TOPIC # 07

TYPES OF SCALE PRODUCTION:

There are three main types of scale of production:

Small-scale production:

This is typically characterized by the production of small batches of goods using

relatively simple equipment and techniques. Small-scale production is often
used for high-value goods or goods that require a high degree of
customization.

Medium-scale production:

This is a step up from small-scale production, with larger batches of goods

being produced using more sophisticated equipment and techniques. Medium-
scale production is often used for mass-market goods or goods that require a
moderate degree of customization.

Large-scale production:
This is the production of very large batches of goods using highly automated
and specialized equipment. Large-scale production is often used for
commodity goods or goods that require a low degree of customization.
TOPIC # 08

CAPACITY UTILIZATION:

Capacity utilization refers to the extent to which a company’s resources are being
used to generate output. This includes equipment, material, labor force, facilities,
and other resources at hand.

Capacity utilization, in project management, refers to the extent to which a

project's resources (including human resources, equipment, materials, and
infrastructure) are being used or "utilized" effectively to produce project
outputs. It is a measure of how efficiently resources are being allocated and
utilized to achieve project goals. This concept is particularly relevant in
manufacturing or production-oriented projects, but it can also be applied to
other types of projects where resources are involved.

In the context of project management, capacity utilization can be assessed at

different levels:

Resource Level:

At the level of individual resources, capacity utilization measures how fully a

particular resource (e.g., a machine, a software license, or a specialized
employee) is being used. It compares the actual hours of use of that resource
to the total available hours.

Project Level:

At the level of the entire project, capacity utilization measures how effectively
all the project's resources are being used in aggregate. It compares the total
productive hours of all resources to the total available hours.
Organizational Level:

At the level of the entire organization, capacity utilization considers how

effectively all projects within the organization are utilizing resources. It looks at
the overall utilization rate of resources across all projects.

Capacity utilization is often expressed as a percentage, with a utilization rate of

100% indicating that resources are fully utilized and no additional capacity is
available. A utilization rate lower than 100% suggests that there is available
capacity that could be utilized more effectively.

Measuring and managing capacity utilization is essential for project managers

and organizations because it helps in:

Optimizing resource allocation:

It helps in identifying areas where resources are underutilized or over utilized

and making adjustments accordingly.

Resource planning:

It assists in determining whether additional resources or adjustments to

schedules are needed to meet project deadlines.

Cost management:

By efficiently using resources, costs can be controlled and minimized.

Effective capacity utilization can lead to better project outcomes, increased

productivity, and higher returns on investment.

Formula:

Capacity Utilization = (Actual Output / Potential Output) × 100

Let’s break it down further:

Actual Output:

This is the real result of your efforts. In our lemonade stand example, it’s the
number of glasses you actually filled with delicious lemonade – let’s say 80
glasses.

Potential Output:

This is like a superhero version of your lemonade stand. It’s the maximum you
could achieve if everything went according to plan. In this case, it’s the 100
glasses you could have made if you were as fast as The Flash and had an
endless supply of lemons.

× 100:

This part turns our result into a percentage, which is like giving your answer a
special outfit. It makes it easier to understand and compare.

Now, let’s put this formula to use with a hands-on example:

You’re managing a small factory that produces cozy blankets. The factory has
the potential to make 500 blankets a month based on the material and
production capacity. However, due to some minor hiccups, you end up making
400 blankets only.

Capacity Utilization = (400 / 500) × 100

Capacity Utilization = 0.8 × 100 = 80%

In this scenario, your factory’s capacity utilization rate is 80%. This tells you
that you’re using 80% of your factory’s full potential. Remember, capacity
utilization is NOT the same as resource utilization.
TOPIC # 09
Inventory management:

Inventory management is the process of tracking the goods and materials used by a
business to produce or sell products. The goal of inventory management is to
ensure there’s always enough stock available to fulfil customer orders while
minimizing the risks and costs of holding inventory.

Efficient inventory management and regular inventory audits ensure you always
have the right quantities of items in the right place ready to meet demand.

What is inventory:

Inventory refers to all the items, goods, and materials held by a business for
selling in the market to earn a profit. Example: If a newspaper vendor uses a
vehicle to deliver newspapers to the customers, only the newspaper will be
considered inventory. The vehicle will be treated as an asset.

Inventory management in engineering:

Inventory management in the field of engineering is crucial, as it deals with

various materials, parts, components, and tools that are required for the
construction, manufacturing, and maintenance of engineering projects.
Effective inventory management ensures that the right materials and tools are
available when needed, minimizing downtime and waste while optimizing
efficiency and cost-effectiveness.

Engineering projects often require raw materials such as metals, plastics, and
other materials used in fabrication, manufacturing, and construction
processes. Managing raw material inventories involves estimating demand,
monitoring suppliers, and ensuring the timely delivery of materials to the
production or construction site.

Engineering projects may involve specialized tools and equipment for tasks
such as welding, cutting, drilling, and measurement. Managing tool and
equipment inventories involves ensuring that the right tools are available for
the job, properly maintained, and in good working condition.

Effective inventory management in engineering requires coordination with

suppliers, subcontractors, and other stakeholders in the supply chain. This
involves managing lead times, monitoring supplier performance, and ensuring
that inventory levels are aligned with production or project schedules.

Inventory level:

Inventory level, also known as stock level, refers to the quantity or amount of
inventory that a business holds at a particular point in time. It is the measure
of how much inventory an organization has on hand, either physically or in its
records.
TOPIC # 10
what is inventory replenishment:

Inventory replenishment refers to the process of restocking or refilling

inventory levels to meet demand and maintain optimal inventory levels. It
involves monitoring inventory levels, determining when to reorder or replenish
stock, and placing orders with suppliers or manufacturers.

Inventory replenishment is a crucial aspect of inventory management, as it

ensures that businesses have the right amount of stock on hand to meet
customer demand while minimizing holding costs and stock outs.

what is inventory replenishment in engineering?

In the field of engineering, inventory replenishment refers to the process of

ensuring that the right materials, components, parts, and tools are available
when needed to support engineering projects, operations, and maintenance
activities. Inventory replenishment in engineering is particularly important in
manufacturing, construction, and maintenance projects, where materials and
equipment play a critical role.

Inventory replenishment in engineering involves following key aspects:

1- Material Management:
Ensuring that an adequate supply of raw materials, and components is
available to support manufacturing and assembly processes.
2- Spare Parts Management:
Managing inventories of spare parts and critical components needed for
the maintenance and repair of machinery, equipment, vehicles, and
infrastructure.
3- Tool and Equipment Management:
Managing inventories of specialized tools, equipment, and instruments
used in engineering operations, such as welding machines, cutting tools,
and measurement devices.
4- Supply Chain Coordination:
Coordinating with suppliers, vendors, and subcontractors to ensure the
timely delivery of materials, components, parts, and equipment needed
for engineering projects.
5- Warehouse and Storage Management:
Managing warehouse and storage facilities to ensure proper
organization, labeling, and storage of inventory items.
6- Inventory Tracking and Control:
Using inventory management systems and tools to monitor inventory
levels, track stock movements, and prevent theft, loss, or damage.
7- Replenishment Planning and Forecasting:
Estimating future demand for materials, components, parts, and tools
based on historical usage data, project schedules, and operational
needs.
8- Procurement and Purchasing:
Ordering and procuring materials, components, parts, and tools from
suppliers and vendors, ensuring that orders are placed in a timely
manner and at optimal quantities.
9- Inspection and Quality Control:
Inspecting incoming inventory to ensure that it meets quality standards,
specifications, and requirements.
 10: Inventory Revaluation and Analysis:

Valuing inventory for accounting and financial reporting purposes and

analyzing inventory data to identify trends, patterns, and opportunities for
improvement.

TOPIC # 11

Economic lot size:

The economic lot size is a concept used in inventory management and supply
chain management to determine the optimal quantity of items to be ordered
or produced at one time in order to minimize costs and maximize efficiency. It
is also referred to as the optimum lot size or the order quantity at minimum
total cost. Economic lot size, also known as economic order quantity (EOQ),
refers to the optimal quantity of items to order or produce at a given time in
order to minimize the total cost of inventory management. Economic Lot Size
(ELS for short) refers to the best lot quantity to make the total cost minimum
by considering the balance between ordering cost and inventory carrying cost,
which are contradictory.
TOPIC # 12
Reorder point in inventory management:

The reorder point in inventory management refers to the level of inventory at

which an organization needs to reorder or replenish stock to avoid stock outs
or shortages. It is the minimum quantity of inventory that should trigger a
reorder or replenishment order. The reorder point is determined based on
factors such as lead time, demand variability, and desired service level.

The formula for calculating the reorder point is:

Reorder Point = (Lead Time Demand * Safety Stock) + Lead Time

Where:

Lead Time Demand is the average demand during the lead time (the time it
takes to receive a new order after it is placed).

Safety Stock is the buffer stock held to mitigate the risk of stock outs due to
uncertainty in demand or supply.

Lead Time is the time it takes to receive a new order after it is placed.
TOPIC # 13

Safety stock level in inventory management:

Safety stock level in inventory management is a buffer quantity of stock that is

kept on hand to mitigate the risk of stock outs due to uncertainties in demand,
lead time, and supply chain disruptions. It represents the additional inventory
held above the reorder point to provide a cushion or buffer against unexpected
fluctuations in demand or supply.

The level of safety stock is typically determined based on factors such as

demand variability, lead time variability, desired service level, and production
or replenishment lead times. Safety stock is usually expressed as a quantity or
as a percentage of the average demand or sales.

The formula for calculating safety stock is:

Safety Stock = (Z * σ * LT) + SS

where:

Z is the z-value representing the desired service level (e.g., for a service level of
95%, Z=1.645 for a one-tailed distribution).

σ is the standard deviation of demand during the lead time.

LT is the lead time.

SS is the additional safety stock.

TOPIC # 14

What Is JIT in inventory management:

Just-in-time, or JIT, is an inventory management method in which goods are

received from suppliers only as they are needed. The just-in-time (JIT)
inventory system is a management strategy that aligns raw-material orders
from suppliers directly with production schedules. Companies employ this
inventory strategy to increase efficiency and decrease waste by receiving
goods only as they need them for the production process, which
reduces inventory costs. This method requires producers to forecast demand
accurately.

The key principles of JIT inventory management include Elimination of Wastes,

Continuous Improvement, Lean Manufacturing, Small Lot Sizes, Quality
Control and Flexible Manufacturing.

Overall, JIT inventory management aims to create a more efficient, responsive,

and flexible production process that can quickly adapt to changing market
conditions and customer demand. By minimizing waste, reducing inventory
levels, and improving production efficiency, JIT helps to reduce costs and
improve competitiveness.