning is
() When cost and lead timeofmanufacturing are less w required. Every stage ofproduction requires a careful planning
Answer compared to job order production. when Control Injob production, high level ofcontrol is
(a) Job Order Production required. |In mass production, low level of control is required.
System C) Mass Production System Accuracy Accuracy for quality product is satisfactory.
Advantages of Job Order Production System Advantages of Mass Production System
Accuracy for quality product is high
b) Job Order Production and Bateh Production
The following are the Mass production has the following advantages,
advantages ofjob order production,
It requires small amount of investment in The rate of production is high in mass The various differences between job order
equipments production with production and batch production are as follows,
and machinery. less cycle time.
Point of
(i) It is flexible in nature and can be () Capacity can be utilized well with the help of line S.No. Job Order Production Batch Production
started early. Difference
(1) In the balancing.
job order system, a mistake or defect in one .Meaning Thejoborderproduction system that involves production is a type of production proces in
Batch
operation, does not interrupt the whole process. ii) Mass production does not require high skilled workers, Produchionof one or few quantityofproducts whichthe job in lots or batches passthrough various
it can be caried out with the help of semiskilled or low
(iv) The risk involved is less and the chances that are designed and produced as per | functional departments.
of failure are skilled workers.
also less. customer requirements
(iv) Less manufacturing cost per unit.
flow of The fow of material is intermittent.
Disadvantages of Job Order Production System 2. Flow ofMaterial There is highly discontinuous
Disadvantages of Mass Production System materials.
Job order production system has the following Mass production suffers from few limitations.
They are manufactures few number of| A whole unit/batch of products are produced.
disadvantages, as follows,
Quantities It one or

The Produced Single designed product strictly according to|

() production system of job shop system is very If one machine stops functioning the entire production customer's specification.
complicated. line stops working.
General purpose machines and facilities are Special purpose machines employed.
are
i) Types of
The job order system faces
difficulty in loading the (1) Alteration in the product design would drastically alter Machines used.
machines. The workers should be highly skilled and versatile.
the line layout Multi-skilled workers are employed
(i) It requires high inventories (i) Huge investment in production facilities.
Worker Skills
Variable
iv). The cost
of material handling involved in job order iv) In mass production, the cycle time is ascertained with
0. Types of Customized

system is high. Product

the heBp of the slowest
operation. STaDENTS
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 FOR EV
3.14

3.4 METHOD
STUDY AND
rONDAMENTALS

WOR
OF
MANAGEMENT

| 3.
Exanine

ally
are criticai
JERADA T - 3 Operation

What is Work
Manage
Measu
MEASUREMENT The
recorded
activities

is the
like, what
purpo
examned by au a17

a
urement? What
objectives? Explain basic
Q16. Define Method
Study. What are its objectives?
place?
s o m e primary
9uestions

What is
sequence?
the
Who is t h
he
ese

include whatOn? son? How Nhe in work measurement, procedure învolarevedits |5. Compile: Compile the data and
3.15

provision to be made for compute standara

the
Explain the basic procedure involved in method the questions t else? ne and
done? and
secondary
nd Answer . appropriate allowan
study. be the
new
method?

tion of Work Measurement

Model Paper4l, Q6la) Deine: Define precisely the
melhods of operation for which series of activities
Definition
should.

ak
and
Answer:
When we obtain the
answers for the
he above questio Work. Measurement Is the and issue the computed time as time has been computed
standard time.
ned to estabish the time for a applieation of techniques
combinino 918. What
Definition of Method for eliminating,of
ar anging o
used
Study they can be
job at a d sired level ofqualified worker to
are the
important methods or techniques
one or
more
or group activities, ta speciied carry
of work measurement
"Method Study is the systematic recording and critical
examination of existing and
simplifying
Work Study
performance". Answer
a means of proposed ways of doing wo rk, 4. Develop
developing and applying easier and more euc The various
methods for reducing cost".
The new method is developed after critical
cal exan methods/techniques of work measurement are,
.
The develope thod should Time study method
Objectives of Method
Study ofthe
recorded data.
bep Method Stucy

The objectives
of method study can be studied as follows,
feasible, safe,
eftective,
econonmical and
acceptable prtoactothhiea
and accent. study and standardize
Work Measurement
(To measure work
2.
.
Synthesis method

functions. methods of
work of a job) Predetermined Motion Time System (PMTS)
To content of ajob) method
examine the present method of performing any J00
activity or operation. 5. Define 4.
Analytical estimating method and
2. lo create or design a method for enhancing the Defining includes,
.Work sampling/ Activity
productivity and decreasing the operating cost. sampling method.
3. (a) ndard practices an
Preparation of written document, standard Resulting in Time Study
To decrease the operating instructions
material handling
or material
movemen, ime
Shudy deals with the ascertainment of
as it helps in reducing the weakness or fatigue or
Recording ofthe improved method for future. ime needed for performing specific task or work amOunt or
Higher Productivity a unit.
Study is one of the essential and important techniques of Time
4
employees.
To make the Bringing out the changes
in layout
refereno, Figure: Work Study measurement which helps in planning and controlling the
work

optimum utilization of resources. ) operations, It determines the time with the help of stop-watch.
Listing out the tools and equupment to be used in ths t helps in
. To make the work methods
processes standardized. So, we can understana that work recording the time to perform a specific task, durings
or
(d)
method and the ney the productiv1ty.
It is most
study can help in| specified time
irequently used to increase period in order to ascertain the adequate time
6. To develop improved quality of products. tout with given quantity of accomplishing
the task. 10
7. Training the concermed personnel on the new
resources
and with little capital|
To introduce high standards ofsafety and health for| )
method.
improved investment.
Time Study has been defined
by ILO.(lnternational
employees. Objectives of Work surement Labour Organisation) as, a "work measurement technique for
recording the tímes and rates of working for the elements of
Procedure Involved in Method Study 6. Install The objectives of work measurement are, a
specified job carried out under specified conditions and for
The basic steps involved can be remembered by the code When we have defined the new improved method To improve layout ot machines and analysing data so as to obtain the time necessary for carrying
he processes. out the job at a defined level of performance".
"SREDDIM" which are the starting letters of each step. The next step is installation ofthe method. It could be done by To improve planning and control.
2.
steps are as follows, Synthesis Method
Gaining acceptance of the change by departmeu To ensure reliable performance measurement.
a 3.
1. Select Synthesis is one of the methods of work measurement
supervisor, management approval, acceptance b To ensure reliable labour cost control. used for developing the time needed to perform the task at
The job which needs to be standardized is selected for involved workers a specific level of
5. To follow standard cost and budget procedures performance by adding the fundamental
method study. time values acquired from past time studies made on other
(6) Retraining the workers to operate new methods.
b. To introduce of fair incentive schemes. jobs including the same job elements or from standard data or
2. Record
Installtion involves three steps, simulated data.
Basic Procedure of Work Measurement
The selected data is recorded using appropriate record1ng Standard Data contains the record of 'fundamental'
technique. The purpose of recording is to, () Planning procedure
The of work measurement involves the
or 'normal' time values for various job elements. This record
following steps, is developed by following the timings of different standard
(a) ldentify and record every minute detail of the process (i) Arrang1ng elements. As same elements or motions are engaged in various
Select: Select the work to be studied.
or operation or activity. jobs, if time study is conducted for a new job then it is wastage
Implementing. 2 Record: Record all relevant data, method, acivity by oftime for those elements in new job which is similar to the
(b) Bring out the sequence and inter-relationship of'various7 accumulated data
activities or operations.
Maintain elements. previously timed jobs. In this situation, the
Eiamine: Examine the recorded data in detail and| known as standard data can be used effectively.
3.
C) Bring out the repetitive operations. It is very essential to maintain the installed methad breakdown critically to ensure that the most effective When the standard data catalogue is developed,
the
ie., to ensure the proper functioning of the installed method methods and movements are used. elemental time values from the standard data catalogue
are
d) Make it useful for future reference.
acquired
by periodic checks and verifications. The purpose of checks in acquired and added. Thus, the simulated time represents
4. Measure: Measure the quantity of work involved which can be transformmed
the expected normal time for a job
Recording
and diagrams.
can be done with the help
ofprocess charts and one.
verifications is tofind
any deviations from the standul oftime and use appropriate work
cach element in terms
into standard time by adding significant
allowances.
measurement technique.
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 MANAGEMENI FON VNT3

OF and implkd
Needs Quallty Mar
3.16 FUNDAMENTALS

Quality Stateel
at

are the neek byby the

specified
euslomen
What

Important7 Discus varlous

gement? Why It
dimenslonm of
3.17
r e d e e r m o e d Motien Time Sywhem (PTS) Nedhw
The
statod nevns or services Perormane
which aarc nnlhed need
the proxhxTN Qualty
hasing
Pmkem1nod Motmn Time Sysiem (PMIS) K atthe tu
of pun detivities
hich wmans mems de prokactivy or cos-efsectivity
needs may eApeLl
mayed t
dse
wih the
vnemed needs m
te tevhnaqucs
ofuii measurement uhiah elpa 1n ktermmmngare lmplied
the pnfuxt. ARONEr Mol TAgh whch the provhaxt aKcomplishes tas plarned oby tve
erhrmed
hy
In order to achie Page40 Eamphe Return-c
the nomal r hasce himcs fr hase human mRMns. These i n
dy
the custoners
must bav
have an ce
nulcquate eaning
of Quality Management taventmemd (RO
formuiatmg the tne fr a new ub al a
Meani
valucs are used for speeifcd
an
organization

attaning qualuy, stated and implied needs o act of ensuring consistent 2. Teatures
specitc level of performae quality in the
ustomen
n
abour the Ahe
Anon ledge (an organizauon is known as quality
ceso l t
producta and Features are the trauta which sd extra value to the
'Ftness for Purpose
nC of the management
disciplinenanagement
which hlpsItis|
PMIS s an extensam of motvn study as t not on Quality as
erv,

product sed enhance the perlcamanee of

.
said to be of Rood
a prdut
provdes a detamed and effetive analysis of themvnon but aso
heips n determining the measurement of anae that is ruiru
Apnaduct
or
s e r v i c e is

is purpose successfully. ,
ty ure
that the means, beneits, outputsand
tnaducts
and procese
ig
and services is maintained tnd
guidelineices
to1 Rellablity
of fulilling
for a sequence of motion. is capable
to miect is purpose
Is considecro
nsidered as uality
delivenred will
guidelines of stakeholders and requirement The prodect's abniay to pertorm umtormly thrcngho
which fails a
bad
the
service

or had quality
service. be
a sp e r
of end its life cyce in caleds 'relablty
Anatytical Estimating Method quality pradurct usCTs

Requirement to

Analytical Estmat1ng is a technique usedfor analyzing|& Quality as

Conformance

"quality is defin.
Reasons B e h l n d t h e
reasing Importance of Quality Ceatormasce
'Philip Crosby"-
Ine customers may Doned
the non-repetitive jobs. It isa system ofsynthesis where in the Actonding to Management

Conformance means the aem to whch the design

requirement.
ciemepts are forecasted Analytical estimating is commonly conformance to abouttheirown needs or maybe There three reasons behind the
ncTeasing importance
and operating features of a
prodact meets the predetermmed
products and services unaware
applied in planned maintenance, engineering adequate knowledge management as follows, standards.
which of quality
construction.

on-off jobs and tool-room work about the availability ofthe An organizati
successfully. S. Durablty
requirements
meet their
I helps the company in
gaining greater
objectives,ifit conducts ann a
Work Sampling' Activity Sampling Method
efectively achieve quality
the requirements ofcustomers
authente .
advantage by improving quality and providingcompetitive
excellent Durnbility means the extent to which a produci copes
research for identifying service up with stress without any failure. t sa product life measure
Activin sampling is a method used for analyzing the
providing products
and servICes as perthe identified cnco stomer'
activities ofa group of
men or machines. In this method, the The companies usually make greater use of quality C iDCludes economic as wells techmical aspects.
requiremenis. 2. management because of an increase in media's
required information can be gathered in less time and at a low
Quality as the one which Satisfies Three FPs Serviceabilty
cost. Activity sampling is also called as work sampling, ratio 5. attention towards quality and consumer expectations
delay or snap reading method of observing
As per the traditional definition of quality, a prod for the quality. Serviceability indicates the comfortablity as well as the
if it satisfies three F's ie facilities of repait.
is said to be of good quality
According to the British Standards Institute, activity Form and Function. This definition18 only concerned aboi, 3. There is a great need 1or efiective quality management 7. Aestheties
sampling 15 defined as "A technique in which a large number the product quality,but not service guality. due to an increase in the nonprice factors such as, image
of instantaneous observations are made over a
period of
of time Basic Concepts Related to Qualny
building, positioning and service delivery process due Acsthetics inchudes the seneory Secatures of a product like
to growth and developments in the consumer market looks, sound, taste, smell ecc.
a
group of machines, processes or workers. Each observation The basic concep!s related to quality are,
records what is happening at that instant and Therefore, 8ood quality along with good reputation Percelved Qualty
the percentage
ofobservation recorded for a particular activity or delay is a Quality Control helos in bridging the gap between pre-use perception and In this dimension, the indirect measures are considered
measure of the pereentage of time during which that activity or Quality control involves all those activities which neci post-use perception of the product/servíce consumed.
while evaluating the standards by makinga comparison of
to be undertaken for achieving quality related objectives of the
delay occurs". Dimensions of Quality product brands.
company. The process of quality control begins at the product
3.5 QUALITY MANAGEMENT design phase itself and ends at the delivery of the product According to Garvin, while ascertaining the
quality levels 3.5.1 Total Quality Management
Q19. Define Quality. What are its features? List out service. Quality control aims at preventing the defects in ofa product, the customers are affected by the eight dimensions
the basic concepts related to quality.
manufacturing in order to produce the quality products in the ofqualiy, These dimensions are shown in the figure given 21. Define Total Quality Management(TOM),h t
first attempt itself and avoiding rework and rejections. below. are objectves, benefits and obstacles to TQM?
Answer:
2. Quality Assurance
Definition of Quality Performance Answer
According to the American society for quality "Quality Definiton of Total Qualty Management (TQM)
The following are some ofthe important definitions of Assurance contains al those planned and systematic actions Features
quality, required to provide adequate confidence that a product or service According to Indian Statistical fnstitute, Hyderabad
will satisfy given requirements for quality. Relability TQM is an integrated organizational approach in delighting
. "Quality is meeting or exceeding customers Quality
expeclations 3. Cost of Quality Conformance customers (both internal and extermal) by meeting their
. "Quality is what is in the eye of the customers". Dimensions
Cost of quality refers to the cost incurred - Durabilty expectations on a continuous basis through everyone involved
Features of Quality while with the organization working on contisuous improvement
performing quality related activities. The various costs include in all products, services and processes along with proper
Following are the features/characteristics of quality, appraisal cost, prevention cost and faílure cost Serviceability
4. Total Quality Management
problem-solving methodology".
. Quality as "Pitaess for Use Aesthetics TOM is
TQM is completely a new concept wherein the According to British Quality Association,
According to Dr. Joseph huran, quality philosophby which recognizes
fitness for use". A product or service is said"quality
is defined as is considered to be a function Perceived qualiy corporate business management
to be
of each and every individual of are inseparable. h is
if it is in a usable conditíon. of good quality, an
organization efforts are made to improve the quality on
and that customer needs and busipess goals
Continuous basis. appropriate within both industry and commerce"
Hgure: Garvin's Product Quality Dimensle
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 UNIT-3

MANAGEMENT
FOR
ENGINEERS
(INTUHY

princlples.
DERABAD
les of TQM
2 Six Sigma
Divadvantages of Six Sigma
elements
and Slgma. Whataare its he following are the disadvantages of six signa
ONDAMENTALS
OF

a22.
Explaln
the
Model Papor-|l, 08 and disadvantages? foatures,
3.18 vantages
products r
ven
though six signa produces defect-frec
Objecthves of TQM erviCes that satisfy customers, still it
does not delignt
are as Elements o fTQM but
as good
managemcnt as follows,
Customers. Six sigma can be regarded
AnSWer
The major objectives oftotal quality elements
ofTQM
are

o fS i x
Sigma ne

tollows, The finltton e best.

and Continuous improvement According to James Harrington, ">Ix Sigma is simply a
policies from being
and specific quality distract the organization
1. To provide defined
Prevention ofdefects
that
TOMprocessthan uses process capability analysis as away of IK SIgma can
to other key
objectives. n e a s u r i n gp r o c e s s ' " Creaive and also gives less importance

focus. activities which are involved in the process ofinnovation.

2. To maintain a strong customer C u s t o m e ro r i e n t e d

istical control limit given to the fact

process because of the
in 3. for quality six sieh oorr task either in the company
3. To build an organizational culture
which helps responsibility
ofcompletinga job completely or partially with a Sx sigma is applied quality goods and
there are no
lence level of 99.9997%. In other words, the probability
that it produces defect-free
Universal

in the organization. to qualie

achieving high quality levels 4. perfomance
management
of
being defective is only 3.4 parts per million. Six variations in the product's
and tem
commitment
chances ofany vanations are
certain.
machines ipation of employee
participationofer the prtexplained as an improvement approach which aims practice chances of
Toprovide incorporation of people,
But, in
empowerment and oft

the desired goal

for
information at organization level.
.
Increasing SIgma
ing the defects by emphasizing on output which is 4. Six Sigma emphasizes on achieving to achieve
not always possible
minimizing

and
every project. But it is
customer
Stristical thinking
procedures ne

the organizational polices,

to
5. To improve important
the set goals.
Sigma
practices. Value improvement o fS i r
terms ofquality
8. 5.
Sx sigmais not perfectly descriptívein
Features

Employee training the features of six sigm2,

Benefits of TQM
Following are involved in DMAIC
024. Explain the steps
follows,
The important benefits of TQM are as
Measurement
ofquality sigma aims at continuous improvementby reducing
methodology of,six sigma.
10.
1. High market share cause
corrective
action the cost of production and increasing customer
Answer
11. Root and retum on investment.
satisfaction six
Effective team work problem-solving
methodology of
2. Good quality products One of the features of sIx Sigma is to produce the output DMAIC is the
12.
sigma. It stands for,
3. Enhanced profits 13. Benchmarking defectless or error free.
D - Define
4. Enhanced productivity
14.
Reduction of inventory Six-sigma's philosophy is "Do it right the first time and M -Measure
every time".
5. Reduced cost of quality 15.
Supplier relationship
A -Analyze
Six sigma's principles
are applied in manufacturing and
6. Less employee grievances. Principles of TQM service industries. I - Improve
(TQM) philosophy makes
Customer satisfaction and Good company reputation Total Quality Management C -Control
for performing the business. Some of Six sigma is astatistical process technique control which
use of certain principles contidence in the company's
8. Employee participation and Successful team efforts
the principles are, is applied to gain complete . D-Define Phase
and also the management.
product and the problems clearly
services
Customer/Customer Satisfaction The define phase helps in defîining
9. Improved problem solving capability Satisfying the
of Six Sigma This is the first step in six sigma
of TQM is to fulfl the Advantages as and when they occur.
important principle identifies those factors
which are
10. Increased job satisfaction level in employees The most
Define phase
for the
customers who make payment few advantages of six sigma, methodology.
requirements of the The following are
improved and controlled for greater
to be measured, analyzed,
Obstacles of TQM service. The customers want to receive due value for
product or

the moneywhich they pay for buying the product or service. Six sigma ensures quality products and focuses upon revenue.
The obstacles to TQM are as follows, M-Measure Phase
customer satisfaction thereby generating sustained2.
2. Satisfying the Supplier/Supplier Satisfaction
success and continuous improvement. then the measure phase
1. In-effectives planning Once the problem is defined,
The second important principle of TQM is to attain the problems in thbe
wherein it measures or evaluates
business framework to set starts
Z. Absence of commitment from management.
supplier satisfaction. A supplier is a per_on from whom the L. It makes use of a common
process which affects the CTQ (Critical-to-Quality) standard

company buys the goods or services. individual goals. defects

3. Absence of effective measurement tools and means to
After measuring the defects,
the impact of these
acquire data and results. . Continuous Improvement of Business Processes
customers by satisfying the needs defects are measurable factors ofa
3 . I tenhances the value to should be measured because measured, the cost
Continuous improvement is the third principle of TQM. and producing good quality products Once the defects are identified and
4 Inability to change the culture of the organisation. of the customers process.
Continuous improvement of business processes is essential for to the customers at the| involved can be saved.
5. and services and delivering it
Io-efective utilization ofteam work and empowerment.
| total quality management. ight time, in right quantity and
at the right cost.
3. A-Analyze Phase
6. Absence of regular training and education. 4. Empowering the Workers which are affecting the
the performance In this phase, the defects
It continuously emphasizes on building and -

are analyzed. Hypothesis

4.
Inconsistent organisational structure. Sometimes it is necessary to empower the workers tor at a faster pace. Critical-to-Quality (CTQ)
and increases the rate of improvement determine the factors which are
satisfying the internal suppliers. The workers must be given statistical tests are used to
acts as a cycle as it
Ignoring the internal and extermal customers. critical to the outcome. Analyze phase
8. the authority to make decisions on the matters which are under new ideas and to
. lt acts as a learning tool for creating
their control. This helps in motivating the internal suppliers and various steps.
9. Lack of focus ensure development in the organization. passes through
on
improvement. reduces the burden of the
supervisors. FOR ENGINEERING
STUDENTS
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face LEGAL proceedings.
 LNGINE.

4..
MINTIOR

n
e*amininig v94
n matetiate
OF
MANAGI
qualtt
rat)-q
thi
h elps
r g g e e filferage eatptaf
20
wDAMENTALR

1
neuhi
tnng and metit y
andmett i
antunl
e 4 Tor (043044in he
Nemn
nl inl a in
imrrsv inp Uepartfnenta e her perig a
the oxue
18,
ntionp
n fa he helpa
inidentilying an diapn4ing irfele
in
ilentily

Mep the bijaihenes Y 1, abl i2Hey} efiphie

siiatepes
thin e I1 itema ol sletes
ulete
rkping
i4 MANAGEMENT

T nventory Manag
INVENTORY
f Poor
to ewmpiti
the
prtha 6 INVE
3.6 by the t o :
nptome

ol
Hhesin
ththe
esting n

fartora huh h#e an

dentited
ured

ihs ntslhca a26.

Whatdo
you
impaI
on
understand

Management"?
"mventov Tew
synfplems
of p9or
nl poof inventoty mAFiayerment
ar
uteome S u n ofet
and "Inventory

yualiiy
benefits? Liat
ato
neaios are made foy artis ing ni the ort iNe 1 andi n v e n t out so niOuit of nvenory tRFeAses mich
(aster than the
objectives
r inventory managemo () Pied rer "usn
its
of poor
rise in s l c s y*
Improve P'hase symptoms

c e the lactors whnch atlevn the 1arishles arr measiun

n Answer t
Sone lems arc otul-of stck leadung to nconvenence
and
analy 7, the npwme phase hopm
n oner to
recti h n h roduction and delay in deliveries to
deieuts In improve phae, all thoae laxton a r imprv
Mewning of Inventory

ofallmatcrin
custrmer
atfevt the itcal 40yual1h outvomes 1hus, the maA Im
s an assct
conpriscd

supplie in clerical costs relating to h Fiaed (rder Periad Sota

stageol processing procevng.
Inventory
and variatis
acvepiahke sange of cach 1anahle is udent1fhed goods in some

are measured using the measunement system

tinishod gowds
or
physically in th expediting
and mainliining inventories
whether
locatcd
ownedby a
company,

transit or
im the
hunds of a diste.nor who The stock of some itemsi in excess whereas few items
C-Control Phase of that company,
in

Contnlphase is und to mamtan QnUnIxNIs mprv eme"has thcm In consignnne are

available in less quantity
mostly
and in somr CUNCN cOntrol phase does nod evist hecausr ventory Management

gets clumunated n the ahove phases. Control phase| Mc»ning o Same tems are misplaced and spoiled and rate of
the
ensures quality, prducuvty and imprn cment 1n the processes management
involves developm
ànd
Invcntory and procedures wh.
obsolescence is also high.
systems
continuously The scope of control mechanisms is Widcr of polices,
administraton
costs decisions and Step-4: Determininz the Orurutiaaí Arrangemest
in turm
reduce 1otalinventory schon There is increase in inventory investment and customer
Struetur
3.5.3 Deming's Contribution to Qualicy service
requirements, production

Q25. Explain in detail Deming's Contribution to

like customer

nurchasing and traflic. In other words, inventory managcmen turnover lead1ng to many working capital problems. he final step of avenry azrmEnn aras cen
ofm oplimum quantities
procedure inventory management process is to deternane the ogamuratEai arrangmert
araete
with planning
quality. and control deals Explain the or
cycie and developing oftech
Model Paper4 a7(b)al
all the stages ofproduction hniques
inventories are availahi and control. What factors influence inventory for handing and managng he nvenary
materala. Podaxta
Answer: make sure that the planned
which management and control? planning and control departmenss pertors e A
The contrihuthons made by W Eduward Deming to
He is a leader in the history ofTotalQuality
qualty Objectives of Inventory
Management
nventory contro
oer-whciming Answer

Costrel
Management (TQM). He proposed fourteen ponts for managers Some of the objectives ol Inventory management ane Factors Iaduencing laventery Masagemeat and
to improve qualty explained below, Procedure of Inventory Management and Control
Tbe vanus tactors nncng ventery a d
Developing stability of goals and purposes. To ensure that raw material, spares and finished god
The process of inventory management and controland coniroi are as foilows
are supplied to appropriale person at appropriate place
Adopting new policies according to the changing trends. involves four steps which are as follows, Type of Production
1o have uninterrupted production and sales.
3. Replacing the technique of mass inspection with the optimum
continuous quality inspection at every stage of2. To avoid overstocking and under-stocking of inventory Step-1: Assessing Inventory Leves hc ype of prodactaoa artavis ievenury managetneet
a sagn1fcant roic a thc
production. and control Inventory costod pays
To avoid the losses due to deterioration, pilferag, The first step of înventory management and control
Developing relationsh1ps with suppliers by crealing a wastages and damages. the amount of inventory which firm hold
hims empoy 1ng contnuoas proxun taon sy s m . WheTeas, the
process is to assess a
hrms employ ing intermittent prrdctwn system do not requre
partnership based on trust instead on price 1ag
Concentrating on corporate reenginecring (a continuous
4. To provide information for planning and controlling In order to determine the level ofinventory
which a tirm| continuous ocontroB of inveniory tems.
inventory for short-term as well as long-term.
mprovement of quality). should hold, the factors such as sales trend, production rate, Kind of Product
To control the material cost so that overall cost of
manufacturing process etc., must be considered. The level of
.
6. Applying moderm and scientific training methods.
production can be reduced. The products may be categonized nto two ypes. They
it keeps changing. So, stack
7.
Replacing the era of supervisory inventory is not always same, on
low unit
that is confined only
6. To avoid the error of ordering the stock twice. are,products with high unit value and products with
to administer rewards and penalties with must be reviewed frequently.
leadership (a vahue. In case, if the materials used in the production of a product
complete guidance). Benefits of Inventory Management are of high unit value, then the products need to be
monitored
. Developing a feeling of security and elim inating the fear
Step-2: Ascertaining the Degree of Control
The following are the benefits of and controlied closely, and if the materials used in the product
from employees inventory managenent The second step of inventory management and control and its stock
and contro, s in short supply, then this affects its purchase
9 Eliminating baiers between functional areas. process is to ascertain the degree of control required for
Jt helps in Quantity of Production
10. reducing the investment in inventories, ataining the objective of inventory management. This problem 3.
Motivating employees through nonverbal communication Inventory carrying costs and obsolescence loses.
such as conveying the can be overcome by classifying the inventory based on their The extent of control of inventory items also depends
message through signs, slogans It
etc., instead of verbal communication. helps in utilizing the stock
effectively by allowing value, ie, by using ABC classification. ABC elassification helps upon the quantity of production. Higher the volume of items
inter-department transfers within the firm. in determining the degree of inventory control. produced, higher will be the extent of control.
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 O r d e r m gC O S I
FUNDAMENTALS O F M A N condition for optimal o
num total cost i
The
be equal to .23
3.22 should
i n gc o s ts h o u l d carryying
cost, so lets Q29. What are
4. Level of Sales evel of
Low High i a lcondlion. find the benefits and limitations of E0OT
which affects cost= Carying cost Answer:
tmportant factor
same

e mOSt Ordering

Model Paper-4, 079)

Dentory u a company is its level ofsales actnuy munt
amun

company. Wben the sales ofacompany increases Benefits/Advantages of E0Q

ofmventor will also imcrease.
The benefits of E0Q are as follows,
Leagth of Production
High Low 2x C xD=
xPx C,
companies which take much
produt order
time to Figure Better Management of Inventory
he
mamtaim relatively large anount of mveni n:
Sothat, any
hout any
2DC
to have high.
uiing prodaction process can
be met immediately wu
ye can neither afford ng coss p PxCc EOQ helps the company in managing inventoTy
Therefore, we
delays. carrying cost. o eto. cuectbvely. When inventory is effectively managea, tne
QUANTITY(EOO)in high
inventory
the twO
WDere
we have to order aquastrike
PxCc npany will be in a
3.7 ECONOMIC ORDER position to reduce operational costs
involved
halanceberween costs
are
optimum. .The relationship isin nvolved in inventory management. This in turn results in m0Te
a r e the
a28. What is EOQ? What are costs
that both
the
indica he fore, Economic
urderuantity (EO) profits to the company.
EOQ? How do you detemine EOQr above.

ofOrdering
Cost 2x Apnual Demand x Cost Per Order
Cost Per Unit x CarTying OST n Fercentage Per Annum Reduced Costs of Holding Inventory
Answer: Calcalstion

Orderingcost=Cost Per Order

Num x

Meaning of Economic Order Quantity (EOQ) Using E0Q method, a company can save inventory cost.
The below figure
ngure snowS how relevant cost is
showWS how relevant
Quantity Peremand
13ternal

amount ot
ordersAnnual
to the mald of Order plotted It doesn't need
Eoonomic order quantity refers resources, t a n g
Number the order quantity to obtain E0Q.
againstt
to have warehouse to
store
Ordered to make the best use ofthe firm's g0ods in limited quantity. Without having EOQ system in place,
OE internally, a Total cost
ofthemateria,space
nio consideration factors such asshelflhfe price breaks
When items are produced the ordenng cost
meaning as the
same
the company will not only have to a warehouse, but it will also
warehousing, has the
for incurred and
ured and space available Cost
need to bear expenses related to stafi.
ordering quantity etc.
Calculation
of Inventory Carying Carrymg
cost

Reduced Ordering Cost

Costs Invoved in E0Q
system and the process
Carrying Cost=Average Inventoryx Unit
Inventory Carrying Cost Cos
be performanceofthe inventory involves certain coss E0Q helps the company save on ordering cost. The
Or aivng at economic order quantity Ordering cost company doesn't need to order goods several times in a month
which are described as follows, Average inventory
Quantity Per Order as EOQ enables it to order goods only one in a month. This
2
Furchase Cost: The purchase cost
consists ofthe actua way, E0Q helps company save transportation costs, packing
1. Ordering Quantity EOQ
of items. The unit price Calculation for Optimal costs and other costs which would have increase if goods were
price paid for procurement
ordered or annual demand in units Quantity/ order
IS Independent of the size of the quantity Let, D- denotes ordered multiple times in a month.
purchased. Figure: Graphical representation of Economic Order Quantity
P- denotes the price per unit
2. Ordering Cost: Ordering cost is associated
with the cost 4. Others
C-denotes cost per order
Formulae
from outside
of placing orders for procurement ofitems the
cost if the Some of the important formulae are, Apart from the above advantages, EOQ provides
Suppliers or it can also be termed as setting C-denotes carrying cost in percent per a
tems are produced by setting up ofmachinery.
Orderng
Optimal quantity
following benefits,
varies wth -denotes quantity to be ordered per orde.
cost is independent of the size of the order, it
2DC (a) It improves overall efficiency.
the numberofordersplaced duringaperiod oftime.Thus, Annual Demand
D QEOQ) PCc
ifa large number of orders are placed, moreW money Number of ordersQuantity ordered per order 0 (b) It minimizes stockouts.
be required for purchasing the items.
L.
Minimum total inventory cost C(O)
Ordering Cost=Cost Per Order x Numberof Ordn Limitations of E0Q
3. Holding Cost: It is also called carying cost. It is
associated with bolding inventory camrying cost and s C2C C, DP The limitations of EOQ are as follows,
directly proportional to the order size.
. Shortage Cost: It is also called as storage cost. The
siorage ofitems is said to happen when actual demand
G 3. Optimal ordering interval ()
Often inventory holding costs and ordering costs cannot
Ifg'is the quantity ordered per orderand is consuned be identified and some times cannot be even
accurately
camnot be fufilled from existing stock of items. We can D
uniformly till the next order quantity is received, then we ca identified properly.
measure it in the form of goodwill loss and lost profit
4. Optimal number of orders ( )
due to existing demand but non-availability of stock ie, Economic order quantity applied without due regard
shortage of stock. consider as average inventory held throughout the year
to possibility of fall in demand, can lead to high value
Total Annual Demand
Determination of E0Q
With the concept of various costs in mind, we can deñine
Carying Cost=Average lInventory x Unit Price* N=
E0Q -8 obsolescent inventory.
Inventory Caying Cost when
economic order quantity as that 5. Number of days supply (d Economic order quantity may not be applicable
quantity, where orderingcost
there is an impending
and inventory carrying costs are
equal and total cost of the two requirements are irregular or when
is optimum (minimum).
.PCe 365 price rise.

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 FUNDAMENTALS OFMANAO
NI
ar of orde Quantuty Per Order 4 8 ABCANALYS

3.24
Number

3.25
olain ABC Analysis 3.
EOQ the help of
ntegory "C' Items
a
PROBLEMs Rao
a33.
sketch.
neat he items
Q30. Detemine E0Q of a product e roduct 4800 A n S w e rt
having low consumption valuc arc put
94.28 Calegory "C' Nearly 70% of inventory
Ltd., if the annual requireme s
100
ABCAnalysls
accounts for 10% of stockca ci
the total invested capital.
P is 5,000 units and ordering cost 50.91 = 51 is the most
These
ABC analysis ponile
ems can be stocked at an operative place where pcopic
hnique used for
foraPlar

per
cd on the basislways Better Control.
cost is 1 inventory
control,.
can
per order and carrying 5I orders. help themsclves with any
of ordes requisition 1omainly
ABCExar
developei

w by H.Ford Dickie. Theofconcept

the Pareto'
Number
o s principle or
was

Solution theinform
is ion about the nalysis

annual consumplion ot items ABC analysis

given
Given that, Below
car shop:
Q32. by a Otton waste,
Pareto

Annual requirement ofpmduct "P"(D covers

used
Upen
(i.e., not the cost Ctc.
nut and bolts, officc consumption items
U n i tp r i c e =5 0 0 funits)
= 5,000 unit
Itis very essential for a company to
Ordering Cost (C) 100 per onder Annual
demand
= 5000 units
variety of items for meeting thepurchase and
hugfacturing
=
s t o c kh u g e

Carying Cost (C) ={l per unit Storage

cost= 5% per annum departments. The stock demands
on hand
of
100
an order=7 50 iRehecked regulariy Dy the stores
manager forP c i n g
has
Cost of placing
1 ob e

nishment orders on tme and

the
EOQ C Interest
rate = 10% per annum an Replenishment order sis placed placen

=,25.000 T00 number of orders to be plan iuatioins the recorder point. it

Situ,

atains the recorder 1S

very
Find the item difficult to keep a
calculate the E0Q. and de the
e
track
the stock
on
level of each item
basis.
and
the accordingly placing
10

10.00.000 the orders on

he Orde
a
regular
has to be divided
divided into Var
total
,

inventory
items
Solution: Model PaperA, the stock has various
categories. The
= 1,000 units categorization of inventory lps the inventory
Given that,
items having high manager to
fpcusechnique which helpsvalue. ABC analysis is the most
'P(Q)=1,00
bconomics order quantity ofaproduct Annual Demand (D)= 5,000 units in the
units. intoA, B and Ccategories. classifying the inventory
Q31. The following information is about
the shock Unit Price (C)=7 500 Policies for A, B and C Items
workshop: Cost ofplacing an order C. =7 50 [pventory O 10 100
absorbers used by an automobile ABC analysis involves the classification of 30
Annual demand: 4800 units into categories A, B and C in inventory % of Annual Consumption
Unit price: 300
Carrying cost (C)= (Storage Rate
Rate) x C
+ yconsumption jtemson and annual monetary descending
and annual
value of
order of annual
each item.
(Curmulative)
e selective technique, an average paftern Based
Cost of placing an order: { 50 of Figure: Graphical Representation of ABC Analysis
d percentages of
(5%+ 10%6) itemsaDd percentages of their annual consumption
=

Storage cost: 3% PA
x
S00 value may Q34. Explain the procedure involved in
as below,
Interest rate: 15% PA =15% x 500 be planned carrying
analysis. List out the advantages and limitations
ADC
Calculate EOQ and also find the number Category Percentage of Percentage of
75 Items (%) of ABC analysis.
of orders to be placed? Annual Usage (%)|
Caleulation of Economic Order Quantity (EO) A 10 Answer:
Solution : 70
B 20
Given, 2DC 20 Procedure of ABC Analysis
Annual demand, D = 4800 units EOQ) C C 70 10
The steps involved in ABC
1. Category "A' Items analysis are as follows,
Cost per unit, P=7 300 2x5,000x 530
Cost
perorder, C=t50 75 More costly and valuable items are clasifed 'A*Step-1: ni.e.,thetotalfirstnumber
category items. Such items have large investment but not
as step, the information relating to the items
of items, annual consumption in units
Storage Cost =3% per annum much in number, e.g., say 10% of items account for and cost of each unit is called and tabulated.
Interest Rate =15%
S,00,000 70%
oftotal capital invested in inventory. So, more careful
per annum 75 Step-2: In the se step, the annual consumption value
and closer control is needed for such items. A
Percentage per annum, C =Storage Cost+ Interest Rate 6666.67 periodic in rupees for each
item is calculated by using the
review should be followed to
minimize the shortage following formula,
C=3+15=18% =0.18 percentage and top management should control these
= 81.65
2DC items. Anmual consumption (in Rupees)= Number of unitsx Per

EOQPC Caleulation of Number of Orders to be Placed

2. Category "B' Items
The items
having consumption
unit cost

V24800 x5
300 0.18
average
classified as 'B', nearly 20% of the items in an inventory
value are Step-3: In this step, arrange the calculated annual consurnption
values in descending order.
Number of orders to be account for 20% of the total investment. These
480000 placed items
Step-4: In the fourth step, the cumulative values of the annual
4 have less importance than 'A' class items, but are much
costly to pay more attention on their use. These items consumption values are calculated.
/888.89 5,000
EOQ=94.28 units 81.65 eqire lesser degre
A'. Statistical of contolthanthose in categoy Step-5: Finally,
sampling technique is used control
the items classified into A, B and C
categories by dividing the items into 70%, 20% and
to
are

61.24. them. 10% of the annual consumption values.

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 Managen
T 3 Oporatior

wT Annual Consumptho
Item No. Value (ACV) in Cemuative Valae of
ACV
Descending Order
36,0 3650
10
32,000 68,00
12,000
8,000 38,00
8,000 96,000
1,400 97 400
1,000 98,400
6 960 99,360
3 400 99,760
5 240 1,00,000
Total 1.00.000
basis for ABC classification is not given in problem, assume the folowing basis
S t e p - 3 :S m c et h e

Category Percentage of Total (ACV)

A 70%
B 20%
C 10% of
remaining
items and
'B' category
is consumed by category 'A tems, 20% of ACV is çonsumed by
e,
70% ofACV
c o n s u
by category C' items.
CVis
1,00,000 x 0
=
70% oftotal ACV
100
=7 70,000
A
fall under the category tems
Since this
value is nearer to cumulative ACV ofT 68,000. Thus, the items 2 and 10
together accounts for 90% of total ACV i.e, (70+20)%
Category (A+B)
90% of ACV =
1,00,000x
100
=90,000 items. The
1 and 4 fall under "B' category
items 7,
value is nearer to cumulative value of ACV of T 96,000,
Since this items.
ns 8,9,6,
3 and 5 are finally categorized under C' category
remainingitems

Step-4:
Classification of Itemns

Class Items %of Items

20%
A 2,10
30%
B 7, 1,4
50%
C 8,9,6,3,5
Construction of ABC Analysis Graph
Exact Average of ACV of 'A' category
items,

68,000x100
1,00,000
100 68%
68%
X =

Percentage of (A+B) items,

96,000 100=96%
1,00,000

Expected percentage ofACV of B' category items,

(A+B)%-A%
96%-68% 28%

Expected percentage ofACVof°C' category items,

100%-96%= 4%
ENGINEERING STUDENTS
SPECTRUM ALLIN-ONEJOURNAL FOR
 ation vidlagoenm

DERABA
ENGIWL / N I T - 3 Operation
FOR

MANAGEMENT 3.29
OF nep-2 the items in the descendino
wDAMENTALS Blale
Rearrange

Sumplion Value (ACV) and calculate cumulative value olAACV.

3.28 Cumulative
Item No. Annual Consumption
% of Item Value (ACV) in
(WN) Cumulative Cumulative
107 10% Deseending Order Value of ACv %of ACV
109 20% 3,60,000 3,60,000 68.98
105 30% 45,000 4,05,000 77.60
101 40% 33,600 4,38,600 34 04
102 50% 24,000 4,62,600 88.64
106 60% 22,000 4,84,600 92.85
19,200 5,03,800 96.53
104 70%
6,400 5,10,200 97.76
110 80%
103 90%
6,000 5,16,200 98.91
108 100%
4,500 5,20,700 99.77
1,200 5,21,900 100
5,21,900
as
Step-3

the basis for ABC classificat

basis ABC classincation is
Since not given in the problem assume the following data.
Category Percentage of Total ACV
70%
B
20%
10%
of
ie., 70% of by category A'
total ACV 5 Consumed items, 20% of total ACV is consumed by B' items and remaining
consumed by category C" items,
ABC analysis.
conduct an
the ACV is
illustrated in table below,
Onsidering
the data 107 108 109 110 Category-A
106
104 105 70% or 0.70 of Total ACV =0.70 x 5,21,900
101 102 103 20 4912
Item No.
511 15 8 7 16 5000 500 -3,65,330
1200 18000 300
Unit Cost
800 4800
2000 300 Since, this value 1s nearer to the cumulative ACV of 3,60,000, the item No. 107 fall under category "A' item.
Annual Demand 4800
Category-B
Solution:
Category (A+B) together accounts for 90% oftotal ACV i.e., (70% +20 %).
Step-1
value for given data. 90% or 0.90ofTotal ACV =0.90x 5,21,900
Calculation of annual consumption
Annual Consumption
Annual
Unit Cost Value =4,69,710
Item Demand
(a) x (b)
No. (a) b) Since, this value is nearer to the cumulativeACV value of 4,62,600, the items 109, 105 and 101 fall under category
jtenis.
4,800 24,000
101
Category-C
02 2,000 22,000
The remaining items 102, 106, 104, 110, 103 and 108 are finally categorized under category C' items.
103 300 4,500
Step-4
104 8 800 6,400
Categorization of items
105 4,800 33,600
C
106 1,200 19,200 107 109 102
107 20 18,000 3,60,000 105 106
108 101 104
300 1,200
110
109
5,000 45,000 103
10 12 500 108
6,000
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 3.30
UNDAMENTALS OFMANAGEMEN

WDERABA UNIT3 .3 Operatton Manageme

JUST-IN-TIME (JIT) STEM
Step-5 3 . 9

Construction of ABC what Is Just-n-Time (JIT)

analy
sis grap.
ENact percentage of ACV of A category items s
a37

prerequlsi for system?

oducing JIT? What are the
|3.10 BUSINESS PROCESS RE
3.31

3,60,000
5,21,900
100
advantages and disadva
antages of JTExplain the a38.
NGINEERING BPR)
68.98%
Answer syste Define Business Process
Exact
st-In-Time (IT) System What are its Re-engineerlng
objectives? Why (8PR);
BPR is neededr
Percentage of (A+ B) items 1s T hconcept
e ofJYT is quite Answer:
4.62,600
100 l are simple parts of
brought only when
5.21.900 quantily

required andtheJust-in
exact Definltion of Business Process
Re-engineering (BPR)
t i m e1 o r u s e .
= 88.64%

In JIT method,,the
the tosupplier
supplier makes the Hammer and
Percentage of ACV of B' categor tems the del Champy (1993) defined BPR "The
omponents.
parts) the delivery of material Tundamental rethinking and radical redesign of as,
(A+B)-A% production line
Om and just-in-time to be assembled. only when it is processes to achieve dramatic business
88.64%-68.98%
regun

Tust-in-time is a broad contemporary measures of improv

19.66% ement that include three mutually
service, and speed."
philosophy of continuous pertomane,
Exact percentage of ACV of°C" category items 15, mpro
(e) People involvement supporting components Objectives of BPR
100%-(A +B)% (b) Total quality control The
objectives of BPR are as follows,
100%-88.64% (c) Flow. To
=11.36% improve the existing business processes and meet the
Prerequisites1orIntroducingJIT Customer demands effectively.
Working Notes (WN)
Calculation of Cumulative Percentage of Items Following are the
prerequisites for introducing To fill the
gaps between actual and
expecied outcomes
ltem Serial Numberx 100 Variety should be low JTT, of the organization.
Cumulative Percentage of ltems=
Total Number of Itenms
Serial Number
of Items
6
T 10 2
3
Demand should be stable
Vendors should be reliable
3. To minimize the cost
of
the cycle time involved products/services
and to reduce
in order fulfilment.

105 101 102 106 104 110 103 Material should be of good quality 4 lo
improve product quality, customer service and so on.
Item No. 107 109 108 4
Calculation There should be effective To achieve success in
T0100 100100100 0100 100 101000100Xl0 communication competitive business scenarios
5.
and to differentiate the
70% 80%
Material handling should be eficient company from other
Cumulative %of10% 20% 30% 40% 50% 60% 90% competitors.
100% There should be proper preventive
Items maintenance NeedImportance of BPR
8. People should work in the form of team
Advantages of JIT System BPR is considered important for the
following reasons,
JIT system învolves the following .Reengineering in an organization facilitates in
advantages,
It reduces inventories and achieving/bringing the radical changes in perfornmance
1.
work-in-progress such as cycle time, service and quality etc.
2. It reduces space requirement and setup time
2. It increases
3. It reduces process time competitiveness in the operational activities
via easy leaning and
4. It encourages great productive processes.
employee participation and
motivation Reengineering in an organization, enables and encourages
5. It increases in
productivity moderm methods for problem solving and encourages
6. It improve products and service qua>ity revolutionary thinking.
. It improve customer service and commitment 4. t helps in improving quality by fulfilling customer needs
and in increasing market share.
Disadvantages of JIT System
The disadvantages/limitations of JIT system are, . It helps in transforming the rule driven and job centric

It is a hígh risk strategy because planning work is short
term and the inventory level is kept to a minimum.
2. Product quality is a main issue with JIT concept.
Suppliers need to be educated by the customer and| 6.
supplier should understand what is expected from them.
3 The need for a continuous process offollow up of
Supplier's development is a critical task.
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organizations into a marketing organization structure, so
that the organizations can directly be in contact with the
Customers.
BPR is both process oriented and customer oriented in
nature, by which the organization can achieve greater
efficiency and effectiveness in meeting and fulfilling the
customer needs.
FOR ENGINEERING STUDENTS