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Operation Management
BA5206 OPERATIONS MANAGEMENT LT P C 3 0 0 3
COURSE OBJECTIVE:
To provide a broad introduction to the field of operations management and explain the concepts,
strategies, tools and techniques for managing the transformation process that can lead to
Competitive advantage.
UNIT I INTRODUCTION TO OPERATIONS MANAGEMENT 9

Operations Management – Nature, Importance, historical development, transformation processes,
differences between services and goods, a system perspective, functions, challenges, current
priorities, recent trends; Operations Strategy – Strategic fit , framework; Supply Chain
Management
UNIT II FORECASTING, CAPACITY AND FACILITY DESIGN 9

Demand Forecasting – Need, Types, Objectives and Steps. Overview of Qualitative and
Quantitative methods. Capacity Planning – Long range, Types, Developing capacity alternatives.
Overview of sales and operations planning. Overview of MRP, MRP II and ERP. Facility
Location – Theories, Steps in Selection, Location Models. Facility Layout – Principles, Types,
Planning tools and techniques.
UNIT III DESIGN OF PRODUCT, PROCESS AND WORK SYSTEMS 9

Product Design – Influencing factors, Approaches, Legal, Ethical and Environmental issues.
Process – Planning, Selection, Strategy, Major Decisions. Work Study – Objectives, Procedure.
Method Study and Motion Study. Work Measurement and Productivity – Measuring Productivity
and Methods to improve productivity.
UNIT IV MATERIALS MANAGEMENT 9

Materials Management – Objectives, Planning, Budgeting and Control. Purchasing – Objectives,
Functions, Policies, Vendor rating and Value Analysis. Stores Management – Nature, Layout,
Classification and Coding. Inventory – Objectives, Costs and control techniques. Overview of
JIT.
UNIT V SCHEDULING AND PROJECT MANAGEMENT 9

Project Management – Scheduling Techniques, PERT, CPM; Scheduling - work centers – nature,
importance; Priority rules and techniques, shopfloor control; Flow shop scheduling – Johnson’s
Algorithm – Gantt charts; personnel scheduling in services.
TOTAL: 45 PERIODS
COURSE OUTCOME:
Understanding of the strategic and operational decisions in managing manufacturing and service
organizations and appreciation of the role of operations management function in an organization.
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TEXTBOOKS
1. Richard B. Chase, Ravi Shankar, F. Robert Jacobs, Nicholas J. Aquilano, Operations
and Supply Management, Tata McGraw Hill, 12th Edition, 2010.
2. Norman Gaither and Gregory Frazier, Operations Management, South Western Cengage
Learning, 2002.
REFERENCES
1. William J Stevenson, Operations Management, Tata McGraw Hill, 9th Edition, 2009.
2. Russel and Taylor, Operations Management, Wiley, Fifth Edition, 2006.
3. Kanishka Bedi, Production and Operations Management, Oxford University Press, 2004.
4. Chary S. N, Production and Operations Management, Tata McGraw Hill, Third Edition, 2008.
5. Aswathappa K and Shridhara Bhat K, Production and Operations Management, Himalaya
Publishing House, Revised Second Edition, 2008.
6. Mahadevan B, Operations Management Theory and practice, Pearson Education, 2007.
7. Pannerselvam R, Production and Operations Management, Prentice Hall India,
Second Edition, 2008.
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UNIT I INTRODUCTION TO OPERATIONS MANAGEMENT 9

Operations Management – Nature, Importance, historical development, transformation
processes, differences between services and goods, a system perspective, functions,
challenges, current priorities, recent trends; Operations Strategy – Strategic fit ,
framework; Supply Chain Management.
Production Systems – Nature

Production is regarded as one of the most crucial functions of management in modern
organizations. Obviously, to sell a product and earn profits, organizations need to firstly have a
product which carters to an unsatisfied need of the consumers. A product which is efficiently
produced helps the organization to reap more advantages in terms of cost saving, resource
utilization leading to reduced inventory costs and delay times and enhanced customer loyalty.
Production becomes the most important function in organizations implementing Just in Time
techniques (JIT). Production is sometimes confused with manufacturing. The definition of both
is same though, the only difference is that production can be used to describe the process of
producing both tangible as well as intangible product, i.e. both goods and services whereas
manufacturing is referred to the process of producing tangible products i.e. goods.
The nature of production can be explained under three heads:
➢ Production as a system
➢ Production as an organizational function
➢ Decision making in production
1. Production as a system: A system can be understood as a group of independent but
interrelated elements comprising a unified whole; "a vast system of production and distribution
and consumption keep the country going". We can thus identify three systems namely
a. Production System: The basic function of a production system is to convert a set of
inputs into a set of desired outputs. Inputs are resources such as materials, personnel, capital,
utilities and information. The objective of an enterprise is to provide goods or services, and to
earn profits. These days, many firms are focusing on continuous improvement and customer
delight. A continuous search for areas of improvement in the production system is needed. For
this, a clear understanding of recent developments in production system, industrial engineering
and management is necessary. To achieve these objectives, the firms need to convert some inputs
like men, material, money, energy, information, etc, into useful outputs like finished products and
services in required quantity and quality. The transformation of the inputs into pre specified
outputs is achieved through production process.
b. Conversion Sub-system: It is a sub-system of the larger production system where the
inputs are converted into outputs. The resources taken in as the inputs are processed to obtain the
desired outputs known as the final product.
c. Control Sub-system: It is a sub-system of the larger production system where a portion
of the output is monitored for feedback signals to provide corrective action if required. This sub-
system is responsible for maintaining the acceptable standards of cost, quality and quantity. If the
produced output varies from what is required, corrective actions are taken to meet the standards.
Thus, the control sub-system ensures a uniform level of system performance by providing
feedback information so that corrective action can be triggered by managers in case of deviation
from set standards.
 Production system model comprises:
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2. Production as an organizational function: As an organizational function the conversion

process of inputs into final goods and services is at the heart of the production function. This
makes the conversion subsystem the core of production system, where labor, materials and
machines are used to convert inputs into products and services. Thus, it becomes clear that every
organization, irrespective of its nature and purpose has a production function where departments
and personnel play a central role in achieving the objectives of the organization.
3. Decision making in Production: Operation managers have to make crucial decisions
related to the planning, organizing, staffing, directing and controlling the process of conversion
of the inputs into desired outputs. They are expected to make decisions at each level and
implement them too. The decisions made by operation managers can be categorized as:
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Importance of Production Function:

Production function can offer competitive advantage to a firm in the following areas:
• Shorter new-product-lead time
• More inventory turns
• Shorter manufacturing lead time
• Higher quality
• Greater flexibility
• Better customer service
• Reduced wastage
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Differences between services and goods

Services Goods
1. Tangible outputs 1. Tangible products
2. Outputs cannot be inventoried 2. Products can be inventoried
3. Extensive customer contact 3. Little customer contacts
4. Short lead times 4. Long lead times
5. Labour intensive 5. Capital intensive
6. Service quality subjectively determined 6. Product quality objectively determined.
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Challenges:
1. Reality of global competition
2. Quality, customer services, and cost challenges
3. Rapid expansion of advanced technologies
4. Continued growth of the service sector
5. Scarcity of operations resources
6. Social-responsibility issues
Other challenges:
Competitive pressure due to economic reforms
Growing customer expectations
Technological developments
Environmental issues
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Current Priorities:
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Current Priority Definition Some ways of creating

Unit cost of each Redesign of products/ services
product/service, including New technology
Low production cost labour, material and overhead Increase in production rates
costs Reduction of scrap or waste
Reduction of inventories
Fast delivery Larger finished-goods
inventories
Faster production rates
Quicker shipping methods
Delivery performance
On-time delivery More realistic promises
Better control of production of
orders
Better information systems
Customer’s perceptions of Improve product/services:
degree of excellence exhibited Appearance
by products/services Malfunction or defect rates
High-quality product/service
Performance and function
Wear, endurance ability
After-sales services
Ability to quickly change Change in type of processes
production to other used
products/services, customer Use of advanced technologies
Customer service and
responsiveness Reduction of amount of work
flexibility
in process through lean
manufacturing
Increase in capacity.
Recent Trends in Operations Management:

1. Global Market Place: Globalization of business is the reason why many manufacturing
firms felt the need of operations in many countries where they have certain economic
advantage. This has increased the level of competition among manufacturing firms
throughout the world.
2. Production/Operations Strategy: An operations strategy becomes important for overall
success of business and the necessity for relating it to their overall business strategy.
3. Total Quality Management: This approach has been adopted by firms to achieve customer
satisfaction by a never-ending quest for improving the quality of goods and services.
4. Flexibility: The ability to adapt quickly to changes in volume of demand, in the product
mix demanded, and in product design or in delivery schedules, has become a major
competitive advantage to the firms.
5. Time Reduction: Reduction of manufacturing cycle time and speed to market for a new
product provides competitive edge to the firm over other firms. When companies can
provide products at the same price and quality, quicker delivery (short lead times) provide
one firm competitive edge over the other.
6. Technology: Advances in technology have led to a vast array of new products, new
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processes and new materials and components. Automation, computerization, information

and communication technologies have revolutionized the way companies operate.
Technological changes in products and processes can have great impact on
competitiveness and quality, if the advanced technology is carefully integrated into the
existing system.
7. Worker Involvement: The recent trend is to assign responsibility for decision making and
problem solving to the lower levels in the organization. This is known as employee
involvement and empowerment, for example quality circles and quality improvement
teams.
8. Re-engineering: This involves drastic measures or break through improvements to
improve the performance of a firm. It involves the concept of clean-slate approach or
starting from scratch in redesigning the business processes.
9. Environmental Issues: There is increasing emphasis on reducing waste, recycling waste,
using less-toxic chemicals and using biodegradable materials for packaging.
10. Corporate Downsizing (Right Sizing): Companies are forced for downsizing or right
sizing due to competition, lowering productivity, need for improved profit and for higher
dividend payment to shareholders.
11. Supply Chain Management: Management of supply chain, from suppliers to final
customers reduces the cost of transportation, warehousing and distribution throughout the
supply chain.
12. Lean Production: Lean production systems use minimal resources to produce high
volume of high quality goods with some variety. These systems use flexible
manufacturing systems and multi-skilled work force to have advantages of both mass
production and job production (or craft production).
Operations Strategy – Strategic fit, framework; Supply Chain Management:
Strategic fit expresses the degree to which an organization is matching its resources and
capabilities with the opportunities in the external environment. The matching takes place through
strategy and it is therefore vital that the company have the actual resources and capabilities to
execute and support the strategy. Strategic fit can be used actively to evaluate the current
strategic situation of a company as well as opportunities such as M&A and divestitures of
organizational divisions. Strategic fit is related to the Resource-based view of the firm which
suggests that the key to profitability is not only through positioning and industry selection but
rather through an internal focus which seeks to utilize the unique characteristics of the
company’s portfolio of resources and capabilities.[1] A unique combination of resources and
capabilities can eventually be developed into a competitive advantage which the company can
profit from. However, it is important to differentiate between resources and capabilities.
Resources relate to the inputs to production owned by the company, whereas capabilities
describe the accumulation of learning the company possesses. Resources can be classified both
as tangible and intangible:
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UNIT II FORECASTING, CAPACITY AND FACILITY DESIGN 9

Demand Forecasting – Need, Types, Objectives and Steps. Overview of Qualitative and
Quantitative methods. Capacity Planning – Long range, Types, Developing capacity
alternatives. Overview of sales and operations planning. Overview of MRP, MRP II and
ERP. Facility Location – Theories, Steps in Selection, Location Models. Facility Layout –
Principles, Types, Planning tools and techniques.
Demand Forecasting:
Forecasting Defined : Forecasting is the first step in planning. It is defined as estimating the
future demand for products and services and the resources necessary to produce these outputs.
Demand forecasting is needed for:

• New facility Planning
• Production Planning
• Work force scheduling
• Financial planning
Types of Forecasts
• Technological forecasts: Concerned with rates of technological progress
• Economic forecasts: Statements of expected future business conditions.
• Demand forecasts: Projections of demand for a company's products or services
throughout some future period.
Objectives of Demand Forecasting

Short range objectives of demand forecasting:
i. Formulation of production strategy and policy
ii. Formulation of pricing policy
iii. Planning and control of sales
iv. Financial planning
Medium or Long-Range Objectives:
i. Long-range planning for production capacity
ii. Labour requirements (Employment levels)
iii. Restructuring the capital structure
Steps in the Forecasting Process

The seven basic steps
i. Determine the purpose (objectives) of the forecast
ii. Select the items for which forecasts are needed
iii. Determine the time horizon for the forecast
iv. Select the forecasting model (method or technique)
v. Gather and analyse the data needed for the forecast
vi. Prepare the forecast
vii. Monitor the forecast
Overview of Qualitative and Quantitative methods:
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(i) Qualitative methods consist mainly of subjective inputs, often of non-numerical

description.
 Jury of executive opinion method involves taking opinion of a small group of high-level
managers and results in a group estimate of demand.
 Salesforce composite method is based on estimate of expected sales by sales persons.
 Market research method or consumer survey method determines consumer interest in
a product or service by means of a consumer survey.
 Delphi method is a judgemental method which uses a group process that allows experts
to make forecasts.
(ii) Quantitative methods involve either projection of historical data or the development of
association models which attempt to use causal variables to arrive at the forecasts.
1. Time series models use a series of past data to make a forecast for the future. Time series is a
time-ordered sequence of observations taken at regular intervals over a period of time.
Yc = T. S. C. R multiplicative model
Yc = T + S + C + R additive model
where T is Trend, S is Seasonal, C is Cyclical, and R is Random components of a series.
Trend is a gradual long-term directional movement in the data (growth or decline).
Seasonal effects are similar variations occurring during corresponding periods, e.g., December
retail sales. Seasonal can be quarterly, monthly, weekly, daily, or even hourly indexes.
Cyclical factors are the long-term swings about the trend line. They are often associated with
business cycles and may extend out to several years in length.
Random component are sporadic (unpredictable) effects due to chance and unusual
occurrences. They are the residual after the trend, cyclical, and seasonal variations are removed.
Trend: Three methods for describing trend are: (1) Moving average, (2) Hand fitting, and
(3) Least squares.
Moving Average
A centered moving average (MA) is obtained by summing and averaging the values from a given
number of periods repetitively, each time deleting the oldest value and adding a new value.
∑x
MA =
Number of Period
A weighted moving average (MAw) allows some values to be emphasized by varying the
weights assigned to each component of the average. Weights can be either percentages or a real
number.
∑ (Wt)X
MAwt =
∑Wt
Hand Fitting
A hand fit or freehand curve is simply a plot of a representative line that (subjectively) seems to
best fit the data points. For linear data, the forecasting equation will be of the form:
Yc = a + b (X) (signature)
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where Yc is the trend value, a is the intercept (where line crosses the vertical axis), b is the slope
(the rise, y, divided by the run, x), and X is the time value (years, quarters, etc.). The
“signature” identifies the point in time when X = 0, as well as the X and Y units.
Least Squares
Least squares are a mathematical technique of fitting a trend to data points. The resulting line of
best fit has the following properties: (1) the summation of all vertical deviations about it is zero,
(2) the summation of all vertical deviations squared is a minimum, and (3) the line goes through
the means X and Y. For linear equations, the line of best fit is found by the simultaneous solution
for a and b of the following two normal equations:
∑Y = na b∑X
∑XY = a∑Xb∑X2
Exponential Smoothing
Exponential smoothening is a moving-average forecasting technique that weights past data in an
Exponential manner so that most recent data carry more weight in the moving average.
With simple Exponential smoothening, the forecast Ft is made up of the last period forecast Ft–1
plus a portion, α, of the difference between the last periods actual demand At–1 and last period
forecast Ft–1.
Ft = Ft–1 + (At–1– Ft–1).
Adjusted Exponential Smoothing
Adjusted exponential smoothing models have all the features of simple exponential smoothing
models, plus they project into the future (for example, to time period t + 1) by adding a trend
correction increment, Tt, to the current period smoothed average, Ft Ft+1= FtTt
The components of a trend-adjusted forecast that utilizes a second smoothing coefficient β. The
βvalue determines the extent to which the trend adjustment relies on the latest difference in
forecast amounts ( F t -F t-1) versus the previous trend Tt–1
A low βgives more smoothing of the trend and may be useful if the trend is not well-
established. A high βwill emphasize the latest trend and be more responsive to recent changes
in trend. The initial trend adjustment Tt–1 is sometimes assumed to be zero.
Regression And Correlation Methods
Regression and correlation techniques quantify the statistical association between two or more
variables.
(a) Simple regression expresses the relationship between a dependent variable Y and a
independent variable X in terms of the slope and intercept of the line of best fit relating the two
variables.
(b) Simple correlation expresses the degree or closeness of the relationship between two
variables in terms of a correlation coefficient that provides an indirect measure of the variability
of points from the line of best fit. Neither regression nor correlation gives proof of a cause-effect
relationship.
Differences between qualitative and quantitative:
Qualitative Quantitative
Methods Methods
Uses when situation is vague Used in stable situations
and little data available Historical data available
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New products Existing products
New technology Current technology
Involves mathematical techniques
Example: forecasting newly introduced Example: sales of color TVs

online sales
Capacity Planning:
Capacity planning is the process of determining the production capacity needed by an
organization to meet changing demands for its products.
Capacity planning involves activities such as:

1. Assessing existing capacity
2. Forecasting future capacity needs
3. Identifying alternative ways to modify capacity
4. Evaluating financial, economical and technological capacity alternatives
Selecting a capacity alternative most suited to achieve the strategic mission of the firm. Capacity
planning involves capacity decisions that must merge consumer demands with human, material
and financial resources of the organization
Capacity planning – Long range:

-The long range planning generally considers planning horizons of one year or longer. A time
period of one year or longer is needed to provide sufficient time to build a new facility, to expand
the existing facility or to move to a new facility due to forecasted changes in demand.
-We determine long-term capacity needs by forecasting demand over a time horizon and then
converting those forecasts into capacity requirements
Long-term considerations relate to overall level of capacity, such as facility size (affected by
trends and cycles)
1. Long range capacity planning: T>1 year.
Decisions: planning for capacity that requires a long time to acquire.
e.g. Plant/building/equipment/high cost facility
2. Intermediate range capacity planning: T(6-18 months).
Decisions: planning for capacity requirement (month or quarterly).
e.g. work force size/new tools/inventory/…..
3. short range capacity planning: T (1-6moth).
Decisions: weekly (or daily) capacity planning.
e.g. overtime use/personnel transfer/alternative routings/……
Ways of Changing Long Range Capacity:

•Expand Capacity
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–Subcontract with other companies to become suppliers of the expanding firm’s components or
entire products
–Acquire other companies, facilities, or resources
–Develop sites, buildings, buy equipment
–Expand, update, or modify existing facilities
–Reactivate facilities on standby status
•Reduce Capacity
–Sell existing facilities, sell inventories, and layoff or transfer employees
–Mothball facilities and place on standby status, sell inventories, and layoff of transfer
employees
–Develop and phase in new products as other products decline
Types of Capacity Planning:

• Long term Capacity Planning
• Short-term Capacity Planing
• Finite Capacity Planning
• Infinite Capacity Planning.
Two categories of factors affecting capacity planning are:
• Controllable Factors
• Less Controllable Factors.
Long Term Capacity: Long range capacity of an organization is dependent on various other
capacities like design capacity, production capacity, sustainable capacity and effective capacity.
Design capacity is the maximum output possible as indicated by equipment manufacturer under
ideal working condition.
Production capacity is the maximum output possible from equipment under normal working
condition or day.
Sustainable capacity is the maximum production level achievable in realistic work condition and
considering normal machine breakdown, maintenance, etc.
Effective capacity is the optimum production level under pre-defined job and work-schedules,
normal machine breakdown, maintenance, etc.
Medium Term Capacity: The strategic capacity planning undertaken by organization for 2 to 3
years of a time frame is referred to as medium term capacity planning.
Short Term Capacity: The strategic planning undertaken by organization for a daily weekly or
quarterly time frame is referred to as short term capacity planning.
Finite and infinite Capacity planning: If time is fixed by the customer required delivery date
or processing cycle, it is possible to accept time as the primary constraint and plan backwards to
accommodate these times. In such cases, planning backwards to infinite capacity offers a
potential solution to the problem. On the other hand if the processing time is not a constraint in
cases where products are produced to stock and sell, it is simpler to use a forward plan based on
finite capacity i.e., based on available resources.
Developing capacity alternatives:
Aside from the general considerations about the development of alternatives (i.e., conduct a
reasonable search for possible alternatives, consider doing nothing, take care not to overlook
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non-quantitative factors), there are other things that can be done to enhance capacity
management:
1) Design flexibility into systems. The long-term nature of many capacity decisions and the
risks inherent in long-term forecasts suggest potential benefits from designing flexible
systems. (For example provision for future expansion).
2) Differentiate between new and mature products or services. Mature products or
services tend to be more predictable in terms of capacity requirements, and they may
have limited life span.
3) Take a “big picture” approach to capacity changes. When developing capacity
alternatives, it is important to consider how parts of the system interrelate. (for example
increase capacity without enough car park).
4) Prepare to deal with capacity “chunks.” Capacity increases are often acquired in fairly
large chunks rather than smooth increments.
5) Attempt to smooth out capacity requirements. Unevenness in capacity requirements
also can create certain problems.
6) Identify the optimal operating level. Production units typically have an ideal or optimal
level of operation in terms of unit cost of output. Production units have an optimal rate
of output for minimum cost Minimum cost and optimal operating rate are functions of
size of a production unit
Overview of sales and operations planning (Aggregate Planning)
Sales and operations planning (S&OP): The process of planning future aggregate resource
levels so that supply is in balance with demand.
Staffing plan: A sales and operations plan of a service firm, which centers on staffing and other
human resource–related factors.
Production plan: A sales and operations plan of a manufacturing firm, which centers on
production rates and inventory holdings
Aggregation:
 The sales and operations plan is useful because it focuses on a general course of action,
consistent with the company’s strategic goals and objectives, without getting bogged
down in details.
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 Product family: A group of customers, services, or products that have similar demand
requirements and common process, labor, and materials requirements.
 A company can aggregate its workforce in various ways as well, depending on its
flexibility.
 The company looks at time in the aggregate – months, quarters, or seasons—rather than
in days or hours.
Plan Objectives:
Six objectives usually are considered during development of a plan:
1. Minimize Costs/Maximize Profits
2. Maximize Customer Service
3. Minimize Inventory Investment
4. Minimize Changes in Production Rates
5. Minimize Changes in Workforce Levels
6. Maximize Utilization of Plant and Equipment
Reactive Alternatives:
 Reactive alternatives are actions that can be taken to cope with demand requirements.
 Anticipation inventory is inventory that can be used to absorb uneven rates of demand or
supply.
 Workforce adjustment: Hiring and laying off to match demand.
 Workforce utilization: Use of overtime and undertime.
 Vacation schedules: Use of plant-wide vacation period, vacation “blackout” periods.
 Subcontracting: Outsourcing to overcome short-term capacity shortages.
 Backlogs, Backorders, and Stockouts:
 Backlog: An accumulation of customer orders that have been promised for
delivery at some future date.
 Backorder: A customer order that cannot be filled immediately but is filled as
soon as possible.
 Stockout: An order that is lost and causes the customer to go elsewhere.
Planning Strategies:
 Chase strategy: A strategy that involves hiring and laying off employees to match the
demand forecast.
 Level strategy: A strategy that keeps the workforce constant, but varies its utilization and
inventory to match the demand forecast.
 Mixed strategy: A strategy that considers and implements a fuller range of reactive
alternatives than any one “pure” strategy.
Constraints and Costs:
The planner usually considers several types of costs when preparing sales and operations
plans.
1. Regular-Time Costs: These costs include regular-time wages plus contributions to
benefits, Social Security, retirement funds, and pay for vacations and holidays.
2. Overtime Costs: Overtime wages typically are 150 percent of regular-time wages.
3. Hiring and Layoff Costs: Include the costs of advertising jobs, interviews,training
programs, exit interviews, severance pay, and lost productivity.
4. Inventory Holding Costs Backorder and Stockout Costs
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Overview of MRP (or) Information Flow in Planning and controlling with MRP.
MRP - It is a technique for determining the quantity and timing for the acquisition of
dependent demand items needed to satisfy MPS
Objectives of MRP
1. To improve customer service by meeting delivery schedules promised and shortening delivery
lead times.
2. To reduce inventory costs by reducing inventory levels.
3.To improve plant operating efficiency by better use of productive resources.
Three main purposes of a basic MRP system are to:
• Control inventory levels
• Assign operating priorities
• Assign capacity to load production systems.
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MRP System Inputs

Master Production Schedule: One of the three primary inputs in MRP, specifies what end
products are to be produced, in what quantities and when.
Bill of Materials file: Provides the information regarding all the materials, parts and sub
assemblies that go into the end product.
Inventory Status file: Gives complete and up-to-date information on the on-hand inventories,
gross requirements, scheduled receipts and planned order releases for the item.
MRP System Outputs
Primary outputs of MRP Systems:
• Planned order schedule
• Changes in planned orders.
Secondary inputs of MRP system:
• Exception reports
• Performance reports
• Planning reports
Computational procedure of MRP
(a) BOM - A listing of all of the raw materials, parts, subassemblies, and assemblies
needed to produce one unit of a product
(b) Inventory status file – It contains important information such as what items
should be ordered and when orders should be released
(c) Gross Requirements – Project the use of the items
(d) Schedule receipts – indicates when the previously released orders if any are
scheduled to be received and available for use
(e) On hand inventory – It indicate the number of units projected to be available at
the end of each time period.
(f) Net requirement – Calculated by subtracting from the gross requirements for that
period.
(g) Planned order release- It indicate when orders should be placed ot meet the
requirements for the item.
Issues in MRP
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a. Lot Sizing
b. Safety Stock
c. Scrap allowance
d. Pegging
e. Cycle counting
f. Updating
g. Time fence
Lot- Sizing Rules

1. Fixed Order Quantity (FOQ)
A rule that maintain the same order quantity each time an order is issued
Formula:
(Projected On-hand inventory balance at end of week t) =
(Inventory on hand at end of week t-1) + (Scheduled (or) planned receipts in week t)
– Gross requirement in week t)
2. Periodic Order Quantity (POQ)-
A rule that allows a different order quantity for each order issued but tends to issue
the order at predetermined time intervals.
Formula:
(POQ lot size to arrive in week t) =
(Total gross requirements for P weeks, including week t ) – (Projected on-hand
inventory balance at end of week t-1)
3. Lot for lot (L4L)
A rule under which the lot size ordered covers the gross requirement of a single week.
Formula:
(L4L lot size) =
(Gross requirement in week t) – (Projected on-hand inventory balance at the end of
week t-1)
Manufacturing Resource Planning (MRP II ):
Broad-based resource co-ordination system involving other areas of a firm in the planning
process, such as marketing, finance and the human resource.
 Manufacturing Resource Planning (MRP II) addresses the planning and control of
activities related to materials, capacity, finance, engineering, sales and marketing.
 Closed-loop MRP:
A system built around material requirement planning (MRP-I) and also including
additional planning functions such as master production scheduling and capacity requirement
planning
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Manufacturing (Materials,
Business Plan Capacity Production
Schedules)
Production Plan
MPS
Rough cut Purchasing (Vendor orders)

capacity plan
MRP
Detailed
capacity plan
Shop floor control,
purchase control Engineering (Process and
product design)
Marketing (sales order

entry, delivery projections)
Finance (Capital
requirements for capacity,
working capital
requirements
Accounting (Bills payable,
Accounts receivable)
ERP: Enterprise Resource Planning

 Enterprise Resource Planning (ERP): A software package developed for optimum use
of resources of an enterprise in a planned manner. It integrates the entire enterprise
starting from the supplier to the customer, covering, logistics, financial and human
resources.
Features of ERP
1. Accommodating variety
2. Integrated Management Information
3. Seamless integration
4. Supply chain management
5. Resource management
6.Integrated data model
Scope of ERP
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a. Financials
b. Logistics
c. Human resources
d. Work flow
Application of ERP
ERP is gaining popularity in India at a rapid pace. This is mainly due to the need for reducing
costs especially when the sales are sluggish in the sub-emerging markets.
Facility location:
Meaning- the establishment of an industry at a particular place.

Or
The selection of a place for locating a plant is one of the problems, perhaps the most important,
which is faced by an entrepreneur while launching a new enterprise.
It is of 2 types-
1. Localization /centralization-means concentration of similar type of industries at some
particular place. E.g. textile in Mumbai.
2. Delocalization /Decentralization-means spreading of similar type of industries at different
places. E.g. banking industries
Factors affecting location & site decisions:

1. Availability of raw material
2. Nearness to the potential market
3. Near to the source of operating requirements like electricity, disposal of waste, drainage
facilities.
4. Supply of labor
5. Transport & communication facilities
6. Integration with other group of companies
7. Suitability of land & climate
8. Availability of housing, other amenities & services
9. Local building & planning regulations
10. Safety requirements
11. Others like low interest on loans, special grants, living standards
Location Theories:
This location theory was propounded by Alfred Weber in 1909. But he fails to explain all subtle
variances in decision-making but does provide a simple set of guidelines.
Weber classified locational factors into two brad categories – primary and secondary. Materials
and labour constitute primary factors that contribute to dispersal of industries over different
regions. Industrial units are materials oriented, if their cost of transportation to units is higher.
Industrial plants are market-oriented when cost of transporting finished goods to markets is
higher. Another primary factor is labour. Weber assumes that centers flush with cheap and skilled
labour pull industries towards themselves
Banking credit, insurance, communication and rent and rates constitute the secondary factors of
location. Some of these attract industries to certain areas from different places and some other
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contribution to their dispersal from original places. The latter are called the degglomerating
factors and the former is agglomerating factors.
Steps in selection:
To be systematic in choosing a plant location, the entrepreneur would do well to proceed step by
step, the steps being
1. Deciding on domestic or international location.
2. Selection of region
- Availability of raw material
- Nearness to the market
- Availability of power
- Transport facilities
- Suitability of climate
- Government policy
- Competition between states
3. Selection of community
- Availability of labour
- Civic amenities for workers
- Existence of complementary and competing industries
- Finance and research facilities
- Availability of water and fire-fighting facilities
- Local taxes and restrictions
- Momentum of a early start
- Personal factors
4. Selection of the site
- Soil, size and topography
- Disposal of waste
Location Models:
- Factor rating method
- Point rating method
- Break –even analysis
- Quantitative factor analysis
1. Factor rating method
Popular because a wide variety of factors can be included in the analysis
Six steps in the method
1. Develop a list of relevant factors called critical success factors
2. Assign a weight to each factor
3. Develop a scale for each factor
4. Score each location for each factor
5. Multiply score by weights for each factor for each location
6. Recommend the location with the highest point score
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2. Point Rating Method:

In selecting a site or location, companies have several objectives, but not all are
of equal importance. The relative weight a company assigns to each objective or to each location
factor may be represented by the number of points a perfect site would receive in each category.
Each potential site is then evaluated with respect to every factor a company is looking for and
points are assigned for each factor. The site with the highest total number of points is considered
superior to other sites.
3. Break even analysis:
Method of cost-volume analysis used for industrial locations
Three steps in the method
1. Determine fixed and variable costs for each location
2. Plot the cost for each location
3. Select location with lowest total cost for expected production volume
Example: Consider a corporate office, which wants to identify the best location. They have identified 3
locations after a preliminary survey. They are locations A, B and C. The corporate has estimated the
variable cost and fixed cost and then the total cost for the each location against the production quantity.
This is shown in the table.
Fixedcost Variable cost
SITE
(Rupees in lakhs) (Rupees per unit)
A 2.5 1000
B 3 750
C 4 500
Solution:
Considering site A and B,
the total cost for site A for ‘x’ quantities = 250000 + 1000x. --------- (1)
the total cost for site B for ‘x’ quantities = 300000 + 750x. --------- (2)
Therefore from (1) and (2),
x = (300000 – 250000)/(1000-750)
= 200 units.
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Considering site B and C,

the total cost for site B for ‘x’ quantities = 300000 + 750x. ---------- (3)
the total cost for site C for ‘x’ quantities = 400000 + 500x. --------- (4)
Therefore from (3) and (4),
x = (400000 – 300000)/(750-500)
= 400 units.
Result,
If ‘x’ < 200 units, select site A as it has minimum fixed value.
If 200 < ’x’ < 400 units, select site B as it has minimum variable cost compared to A and
minimum total cost compared to C.
If ‘x’ > 400 units, select site C as it has the least variable cost.
Graphical representation:
4. Qualitative factor analysis method:

IF economic criteria are not sufficiently influential to decide the location alternative, a system of
weighting the criteria might be useful in making a plant location decision. This approach is
referred to as qualitative factor analysis.
Steps:
- Develop a list of relevant factos
- Assign a weight to each factor to indicate its relative importance ( Weights may
total upto 1.0
- Assign a common scale to each factor (say 0 to 100) and designate any minimum
point to be scored by any location.
- Score each potential location according to the designated scale and multiply the
scores by the weights to arrive at the weighted scores.
- Total the points for each location, and choose the location with the maximum
points
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Other Location models:

Center-of-Gravity Method: This technique is used in determining the location of a facility which
will either reduce travel time or lower shipping costs. Distribution cost is seen as a linear
function of the distance and quantity shipped. The Center of Gravity Method involves the use of
a visual map and a coordinate system; the coordinate points being treated as the set of numerical
values when calculating averages. If the quantities shipped to each location are equal , the center
of gravity is found by taking the averages of the x and y coordinates; if the quantities shipped to
each location are different , a weighted average must be applied (the weights being the quantities
shipped).
Calculate X and Y coordinates for ‘center of gravity’

Assumes cost is directly proportional to distance and volume shipped
where dix = x-coordinate of location i

diy = y-coordinate of location i
Qi = Quantity of goods moved to or from location i
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Facility layout:
A Facility or plant layout is the placing of the right items coupled with the right place and the
right method, to permit the flow of production process through the shortest possible distance in
the shortest possible time.
Definition: Plant layout refers to the arrangement of physical facilities such as machines,
equipment, tools, furniture etc. in such a manner so as to have quickest flow of material at the
lowest cost and with the least amount of handling in processing the product from the receipt of
raw material to the delivery of the final product.
Objectives of good Plant Layout:

· A well designed plant layout is one that can be beneficial in achieving the following
Objectives:
· Proper and efficient utilization of available floor space
· Transportation of work from one point to another point without any delay
· Proper utilization of production capacity.
· Reduce material handling costs
· Utilize labour efficiently
· Reduce accidents
· Provide for volume and product flexibility
· Provide ease of supervision and control
· Provide for employee safety and health
· Allow easy maintenance of machines and plant.
· Improve productivity
CRITERIA FOR GOOD LAYOUT

1. Flexibility
2. Maximum coordination
3. Maximum visibility
4. Maximum accessibility
5. Minimum distance
6. Minimum handling
7. Minimum discomfort- proper light,ventilation etc.
8. Inherent safety
9. Efficient process flow
10. Identification –provision of space to workers.
The principles of plant layout
1. Integration of all factors - The plant should integrate all the essential resources of men,
machines and materials in order to give an optimum level of production.
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2. Minimum Movement - The less the movement of men, machines and materials, the less will
be the cost of production. Thus, minimum movement of theses resources will provide cost
efficiency.
3. Unidirectional flow - All materials should progressively move towards the same direction i.e.
towards the stage of completion. Any back-tracking should be avoided here.
4. Efficient space handling - The space used up during the plant work also costs money as more
the space required, more will be the floor rent. The materials should be organized in stacks in a
proper and recognizable order to maintain space efficiency.
6. Maximum observation capacity - The layout of the plant should such that all of its resources
and workforce can be observed and evaluated at all points in time. This helps in better
supervision of work and helps in increasing both effectiveness and safety.
7. Maximum accessibility - The layout of the plant should ensure that all essential resources are
accessible to the labour and machines without any delay. The aisles should be free from
obstacles. The materials should be placed as close,to the machines concerned, as possible.
8. Minimum Handling - The ineffective handling of materials leads to a rise in cost. Materials
should be handled in stacks and transferred in one go. Handling of a material twice in the same
direction must be avoided.
9. Maximum protection - The layout should ensure the protection of the materials and machines
while they are in the working or the storage stage. The security system should be efficient
without making too many doors or barriers.
10. Maximum flexibility - The plant layout should not be rigid and permanent. If the need arises,
the plant layout should be able to change itself without being expensive.
5. Inherent safety - The environment of the plant should be safe for the workers as well as the
machines. There should be fire extinguishers and fire exits placed strategically. There should be
minimum contact of the labour to toxic chemicals and environment.
Types Of Layout:
There are mainly four types of plant layout:
(a) Product or line layout

(b) Process or functional layout
(c) Fixed position or location layout
(d) Combined or group layout
PRODUCT OR LINE LAYOUT:

In this type of layout the machines and equipments are arranged in one line depending upon the
sequence of operations required for the product. It is also called as line layout. The material
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moves to another machine sequentially without any backtracking or deviation i.e the output of
one machine becomes input of the next machine. It requires a very little material handling.
It is used for mass production of standardized products.
Advantages of Product layout:
· Low cost of material handling, due to straight and short route and absence of backtracking
· Smooth and continuous operations
· Continuous flow of work
· Lesser inventory and work in progress
· Optimum use of floor space
· Simple and effective inspection of work and simplified production control
· Lower manufacturing cost per unit
Disadvantages of Product layout:

· Higher initial capital investment in special purpose machine (SPM)
· High overhead charges
· Breakdown of one machine will disturb the production process.
· Lesser flexibility of physical resources.
PROCESS LAYOUT:
In this type of layout the machines of a similar type are arranged together at one place. This type
of layout is used for batch production. It is preferred when the product is not standardized and
the quantity produced is very small.
Advantages of Process layout:

· Lower initial capital investment is required.
· There is high degree of machine utilization, as a machine is not blocked for a single
product
· The overhead costs are relatively low
· Breakdown of one machine does not disturb the production process.
· Supervision can be more effective and specialized.
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· Greater flexibility of resources.
Disadvantages of Process layout:

· Material handling costs are high due to backtracking
· More skilled labour is required resulting in higher cost.
· Work in progress inventory is high needing greater storage space
· More frequent inspection is needed which results in costly supervision
COMBINED LAYOUT:
· A combination of process & product layout is known as combined layout.
· Manufacturing concerns where several products are produced in repeated numbers with
no likelihood of continuous production, combined layout is followed
FIXED POSITION OR LOCATION LAYOUT:

Fixed position layout involves the movement of manpower and machines to the product which
remains stationary. The movement of men and machines is advisable as the cost of moving them
would be lesser. This type of layout is preferred where the size of the job is bulky and heavy.
Example of such type of layout is locomotives, ships, boilers, generators, wagon building,
aircraft manufacturing, etc.
Advantages of Fixed position layout:

· The investment on layout is very small.
· The layout is flexible as change in job design and operation sequence can be easily
incorporated.
· Adjustments can be made to meet shortage of materials or absence of workers by
changing the sequence of operations.
Disadvantages of Fixed position layout:
· As the production period being very long so the capital investment is very high.
· Very large space is required for storage of material and equipment near the product.
· As several operations are often carried out simultaneously so there is possibility of
confusion and conflicts among different workgroups.
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Planning Tools and Techniques:

Templates: Templates are patterns which consist of a thin plate of wood or metal, which a
serves as a gauge or a guide in mechanical work. A plant layout template is a scaled
representation of physical object in a layout. This object may be amachine, materials handling
equipment, a worker or even materials. The templates are fixed to a plan drawing and are moved
around the drawing to explore the various layout possibilities until a layout, which eliminate
unnecessary handling and back tracking of materials and offers flexibility to admit revisions at
the least cost, emerges. The template method is particularly useful in developing a layout,for an
existing department or building or when the configuration of the building to already established
through other layout techniques
Operations sequence analysis:

This technique utilizes computer technology in designing the facility layout by sequencing out
all activities and then arranging them in circular or in a straight line.
Line Balancing:
Line: an assembly line composed of several work stations, at which specific operations are
performed.
• Line Balancing is the process of assigning tasks to workstations in such a way that the
workstations (operations) have approximately equal time requirements.
• For Product Layouts (Sequence of tasks!)
• Multiple tasks can be assigned to one workstation.
Cycle Time of Workstation

• The time a workstation needs to complete its set of assigned tasks once.
Example: Workstation A is assigned 2 tasks, task one needs 0.5 minute and task two 1 minute. So
the Cycle Time (CT) of Workstation A is?
The CT of a product line containing multiple workstations is the longest CT of the workstations.
(Line CT)
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Precedence Diagram:
• Task assignments must respect precedence relationships and other technological
constraints.
• Precedence diagram: Tool used in line balancing to display elemental tasks and sequence
requirements
Number of Workstations:
Question: How does one determine the number of workstations to use?
Answer: By specifying a desired line cycle time or, equivalently by specifying an output rate.
(How are cycle time and output related?)
Desired Cycle Time
Operating Time per Day (OT)

Desired Line CT 
Desired Output per Day (D)
Suppose OT = 8 hours per day (480 minutes per day) and D = 400 units per day. Then CT = ??
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Minimum Number of Workstations Required:

(D)( t)
Sum of Task Times N=
N min  OT
Cycle Time
 tof=task
CT = 480/400= 1.2 minutes per unit per workstation, Sum sumtimes
of task time
= 2.5 s
minutes per unit.
Nmin =???
Line Efficiency:
Sum of task times

Line Efficiency  x100%
(N actual )(CT)
CT = 1.2 minutes per unit per workstation

Sum of task times = 2.5 minutes per unit.
Line Efficiency = 2.5/(3*1.2) =69.4%
Line Balancing Procedure:

1. Calculate CT and NMin.
2. Assign tasks to workstations moving from left to right through the precedence diagram.
3. Tasks eligible for assignment are
a. tasks where all preceding tasks have been assigned and
b. tasks with times that do not exceed the remaining time at the work station.
4. Select an eligible task for assignment using one or more of the following rules:
a. Assign the task with the greatest number of tasks following it.
b. Assign the task with the longest task time.
5. After each task assignment calculate time remaining at the current work station.
6. Continue this until all tasks have been assigned to workstations.
7. Compute appropriate measures (e.g., line percent idle time and line efficiency) for the set
of assignments.
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UNIT III DESIGN OF PRODUCT, PROCESS AND WORK SYSTEMS 9

Product Design – Influencing factors, Approaches, Legal, Ethical and Environmental issues.
Process – Planning, Selection, Strategy, Major Decisions. Work Study – Objectives, Procedure.
Method Study and Motion Study. Work Measurement and Productivity – Measuring Productivity
and Methods to improve productivity.
Product: “A product is a bundle of physical services and symbolic particulars expected to yield
satisfactions or benefits to the buyer” – by Phillip Kotler
Product design: “Product design in its broadest sense includes the whole development of the
product through all the preliminary stages until actual manufacturing begins”
– by C.S. Deverell
New product development (Steps)
Advance product Advance Design
Needs identification
planning
Detailed
Engineering Design
Production process Product Evaluation Product use and

design and development and improvement support
Interrelationship (or) interaction (or) linkage of product design and process design
Product ideas
Feasibility studies
Product design Process design
Advance product planning, Advance design Organizing the process flow

Production process design and Relation of process design to
Continuous
development Product evaluation and process flow
interaction
improvement, product use and support Evaluating the process design
Produce and market new product/service
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Interrelationship (or) interaction (or) linkage of product planning and process planning
Product development
Product planning system

Product Final design
New Technology
Process R& D Process Design
Work station Selection Work flow analysis
Operation design
Operation Content
Operation method
Plant planning systems
Product Design: Concerned with form and function of a product. It refers to the arrangement of
elements or parts that collectively form a product.
Process Design: Concerned with the overall sequence of operations required to achieve the
design specification of the product.
Production Design: Concept of designing products from the point of view of producibility.
Objectives of Product Design
(i) The overall objective is profit generation in the long run.
(ii) To achieve the desired product quality.
(iii) To reduce the development time and cost to the minimum.
(iv) To reduce the cost of the product.
(v) To ensure producibility or manufacturability (design for manufacturing and assembly).
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Influencing factors for Product design:

Influencing factors
Customer perspectives Organisational perspectives
1. Functions 1. Intrinsic cost of material

2. Aesthetics 2. Intrinsic cost of labour
3. User Friendliness 3. Replacement, Exchange
4. Esteem Associated with and disposal
Other Factors Influencing Product Design
i. Customer requirements
ii. Convenience of the operator or user
iii. Trade off between function and form
iv. Types of materials used
v. Work methods and equipments
vi. Cost/Price ratio
vii. Product quality
viii. Process capability
ix. Effect on existing products
x. Packaging
Approaches to /Elements in Product design
Reverse
Engineering
Research and
development
Manufacturabili
ty
Approaches/
Robust design
Elements in
product
Standardization design
Modular design
Product life
cycle
Computer aided
Concurrent design (CAD)
engineering
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Approaches to Product Design

i. Designing for the customer
• Industrial design
• Voice of the customer
• Quality function deployment (QFD)
ii. Designing for Manufacture and Assembly (DFMA)
• “Over-the-wall approach”
• Concurrent engineering
• Design for Manufacturing (DFM) Design for Assembly (DFA)
iii. Designing for ease of production (or for producibility or manufacturability)
• Specification
• Standardisation
• Simplification
iv. Designing for Quality
a. Designing for robustness (or robust design)
b. Designing for production
i. Modular design
ii. Designing for automation
c. Designing for reliability
v. Designing for Ergonomics
vi. Designing for environmental protection
vii. Designing for recycling
viii. Designing of disassembly (DFD)
ix. Designing for mass customisation
Delayed differentiation and modular designs are two tactics used to make mass
customisation possible.
x. Other issues in product design are (a) Computer aided design (CAD), (b) Value
engineering or value analysis which
• Computer aided design: Use of computer graphics for designing the product helps
to generate a number of alternative designs and identify the best alternative which
meets the designer’s criteria.
• Value engineering/Value analysis: Concerned with the improvement of design and
specifications at various stages of product planning and development.
Legal, Ethiocal and Environmental issues:

Legal Aspect of Product Design :
 The imposition of rules and acts passed by State and Central Govt.
 The standards related to code of practice for design, fabrication and testing of products
prepared by standards organization.
 The imposition of punitive damages by the courts in product liability cases.
 The resistance of consumer protection forums to badly designed and manufacturing
products.
 The resistance of public to damage of their environment.
 The most important law to consider while dealing with the product liability is the
Consumer Protection Act of 1986.
 The sales of Goods Act of 1956.
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Other Legal issues:

 Product liability
 Intellectual Property
Ethical issues:
 Assessing the impact of the design on consumer
 Protection of Intellectual Property
 Privacy
 Exposure to the undesirable
 Advertising of Design
 Right to alter natural order
 Whether designs should be tested on animals and humans
 Environmental impact
 Sustainable technology
 Minority groups
Environmental Issues
Product Pollution
Designer should anticipate environmental trends and design products that are clean enough for
future environmental standards.
Process Pollution
Product designer must avoid the process that causing pollution from solvents, combustible
products, wastes etc. or he may change the processes at the early stages.
Ease of recycling product
Everyone has a moral obligation about the happens to the product after it’s useful life is over?
Can it be recycled into new even be able to profit in some manner from recycling of it’s product.
Process Planning and Process Design

 After the final design of the product has been approved and released for production, the
production planning and control department takes the responsibility of process planning
and process design for converting the product design into a tangible product.
What is a Process?
A process is a sequence of activities that is intended to achieve some result, for example, to
create added value for the customers
Process planning: Concerned with planning the conversion processes needed to convert the raw
material into finished products.
Steps in process planning:
1. Analysis part print
2. Consult with product engineer on product design changes
3. List the basic operation
4. Determine – economical and practical manufacturing methods
5. Combine the operation and put them in to sequence
6. Specify the gauging required for process
Process design: Concerned with the overall sequences of operations required to achieve the
product specifications
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Operations design: Concerned with the design of the individual manufacturing operation.
Process Selection
Process selection refers to the way production of goods or services is organised.
Three primary questions to be addressed before deciding on process selection are:
(i) How much variety of products or services will the system need to handle?
(ii) What degree of equipment flexibility will be needed?
(iii) What is the expected volume of output?
Process Selection Decisions
Processes by market orientation
1. Make to stock
2. Assemble to order
3. Make to order
4. Engineer to order
*Processes as production systems –

1. Project
2. Job shop
3. Batch production
4. Assembly line
5. Continuous flow
*Processes and customer involvement
1. Self service
2. Produt selection
3. Partnership
Process Strategy
An organisation’s approach to selection of the process for the conversion of resource inputs into
outputs.
Key aspects in process strategy include:
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i. Make or buy decisions

ii. Capital intensity and
iii. Process flexibility
Types of process designs (or) Process Strategy

(A) Product –focused (production line or continuous production) - Organised according
to the type of product/service being produced
2 general form
1. Discrete unit manufacturing
2. Process manufacturing
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(B) Process-Focused (Intermittent production or job shops) – Production operations are

grouped according to type of processes.
Receiving and Foundry Rough Fabrication Painting Packaging

raw material machine and shipping
1 2 3 6 6 7
8
4 5 5
1
4
2 3 7
Shear and Finish Debur Assembly

punch Machine
(C) Repetitive Focus system:
It falls between product and process focuses system – modules
Classic assembly lineMass customization focus
(D)Mass customization focus
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(E) Group Technology/Cellular Manufacturing system
Major Strategy:
1. Process choice
2. Nature of product/Services
3. Vertical integration
54
4. Resource flexibility
5. Customer involvement
6. Capital intensity
Process Choice – it depends on volume and degree of customization

Project, Job,Batch,Line and Continuous.
Vertical integration – degree to which a firms own production system or service facility
handles the entire supply chain
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1. Backward integration – firms movement upstream towards sources of raw material and
parts
2. Forward integration – downstream by acquiring more channels of distribution such as
its own distribution centers and retail sources
• Outsourcing
• Make-or-buy decision
Flexible workforce – A workforce whose members are capable of doing many tasks either
at their own workstation or as they move form one workstation to another
Workforce
Equipment
Customer involvement –
1. Self service
2. Product selection
3. Time and location
Capital Intensity
Automation is one way to address the mix of capital and labor
Fixed Automation
Flexible Automation
Process Selected Must Fit with Volume and Variety
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Work Study-Method Study and Work Measurement
• Methods engineering includes work simplification, job design, value analysis and the
like.
• Work study method was developed to improve performance of a given work.
• Work study is the body of knowledge concerned with analysis of the work methods, and
the standard of proposed work methods.
• Objective of work study is to improve operational efficiency.
• The purpose of work study is to determine the best or most effective method of
accomplishing a necessary operation.
Relationship of Time and Motion Study to Work Study
• Time study and motion study are results of practices developed by F.W. Taylor, Frank and
Lillian Gilbreth.
• Time study: Exercising control over the output in respect of a job by setting standards for
performance.
• Time study may be used to compare the effectiveness of alternative work methods.
Objectives:
 To analyse the present method of doing a job, systematically in order to develop a new
and better method
 To measure the work content of a job by measuring the time required to do the job for a
qualified worker and hence to establish standard time
 To increase the productivity by ensuring the best possible use of human, machine and
material resources and to achieve bet quality product/service at minimum possible cost.
 To improve operational efficiency
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Steps or procedure Involved in Work Study
Method Study or Methods Analysis

• Method study is also known as methods improvement.
• Prime objectives of method study are to eliminate wasteful and inefficient motions.
Steps in method study
1. Select- select the work to be studied.
2. Record-record all the relevant facts of the present method of direct observation.
3. Examine-examine the facts critically in sequence, using special critical examination sheet.
4. Develop-develop the best method (i.e) the most practical, economic and effective method,
under prevailing circumstances.
5. Install-install that method as standard practice
6. Maintain- maintain the standard practice by regular routine check.
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Motion Study
Motion study is the science of eliminating wastefulness resulting from using unnecessary; ill-
directed and inefficient motion. The aim of motion study is to find and perpetuate the scheme of
least waste methods of labour.
Micro motion study provides a valuable technique for making minute analysis of those
operations that are short in cycle, contain rapid movements and involve high production over a
long period of time.
Micro-motions are also known as ‘Therbligs’.
Examples of Therbligs
1. Search (Sr)
2. Select (St)
3. Grasp (G)
4. Transport empty (TE)
5. Transport loaded (TL)
6. Hold (H)
7. Release load (RL)
8. Position (P)
9. Pre-position (PP)
10. Inspect (I)
11. Assemble (A)
12. Disassemble (DA)
13. Use (U)
14. Unavoidable delay (UD)
15. Avoidable delay (AD)
16. Plan (Pn)
17. Rest for overcoming fatigue (R)
18. Find (F)
Principles of Motion Economy

Principles of motion economy are divided into three groups.
a. Effective use of the operator
b. Arrangement of the workplace
c. Tools and equipment
Work measurement and productivity:

Work measurement is the application of techniques designed to establish the time for a qualified
worker to carry out a specified job at a defined level of performance.
Techniques of Work Measurement

The main techniques used to measure work are:
 Direct Time Study.
 Synthesis Method.
 Analytical Estimating.
 Pre determined Motion Time System (PMTS).
 Work sampling or Activity Sampling or Ratio Delay Method.
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Steps in Work Measurement

Work measurement involves seven steps.
1. Break the job into elements
2. Record the observed time for each element by means of either time study, synthesis or
analytical estimating.
3. Establish elemental time values by extending observed time into normal time for each
element by applying a rating factor.
4. Assess relaxation allowance for personal needs and physical and mental fatigue involved
in carrying out each element.
5. Add the relaxation allowance time to the normal time for each element to arrive at the
work content.
6. Determine the frequency of occurrences of each element in the job, multiply the work
content of each element by its frequency (i.e., number of time the element occurs in the
job) and add up the times to arrive at the work content for the job.
7. Add contingency allowance if any to arrive at the standard time to do the job.
Techniques of work measurement

The following are the principal techniques by which work measurement is carried out:
1. Time study
2. Activity sampling
3. Predetermined motion time systems
4. Synthesis from standard data
5. Estimating
6. Analytical estimating
7. Comparative estimating
Of these techniques we shall concern ourselves primarily with time study, since it is the basic
technique of work measurement. Some of the other techniques either derive from it or are
variants of it.
1. Time Study
Time Study consists of recording times and rates of work for elements of a specified job carried
out under specified conditions to obtain the time necessary to carry out a job at a defined level of
performance.
In this technique the job to be studied is timed with a stopwatch, rated, and the Basic Time
calculated.
1.1 Requirements for Effective Time Study
The requirements for effective time study are:
 Co-operation and goodwill
 Defined job
 Defined method
 Correct normal equipment
 Quality standard and checks
 Experienced qualified motivated worker
 Method of timing
 Method of assessing relative performance
 Elemental breakdown
 Definition of break points
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 Recording media
One of the most critical requirements for time study is that of elemental breakdown. There are
some general rules concerning the way in which a job should be broken down into elements.
They include the following. Elements should be easily identifiable, with definite beginnings and
endings so that, once established, they can be repeatedly recognised. These points are known as
the break points and should be clearly described on the study sheet. Elements should be as short
as can be conveniently timed by the observer. As far as possible, elements - particularly manual
ones - should be chosen so that they represent naturally unified and distinct segments of the
operation.
1.2 Performance Rating
Time Study is based on a record of observed times for doing a job together with an assessment
by the observer of the speed and effectiveness of the worker in relation to the observer's concept
of Standard Rating.
This assessment is known as rating, the definition being given in BS 3138 (1979):
The numerical value or symbol used to denote a rate of working.
Standard rating is also defined (in this British Standard BS3138) as:
"The rating corresponding to the average rate at which qualified workers will naturally work,
provided that they adhere to the specified method and that they are motivated to apply
themselves to their work. If the standard rating is consistently maintained and the appropriate
relaxation is taken, a qualified worker will achieve standard performance over the working day
or shift."
Industrial engineers use a variety of rating scales, and one which has achieved wide use is the
British Standards Rating Scale which is a scale where 0 corresponds to no activity and 100
corresponds to standard rating. Rating should be expressed as 'X' BS.
Below is an illustration of the Standard Scale:
Rating Walking Pace
0 no activity
50 very slow
75 steady
100 brisk (standard rating)
125 very fast
150 exceptionally fast
The basic time for a task, or element, is the time for carrying out an element of work or an
operation at standard rating.
Basic Time = Observed Time x Observed Rating
The result is expressed in basic minutes - BM's.
The work content of a job or operation is defined as: basic time + relaxation allowance + any
allowance for additional work - e.g. that part of contingency allowance which represents work.
1.3 Standard Time
Standard time is the total time in which a job should be completed at standard performance i.e.
work content, contingency allowance for delay, unoccupied time and interference allowance,
where applicable.
Allowance for unoccupied time and for interference may be important for the measurement of
machine-controlled operations, but they do not always appear in every computation of standard
time. Relaxation allowance, on the other hand, has to be taken into account in every
computation, whether the job is a simple manual one or a very complex operation requiring the
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simultaneous control of several machines. A contingency allowance will probably figure quite
frequently in the compilation of standard times; it is therefore convenient to consider the
contingency allowance and relaxation allowance, so that the sequence of calculation which
started with the completion of observations at the workplace may be taken right through to the
compilation of standard time.
Contingency allowance
A contingency allowance is a small allowance of time which may be included in a standard time
to meet legitimate and expected items of work or delays, the precise measurement of which is
uneconomical because of their infrequent or irregular occurrence.
Relaxation allowance
A relaxation allowance is an addition to the basic time to provide the worker with the opportunity
to recover from physiological and psychological effects of carrying out specified work under
specified conditions and to allow attention to personal needs. The amount of the allowance will
depend on the nature of the job. Examples are:
Personal 5-7%
Energy output 0-10%
Noisy 0-5%
Conditions 0-100%
e.g. Electronics 5%
Other allowances
Other allowances include process allowance which is to cover when an operator is prevented
from continuing with their work, although ready and waiting, by the process or machine
requiring further time to complete its part of the job. A final allowance is that of Interference
which is included whenever an operator has charge of more than one machine and the machines
are subject to random stoppage. In normal circumstances the operator can only attend to one
machine, and the others must wait for attention. This machine is then subject to interference
which increased the machine cycle time.
It is now possible to obtain a complete picture of the standard time for a straightforward manual
operation.
2. Activity Sampling
Activity sampling is a technique in which a large number of instantaneous observations are made
over a period of time of a group of machines, processes or workers. Each observation records
what is happening at that instant and the percentage of observations recorded for a particular
activity or delay is a measure of the percentage of time during which the activity or delay occurs.
The advantages of this method are that
1. It is capable of measuring many activities that are impractical or too costly to be
measured by time study.
2. One observer can collect data concerning the simultaneous activities of a group.
3. Activity sampling can be interrupted at any time without effect.
The disadvantages are that
1. It is quicker and cheaper to use time study on jobs of short duration.
2. It does not provide elemental detail.
The type of information provided by an activity sampling study is:
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a. The proportion of the working day during which workers or machines are producing.
b. The proportion of the working day used up by delays. The reason for each delay must be
recorded.
c. The relative activity of different workers and machines.
3. Predetermined Motion Time Systems

A predetermined motion time system is a work measurement technique whereby 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.
The systems are based on the assumption that all manual tasks can be analysed into basic
motions of the body or body members. They were compiled as a result of a very large number of
studies of each movement, generally by a frame-by-frame analysis of films of a wide range of
subjects, men and women, performing a wide variety of tasks.
The first generation of PMT systems, MTM1, were very finely detailed, involving much analysis
and producing extremely accurate results. This attention to detail was both a strength and a
weakness, and for many potential applications the quantity of detailed analysis was not
necessary, and prohibitively time -consuming. In these cases "second generation" techniques,
such as Simplified PMTS, Master Standard Data, Primary Standard Data and MTM2, could be
used with advantage, and no great loss of accuracy. For even speedier application, where some
detail could be sacrificed then a "third generation" technique such as Basic Work Data or MTM3
could be used.
4. Synthesis
Synthesis is a work measurement technique for building up the time for a job at a defined level
of performance by totaling element times obtained previously from time studies on other jobs
containing the elements concerned, or from synthetic data.
Synthetic data is the name given to tables and formulae derived from the analysis of accumulated
work measurement data, arranged in a form suitable for building up standard times, machine
process times, etc by synthesis.
Synthetic times are increasingly being used as a substitute for individual time studies in the case
of jobs made up of elements which have recurred a sufficient number of times in jobs previously
studied to make it possible to compile accurate representative times for them.
5. Estimating
The technique of estimating is the least refined of all those available to the work measurement
practitioner. It consists of an estimate of total job duration (or in common practice, the job price
or cost). This estimate is made by a craftsman or person familiar with the craft. It normally
embraces the total components of the job, including work content, preparation and disposal time,
any contingencies etc, all estimated in one gross amount.
6. Analytical estimating
This technique introduces work measurement concepts into estimating. In analytical estimating
the estimator is trained in elemental breakdown, and in the concept of standard performance. The
estimate is prepared by first breaking the work content of the job into elements, and then utilising
the experience of the estimator (normally a craftsman) the time for each element of work is
estimated - at standard performance. These estimated basic minutes are totalled to give a total job
time, in basic minutes. An allowance for relaxation and any necessary contingency is then made,
as in conventional time study, to give the standard time.
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7. Comparative estimating
This technique has been developed to permit speedy and reliable assessment of the duration of
variable and infrequent jobs, by estimating them within chosen time bands. Limits are set within
which the job under consideration will fall, rather than in terms of precise capital standard or
capital allowed minute values. It is applied by comparing the job to be estimated with jobs of
similar work content, and using these similar jobs as "bench marks" to locate the new job in its
relevant time band - known as Work Group.
Productivity
Production refers to the total output.
• Productivity: The amount of goods and services produced with resources used.
• Partial productivity: Output in a given period divided by labors hours used in the period.
Output in a given period

Total productivity =
Labour + Capital + Materials + Energy used in the same period
Measuring Productivity:
Productivity refers to output relative to the inputs. Inputs in any production process comprise
capital, labour materials and energy. Productivity of each resource can be measured separately.
Such measurement gives partial productivity. Productivity of all resources put together gives
productivity on the total facto basis. This method of calculating productivity considering all
resources is called multi-factor approach to measuring productivity.
Partial productivity = Out put in a given period / Labour hours used in the period
Total productivity = Out put in a given period / Labour + Capital+ Material+ Energy used in the
same period
Labour productivity in 3 ways

(i) Output per man-hour
Labour productivity = Output / Man – hours used
(ii)Labour hours per unit of output
Labour productivity = Total labour hours used / Output
(iii)Added value per unit of labour cost
Labour productivity = Added value for the product total wages / Total wages
Methods to improve productivity:

- To understand the factors that influences the relationship between output and input.
- In long run, it cannot be achieved only by increased worker effort. The real growth can
come abut only through capital investments in newer and better machines, equipment and
facilities
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- Own the best of machines, but if the people do not work with dedication, productivity
cannot increase. Employees’ job performance depends on their ability and motivation.
Ability depends on the quality of people hired. Motivation is the effort of leadership.
- Other ways are - production planning and control, inventory control , operations
research, cost control, budgetary control, marketing research, preventive maintenance and
the like, help improve productivity.
Production function – Areas of productivity

- Improving volume of production
- Reducing rejection rates
- Minimising rework rate
- Maintaining delivery schedules
- Controlling idle time of machines and men
- Establishing/updating/improving/setting industrial engineering orms.
- Updating processes and procedures
- Maintaining accuracy and timeliness of MIS.
- Decreasing machine set-up time.
- Controlling overtime
- Good hours-keeping
- Checking absenteeism, thefts/pilfers age and misconduct
- Eliminating accidents
- Effective grievance handling
- Efficient training and team building
- Minimising inventory and achieving better yields
- Enhancing customer satisfaction
- Total quality management
- Business process re-engineering (BPRE)
- Automation
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UNIT IV MATERIALS MANAGEMENT 9

Materials Management – Objectives, Planning, Budgeting and Control. Purchasing – Objectives,
Functions, Policies, Vendor rating and Value Analysis. Stores Management – Nature, Layout,
Classification and Coding. Inventory – Objectives, Costs and control techniques.
Overview of JIT.
Why Materials Management?

 Materials is one of the five M’s(Men, Material, Money, Machine and Methods) of an
industrial organization.
 Materials offer considerable scope for improving profit.
 Materials form an important form of current assets in any organization.
 Value addition is the margin between the raw material value and finished goods value.
 Suppliers and materials management account for more than 50 percent of total value.
 Quality of the finished product depends on quality of materials used.
 Conservation of materials and their availability for posterity is one of the planks of social
responsibility of business.
 Exploring new sources of supply is a challenge for material management executives.
Materials Management
 Material management involves organizing and coordinating all management functions that
are responsible for every aspect of materials, storage, and transformation.
 Buying, storage, and movement of material are the three basic objectives of materials
management.
 Optimum investment in inventory is the prime objective of materials management.
 Development of personnel is very important for long-term growth of a firm.
 Engineering groups are primarily responsible for standards of specifications.
Importance of Materials Management
1. Lower prices for materials
and equipment
2. Faster inventory turnover
3. Continuity of supply
4. Reduced lead time
5. Reduced transportation
costs
6. Less duplication of efforts
7. Elimination of buck-
passing
8. Reduced materials
obsolescence
9. Improved supplier
relationships and better
records, and information
10. Better interdepartmental
cooperation
11. Personnel development
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Operations Management
Functions of Materials Management
1. Materials planning and programming
2. Raw material purchase
3. Receiving, store keeping, and warehousing
4. Issuing of material
5. Inventory control
6. Value engineering
7. Transportation of materials
8. Vendor development
9. Vendor rating
10. Disposal of scrap and surpluses
Objectives
Primary Objectives
2. Buying the best item at the lowest cost
3. Reduction in inventory cost and High inventory turnover
4. Maintaining the flow of production
5. Maintaining the consistency of quality
6. Optimization of acquisition and possession, resulting in lower cost
7. Cordial relationship with suppliers
8. Maintaining good records
9. Contribution towards competitiveness
10. Personnel development
Secondary Objectives
1. Promotion of standardization with suppliers
2. Development of reciprocal relations with customers
3. Committees to decide on economic make –or- buy decisions
4. Development of inter departmental relationships
Material Planning And Control

Material planning is a scientific technique of determining in advance the requirements of raw
materials, ancillary parts and components, spares etc. as directed by the production programme.
It is a subsystem in the overall planning activity. There are many factors, which influence the
activity of material planning. These factors can be classified as macro and micro systems.
1. Macro factors: Some of the micro factors which affect material planning, are price trends,
business cycles Govt. import policy etc.
2. Micro factors: Some of the micro factors that affect material planning are plant capacity
utilization, rejection rates, lead times, inventory levels, working capital, delegation of powers
and communication.
Materials Budgeting
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The Process of Preparing Material Budgets
Materials Budgeting: Process of preparing materials budget or purchase budget in terms of

quantity and money value of materials to be procured for a given period of time.
Material Budgeting is an estimate of expenses to be incurred in the procurement of material and
its helps in effective execution and control of material plans.
Material Control
Function of maintaining constantly availability of all kinds of materials required for the
manufacture of products.
Purchasing
The term ‘purchasing’ refer to buying of a material or an item from a company or division that
supplies materials. Since a manufacturing firm is involved in the conversion of raw material into
finished goods, it should ensure that right type of material are purchased in the right time. A one
percent saving in cost is equivalent to 10 percent increase in turnover.
Objectives of Purchasing
The basic objective of the purchasing function is to ensure continuity of supply of raw materials,
sub-contracted items and spare parts and to reduce the ultimate cost of the finished goods. In
other words, the objective is not only to procure the raw materials at the lowest price but to
reduce the cost of the final product.
The objectives of the purchasing department can be outlined as under:
� To avail the materials, suppliers and equipments at the minimum possible costs: These are
the inputs in the manufacturing operations. The minimization of the input cost increases the
productivity and resultantly the profitability of the operations.
� To ensure the continuous flow of production through continuous supply of raw materials,
components, tools etc. with repair and maintenance service.
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� To increase the asset turnover: The investment in the inventories should be kept minimum in
relation to the volume of sales. This will increase the turnover of the assets and thus the
profitability of the company.
� To develop an alternative source of supply: Exploration of alternative sources of supply of
materials increases the bargaining ability of the buyer, minimisation of cost of materials and
increases the ability to meet the emergencies.
� To establish and maintain the good relations with the suppliers: Maintenance of good
relations with the supplier helps in evolving a favourable image in the business circles. Such
relations are beneficial to the buyer in terms of changing the reasonable price, preferential
allocation of material in case of material shortages, etc.
To achieve maximum integration with other department of the company: The purchase
function is related with production department for specifications and flow of material,
engineering department for the purchase of tools, equipments and machines, marketing
department for the forecasts of sales and its impact on procurement of materials, financial
department for the purpose of maintaining levels of materials and estimating the working
capital required, personnel department for the purpose of manning and developing the
personnel of purchase department and maintaining good vendor relationship.
� To train and develop the personnel: Purchasing department is manned with varied types of
personnel. The company should try to build the imaginative employee force through training and
development.
� Efficient record keeping and management reporting: Paper processing is inherent in the
purchase function. Such paper processing should be standardised so that record keeping can be
facilitated. Periodic reporting to the management about the purchase activities justifies the
independent existence of the department.
Purchase Cycle
Purchasing cycle comprising of eight steps.

1. Recognition of Need : Identifying an item that is officially brought to the attention of
purchasing department.
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2. Description of Requirement: Purchase requisition should give accurate information for
ordering recognised product.
3. Selection of Source: Registered suppliers who are approved by the company. Buying
from single supplier helps develop long-term relationship and reduces the risk and
interruption in the supply. Buying from multiple suppliers may not help in maintaining
quality and helps get material at competitive prices.
4. Determination of Price and Availability
5. Placing the Order
6. Order Acknowledgement
7. Follow Up and Expediting
8. Checking The Invoice and Approval
Purchase Functions
1. Obtaining prices
2. Selecting vendors
3. Awarding purchase orders
4. Follow up on delivery promise
5. Adjusting and settling complaints
6. Selecting and training of purchase personnel
7. Vendor relations
Purchasing Policies
• Ancillary Development: The firms sub-contracts, i.e., decides to buy the parts from outside
suppliers. Mostly the fabricated parts, components are brought from outside suppliers by the
firms.
• Make or buy: Another purchasing policy is whether to buy the parts or components from
outside supplier or manufacture within the firm. The decisions lie depending in various
factors.
• Speculative buying: Speculative buying is conducted with the hope of making profit out of
price changes. Here the profit is made by buying at low price and selling at higher price.
Vendor rating:
The evaluation of supplier or vendor rating provides valuable information which help in
improving the quality of the decision. In the vendor rating three basic aspects are considered
namely quality, service and price
The Development Project Committee of the National Association of Purchasing Agents (U.S.A.)
has suggested following methods for evaluating the performance of past suppliers.
1. The categorical plan: Under this method the members of the buying staff related with the
supplier like receiving section, quality control department, manufacturing department etc., are
required to assess the performance of each supplier. The rating sheets are provided with the
record of the supplier, their product and the list of factors for the evaluation purposes. The
members of the buying staff are required to assign the plus or minus notations against each
factor.
2. The weighted-point method: The weighted-point method provides the quantitative data for
each factor of evaluation. The weights are assigned to each factor of evaluation according to the
need of the organization, e.g., a company decides the three factors to be considered—quality,
price and timely delivery. It assigns the relative weight to each of these factors as under:
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Quality ……… 50 points
Price ……… 30 points
Timely delivery ……… 20 points
3. Critical incidents method: Record of events related to buyer vendor relationships is
maintained in each vendor’s file. They reflect positive and negative aspect of actual performance.
This kind of documentation useful in discussing ways and means of improving performance,
acknowledging the existence of good relationships, determining the competence of a vendor, and
if necessary considering termination
4. The cost-ratio plan: Under this method, the vendor rating is done on the basis of various
costs incurred for procuring the materials from various suppliers. The cost-ratios are ascertained
delivery etc. The cost-ratios are ascertained for the different rating variables such as quality,
price, timely delivery etc. The cost-ratio is calculated in percentage on the basis of total
individual cost and total value of purchases.
5. Checklist system: A simple checklist is used to evaluate the vendors. Check list may be
something like Reliability, technical capability, after sales service, availability, buying
convenience etc
Value Analysis
Value engineering or value analysis had its birth during the World War II Lawrence D. Miles was
responsible for developing the technique and naming it. Value analysis is defined as “an
organized creative approach which has its objective, the efficient identification of unnecessary
cost-cost which provides neither quality nor use nor life nor appearance nor customer features.”
Value analysis focuses engineering, manufacturing and purchasing attention to one objective-
equivalent performance at a lower cost.
Function .
Value =
Cost
Steps in Value Analysis
In order to answer the above questions, three basic steps are necessary:
1. Identifying the function: Any useful product has some primary function which must be
identified—a bulb to give light, a refrigerator to preserve food, etc. In addition it may have
secondary functions such as withstanding shock, etc. These two must be identified.
2. Evaluation of the function by comparison: Value being a relative term, the comparison
approach must be used to evaluate functions. The basic question is, ‘Does the function
accomplish reliability at the best cost’ and can be answered only comparison.
3. Develop alternatives: Realistic situations must be faced, objections should overcome and
effective engineering manufacturing and other alternatives must be developed.
Stores Management
Stores play a vital role in the operations of company. It is in direct touch with the user
departments in its day-to-day activities. The most important purpose served by the stores is to
provide uninterrupted service to the manufacturing divisions. Further, stores are often equated
directly with money, as money is locked up in the stores.
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Nature of Stores
 Store as building where inventories are kept.
 Storage is the function of receiving, storing, and issuing materials.
 Stores ensure ready accessibility of major materials there-by efficient service to users.
 Minimisation of stores cost, and continuous supply is the prime function of stores.
 Stores layout is a fundamental factor in determining the efficient performance of stores
department.
 A satisfactory storage system compromises between the use of space and the use of time.
 Random location means that items can be stored in any storage position which is
available.
 Keeping stock on one side of the aisle in which case the layout is called comb type .
 Stores manual is a written statement of policies, and procedures.
Layout:
Comb type layout: Stock may be kept on one side of the aisle in which case it is called comb type.
Aisle
Tree type layout: Goods may be placed on either side of the aisle in which case, the method is
called tree type layout
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Aisle
Classification and Codification:

It is one of the functions of stores management. Codification is a process of representing each
item by a number, the digit of which indicates the group, the sub-group, the type and the
dimension of the item.
OBJECTIVES OF CODIFICATION
The objectives of a rationalized material coding system are:
1. Bringing all items together.
2. To enable putting up of any future item in its proper place.
3. To classify an item according to its characteristics.
4. To give an unique code number to each item to avoid duplication and ambiguity.
5. To reveal excessive variety and promote standardization and variety reduction.
6. To establish a common language for the identification of an item.
7. To fix essential parameters for specifying an item.
8. To specify item as per national and international standards.
9. To enable data processing and analysis.
Inventory
A physical resource that a firm holds in stock with the intent of selling it or transforming it into a
more valuable state.
 Raw Materials
 Works-in-Process
 Finished Goods
 Maintenance, Repair and Operating (MRO)
Objectives:
The main objective of inventory management is to maintain inventory at appropriate level to
avoid excessive or shortage of inventory because both the cases are undesirable for business.
Thus, management is faced with the following conflicting objectives:
1.To keep inventory at sufficiently high level to perform production and sales activities smoothly.
2. To minimize investment in inventory at minimum level to maximize profitability.
Other objectives of inventory management are explained as under:-
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 To ensure that the supply of raw material & finished goods will remain continuous so that
production process is not halted and demands of customers are duly met.
 To minimize carrying cost of inventory.
 To keep investment in inventory at optimum level.
 To reduce the losses of theft, obsolescence & wastage etc.
 To make arrangement for sale of slow moving items.
 To minimize inventory ordering costs.
Inventory Control:
Inventory Control is the supervision of supply, storage and accessibility of items in order to
ensure an adequate supply without excessive oversupply.
It can also be referred as internal control - an accounting procedure or system designed to
promote efficiency or assure the implementation of a policy or safeguard assets or avoid fraud
and error etc.
Objectives of Inventory Control
1. To ensure adequate supply of products to customer and avoid shortages as far as possible.
2. To make sure that the financial investment in inventories is minimum (i.e., to see that the
working capital is blocked to the minimum possible extent).
3. Efficient purchasing, storing, consumption and accounting for materials is an important
objective.
4. To maintain timely record of inventories of all the items and to maintain the stock within the
desired limits
5. To ensure timely action for replenishment.
6. To provide a reserve stock for variations in lead times of delivery of materials.
7. To provide a scientific base for both short-term and long-term planning of materials.
Inventory Costs
Inventory costs include ordering cost plus carrying costs.
Ordering Cost
Cost of procurement and inbound logistics costs form a part of Ordering Cost. Ordering Cost is
dependant and varies based on two factors - The cost of ordering excess and the Cost of ordering
too less.
Both these factors move in opposite directions to each other. Ordering excess quantity will result
in carrying cost of inventory. Where as ordering less will result in increase of replenishment cost
and ordering costs.
These two above costs together are called Total Stocking Cost. If you plot the order quantity vs
the TSC, you will see the graph declining gradually until a certain point after which with every
increase in quantity the TSC will proportionately show an increase.
This functional analysis and cost implications form the basis of determining the Inventory
Procurement decision by answering the two basic fundamental questions - How Much to Order
and When to Order.
How much to order is determined by arriving at the Economic Order Quantity or EOQ.
Carrying Cost
Inventory storage and maintenance involves various types of costs namely:
 Inventory Storage Cost
 Cost of Capital
Inventory carrying involves Inventory storage and management either using in house facilities or
external warehouses owned and managed by third party vendors. In both cases, inventory
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management and process involves extensive use of Building, Material Handling Equipments, IT
Software applications and Hardware Equipments coupled managed by Operations and
Management Staff resources.
Inventory Storage Cost
Inventory storage costs typically include Cost of Building Rental and facility maintenance and
related costs. Cost of Material Handling Equipments, IT Hardware and applications, including
cost of purchase, depreciation or rental or lease as the case may be. Further costs include
operational costs, consumables, communication costs and utilities, besides the cost of human
resources employed in operations as well as management.
Cost of Capital
Includes the costs of investments, interest on working capital, taxes on inventory paid, insurance
costs and other costs associate with legal liabilities.
The inventory storage costs as well as cost of capital is dependant upon and varies with the
decision of the management to manage inventory in house or through outsourced vendors and
third party service providers.
Inventory Control Techniques:

Economic Order Quantity:
EOQ (Economic Order Quantity) -EOQ is the level of inventory order that minimizes the total
cost associated with inventory management. The objective is to find out and maintain optimum
level of investment in inventory to minimize the total cost associated with it.
The total cost includes:
Carrying Cost: Are associated with the maintenance/holding of inventory.

Ordering Cost: Are costs associated with acquisition of/placing order for inventory.
It is that quantity where the total of ordering cost and holding cost remains lowest.
Re-order level: stock level at which fresh order is placed.
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Average consumption per day x lead time + buffer stock
Lead time: Duration time between placing an order & receipt of material
Ideal – 2 to 6 weeks.
1. Always better control (ABC) classification. In this analysis, the classification of existing
inventory is based on annual consumption and the annual value of the items. Hence we
obtain the quantity of inventory item consumed during the year and multiply it by unit cost to
obtain annual usage cost. The items are then arranged in the descending order of such annual
usage cost.
(a) A-Item: Very tight control, the items being of high value. The control need be exercised at
higher level of authority.
‘A’ ITEMS
Small in number, but consume large amount of resources
Must have:
• Tight control
• Rigid estimate of requirements
• Strict & closer watch
• Low safety stocks
• Managed by top management
(b) B-Item: Moderate control, the items being of moderate value. The control need be exercised
at middle level of authority.
‘B’ ITEM
Intermediate
Must have:
• Moderate control
• Purchase based on rigid requirements
• Reasonably strict watch & control
• Moderate safety stocks
• Managed by middle level management
(c) C-Item: The items being of low value, the control can be exercised at gross root level of
authority, i.e., by respective user department managers.
‘C’ ITEMS
Larger in number, but consume lesser amount of resources
Must have:
• Ordinary control measures
• Purchase based on usage estimates
• High safety stocks
ABC analysis does not stress on items those are less costly but may be vital
This is based on cost criteria.

It helps to exercise selective control when confronted with large number of items it rationalizes
the number of orders, number of items & reduce the inventory.
About 10 % of materials consume 70 % of resources
2.High, medium and low (HML) classification. In this analysis, the classification of existing
inventory is based on unit price of the items. They are classified as high price, medium price and
low cost items.
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3.Vital, essential and desirable (VED) classification. In this analysis, the classification of
existing inventory is based on criticality of the items. They are classified as vital, essential and
desirable items. It is mainly used in spare parts inventory.
4.Scarce, difficult and easy to obtain (SDE). In this analysis, the classification of existing
inventory is based on the items.
5.GOLF analysis: In this analysis, the classification of existing inventory is based sources of the
items. They are classified as Government supply, ordinarily available, local availability and
foreign source of supply items.
6.SOS analysis: In this analysis, the classification of existing inventory is based nature of supply
of items. They are classified as seasonal and off-seasonal items.
7.Fast moving, slow moving and non-moving (FSN).
8.Economic order quantity (EOQ). Inventory models deal with idle resources like men,
machines, money and materials. These models are concerned with two decisions: how much to
order (purchase or produce) and when to order so as to minimize the total cost.
9.Max-Minimum system.
10.Two bin system
Overview of JIT
What is a “Just-in-time System”?
“Just-in-time”: A philosophy of manufacturing based on planned elimination of all waste and
continuous improvement of productivity.
Just in time is a ‘pull’ system of production, so actual orders provide a signal for when a product
should be manufactured. Demand-pull enables a firm to produce only what is required, in the
correct quantity and at the correct time.
This means that stock levels of raw materials, components, work in progress and finished goods
can be kept to a minimum. This requires a carefully planned scheduling and flow of resources
through the production process. Modern manufacturing firms use sophisticated production
scheduling software to plan production for each period of time, which includes ordering the
correct stock. Information is exchanged with suppliers and customers through EDI (Electronic
Data Interchange) to help ensure that every detail is correct.
Supplies are delivered right to the production line only when they are needed. For example, a car
manufacturing plant might receive exactly the right number and type of tyres for one day’s
production, and the supplier would be expected to deliver them to the correct loading bay on the
production line within a very narrow time slot.
Overview of JIT manufacturing

1. Inventory reduction
2. Quality improvement
3. Lead time reduction
4. Lead time reduction
5. Continuous Improvement
6. Total Preventive Maintenance
7. Strategic Gain
Advantages of JIT
 Lower stock holding means a reduction in storage space which saves rent and insurance
costs
 As stock is only obtained when it is needed, less working capital is tied up in stock
 There is less likelihood of stock perishing, becoming obsolete or out of date
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 Avoids the build-up of unsold finished product that can occur with sudden changes in
demand
 Less time is spent on checking and re-working the product of others as the emphasis is on
getting the work right first time
Disadvantages of JIT
 There is little room for mistakes as minimal stock is kept for re-working faulty product
 Production is very reliant on suppliers and if stock is not delivered on time, the whole
production schedule can be delayed
 There is no spare finished product available to meet unexpected orders, because all
product is made to meet actual orders – however, JIT is a very responsive method of
production
UNIT V SCHEDULING AND PROJECT MANAGEMENT 9

Project Management – Scheduling Techniques, PERT, CPM; Scheduling - work centers – nature,
importance; Priority rules and techniques, shop floor control; Flow shop scheduling – Johnson’s
Algorithm – Gantt charts; personnel scheduling in services.
Project Management:
A project is an organized endeavor to accomplish a specified non-routine or low volume task.
Although projects are not repetitive, they take significant amount of time to complete and are
large scale or complex enough to be recognized and managed as separate undertakings.
Project life cycle:

1. The concept phase: During this phase, the organization realizes that a project may
be needed or the organization is requested to propose a plan to perform a project
for some customer.
2. Initial planning or feasibility phase: During the phase, the project manager plans
the project to a level of detail, sufficient for initial scheduling and budgeting.
3. Detailed planning phase: If the project is approved, then detailed scheduling and
budgeting is done in this phase.
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4. Organisation phase: During this phase, a detailed project definition such as the
work breakdown structure is examined.
5. Execution phase: During this phase the various activities planned and completed
as per the schedule, utilizing the allotted resources.
6. Termination phase: This is the phase, during which the project is terminated or
disbanded after completion. The personnel who were working in the project are
assigned back to their regular jobs or to other jobs in the organisation or to other
projects in this phase
Role of a Project Manager:

1. Manage the project’s scope to define the goals and work to be done, in sufficient
detail to facilitate understanding and correct performance by the participants
2. Manage the human resources involved in the project
3. Manage communications to see that, the appropriate parties are informed
4. Manage time by planning and meeting a schedule
5. Manage quality so that, the projects results are satisfactory
6. Manage costs so that, the project is performed at the minimum practical cost and
with in budget if possible.
Terms Used in Project Management

Activity : A certain amount of work or task required in the project
Activity duration: In CPM the best estimate of time to complete an activity . In PERT the
expected time or average time to complete an activity
Critical activity : An activity that has no room for schedule slippages : if it slips the entire the
entire project completion will slip. An activity with zero slack
Activity : A certain amount of work or task required in the project
Activity duration: In CPM the best estimate of time to complete an activity . In PERT the
expected time or average time to complete an activity
Critical activity : An activity that has no room for schedule slippages : if it slips the entire the
entire project completion will slip. An activity with zero slack
Event :A beginning , a completion point ,or a milestone accomplishment within the project .
An activity begins and ends with events
Latest finish (LF) : The latest that an activity can finish from the beginning of the project
Latest start (LS) :The latest that an activity can start from the beginning of the project
Most likely time ( t m) : The time for completing the activity that is is the consensus best
estimate, used in PERT
Optimistic Time (to): The time for completing an activity if all goes well : used in PERT
Pessimistic Time (tp): The time for completing an activity if bad luck is encountered : used in
PERT
Predecessor activity : An activity that must occur before another activity .
Slack : The amount of time that an activity or group of activities can slip without causing a delay
in the completion of the project
Successor activity : An activity that must occur after another activity
Conventions used in drawing network diagrams (Arrows & Circles )
 Activity on Arrow (AOA) : The activities are denoted by Arrows and events are denoted
by circles
 Activity on Node(AON) : Activities are denoted by circles(or nodes) and the precedence
relation ships between activities are indicated by arrows
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Scheduling:
Scheduling is the process of deciding how to commit resources between a variety of
possible tasks. Time can be specified (scheduling a flight to leave at 8:00) or floating as
part of a sequence of events.
Scheduling Techniques
Gantt Chart:
During the era of scientific management, Henry Gantt developed a tool for displaying the
progression of a project in the form of a specialized chart. An early application was the tracking
of the progress of ship building projects. Today, Gantt's scheduling tool takes the form of a
horizontal bar graph and is known as a Gantt chart, a basic sample of which is shown below:
The horizontal axis of the Gantt chart is a time scale, expressed either in absolute time or in
relative time referenced to the beginning of the project. The time resolution depends on the
project - the time unit typically is in weeks or months. Rows of bars in the chart show the
beginning and ending dates of the individual tasks in the project.
In the above example, each task is shown to begin when the task above it completes. However,
the bars may overlap in cases where a task can begin before the completion of another, and there
may be several tasks performed in parallel. For such cases, the Gantt chart is quite useful for
communicating the timing of the various tasks.
For larger projects, the tasks can be broken into subtasks having their own Gantt charts to
maintain readability.
Gantt Chart Enhancements

This basic version of the Gantt chart often is enhanced to communicate more information.
A vertical marker can used to mark the present point in time.
The progression of each activity may be shown by shading the bar as progress is made, allowing
the status of each activity to be known with just a glance.
Dependencies can be depicted using link lines or color codes.
Resource allocation can be specified for each task.
Milestones can be shown.
PERT:
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Complex projects require a series of activities, some of which must be performed sequentially
and others that can be performed in parallel with other activities. This collection of series and
parallel tasks can be modeled as a network.
In 1957 the Critical Path Method (CPM) was developed as a network model for project
management. CPM is a deterministic method that uses a fixed time estimate for each activity.
While CPM is easy to understand and use, it does not consider the time variations that can have a
great impact on the completion time of a complex project.
The Program Evaluation and Review Technique (PERT) is a network model that allows for
randomness in activity completion times. PERT was developed in the late 1950's for the U.S.
Navy's Polaris project having thousands of contractors. It has the potential to reduce both the
time and cost required to complete a project.
The Network Diagram
In a project, an activity is a task that must be performed and an event is a milestone marking the
completion of one or more activities. Before an activity can begin, all of its predecessor activities
must be completed. Project network models represent activities and milestones by arcs and
nodes. PERT originally was an activity on arc network, in which the activities are represented on
the lines and milestones on the nodes. Over time, some people began to use PERT as an activity
on node network. For this discussion, we will use the original form of activity on arc.
The PERT chart may have multiple pages with many sub-tasks. The following is a very simple
example of a PERT diagram:
PERT Chart
The milestones generally are numbered so that the ending node of an activity has a higher
number than the beginning node. Incrementing the numbers by 10 allows for new ones to be
inserted without modifying the numbering of the entire diagram. The activities in the above
diagram are labeled with letters along with the expected time required to complete the activity.
Steps in the PERT Planning Process
PERT planning involves the following steps:

Identify the specific activities and milestones.
Determine the proper sequence of the activities.
Construct a network diagram.
Estimate the time required for each activity.
Determine the critical path.
Update the PERT chart as the project progresses.
1. Identify Activities and Milestones

The activities are the tasks required to complete the project. The milestones are the events
marking the beginning and end of one or more activities. It is helpful to list the tasks in a table
that in later steps can be expanded to include information on sequence and duration.
2. Determine Activity Sequence
This step may be combined with the activity identification step since the activity sequence is
evident for some tasks. Other tasks may require more analysis to determine the exact order in
which they must be performed.
3. Construct the Network Diagram
81
Using the activity sequence information, a network diagram can be drawn showing the sequence
of the serial and parallel activities. For the original activity-on-arc model, the activities are
depicted by arrowed lines and milestones are depicted by circles or "bubbles".
If done manually, several drafts may be required to correctly portray the relationships among
activities. Software packages simplify this step by automatically converting tabular activity
information into a network diagram.
4. Estimate Activity Times
Weeks are a commonly used unit of time for activity completion, but any consistent unit of time
can be used.
A distinguishing feature of PERT is its ability to deal with uncertainty in activity completion
times. For each activity, the model usually includes three time estimates:
Optimistic time - generally the shortest time in which the activity can be completed. It is
common practice to specify optimistic times to be three standard deviations from the mean so
that there is approximately a 1% chance that the activity will be completed within the optimistic
time.
Most likely time - the completion time having the highest probability. Note that this time is
different from the expected time.
Pessimistic time - the longest time that an activity might require. Three standard deviations
from the mean is commonly used for the pessimistic time.
PERT assumes a beta probability distribution for the time estimates. For a beta distribution, the
expected time for each activity can be approximated using the following weighted average:
Expected time = ( Optimistic + 4 x Most likely + Pessimistic ) / 6

This expected time may be displayed on the network diagram.
To calculate the variance for each activity completion time, if three standard deviation times
were selected for the optimistic and pessimistic times, then there are six standard deviations
between them, so the variance is given by:
[ ( Pessimistic - Optimistic ) / 6 ]2
5. Determine the Critical Path
The critical path is determined by adding the times for the activities in each sequence and
determining the longest path in the project. The critical path determines the total calendar time
required for the project. If activities outside the critical path speed up or slow down (within
limits), the total project time does not change. The amount of time that a non-critical path
activity can be delayed without delaying the project is referred to as slack time.
If the critical path is not immediately obvious, it may be helpful to determine the following four
quantities for each activity:
ES - Earliest Start time
EF - Earliest Finish time
LS - Latest Start time
LF - Latest Finish time
These times are calculated using the expected time for the relevant activities. The earliest start
and finish times of each activity are determined by working forward through the network and
determining the earliest time at which an activity can start and finish considering its predecessor
activities. The latest start and finish times are the latest times that an activity can start and finish
without delaying the project. LS and LF are found by working backward through the network.
82
The difference in the latest and earliest finish of each activity is that activity's slack. The critical
path then is the path through the network in which none of the activities have slack.
The variance in the project completion time can be calculated by summing the variances in the
completion times of the activities in the critical path. Given this variance, one can calculate the
probability that the project will be completed by a certain date assuming a normal probability
distribution for the critical path. The normal distribution assumption holds if the number of
activities in the path is large enough for the central limit theorem to be applied.
Since the critical path determines the completion date of the project, the project can be
accelerated by adding the resources required to decrease the time for the activities in the critical
path. Such a shortening of the project sometimes is referred to as project crashing.
6. Update as Project Progresses
Make adjustments in the PERT chart as the project progresses. As the project unfolds, the
estimated times can be replaced with actual times. In cases where there are delays, additional
resources may be needed to stay on schedule and the PERT chart may be modified to reflect the
new situation.
Benefits of PERT
PERT is useful because it provides the following information:
Expected project completion time.
Probability of completion before a specified date.
The critical path activities that directly impact the completion time.
The activities that have slack time and that can lend resources to critical path activities.
Activity start and end dates.
Limitations
The following are some of PERT's weaknesses:
The activity time estimates are somewhat subjective and depend on judgement. In cases where
there is little experience in performing an activity, the numbers may be only a guess. In other
cases, if the person or group performing the activity estimates the time there may be bias in the
estimate.
Even if the activity times are well-estimated, PERT assumes a beta distribution for these time
estimates, but the actual distribution may be different.
Even if the beta distribution assumption holds, PERT assumes that the probability distribution
of the project completion time is the same as the that of the critical path. Because other paths can
become the critical path if their associated activities are delayed, PERT consistently
underestimates the expected project completion time.
The underestimation of the project completion time due to alternate paths becoming critical is
perhaps the most serious of these issues. To overcome this limitation, Monte Carlo simulations
can be performed on the network to eliminate this optimistic bias in the expected project
completion time.
CPM:
In 1957, DuPont developed a project management method designed to address the challenge of
shutting down chemical plants for maintenance and then restarting the plants once the
maintenance had been completed. Given the complexity of the process, they developed the
Critical Path Method (CPM) for managing such projects.
83
CPM provides the following benefits:
 Provides a graphical view of the project.
 Predicts the time required to complete the project.
 Shows which activities are critical to maintaining the schedule and which are not.
CPM models the activities and events of a project as a network. Activities are depicted as nodes
on the network and events that signify the beginning or ending of activities are depicted as arcs
or lines between the nodes. The following is an example of a CPM network diagram:
CPM Diagram
Steps in CPM Project Planning

1. Specify the individual activities.
2. Determine the sequence of those activities.
3. Draw a network diagram.
4. Estimate the completion time for each activity.
5. Identify the critical path (longest path through the network)
6. Update the CPM diagram as the project progresses.
1. Specify the Individual Activities
From the work breakdown structure, a listing can be made of all the activities in the project. This
listing can be used as the basis for adding sequence and duration information in later steps.
2. Determine the Sequence of the Activities
Some activities are dependent on the completion of others. A listing of the immediate
predecessors of each activity is useful for constructing the CPM network diagram.
3. Draw the Network Diagram
Once the activities and their sequencing have been defined, the CPM diagram can be drawn.
CPM originally was developed as an activity on node (AON) network, but some project planners
prefer to specify the activities on the arcs.
4. Estimate Activity Completion Time
The time required to complete each activity can be estimated using past experience or the
estimates of knowledgeable persons. CPM is a deterministic model that does not take into
account variation in the completion time, so only one number is used for an activity's time
estimate.
5. Identify the Critical Path
The critical path is the longest-duration path through the network. The significance of the critical
path is that the activities that lie on it cannot be delayed without delaying the project. Because of
its impact on the entire project, critical path analysis is an important aspect of project planning.
The critical path can be identified by determining the following four parameters for each activity:
84
 ES - earliest start time: the earliest time at which the activity can start given that its
precedent activities must be completed first.
 EF - earliest finish time, equal to the earliest start time for the activity plus the time
required to complete the activity.
 LF - latest finish time: the latest time at which the activity can be completed without
delaying the project.
 LS - latest start time, equal to the latest finish time minus the time required to complete
the activity.
The slack time for an activity is the time between its earliest and latest start time, or between its
earliest and latest finish time. Slack is the amount of time that an activity can be delayed past its
earliest start or earliest finish without delaying the project.
The critical path is the path through the project network in which none of the activities have
slack, that is, the path for which ES=LS and EF=LF for all activities in the path. A delay in the
critical path delays the project. Similarly, to accelerate the project it is necessary to reduce the
total time required for the activities in the critical path.
6. Update CPM Diagram
As the project progresses, the actual task completion times will be known and the network
diagram can be updated to include this information. A new critical path may emerge, and
structural changes may be made in the network if project requirements change.
CPM Limitations
CPM was developed for complex but fairly routine projects with minimal uncertainty in the
project completion times. For less routine projects there is more uncertainty in the completion
times, and this uncertainty limits the usefulness of the deterministic CPM model. An alternative
to CPM is the PERT project planning model, which allows a range of durations to be specified
for each activity.
Example:
St. Paul’s Hospital
Immediate
Activity Description Predecessor(s)
85
B-D-H-J-K is the critical path which have longest time duration.
Critical Path:
The longest path in the network
86
Defines the shortest time project can be completed
Critical path activity delay --- project delay
Earliest Start and Earliest Finish:

Begin at starting event and work forward
ES is earliest start
ES = 0 for starting activities
ES = Maximum EF of all predecessors for non-starting activities
EF is earliest finish
EF = ES + Activity time
Earliest Start / Earliest Finish:
Latest Start and Latest Finish:

Begin at ending event and work backward
LF is latest finish
LF = Maximum EF for ending activities
87
LF = Minimum LS of all successors for non-ending activities
LS is latest start
LS = LF – Activity time
Scheduling:
The allocation of resources overtime to accomplish specific tasks.
Two basic types of scheduling

1. Workforce scheduling: A type of scheduling that determines when employees work.
2. Operations scheduling: A type of scheduling that assign jobs to machines or workers to
jobs.
Objectives:
 Work Center Defined
 Typical Scheduling and Control Functions
 Job-shop Scheduling
 Examples of Scheduling Rules
 Shop-floor Control
 Principles of Work Center Scheduling
 Issues in Scheduling Service Personnel
Work centre:
A work center is an area in a business in which productive resources are organized and work is
completed
Can be a single machine, a group of machines, or an area where a particular type of work is done
Objectives:
1. Meet due dates
2. Minimize lead time
3. Minimize setup time or cost
4. Minimize work-in-process inventory
5. Maximize machine utilization
Principles of Work Center Scheduling:

1. There is a direct equivalence between work flow and cash flow
2. The effectiveness of any job shop should be measured by speed of flow through the shop
3. Schedule jobs as a string, with process steps back-to-back
4. A job once started should not be interrupted
 Infinite loading: work is assigned to a work center based on what is needed

No consideration to capacity
 Finite loading: schedules each resource using the setup and run time required for each
order.
Determines exactly what will be done by each resource at every moment during the day
88
 Forward scheduling: the system takes an order and schedules each operation that must be
completed forward in time
Can tell the earliest date an order can be completed
 Backward scheduling: starts with due date and schedules the required operations in
reverse sequence
Can tell when an order must be started in order to be done by a specific date
Priority rules and techniques: the rules used in obtaining a job sequence
Can be simple or complex
Can use one or more pieces of information
Common rules shown on next slide
 FCFS – First-come first served – A priority sequencing rule which states that the job that
arrived at the workstation first has the highest priority.
 STP – Shortest processing time – A priority sequencing rule which states that the job
requiring the shortest processing time is the next job to be processed.
 EDD – Earliest due date – A priority sequencing rule which specifies that the job has the
earliest due date is the next job to be processed.
 CR – Critical ratio – A ratio calculated by dividing the time remaining until a job’s due
date by the total shop time remaining for the job including the setup, processing, move ,
and expected waiting times of all remaining operations, including the operation being
scheduled.
CR = Due date – Today’s date / Total shop time remaining
 S/RO – Slack per remaining operations – A priority sequencing rule that determines
priority by dividing the slack by the number of operations that remain, including the one
being scheduled.
S/RO = (Due date - Today’s date) – Total shop time remaining / Number of
operations remaining.
Shop floor control:
Major Functions:
1. Assigning priority of each shop order
2. Maintaining work-in-process quantity information
3. Conveying shop-order status information to the office
4. Providing actual output data for capacity control purposes
5. Providing quantity by location by shop order for WIP inventory and accounting purposes
6. Providing measurement of efficiency, utilization, and productivity of manpower and machines
Input/Output Control:
Input Workcenter Output
89
 Planned input should never exceed planned output
 Focuses attention on bottleneck work centers
Flow shop scheduling – Johnson’s Algorithm – Gantt charts

Production systems for which: A number of operations have to be done on every job.
These operations have to be done on all jobs in the same order, i.e., the jobs have to follow the
same route. The machines are assumed to be set up in series.
Common assumptions:
Unlimited storage or buffer capacities in between succesive machines (no blocking).
A job has to be proccessed at each stage on only one of the machines (no parallel machines).
Johnson’s rule
A procedure that minimize makespan in scheduling a group of jobs on two workstations.
The procedure is a follows

Step 1: Scan the processing times at each workstation and find the shortest processing time
among the jobs not yet scheduled. If there is a tie, chose one job arbitrarily.
Step 2: If the shortest processing time is on workstation 1, schedule the correspondingjob as

early as possible. If the shortest processing time is on workstation 2, schedule the corresponding
job as late as possible.
Step 3: Eliminate the last job scheduled from further consideration, Repeat step 1 and 2 until all
jobs have been scheduled.
Gantt chart:
A Gantt chart is a horizontal bar chart developed as a production control tool in 1917 by Henry
L. Gantt, an American engineer and social scientist. Frequently used in project management, a
Gantt chart provides a graphical illustration of a schedule that helps to plan, coordinate, and track
specific tasks in a project.
A Gantt chart, commonly used in project management, is one of the most popular and useful
ways of showing activities (tasks or events) displayed against time. On the left of the chart is a
list of the activities and along the top is a suitable time scale. Each activity is represented by a
bar; the position and length of the bar reflects the start date, duration and end date of the activity.
This allows you to see at a glance:
 What the various activities are

 When each activity begins and ends
 How long each activity is scheduled to last
 Where activities overlap with other activities, and by how much
90
 The start and end date of the whole project
To summarize, a Gantt chart shows you what has to be done (the activities) and when (the
schedule).
A simple Gantt chart
Personnel scheduling in services:

All production operations whether manufacturing operations or quasi-manufacturing service
operations must schedule personnel to work centers. As in manufacturing operations, the
principal means of performing services is through personnel or workforce. Scheduling personnel
in services involves three difficulties.
1. Demand variability
2. Service time variability
3. Availability of personnel when they are needed.
For instance, in scheduling attendants in a health club, the following facts must be considered:
(i) The number of members at the club varies drastically both throughout the day and
throughout the week.
(ii) The hourly pattern of the number of members at the club varies among the days of
the week. If the attendants are required to assist the members in their exercises, then
the number of attendance needed in each hour of the week depends on the number of
member at the club in each hour.
Because of the fluctuations in customer demand, operation managers often use two
tactics to develop work schedules for employees.
 Use full-time employees exclusively
 Use of some full-time employees
Customer-as-participants – Customer actually participates in service operation. For eg;

retailing tourism etc., has huge involvement of customer in service operations.
Customer-as-product- Service is actually performed on the customer. For eg; hair dressing,
medical treatment, surgery etc.,
91
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Operation Management

BA5206 OPERATIONS MANAGEMENT LT P C 3 0 0 3

UNIT I INTRODUCTION TO OPERATIONS MANAGEMENT 9

UNIT II FORECASTING, CAPACITY AND FACILITY DESIGN 9

UNIT III DESIGN OF PRODUCT, PROCESS AND WORK SYSTEMS 9

UNIT IV MATERIALS MANAGEMENT 9

UNIT V SCHEDULING AND PROJECT MANAGEMENT 9

UNIT I INTRODUCTION TO OPERATIONS MANAGEMENT 9

Production Systems – Nature

2. Production as an organizational function: As an organizational function the conversion

Importance of Production Function:

Differences between services and goods

Current Priority Definition Some ways of creating

Recent Trends in Operations Management:

processes and new materials and components. Automation, computerization, information

Operations Strategy – Strategic fit, framework; Supply Chain Management:

UNIT II FORECASTING, CAPACITY AND FACILITY DESIGN 9

Demand forecasting is needed for:

Objectives of Demand Forecasting

Steps in the Forecasting Process

Overview of Qualitative and Quantitative methods:

(i) Qualitative methods consist mainly of subjective inputs, often of non-numerical

Differences between qualitative and quantitative:

and little data available Historical data available

New products Existing products

New technology Current technology

Involves mathematical techniques

Example: forecasting newly introduced Example: sales of color TVs

Capacity planning involves activities such as:

Capacity planning – Long range:

Ways of Changing Long Range Capacity:

Types of Capacity Planning:

Developing capacity alternatives:

Overview of sales and operations planning (Aggregate Planning)

MRP System Inputs

Lot- Sizing Rules

Rough cut Purchasing (Vendor orders)

Marketing (sales order

ERP: Enterprise Resource Planning

Meaning- the establishment of an industry at a particular place.

Factors affecting location & site decisions:

2. Point Rating Method:

Considering site B and C,

4. Qualitative factor analysis method:

Other Location models:

Calculate X and Y coordinates for ‘center of gravity’

where dix = x-coordinate of location i

Objectives of good Plant Layout:

CRITERIA FOR GOOD LAYOUT

The principles of plant layout

There are mainly four types of plant layout:

(a) Product or line layout

PRODUCT OR LINE LAYOUT:

Advantages of Product layout:

Disadvantages of Product layout:

Advantages of Process layout:

· Greater flexibility of resources.

Disadvantages of Process layout:

FIXED POSITION OR LOCATION LAYOUT:

Advantages of Fixed position layout:

Disadvantages of Fixed position layout:

Planning Tools and Techniques:

Operations sequence analysis: