MB 0044

Production and Operations Management

Contents
Unit 1
Production Management 1
Unit 2
Advanced Methodologies of Production 20
Unit 3
Operations Management 40
Unit 4
Production Techniques 60
Unit 5
Facility Management 78
Unit 6
Total Quality Management 102
Unit 7
Business Process Modelling 125
Unit 8
Project Management – Planning Process 144
Unit 9
Project Implementation, Control and Closure 171

Edition: Spring 2010

th
BKID – B1133 7 Jan. 2010
Unit 10
Modern Trends in Project Management 198
Unit 11
Supply Chain Management 218
Unit 12
Material Handling 242
Unit 13
Just-in-Time 262
Unit 14
Value Engineering 280
Unit 15
Quantitative Modelling and Workforce Management 297
Bibliography 313
Dean
Directorate of Distance Education
Sikkim Manipal University

Board of Studies
Chairman Mr. Pankaj Khanna
HOD Management & Commerce Director
SMU – DDE HR, Fidelity Mutual Fund
Additional Registrar Mr. Shankar Jagannathan
SMU – DDE Former Group Treasurer
Wipro Technologies Limited
Controller of Examination Mr. Abraham Mathew
SMU – DDE Chief Financial Officer
Infosys BPO, Bangalore
Dr. T. V. Narasimha Rao Ms. Sadhna Dash
Adjunct Faculty & Advisor Ex-Senior Manager, HR
SMU – DDE Microsoft India Corporation (Pvt.) Ltd.
Prof. K. V. Varambally
Director
Manipal Institute of Management
Manipal

Content Preparation Team Peer Review By

Prof. N. Chandrashehar Prof. Anil B. Gowda Mr. Vasudev Rao
(Visiting Faculty – Presidency (Visiting Faculty – MSR Dean
College and Christ College) Institute of Management and TAPMI, Manipal
Canara Bank Institute School
of Management Studies)

Edition: Spring 2010

This book is a distance education module comprising of collection of learning
material for our students.
All rights reserved. No part of this work may be reproduced in any form by any
means without permission in writing from Sikkim Manipal University of Health,
Medical and Technological Sciences, Gangtok, Sikkim.
Printed and Published on behalf of Sikkim Manipal University of Health, Medical and
Technological Sciences, Gangtok, Sikkim by Mr. Rajkumar Mascreen, GM, Manipal
Universal Learning Pvt. Ltd., Manipal – 576 104. Printed at Manipal Press Limited,
Manipal.
 SUBJECT INTRODUCTION
Globally, it is seen that there is an ever growing need to increase the supply
to meet the demands. It is not possible to meet the demand by simply
maintaining the existing systems and processes.
Therefore, it is necessary to change and implement newer systems for
increasing the production and to meet the increasing demand as well as the
technology. The operational methods have undergone a drastic changes in
the recent past, hence the need to study the operations.
In today’s globally competitive environment, where input costs are forever
on the increase, most global economies are either flat or declining, margins
are perennially under pressure, employees demands are beyond economies
of scale, and success of manufacturing companies depends more on HOW
they are being run rather than what they are offering the market.
It is in this context that, an in-depth study into various Business Processes
and a clear understanding of best practices within an enterprise assumes
greater significance. This comprehensive self-instructional material
encompasses within its fold various processes and a compendium of
subject which together make up PRODUCTION AND OPERATIONS
MANAGEMENT TECHNIQUES applicable to today’s Global Engineering
Enterprises. This module comprises 15 units:
Unit 1: Production Management
In this unit, the main concepts of Production throughout the organisation are
discussed.
Unit 2: Advanced Methodologies of Production
This unit discusses about the latest trends in manufacturing to meet large
scale production.
Unit 3: Operations Management
This unit proves that every activity is considered as an operation in the
transformation of goods and delivery of services.
Unit 4: Production Techniques
In this unit, the methodologies and techniques to increase productivity for
large scale manufacturing are focused.
Unit 5: Facility Management
In this unit, location of the manufacturing place and the importance for
customers and suppliers for economies are considered.
Unit 6: Total Quality Management
This unit discusses about the importance of maintaining quality across all
functions of an organisation, instead of focusing on a particular department.
Unit 7: Business Process Modelling
This unit is a new approach to meet strategic requirements of modern
manufacturing business.
Unit 8: Production Management – Planning Process
This unit discusses the importance of good planning. It emphasises on the
methods of planning.
Unit 9: Project Implementation, Control and Closure
In today’s manufacturing environment, a bundle of activities are treated like
a project for effective implementation. This unit deals with the same.
Unit 10: Modern Trends in Project Management
In this unit, the latest methods of executing projects with the help of software
and techniques are discussed.
Unit 11: Supply Chain Management
From material to the end product being delivered to the customer for
consumption forms a chain – how value gets added at every stage is
discussed in this unit.
Unit 12: Material Handling
A proper and systematic layout of the handling equipments for both
incoming and in process materials is focused in this unit.
Unit 13: Just In Time
This unit discuss about the methods of reducing inventory by using JIT.
Unit 14: Value Engineering
Value Engineering is a cost reduction process and the value of the material
depends on its contribution to the performance of the product. This concept
is discussed in detail.
Unit 15: Quantitative Modelling and Workforce Management
Decisions have to be taken on facts and analysis. Models help in the
process. A brief discussion on how efficiently a workforce can be utilised is
discussed in this unit.
Production and Operations Management Unit 1

Unit 1 Production Management

Structure:
1.1 Introduction
Learning Objectives
1.2 Integrated Production Management
Production management and production control
Inventories
Material control and material handling
1.3 System Productivity
1.4 Capital Productivity
Outsourcing strategies
Balancing of workstations
Quality circles
Rationalisation of packaging methods
1.5 Labour Productivity
Balancing operations in assembly line
Reallocation of workers
Setting up productivity norms and evaluation of production
operations
1.6 Personnel Productivity
1.7 Training
1.8 Summary
1.9 Terminal Questions
1.10 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions
1.11 References

1.1 Introduction
Production Management encompasses all activities that go into conversion
of a set of inputs into outputs which are useful to meet human needs. (See
Figure 1.1 Diagrammatic representation of production management)

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Production
Inputs Management Output

Figure 1.1: Diagrammatic representation of production management

 Production Management involves the identification of the requisite

materials, knowledge of the processes, and installation of equipments
necessary to convert or transform the materials to products.
 The quantities to be produced have to be ascertained, processes
established, specifications detailed out, quality maintained, and products
delivered in time to meet the demands.
 Decisions need to be taken about:
 Location of the facility
 Variety of machineries required to be installed
 Technologies to be deployed
 Recruitment of workforce with adequate training to perform the tasks
These decisions will help to achieve productivity with utmost
efficiency. Constraints on resources and competition demands that
optimisation be obtained in all functions at all levels.
 Different materials have to be procured, stored, and transported inside
the organisation for transformation using processes. Information flows
throughout the cycle to instruct, to monitor and to control the processes
to establish relevant costs and to look for opportunities for continuous
improvement. All these functions generate their own subsystems which
help in the establishment of accountability and the recognition of
performance necessary for improvement.
 Strategies at various levels will have to be formulated with appropriate
implementation procedures established with checks and balances.
 Flexibility will have to be designed into the system to take care of
fluctuations in the market – both for purchased items and the demand.

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 Technological changes have to be accommodated – both as challenges

and opportunities for development to be abreast of the global
environment.
You will learn about these aspects of production and understand the
intricacies involved so that you will be able to adapt yourself to a production
environment.
Learning Objectives
By the end of this unit, you should be able to:
 Define production management
 Identify key elements of product manufacturing
 Explain the processes involved in product manufacturing
 List the methods of improvement
 Recall the role of quality circles in achieving quality
 Explain the methods of balancing workstations and their impact on
productivity
 Identify the importance of training
In this module you will learn about the methods and strategies deployed for
ensuring productivity. You will realise the importance of balancing loads on
various workstations and how setting up norms and evaluation of personnel
based on them improves productivity. The concepts behind quality circles,
methods improvement and training will become clear to you.

1.2 Integrated Production Management

The various functions involved in production are:
 Procurement of materials
 Moving the material for transformation, that is, to adapt processes which
change their characteristics and attributes to make them suitable for the
product
 Training and deploying the workforce
 Implementing procedures for systematic loading of machines
 Maintaining inventories
 Maintenance of machines
 Establishing methods of inspection
 Packaging them suitably

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Planning, both long and short term, requires information about the
capacities that are required. Many items need to be purchased, some
partially manufactured, and some partially processed. The quantities of each
of these have to be assessed for procurement, storage, inspection, and
receipt. Information flow at every stage identifies the value additions that are
taking place.
A faithful record of the various stages, the time consumed, costs involved
and their impact on other processes helps in identifying bottlenecks and
opportunities for improvement. It has been widely recognised that
inventories, such as raw materials, work-in-process, and finished goods,
cast a heavy burden on profitability. In the modern times, when there is
pressure on margins from all sides, it is mandatory to keep inventories to the
minimum. So the concepts of Just-in-time (JIT) and Lean Manufacturing are
applied to utilise the resources to best advantage.
Integrated Production Manufacturing is expected to address these concerns
and offer methodologies to make the production system efficient.

Self Assessment Questions

Fill in the blanks
1. Information flow at every stage identifies the _______ that are taking
place.
2. The quantities of each of the items have to be assessed for ______,
______, ______ and ________.
1.2.1 Production management and production control
Production Management typically starts with Aggregate Planning. The data
for this planning comes from the marketing department which determines
the quantities of various products needed to fulfil orders. The delivery
schedules are also given. Available stocks and buffer stocks needed to
meet exigencies are also considered.
In aggregate planning, all inputs that are required to meet the targets, such
as, machinery, raw materials, sub-contracting, number of machines and
their types, work force, storage space, facilities for movement and storage
are considered. Make or buy decisions have to be taken to meet the varying
demands to smoothen deficits or excesses by two well known methods -
Matching Demand and Level Capacity. (See Figure 1.2 Make or buy decisions)

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Figure 1.2: Make or buy decisions

In the matching method, production capacity is adjusted to match the

forecast demand by varying the level of the work force by hiring or laying off.
The advantage of this method is that there will be no finished goods
inventory.
In the level capacity method, production capacity is held constant at an
optimum level. The varying demands are met by maintaining inventory,
backlog, over-time or sub-contracting. The choice between the two is
determined by the capacities available, availability of part time labour,
reliability of subcontractors and management’s policies.
Master Production Schedule sets the quantity of each end item to be
completed each week of the short range planning. The details are arrived at
after verifying the progress of the schedules of work, expected receipts,
available stocks from inventory and the needs of assembly shops to meet
the demands. Constant reviewing makes for successful scheduling which
results in economies as well as high rate of order completion.
The functions of Production Planning are broadly classified as: Estimating,
Routing, and Scheduling. (See Figure 1.3 Production planning)

Figure 1.3: Production planning

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 Estimating involves estimating the manpower requirements, machine

capacity and materials required to meet the planned production targets.
 Routing is the process of determining the sequence of operations. It
tackles the problem of moving materials in specific steps to work centers.
It keeps a close track of verifying the completion of operations as per the
specifications, confirms that inspections have been carried out at every
stage and informs about the next operation.
 Scheduling fixes priorities for various jobs and is mainly concerned with
completion of jobs at pre-set times. This helps in balancing loads on
work centers as well as utilising the labour time - important for ensuring
delivery as per schedule and achieving cost effectiveness.
The functions of Production Control are Dispatching and Expediting. (See
Figure 1.4 Production control function)

Figure 1.4: Production control function

 Dispatching is concerned with setting production activities in motion.

The production activities include issuing material release orders and
moving materials from work centre to work centre, meeting the
requirements of routing and scheduling.
 Expediting function ensures that the progress, the path of the
production process is cleared of constraints and the workflow is smooth.
It helps in situations when out of turn deliveries are required to meet
market demands.
1.2.2 Inventories
Inventories are materials held at various locations in a production system.
They are either planned or unplanned inventories. Planned inventories are
for purposes of building up buffer stocks to cater to unexpected demands, or
anticipated disruptions in sections of the manufacturing flow lines. However,

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they introduce costs which the management has to accept for the safety it
provides. But, inventories cover up inefficiencies and therefore have to be
brought under control.
Just-in-time and Lean Manufacturing methodologies were developed to
minimise wastage across the organisation. If a firm is optimistic about the
demand, then that firm increases their planned inventories. On the other
hand if the demand is weak when compared to the expectations, then that
firm’s unplanned inventories are high.
1.2.3 Material control and material handling
Material control is a management function whereby procurement, storage,
and issuance of the storage material for purposes of manufacturing the
products or consumption are conducted. Typically, material control involves:
 Formulating the policies regarding selection of suppliers
 Determining the quantities to be ordered
 Fixing prices
 Formulating the terms of delivery
Material handling refers to the activities that are conducted to provide
suitable and sufficient space for the materials that are stored either before
starting their usage or during their usage. It is also concerned with
movement of materials. The equipments range from hand trolleys, forklifts,
hoists, cranes to automatic handling devices.

Self Assessment Questions

Fill in the blanks
3. Just-in-time and Lean Manufacturing methodologies were developed to
_________ the _________ across the organisation.
4. _________ sets the quantity of each end item to be completed each
week of the short range planning. ______, ______ and ________.

1.3 System Productivity

Productivity is generally expressed as the ratio of outputs to inputs.

Output
Productivi ty 
Input

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Enhancement of productivity is achieved by either reducing the inputs for

the same output or increasing the output by using the same input.
Productivity can be calculated for a:
 Single operation
 Functional unit
 Department or division
 Plant
Productivity is a measure of the efficiency of the system and looks at the
economies achieved during the processes. Every process will have a
number of contributors which help in achieving maximum productivity. The
processes are: People, Machines, Facilitating goods, Ancillary equipments,
and Technology. Each of these elements attempts to enhance the
contribution of other elements.
Opportunities exist at all stages of the workflow in the entire system to
introduce measures for increasing productivity. However in actual
manufacturing situations, the inefficiencies will have cascading effect in
hampering productivity. Communication, effective review processes and
innovative methods will ensure optimisation of resources. Building up
reliability into the equipments, managing the supply chain to economise on
the cost factors improves productivity.
Quality circles are very efficient in incorporating low cost and non-intrusive
methods of improving productivity and quality throughout the organisation.
Quality circles:
 Involve all persons who are actually involved in the production system
and the information they elicit and bring about improvements that are
highly cost effective
 Unveil creativity and encourage team work and bring about
improvements almost on a day to day basis
 Bring continuous incremental changes in a harmonious way instead of
dramatic changes
 Encourage identification of possible failures and seek methods of
preventing things going wrong

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1.4 Capital Productivity

Capital deployed in plant, machinery, buildings and the distribution systems
as well as working capital are the components of the cost of manufacturing.
Demand fluctuations, uncertainties of production owing to breakdowns, and
inventories being created drag the productivity down. Therefore, strategies
are needed to maximise the utilisation of the funds allotted towards capital.
The strategies included are:
 Outsourcing strategies
 Methods improvement
 Balancing of workstations
 Quality circles
 Rationalisation of packaging methods
Let us know in detail about each strategy in this section.
1.4.1 Outsourcing strategies
When capacity requirements are determined it is easy to figure out whether
some goods or services can be outsourced. Outsourcing can reduce the
capital and manpower requirements. Also the available capacities can be
used to augment core competencies thus reducing the cost of the product or
service to the customer. However, lack of expertise, quality considerations,
nature of demand and cost factors may restrict outsourcing.
 Lack of Expertise: The outsourced firm may not have the requisite
expertise to do the job required.
 Quality Considerations: Loss of control over operations may result in
lower quality.
 Nature of Demand: When the load is uniform and steady, it may not be
worthwhile to outsource. Absence of supervision and control may be a
hindrance to meet any urgent requirements of the customer. This affects
the business especially if no production facilities are built in the
organisation.
 Cost: It may not be worthwhile when the fixed costs that go along with
making the product does not get reduced considerably

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Caselet 1
In 1992 IBM in collaboration with an outsourced agent started the
TeleServices Center to provide customer services. Through this
service centers, IBM has provided an integrated and comprehensive
marketing service. It was organised into three groups.
1) The Customer Service Group handles simple inquiries and
provides customers with technical support and assistance solving
complex problems
2) The Telesales Group handles account management and sales of
IBM products and services that do not require field sales support
3) The Direct Marketing Group is responsible for generating new
product leads, upgrades, service contracts and seminar
attendance
The integration of the TeleSerivces Center within IBM has:
 Reduced the cost of customer contact from $500 to $15. This is
almost a 97% reduction
 Shrunk the field sales cycles up to 80%
 Generated 125% of goal for leads
 Exceeded customer expectations almost 80% of the time –
according to a customer service satisfaction survey
Similarly, Siemens ROLM’s in collaboration with an outsourced agent,
designed and implemented an on-site Client Call Center. Within a
period of six months, the company generated 116% of goals for sales
leads, grossed over $4.2 million in MAC sales and produced leads
valued as high as $1M.
[Source: http://callcentres.com.au/outsourcadv.htm]

Methods improvement
Methods Improvement starts with Methods Analysis. The focus of this
process is to find out how a job is done and breaking it down to elemental
tasks so that they are amenable for analysis. This is done for both running
jobs and new jobs. For a new job, the description becomes the input for
analysis. For current jobs, the analyst depends on observations, records
and suggestions of the persons involved in the job. When improved

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methods are suggested, they are implemented and records created for
assessing the consequences of the methods improvement procedures.
The analyst should involve all concerned persons in the process so that
acceptance becomes possible and opportunities open up for further
improvements. Moreover, the people actually involved would be interested
in improving their productivity and will help the analyst in the process.
1.4.2 Balancing of workstations
Assembly lines carry out operations in a sequence so that the product gets
completed in stages. Since the workflow has to be uniform and operations
may require different periods for completion the necessity of Line Balancing
is felt. Capacities at workstations are so adjusted that a product takes
approximately the same amount of time during each stage in the process of
assembly.
1.4.3 Quality circles
Kaoru Ishikawa is generally considered to have promoted the concept of
Quality Circles. It is well known that he is the originator of fishbone diagrams
to identify the root cause of any problem (See Figure 1.5 Example of a fishbone
diagram). The causes for the existence of a problem are classified as
pertaining to the material, processes or method or any factor that goes into
production. The matter is further investigated and pursued till the exact
cause is determined.

Figure 1.5: Example of a fishbone diagram

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Quality Circles use these principles in solving problems. A Quality Circle is

composed of a small group of employees who genuinely care about others,
and who preferably does similar work, that is:
 Meeting voluntarily with a leader on a regular basis
 Identifying the problems
 Analysing the causes
 Recommending their solutions to management
 Implementing solutions, wherever possible
The teams select projects as per these problems and implement actions to
achieve improvement in the processes with a view to improve quality. Since
these activities are carried out without affecting the regular work and involve
little involvement of the managers, team work gets reinforced and results in
continuous improvement in methods and quality. The capital deployed is
minimal, if at all, and therefore productivity is enhanced.

Case Study 1
Rookz Motors is one of the leading car manufacturers in India. The
quality and variety of cars manufactured enriched a strong hold in the
Indian market. In the year 1998, Rookz faced strong competition from
foreign and other automobile players who offered varied designs,
products as well as better technology. The only advantage that Rookz
Motors had over the other car companies was the cost factor. The
prices of Rookz cars were relatively less than those of its competitors.
Finally, Rookz Motors began to lose its market share.
The CEO of Rookz Motors called a meeting of the engineers and other
department leaders to discuss the market condition and the strengths
and weaknesses of Rookz and their competitors were discussed. To
take the company forward in a highly competitive market, he suggested
that the firm bring out new designs and models that would cater not
only to the middle class market but also increase the market share.
The new project was handed over to Rahul. Rahul asked the CEO for 4
months to analyse the financial needs and seek for the coordination of
the other departments. Raul invited other department officials to
participate and give suggestions regarding the time and resources
needed to produce such a car. However, Rahul was not ready with the
(Cont. in next page)

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(Cont. from previous page)

design and he concluded that he did not have enough finance. He also
stated that the cooperation from the employees of the other department
was lacking. The CEO was disappointed.
The work was then handed over to Kiran Kumar. He was a specialist in
computer aided design. When the work was assigned to him, the first
task that he undertook was to form a quality circle consisting of
members from the design, production and other departments. The
team consisted of ten members. The members with their knowledge
and coordination were able to submit the design for a car model in two
months. Their designed car would cost around two lakh rupees. The
CEO appreciated the efforts of Kiran and his team and advocated the
formation of more quality teams that would not only help the firm in
improving the quality of products, but also in increasing the
coordination between the various departments.

1.4.4 Rationalisation of packaging methods

With logistics becoming an important function of the supply chain and
outsourcing becoming the norm, packaging has become an important
aspect. Space is at a premium and therefore stacking and storing have to
more scientific. Movements inside the premises from one location to another
location are being done with automated systems. Also there is a need for
the packaging systems to be designed for safe transit and continuous
monitoring – both for quantities and operations need to be there. In case of
outsourced products the materials used and their design should facilitate
reuse of the same, which brings about economy.

Self Assessment Questions

Fill in the blanks
5. ________ is very efficient in incorporating low cost and non-intrusive
methods of improving.
6. _________ and ________ drag the productivity of a manufacturing
system.

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1.5 Labour Productivity

Labour Productivity is measured by calculating the number of products per
hour for an individual.

Number of products produced

Labour Pr oductivity =
Hour

Measurement of time required for any task is measured using Motion Study
and Work Measurement methods.
 Motion Study is an analysis of a specific job in an effort to find the most
efficient method in terms of time and effort.
 Work Measurement is the use of accurate observation and recording to
determine the time it would take for a qualified worker to complete a
specific job to a required level of performance.
Standards are set taking into consideration the differences in performance
by different workers and allowances for accommodating relaxation needs of
human beings. Periods during changeover of jobs, taking trials, inspecting,
and adjusting the tools are all factors that should be considered.
Monotony, difficult conditions and complexity of work contribute to lesser
production. Reducing the stresses induced by these is a part of superior job
design. There are three steps involved in increasing labour productivity.
1. Balancing operations in assembly line
2. Reallocation of workers
3. Setting up productivity norms and evaluation of production operations
In this section, let us know in detail about the three steps.
1.5.1 Balancing operations in assembly line
Productivity increases when the product moves through the various
operations toward completion without any hold-over. Balancing a variety of
operations is the major concern which is addressed by the design and
allocation of machines at workstations. Employing extra persons where
bottlenecks are observed or anticipated is a strategy for facilitating workflow.
Relaxation and personal needs take away the worker from the process area;
additional workers should keep the flow smooth thus facilitating increase in
productivity. However care must be taken to see that this provision is used
effectively.
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Other methods like improving jigs and fixtures, adopting new methods and
redesigning are allocated to workers. This is done on the basis of an effort
to match job design/job description to the competencies that would have
been mapped.
However, job requirements may need reallocation of workers to provide the
skills required for efficient handling of jobs. Often, to break the monotony,
job rotation is resorted to. This enables more workers to be exposed to
many jobs. Bottlenecks have to be identified and methods to ease them will
have to be devised and implemented. The main focus will be on balancing
the time taken at all the stages of assembly or the manufacturing process so
that the product/work flows with minimum delay. This also helps in
minimising the inventory.

Case Study 2
Anil and Ravi have a small company to assemble chairs from pre-cut
chair ‘kits’. They hired three workers. There are three process involved
in assembling a chair:
1) assembling the back rest;
2) assembling the frame (seat and arm rest); and
3) attaching the back rest and the frame.
Each worker was assigned the task of assembling all the three
processes of the chair. They were each given a target of 30 chairs a
week. Therefore, the weekly target was 90 chairs a week. The workers
could meet that target.
The company flourished and the demand for chairs increased. To meet
the increasing demand with the same amount of workers, Anil and Ravi
had to devise a strategy.
According to their strategy, each worker was allocated the task of
assembling any one of the three processes. This strategy helped each
worker to specialise in the task he/she was performing, thereby,
improving the efficiency of the job. Thus, Anil and Ravi could increase
production by 15 chairs a week.

1.5.2 Reallocation of workers

Allocation of workers should be made when operations start. The allocation
should be based on the job description, requirements on the machining
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centres and the skills of the workers. Bottlenecks get cleared only when the
rate of production at different work stations have been equalised by
increasing capacities at intermediate positions. This happens by either
improving the tooling or adding another machine or by allocating an
additional worker. A skilled worker may be substituted by a less skilled
worker. Similarly, the skilled worker may be located at a more suitable
position. This process may involve training. This process of relocation
should result in better utilisation of equipment and smoother throughput.

Case Study 2 (Continued...)

Let us consider the previous case study. Let us take a scenario where
the worker who performs step one of the manufacturing processes is
on leave for 10 days. In that case, to run the production smoothly and
to meet the demand, Anil and Ravi asked the remaining two workers to
help each other in assembling the back rest and then to perform their
respective steps (assembling the frame and attaching the back rest).
They also bought an advanced drilling machine to make their work
easy.
As a result, instead of any loss due to the absence of the worker who
performs the first step, the remaining two workers could finish the job
smoothly. This is because Anil and Ravi properly reallocated the work
to the two workers who were skilled. Also the usage of the advanced
drilling machine at the right time made their work easy.

1.5.3 Setting up productivity norms and evaluation of production

operations
Productivity norms are done by various methods of Time and Motion studies
which use Predetermined Motion Time System (PMTS).
Time and Motion Study is a method of finding the best way of performing a
complex task by breaking the task into small steps and measuring the time
taken to perform each step. This enables standards of performance to be
set. These standards can then be used to plan and control production,
estimate prices and deliver times, and devise incentive schemes.
The standards were set after a lot of documentation and research to fix
basic times for various operations. The norms are set for different jobs

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based on basic motions and the time required for them. System efficiency is
also taken into consideration while fixing productivity norms. Production
operations are conducted and measured in terms of quantities and time
requirements. It is important to make an estimate of both of them to assure
deliveries. The operations are based on sequencing, loading, and
dispatching. Expediting is done with the purpose of ensuring that the
operations are smooth. Shortfalls will have to be made up either by overtime
or subcontracting. Evaluation has to be on a continuous basis so that
deadlines are met.

Self Assessment Questions

Fill in the blanks
7. The operations are based on _______, _______ and _____.

1.6 Personnel Productivity

To differentiate the persons who actually work on machines and who do not,
but facilitate the operations in other ways, we use the word Personnel.
Personnel are the ones who:
 Facilitates the operations
 Coordinates between various operations in identifying the jobs that have
to be done
 Checks the set ups
 Verifies that proper jigs and fixtures are provided
 Inspects allocated machines
This group is equipped with a variety of skills that are required to manage
and sort out the problems on a day to day basis. Measuring their
performance for provision of reward is a daunting task for the manager.
Their productivity cannot be directly measured. However, it is necessary that
their functions are recognised and evaluated for purposes of training and
compensation. The middle management relies upon the performance of
these personnel for information, communication, and implementation of any
production enhancing activities. Personnel will be the ones who will motivate
the workforce during implementation of change programme, quality
enhancement activities, and methods improvement. Their productivity is
indirectly measured in terms of the productivity in the functions and
workforce to which they are aligned.
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1.7 Training
Job descriptions provide details the contents of a job, which need to be
performed with efficiency. The person should be evaluated for his
knowledge level, skill level, and the behavioural aspect (attitude). Any
shortfall has to be corrected and it is this process that we call training. When
the task is performed systematically under supervision and guidance, the
job gets done. The purpose of training is to enhance performance so that
the overall objective of achieving desired productivity is achieved.
Needs are assessed, gaps measured and the remedial actions planned.
New methods, advanced technology and latest equipments call for training
for those who use these. Training programmes enhance motivation, which is
an important attribute of a productive employee. It gives an assurance to the
manager and confidence to the employee. Different methods are employed
depending upon the needs, time and budget.
Training also adds value to the workers’ contribution and thus paves way for
career development, which every employee looks forward to. This is a
motivating factor and thus reduces attrition and assures better performance.
Entropy hampers efficiency and training is necessary to maintain even the
existing levels of efficiency. When expansion development is on the anvil,
training is an efficient tool to make the process efficient. Implementation of
TQM and other change management programmes depend on training for
their success.
Self Assessment Questions
Fill in the blanks
8. When the task is performed systematically under ________ and
__________ the job gets done better. The purpose of training is to
enhance___________.

1.8 Summary
Production operations involve conversion of materials into saleable
products. Getting maximum productivity depends on the utilisation of
machines most efficiently with well trained and motivated workforce.
Transferring of materials inside the operations area also has to be optimised
for efficiency. Job descriptions are important to select, train and deploy
personnel.
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1.9 Terminal Questions

1. How are production processes integrated?
2. Explain Matching Demand and Level Capacity.
3. What are the components of systems productivity?
4. What are the factors that restrict outsourcing?
5. How does balancing of workstations lead to methods improvements?
6. What is the purpose of reallocation of worker?
7. What is PMTS? What is its utility in fixing standard time?

1.10 Answers to SAQs and TQs

Answers to Self Assessment Questions
1. Value additions
2. Procurement, storage, inspection and receipt
3. Minimise, wastages
4. Master Production Schedule
5. Quality circles
6. Inventory, Breakdown
7. Sequencing, loading and dispatching
8. Supervision and Guidance, performance

Answers to Terminal Questions

1. Refer to 1.3
2. Refer to 1.3
3. Refer to 1.4
4. Refer 1.5.1
5. Refer to 1.5.2
6. Refer to 1.6.2
7. Refer to 1.6.3

1.11 Reference
 http://callcentres.com.au/outsourcadv.htm

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Unit 2 Advanced Methodologies of Production

Structure:
2.1 Introduction
Learning Objectives
2.2 Advanced Methodologies of Production
Use of computers in design – CAD
Computer integrated manufacturing
2.3 Split-case Order Fulfilment Methods and Mechanisation
Order picking methods
Order extent
Coverage extent
Sorting and routing
Order packing methods
Classification schemes
Choice of optimal fulfilment strategies
2.4 Communication of Picking Directives
2.5 Order Picking and Packing Economics
Space and storage equipment costs
Storage costs per annual cube movement
Storage density vs. velocity
2.6 Capital Costs for on-line Storage
Mechanisation costs – for assembly and packing
Picking and packing costs
Order assembly and packing system costs
2.7 Summary
2.8 Terminal Questions
2.9 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions

2.1 Introduction
In this unit, we discuss advanced technologies of production; use of
Computer Aided Design (CAD) and Computer Integration Manufacturing
(CIM) to facilitate production. Classification of material, their storage, and

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how assembly lines are fed with picking materials using mechanised
systems for achieving high efficiencies are also discussed. Also discussed
are the costs at various stages and the way a balance is struck for
optimisation.
Learning Objectives
By the end of this unit, you should be able to:
 Identify the new concepts of manufacturing technology
 Recognise the use of computers in design of products, components,
assemblies, and how their analyses help in producing better products
 Recognise the importance of information flow which should be
continuous, accurate and timely
 Identify the advanced methodologies of mechanisation that help in
improving quality and reducing throughput time
 Recognise the importance of Computerised Integrated Manufacturing
systems in production system
 Identify the process of packaging and movements of materials both
inside the plant and in external distribution points for raw materials and
finished products

2.2 Advanced Methodologies of Production

Production systems contain principally the machinery, which are used to
transform materials to the desired shapes, having the requisite properties
induced into them for obtaining specific performance parameters. This
process calls for obtaining raw materials, storing them, and moving them
from one stage of operation to the next, sometimes outside the plants.
Tracking them throughout the process, that is, the supply chain and verifying
the completion of operation are stupendous tasks. Optimisation at every
stage is necessary to derive competitive advantage. Advanced
methodologies get the support of database management systems, online
transmission, and processing of information that initiate and follow activities.
The advanced methodologies could be in aspects like material handling,
scheduling, Just-In-Time, Lean Manufacturing, packaging, logistics. With
advancement in IT, processing of operations has become fast and accurate.
These bring in economies which have made it possible to manufacture and

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deliver high quality products on a global scale. We will consider them in

detail in the following pages.
2.2.1 Use of computers in design – CAD
Designs of products are increasingly depending on Computer Aided Design
(CAD) (See Figure 2.1 for Design of car using CAD) . It is an electronic system
for designing new parts or products or altering existing ones, replacing
drafting traditionally done by hand. The designs are made using powerful
desktop computers and graphics software. Designer can create drawings
and view them from any angle on a display monitor. Images of different
components can be seen as ‘assembled’; sections taken and relative
positions can be checked to great accuracies. Views can be made from
different angles and positions, so that the visualisation process of the
designed component/product helps the designer to suggest alternatives to
the customer and the production department.
The drawings can be sent via intranet or internet to the concerned persons
and their opinions taken. Corrections and incorporations can be made very
quickly. The computer can also simulate the reaction of a part to strength
and stress tests. Using the design data stored in the computer’s memory,
manufacturing engineers and other users can quickly obtain printouts of
plans and specifications for a part or product. The software can generate the
volume, weights of components as also other engineering parameters like
centre of gravity, deflections under estimated loads, and various other
design parameters on complicate forms, either for single components or
assemblies. Laborious mechanical drawings or complicated calculations
need not be drawn for people using this software. The database can be
prepared, updated continuously and their access to executive. Analysts use
CAD to store, retrieve, and classify data about various parts.

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Figure 2.1: Design of car using CAD

CAD helps to increase the efficiency of a designer’s work. This aids in

reducing the time required for making a design or modifying a product and
thus concept market period gets drastically cut. This implementation also
cuts the cost of product development and sharply reduces the time to
market new products. It saves time by enabling designers to access and
modify old designs quickly, rather than start from scratch.

Example 1
CAD is revolutionising in-house design departments. Many large
companies such as IBM, Rubbermaid, AT&T, and Steelcase are opting
for investing CAD in their organisations.

2.2.2 Computer integrated manufacturing (CIM)

Integration occurs when a broad range of manufacturing and supporting
activities are linked. CIM is the complete automation of a manufacturing
plant, with all processes functioning under computer control and digital
information tying them together. The three major functions in manufacturing
are production, design, and management function. Production function
converts resources into products. The design function transforms customer
specifications into design. Finally the management functions plan and
control production activities. The three computer aids in CIM are:
 Computer aid to the production function (automated flow of materials)
 Computer aid to the design function (automated flow of technological
information)

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 Computer aid to the management function (automated flow of

managerial information)
When it comes to production, CIMs are included in different areas of
production process such as in engineering design, production planning,
shop control, order processing, material control, distribution and many other
areas. Information flow across all the functions takes place with the help of
computers. Transmission, processing, distribution, and feedback happen
almost in real time so that intended activities are conducted rapidly. (See
Figure 2.2 for CIM related activities)

Figure 2.2: CIM related activities

CIM process helps in rapid production and also reduces indirect costs. CIM
uses computers to control the entire production process. This integration
allows the processes to exchange information with each other and thus they
become capable of initiating actions. As response times decrease, customer
satisfaction increases resulting in better business. CIM helps in avoiding
accumulation of materials resulting in better throughput and better utilisation
of space. Bar coded labels that accompany materials contain instructions for
processing them which are read by sensing devices and display the status
on monitors. This information is available to all concerned personnel
responsible in planning, marketing and other activities so that they will be
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aware of the status of any order. If expediting is needed to meet deadlines,

they will be able to seek intervention. Identifying shortages and ensuring
faster deliveries become easy with CIM.

Example 2
XYZ Ltd introduced CIM in its Hyderabad factory by investing Rs. 10
lakhs. The integration of computer system in the factory has
enhanced:
 Automatic scheduling of the manufacturing tasks
 Keeping track of labour
 Sending instructions to computer screens at workstations along
the assembly line
British Society of Production Management published the advantages
of implementing CIMs in manufacturing companies. The following
illustrates the same:
 Reduction in design cost: 15 – 30%;
 Increased efficiency of design activity: 4 – 20 times;
 Decrease in lead times: 30 – 70%;
 Improved quality for products: 2 – 5 times;
 Reduction of inventory: 30 –70 %;
 Total productivity increase: 30 –60 %;
 Reduction of labour costs: 5 – 25%;

Thus, CIM is an important aspect of technology in manufacturing. Almost 40

percent of manufacturing companies are now using one or more elements of
CIM technology.

2.3 Split-case Order Fulfillment Methods and Mechanisation

Split-case order fulfilment system looks at situations when bulk supplies in
full cases to one or more destinations are not done. Fulfilment of orders
which need different merchandise in different quantities requires that ‘cases’
will have to be split, and pieces picked, repacked in cartons, and shipped to
the customer.
Mechanisation helps in improving identification, pick-up, and repacking the
materials in addition to relieving monotony of the workers. A few strategies

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of achieving this objective optimally are discussed here. The strategies for
achieving the split-case order fulfilment are optimally discussed in this
section.
1. Order picking methods
2. Sorting and routing
3. Order packing methods
4. Classification schemes
5. Choice of optimal fulfilment strategies
2.3.1 Order picking methods
Items as per customer requirements have to be picked and packed in a
logical manner and assigned to personnel so that their productivity is
maximised (See Figure 2.3 for Order picking method). Accuracy of fulfilment of
order is ensured by two basic factors.
1. Order Extent
2. Coverage Extent

Figure 2.3: Order picking method

2.3.1.1 Order extent

Order extent is defined as the number of orders to be picked simultaneously
by a picker in an assignment. This is categorised as Discrete order picking
and Batch order picking.
 Discrete order picking involves picking all the items for a single order,
that is, one order at a time. A single worker picks only one order and

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collects all items necessary to fulfil that customer’s need. The worker
has to go to each section and pick each individual item for that order
before going back and starting on a new order. The picker does not pick
other items until the order for the customer is complete. This method
involves broken case picking, where the order picker is selecting
individual items from a case and packing them to a tote or shipping
carton that may be palletised. In this method of picking, a customer
order is picked quickly upon receipt without delaying. There are many
advantages of discrete order picking.
 Method is simple and reliable
 Best suited for a small organisation with low order counts
 Minimises confusion, since the picker is not juggling many orders
 Maximises cycle time
However, there are some disadvantages of discrete order picking as
well.
 The picker has to walk the entire route for each order
 There is less productivity
This method of picking is commonly used for real-time operations such
as Service Merchandise, where essentially all items for a customer order
are picked from the in-store warehouse while the customer waits.
 In batch order picking the merchandise requirements of many orders
are put together and selected for pick up in the geographical area which
is covered in a single pass. In one trip, the picker grabs many of the
same items for multiple orders. The collected items are separated into
different cartons. The advantage of this method is that, the picker can
make one trip for 10 orders instead of travelling the same route 10 times
for 10 orders. This method is best useful when there is a big pick
distance.
2.3.1.2 Coverage extent
Coverage extent is the physical area to be traversed by a picker while
selecting merchandise for an assignment within the picking system. The
pickers pick the merchandise up from a zone, the zone being a contiguous
area with different picking locations. The boundaries may be fixed or
adjusted dynamically to accommodate personnel or customers. This zone is
identified within the picking area. In the other method called tour picking, the

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entire picking area is considered for picking merchandise. Either of the

strategies is adopted to meet the constraints or opportunities which
maximise employee productivity and the customers’ needs.

Caselet 1
Satya Wholesale Ltd (SWL) is the second largest wholesaler
groceries in India. SWL has an extensive distribution network and
eight distribution centers. It serves around 2500 retail stores in 22
states. SWL’s facility located in the city of Hyderabad has been
providing dairy products, dry goods, freezer products, meat, and
other perishables since the early 1990s. The facility used scanning
technology for ‘order picking’ all its products except ‘freezer products’.
This was because the ‘freezer products’ were stored in a refrigerated
environment.
The usage of scanning technology in highly refrigerated environment
was not that convenient for the warehouse personnel. The screens
and liquid crystal displays used to freeze frequently. For updating the
information, the personnel had to either remove their gloves and wipe
of the frost from the screen or use RF guns to melt them. These
minor inconveniences were slowing down operations of SWL. So to
avoid this, SWL felt for the need of more accurate and efficient order
picking system.
To improve the efficiency of order picking, the basic requirement is to
adopt a technology which could be suitable for picking orders even in
extremely cold and refrigerated environment. SWL found a new
technology called Voice technology, through which the voice
templates of all the employees were recorded and stored as files.
Tests were conducted to confirm the suitability of usage in extreme
refrigerated environment. Finally it was proven advantageous and
now almost 170 warehouse personnel use the technology
simultaneously to pick products.

2.3.2 Sorting and routing

Sorting is done to ease the operation of matching orders, merchandise and
the customers for whom they are done. This activity can be done as and

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when orders are picked, that is, sorting immediately or by merging a number
of orders. Batches are made to consolidate the priorities for execution. This
method is called Merge and Sort. The strategy depends on the total area of
the zone, the number of orders, and the type of merchandise and the
economics of balancing all the above.
When orders are routed among those zones where picks are required, we
call them Routing the picks. When orders are routed from zone to zone, in
a particular order, whether any picks are there or not, we call them chaining.
When multiple zones are covered simultaneously in different zones we call
them parallel routing. As can be discerned, no one single method is suitable
for actual situations on site. They are formulated as a strategy for
optimisation of resources in view of the constraints.
"Zones" are created uniquely for each order or batch. This helps in
balancing the workload as pickers are free to work in any segment of the
circle without having to travel to another zone.
2.3.3 Order packing methods
Order fulfilling methodology covers one more aspect, that is, the order
packing methods. When split-case is executed it becomes necessary that
the merchandise is re-packaged for shipment to meet the requirements of
the customers (See Figure 2.4 for Order packing method). There are two
methods used for order packing:
1. Pack Immediate: In the first method they are packed as they are
picked. This is applicable in cases where the merchandise is usable by
the customer directly. It is also applicable when the tools and packaging
materials are available with the picker and he can pack them throughout
the picking area.
2. Assemble and Pack: In assemble and pack system, the orders of the
customers are assembled together in a dedicated area equipped for
packing.

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Figure 2.4: Order packing method

2.3.4 Classification schemes

In this section you will learn about the coding of various methods of split
picking and packing methodologies. The letters and subscripts will uniquely
identify the method intended to be used for picking and packing. Using
these codes all personnel in the process will know disposition status of the
merchandise.
The three major factors characterising a system are each represented by a
letter in sequence:

1st letter: Discrete Order Picking (or)

Batch Order Picking
2nd letter: Zone Picking (or)
Tour Picking
3rd letter: Pack Immediate (or)
Assemble and Pack

For example, DZA indicates a discrete order picking system where the
picker covers the entire zone picking area and then assembles and packs
the order as it is selected.
This classification and identification system can be extended to designate
the batch sortation and zone visitation methods by the use of subscripts as
follows:

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1st letter Subscript: BS: Batch Order Picking - Sort Immediate

BM: Batch Order Picking - Merge and Sort
nd
2 letter Subscript: ZR: Zone Picking with Routing
ZC: Zone Picking with Chaining
ZP: Zone Picking in Parallel
For example, BSZCA indicates a system with batch order picking in chaining
multiple zones with an immediate sorting function leading to a separate
order assembly and packing area.
With this type of coding 24 ways of representing the type of split order
picking and packing are identifiable.
2.3.5 Choice of optimal fulfilment strategies
The choice of order fulfilment strategy depends upon the predominant order
characteristics and category of distribution. They are determined by general
order characteristics such as:
1. Number of line-items
2. Quality of pieces per line-item
General order categories are:
a. Wholesale Distribution: For wholesale distributions, the orders are
usually for large number of pieces of a few items.
b. Retail Distribution: For retail distributions, the orders are for large
quantities for a large number of items.
c. Direct Marketing: The orders for direct marketing are for small
quantities.
d. Consumer Distribution: The orders for consumer distribution are for
small quantities of different items. This is usually for the purpose of
evaluation, promotion, and consumption.
The performance measures to be satisfied by the choice of strategy are to
minimise the costs involved and maximise desirable characteristics. The
following are the performance needs to be satisfied.
 Minimise the cost of pick and pack for every order
 Minimise the cost of shipping per order
 Reduce the time required per cycle
 Increase the fill rate

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 Improve accuracy of the elements of the process

 Improve traceability and accountability of all transactions
Advanced technology involving Bar Coding, feeding on-line data, high speed
processing and distribution of information across all nodes of the supply
chain helps in improving the efficiency, reducing costs, and improving
customer satisfaction.

Self Assessment Questions

Fill in the blanks
1. Mechanisation helps in improving __________, _________ and
___________the materials in addition to relieving monotony of the
workers.
2. When multiple zones are covered simultaneously in different zones we
call them __________ _________.

2.4 Communication of Picking Directives

In any organisation, communication plays a vital role for efficient order
picking by personnel. The necessary directives have to be accurate, timely,
and sufficient. With the help of computers and automation, this task has
become reliable to such an extent that dependence is now almost total. So,
the method selected to communicate the directives for picking will certainly
impact the performance measures, which represent the consequences of
the activities indulged in. A few of the techniques are discussed here.
 Reports: Customers’ orders are either in the printed format generated
by the customer or converted by the marketing department into pick lists,
packing slips, stock location reports, and delivery notes. The reports flow
along with the orders and when split are distributed for parallel picking.
 Labels: These are used to direct order pick locations. These labels are
bar coded for item sorting and order verification. These are used mostly
for Discrete order or Batch selection methods.
 Radio Frequency Terminals: These are used in combination with bar-
coded shipping labels to identify the orders for purposes of sorting and
routing. They need classification, coding, and bar coding for identifying
orders for routing and sorting.

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 Display Lights: These computer activated lights are used to direct order
selectors to items and locations to pick order or batch requirements.
Items are ‘put’ in designated locations and the data read. The light helps
the sorting of the items as per orders. They call for the attention of the
personnel and alert them.

Self Assessment Questions

Fill in the blanks
3. Directives they need have to be ________, _______ and ______.

2.5 Order Picking and Packing Economics

The primary cost factors of split-case order picking and packing can be
divided into two categories – Capital Costs and Operating Costs.
Capital costs are non-recurring costs and include facilities, material handling
systems, weighing systems, and other supporting and facilitating goods,
which are used over a long time.
The operating costs are recurring costs and include labour, consumable
supplies, insurance, utilities, and taxes. Operating costs are generally
elevated to the scale of operations.
Some more costs which can be called Incidental Costs are those
associated with damages, resolution of errors, return handling, inventory
and shrinkage.
2.5.1 Space and storage equipment costs
Split case picking and packing functions and the space required for them
can be broadly categorised as:
a) On line storage for inventory
b) Replenishment aisles
c) Picking aisles (work area)
d) Packing work space
e) Material handling space. Activity levels are used to determine the
methods of online storage for managing online storage. They include–
Pallet Racks, Case Flow Rack, Bin Shelving, and Carousel. They are
used depending on the size, quantities, patterns of withdrawal, and
velocity

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2.5.2 Storage costs per annual cube movement

Pallet storage is the lowest cost option per cubic-metre movement. This is
because investments in racking, flow rail get amortised over a long period
while transporting huge volumes. Case flow racks are only slightly costlier.
Bin storage is relatively costlier than the earlier two. The capital cost of
carousel is significantly costlier than all the other systems though rate of
movement is considerably higher.
2.5.3 Storage density vs. velocity
Storage Density refers to quantity of material or number of items that can be
stored in a unit of volume, say 10 cubic-metres. The type of storage
depends on the:
 Average duration of storage
 The frequency of retrieval
 Movement of stored goods
 Replenishment and pick-up activities
The movement of stored goods varies, if:
 The storage of different materials needs to be bought to a central
location for purpose of assembly and then perform transmission
 The stored materials are transmitted directly to the customers
Replenishment and pick-up activities matter when we consider the type of
storage provided. If replenishment and pick-up activities have to be
conducted simultaneously Cash Flow Rack becomes the preferred choice.
Velocity refers to the speed with which materials are moved into the storage
space and how fast they are required to be moved to the next point in the
supply chain. In Split-Case Order Fulfilment situations, where the variety of
items that need to go into satisfying orders are many, the access to the
personnel in the system becomes an important factor in the design of the
system.
The major costs that are necessary to be incurred for an online storage
system are space costs and equipment costs. The economics of all the four
systems – Pallet Rack, Case Flow Rack, Bin Shelving, and Carousel are
considered for maximum utilisation of space, requisite amount of
mechanisation, and productivity of the personnel.

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Self Assessment Questions

Fill in the blanks
4. Type of storage we provide depends on the average ____ and _____.

2.6 Capital Costs for On-line Storage

Storage economics are mainly concerned with the capital cost for online
storage when rationalised with annual item cube movement. Capital costs
are those for the space, building, material handling equipments, bins,
pallets, pallet loading systems, and computer hardware and software for
identifying and processing information about the storage cost. The main
concern is the provision for picking, retrieval, and packing. The supporting
and efficiency enhancing fixtures needed for the efficient use of space and
heavy equipments should be addressed.
The extent of mechanisation depends on the expected returns in them.
Sometimes, mechanisation will not solve some fundamental problems of
basic design of the system, inadequate forecasting or inappropriate
methodologies. It will be found that capital costs which are quite huge fail to
result in increased productivity and will be a drain on the economics of the
operation.
2.6.1 Mechanisation costs – for assembly and packing
Failure of the split-case order in assembly and packaging systems occurs
mainly due to two reasons:
a) Tote Sorting
b) Item Sorting

Figure 2.5: Tote sorting Figure 2.6: Cross belt sorter

Totes containing the picked merchandise area are moved from the selected
zone. These are received for sorting where the sorter automatically transfers
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all totes of a given order on a conveyor which supplies them to the packing
station (See Figure 2.5 Tote sorting). The stations which perform this activity
will have their workload assigned dynamically.
The Item Sorting System receives the totes with picked merchandise and is
transported to one more induction station where individual items are
removed. These items are inducted into an item sorter. The sorter will be in
the form of tilt tray or a cross belt (See Figure 2.6 Cross belt sorter). Individual
items get sorted and sent to chutes which carry the items for assembly and
packing.
The discharge takes place at the pack stations. Sometimes belt conveyors
are used for sorting and transporting. In such cases chutes may become
redundant. It is to be noted that for different types of merchandise, their
quantities determine the method for the intended operations.
The capital costs in adopting one system to another will vary. Utilisation and
productivity are factors which determine the choice. However, it is advisable
that provision for alternates may be planned so that modifications do not
become very costly.
2.6.2 Picking and packing costs
These activities require a good deal of human intervention, thus needing a
number of people. Distribution centres, where picking and packing activities
take place, measure performances on the basis of pieces per man-hour or
order lines per man-hour. Inevitably, these get linked to orders (See Figure
2.7 for Picking and packing).

Figure 2.7: Picking and packing

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There is a large variation in the quantities per order, variety of merchandise,

waiting lines, and other characteristics of the orders being filled. The orders
might be wholesale, retail, direct or consumer. Productivity measures,
though dependent on pieces per hour or lines per hour, will have to be
adjusted to suit the peculiarities of the situation. The extent of
mechanisation also has to be considered. Costs involved both in terms of
capital and labour intensive activities should get suitable representation of
the cost structure.
2.6.3 Order assembly and packing system costs
Assembly is done manually and hence needs a well trained workforce. The
variety of merchandise that arrive from totes either via the chute or tray or
cross belt have to be accurately identified and placed for assembly. Though
every care would have been taken, gaps in the information flow would still
hold up the operations. Reducing inventory at this level is critical to
productivity. Feedback systems should be very efficient to rectify errors as
and when they occur. Main costs involved at this stage are the manpower;
capital costs would not be heavy. Packing systems may be semi-automatic
or manual. Fully automatic systems may not be advisable for order
assembly situation unless quantities are large and requirements are for
longer periods.

Self Assessment Questions

Fill in the blanks
5. Many times ______will not solve some fundamental problems of basic
design of the system, ______ or inappropriate methodologies.
6. Sometimes bulk handling _______ systems area used for _______.
7. ________ though dependent on pieces per hour or lines per hour will
have to be adjusted to suit the peculiarities of the situation.

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Case Study 1
InDex was an Rs.12 billion-a-year delivery service company that
thrived on speed and reliability. InDex delivered 5 million packages
each day. Since 60 percent of the packages went by plane, InDex
could charge premium prices for the service. For 20 years,
companies traditionally chose InDex because of its on-time delivery
and technological superiority in tracking packages. The internet,
however, changed things drastically. Many businesses started using
emails to deliver documents instantaneously.
These technological advances cut into the demand for InDex’s
traditional services. The market was taken over by internet
companies such as XYZ.com, which relies on ground transportation
services to deliver packages directly to the customer’s door, and by
the vast business-to-business supply networks created by web-based
purchasing systems. To remain competitive, InDex created two new
services: InDex Ground and InDex Home Delivery. InDex Ground
focuses on business-to-business deliveries to residences. The goals
were low-cost operations and dependable delivery–a change from
past operations’ goals that stressed speed. In addition, InDex
invested Rs.20 million in processes for co-ordinating the flow of
goods.
InDex Ground came up with advanced technology such as, new bar
code, material handling, advanced order picking and order packing
methodologies, and computer technologies. It also came up with a
proper sorting and routing technique across all nodes of supply chain
for providing a time-definite fast delivery to the customers.
InDex, now with its ability to rely on skill managing operations,
competed successfully with competitors in dynamic environment and
resulted with revenue of Rs.4 billion for the financial year 2009. It also
provided employment for more than 70,000 people and independent
contractors.

2.7 Summary
New concepts of manufacturing technology and use of computers in design
of products, components, assemblies, help in producing quality products

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with a maximum accuracy. The information flow should be continuous,

accurate and timely is an important element introduction Advanced
methodologies of mechanisation help in improving quality and reducing
throughput time. The integration of computer integrated manufacturing
systems will improve the process of information flow across all the functions.
The system takes care of various processes like scheduling, routing,
inventory and optimises the usage of space and storage systems.
Packaging and movements of materials both inside the plant and external
distribution points for raw materials and finished products is an important
function in the supply chain.

2.8 Terminal Questions

1. Explain how CAD and CIM help in improving productivity
2. How do split case orders processes improve customer satisfaction?
3. Explain the difference between Storage Density and Velocity.
4. Give reasons as to why failures occur in split case order assembly.

2.9 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. Identification, pick-up, and repacking
2. Parallel routing
3. Accurate, timely and sufficient
4. Duration of storage and the frequency of retrieval.
5. Mechanisation, inadequate forecasting
6. Belt conveyors, sorting and transporting
7. Productivity measures

Answers to Terminal Questions

1. Refer to 2.3
2. Refer to 2.4
3. Refer to 2.6.3
4. Refer to 2.7.1

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Unit 3 Operations Management

Structure:
3.1 Introduction
Learning Objectives
3.2 Operations Strategy
Strategic management process
Strategic decision making
Differentiation strategies
3.3 Tools for Implementation of Operations
Implementation of operations
Tools for implementation
3.4 Industry Best Practices
Pragmatic bench marking
3.5 Summary
3.6 Terminal Questions
3.7 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions
3.8 References

3.1 Introduction
An operation management is the systematic design, direction, and control of
the processes that transform inputs into services and products for the
customers. It encompasses all management activities using resources such
as:
 Plants: The factory and the location where all the activities take place,
machinery and heavy equipments
 People: Direct or indirect workforce
 Parts: The components, sub-assemblies or even products
 Processes: Methodologies, technology, tooling, fixtures for establishing,
maintaining and improving productivity

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 Planning and control: This is an information management system

which initiates, directs, monitors and collects feedback to enable efficient
use of all other resources
Optimisation in all the above aspects of operations is vital to enable the firm
to be competitive. Quality systems have to be established to enable the
organisation to move towards leadership position. To achieve excellence,
benchmarking processes are employed and international certification
sought. All these activities in the direction of achieving leadership position
have impact on operations conducted in the organisation.
In this unit, you are going to learn the strategies and tools used by the
companies to balance these factors.

Learning Objectives
By the end of this unit, you will be able to:
 Describe operations management
 Explain the scope of operations management
 Outline the different strategies used in operations management to
enable you make better decisions during implementation
 Recall the tools used for the implementation of operations management
 Recognise the industries‟ best practices to improve upon the road to
excellence

3.2 Operations Strategy

Operations management is one of the major functions of any business
organisation. Marketing discovers the destination for the product or service
that is produced. Operations provide the deliverables by utilising the
resources and producing the same. All equipments, facilities, technology,
information, human resources, finance should be tuned to make operations
most efficient to derive maximum advantage and be competitive. Operations
function should therefore be guided by strategies which are consistent with
the organisation strategy. For example, Intel Corporation, USA, has superior
computer chip design. This is because of its technological expertise in
producing microchip.

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Competitiveness is at the core of all strategies. Even among them, priorities

tend to bring the organisation‟s focus on the areas to be dealt with in terms
of allocation of resources – people, money, and time. This means that
different functional areas with their own capabilities and constraints have to
be integrated for the overall corporate strategy. Flexible strategies and an
adaptive production process help to achieve high productivity and also to
satisfy the needs of customers, thereby improving the deliverables. For
example, one hour paper printing and one hour screen printing services on
the cover and „same-day‟ flex printing and binding services.

Corporate strategy, functional area strategies, market analysis, competitive

priorities, competitive capabilities, and new service/product design are the
main operations strategies in any organisation. Operations strategy is
formulated to leverage the advantages, absorb the consequences of the
variable nature of various functions and provide a dependable
implementation programme. As you can see, effective and timely
communication is a vital factor to involve people at various stages and
monitor the progress. Figure 3.1 shows the links between the factors of
operations management.

Formulation of a strategy depends on the following:

 Assessment of strengths
 Understanding of the weaknesses
 Nature of external environment
 Resilience of the internal environment

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Corporate Strategy

Environmental Scanning
Core Competencies Market Analysis
Core Processes Market Segmentation
Global Strategies Needs Assessment

Competitive Priorities
Cost
Quality
Time
Flexibility

Competitive
Capabilities
Current
Needed
Planned

New Service/
Product Design
Functional Area
Design
Strategies
Analysis
Finance
Development
Marketing
Full Launch
Operations
Others

1
Figure 3.1 Links between the factors of operations management
The policies derived from the operations strategy should be amenable to go
along with other functions. Organisation strategy should be such that the
strategies of different functions are designed to lend support to one another.
Culture of the organisation should be established and nurtured in such a
way, that, conflicts are resolved with the overall organisation strategy in

1
Operations Management, Krajewski and Ritzman – Prentice Hall India (7th Edition, 2004)

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view. Operations strategy takes under its umbrella the quality, time, and
flexibility. (See Figure 3.2 for Phases of operations strategy)

Figure 3.2: Phases of operations strategy

a) Quality: Quality is the driving factor for any organisation. When buying a
product, a customer will always think about the value of the money he is
investing. Even if the price of the product is high, the quality of the
product will provoke the customer to buy it. Typical examples of quality
are: Amway, Coco-Cola, Pepsi, Tupperware, Sony, BMW. Quality also
includes cost reduction by various methods like Just-In-Time (JIT), Lean
Manufacturing, TQM, and TPM. Quality enables the firm to be
competitive.
b) Time: Time aspect considers that deliveries are made on time to meet
customers‟ expectations. Time taken to develop and market new
products is becoming very critical in the global environment. To seek
more business, organisations should reduce the time taken for each
factor during operations. The organisations mainly focus on reducing the
time for the list given in the figure 3.3.

Figure 3.3: Factors to be reduced during operations

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c) Flexibility: Flexibility enables to meet the changing demands of

customers, in order to develop new processes and materials and to
make the organisation more agile in its manufacture. For example,
Photon, Inc, a European computer component manufacturer, produces
components which are not fixed to particular configurations. This
enables production lines to be reconfigured within hours or days to make
new and different products. This flexibility has allowed Photon to expand
from manufacturing a few products for a single customer to making
hundreds of products for over 50 different companies.

Remember
Operations strategy takes under its umbrella, the quality of the product or
service, time taken to deliver the product, and flexibility for changing
demands of customers.

Self Assessment Questions

Fill in the blanks
1. _________ should be such that the strategies of different functions are
designed to lend support to one another.
3.2.1 Strategic management process
Strategic management is used to leverage the company‟s advantages,
prepare for the eventualities of uncertain external happenings and maximise
the success of its endeavours. This necessitates that all organisational
processes are effective and efficient.
A business strategy is the result of a decision taken at the highest level.
They are specific programme of action which outlines how the resources are
deployed to achieve goals in an environment. A general framework to guide
and activate think-tanks in the organisation is to come up with proposals.
Action plans with time frames, authority hierarchies, and feed-back
mechanisms are formulated and designed. At this stage, detailed scenarios
as to the likely consequences are considered and contingency plans worked
out for implementation, if situations call for the same. Being in readiness
with alternatives is a good way of assuring the success of any plan.
For example, the production of a model of motor cycle is to be increased by
25% and the price to be reduced by 10%. This decision would have been

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taken as a strategy to meet the increasing demands which are real in order
to fulfil the following:
 Enter a niche market of the competitor
 Augment marketing department‟s claim after a vigorous sales campaign
 Any other reason
The strategy for the marketing function would be many like promising
freebies, making the commission attractive for the dealer, opening more
service outlets. The objective of an operations strategy is to achieve the
long-term goals established by the business strategy. The operations
strategy would consider the following constraints:
 Sub-contracting or including additional machinery
 Improving productivity using different methods
 Revamping assembly lines
 Motivating the employees
 Promoting existing employees or hiring new ones
 Identifying and developing new suppliers
 Looking for opportunities to reduce costs as scaling up provides scope
The above measures will be under consideration at all times. When a
change is considered, identification of areas of cooperation and
collaboration becomes easy. Opportunities arise for understanding and
resolution of problems. Setting up visible targets to meet deadlines
encourages application of „constancy of purpose‟ as per Deming. This in
itself would be a strategy for improving quality and productivity.
3.2.2 Strategic decision making
Decision making is the most crucial management function. Decisions
commit the organisation and its members to activities which have financial
repercussions and affect the functioning of others who are connected with
those. Therefore, decisions are taken after lot of deliberations which involve
data gathering, analysis, and predicting outcomes as shown in figure 3.4.
Accuracy of data, their relevance for the matter under consideration is the
factor which affects the quality of decisions. In addition, the following factors
also form the basis of decision making:

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Figure 3.4: Planning and decision making

a) Environmental scanning: The business environment of any

organisation includes the industry, marketplace, governmental agencies,
society, ecology, technology, and others. Organisations should be aware
of the business environment in which the firm exists, and have to
compete continually by exhibiting potential for opportunities and threats.
Being aware of those, and their impact on the firm by a process of
analysis, is called environmental scanning. Let us now consider the
potential exhibited by business environment.
 Competitors may be gaining edge by diversification, making forays
into the firm‟s niche market by making new and better products
 Suppliers could be forming cartels and preparing to drive hard
bargains
 Government could be passing laws and issuing orders which could
affect the supply of materials or restrictions on import and export or
even employment conditions.
Adaptation to these dynamic factors by environment scanning and
basic strategic decisions is vital.
b) Core competencies: Each organisation is started by an entrepreneur or
a small group of entrepreneurs. The objective is to use their unique
strengths to create and develop an organisation. These unique strengths
are the core-competencies of the organisation. However, many-a-time, it
becomes necessary to augment the existing business with some
additional strengths or competencies. Such developments and

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improvements in core competencies provide an edge over the

competitors who would have to grapple with these competencies.
Core processes of an organisation are determined by the core
competencies. Four main core processes are mentioned below. (See
Figure 3.5 Core competency process)
 Customer relationship
 New product/service development
 Supplier relationship
 Order fulfilment
The emphasis on these processes depends on:
 The type of industry
 The length of its existence
 The consequent strengths built up in certain areas
 The way earlier successes have been achieved
 The reinforcement they have given to the organisation
One should remember that the environment is always dynamic and the
strategy formulation needs to be constantly updated for making
implementation effective. Ultimately, every organisation depends on the
core competencies which give it an advantage over the competitors.

Figure 3.5: Core competency processes

3.2.3 Differentiation strategies
Differentiation is a process, by which, a company distinguishes itself, from
its competitors, and their offerings. The process includes adding a set of
differentiators, which are meaningful, and adds value for the customer. The
differences should be perceived by the customer as important, distinctive,
superior, and affordable. Despite anything to the contrary, they have to
make the company‟s offerings (the products and services) profitable.
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To derive competitive advantage, the study of the processes to adapt

innovations which should be pre-emptive is important. Here, we are not
considering the situation of an entirely new product but those which are
already contributing to the company revenues.
“Companies have different potential in terms of manoeuvrability along with
target market, place (channels), promotion, and price. These are affected by
the company’s position in the market, and the industry structure.”
– According to Miland Lele, (Miland M.Lele, Creating Strategic Leverage: New York,
John Wiley 1992)
Boston Consulting Group (BCG) has classified four types of industries and
the approaches available, depending on the cell the particular industry fits
into. The figure 3.6, illustrates the classification of industries according to
BCG.

Figure 3.6: BCG’s Classification

Size of advantage vs. number of approaches to achieve advantage

When the volume of the industry is large, the advantage for a firm is high,
but the number of approaches is small. On the other hand, if it is
fragmented, the size of the advantage is small, and the approaches are
many. The options available and the quantum of advantage are the
considerations for any strategy. For products differentiation we consider
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form, features, and the quality of performance. By form, we mean the

shapes, dimensions, aesthetics which determine the physical aspects of the
product.
The components and parts that are integral to the product may not be visible
but will have forms which make it easy for assembly, identification,
extraction, insertion, and inspection. This is necessary for making a product
serviceable and repairable to meet customers‟ needs. The dimensions are
optimised for safe use, safety, and durability.
Aesthetics is the ultimate differentiator to attract the customer and make him
comfortable using it. Features contribute for differentiation to a large extent.
It addresses the requirements of the customer in such a way as to make the
products meet them in a way that the competitors do not. Again,
performance is looked at from the point of view of reliability, durability, and
reparability.
The strategy that gives advantage is to have features incorporated during
design and ensuring fail-safe methods in the processes. Measures taken
should be implemented in such a way that all personnel involved are aware
of the purpose and improves commitment. From the operations perspective,
it is bound to unlock creativity and encourage innovativeness, a well earned
bonus.
Self Assessment Questions
Fill in the blanks
2. Features contribute to a large extent in that they address the _______ of
the _______.

3.3 Tools for Implementation of Operations

All functions in the organisation including administration, finance, materials,
purchase, marketing, production, logistics, communication and others, can
be considered operations. The reason is all of them use some inputs like
materials or information either on a person to person basis or through a flow
line. They are required to use some process and convert them into outputs
usable in the next stage of the value chain. For example, when an invoice is
received for payment, it contains information about the following:
 Material or a service

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 Person who needed the invoice

 Price to be paid
 Supplier
 Transportation
 Insurance
 Quantity
 Tax to be paid
 Others
The bills payable section will have to verify data regarding the above, seek
inspection reports from the quality control department/user. Before actual
payment is made, verification such as, the terms of payment and availability
of funds are done. Verification will help you to notice the following:
 Information is sought or given
 Materials received and transferred
 Papers/instructions are received/issued for initiating activities
All these are also operations. However, for our study we will limit our focus
to operations involving manufacturing. We identify a set of specialised
techniques. We call them tools which can be standardised for ease of
implementation and control.

3.3.1 Implementation of operations

Implementation is the process of executing the planned operations. When
planning and controlling functions are put together, we call it as
Implementation of Operations.
The planning is the process of estimating, routing, and scheduling. The
controlling functions are conducted while the manufacturing is going on, like
dispatching and expediting. (See Figure 3.7 Implementation of operations)

Figure 3.7: Implementation of operations

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 Estimating: Estimating gives the quantities to be made at each

workstation depending on the Sales forecast, Provision for buffer stock,
Quantities bought out, Services outsourced, Likely shortfalls, and
Others. It is made on the basis of capacity.
 Routing: Routing, determines the sequence of operations and the
machines that do them, so that work flow, as determined by the
processes, is smooth resulting in minimum inventory.
 Scheduling: Scheduling is mainly concerned with allocating time slots
for different jobs. It specifies as to when jobs start and end at particular
workstations. The purpose is to prevent imbalances among work centers
and to utilise labour hours in such a way that established lead times are
maintained.
 Dispatching: Dispatching is concerned with moving of the materials with
tools, jigs, and fixtures to specific machines along with drawings and
ensuring inspections at specific nodes, so that the materials move in the
supply chain
 Expediting: Expediting ensures that all the above are being done
properly. Reports are generated and any bottleneck that gets created is
removed.

3.3.2 Tools for implementation

GANTT charts are used to record progress, comparing the actual against
the planned activities, and to keep track of the flow of the material. Line
balancing and line of balance are two more tools to ensure that machining
centres are loaded, as uniformly as possible to prevent build up stocks at
intermediate stages.
Simulation models are used to predict utilisation of machines, and
production levels. Various inventory models help us to determine when to
order, and how many to order. It also gives us an insight to the risks and
opportunities that come up for our consideration.
Proper maintenance and analysis of records help us to see the gaps that
have crept into the operations system. Learning that happens across
functions will make the tools being used more realistically and increase
efficiency. ERP software, especially SAP, have many modules that store,
sort, and analyse data, and make them available to the staff across the
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globe in many plants enabling managers to streamline their operations.

Software specific to functions, applications or organisation can be obtained.
Microsoft Operations Manager 2005 is a useful tool in this regard. (See
Figure 3.8 Microsoft Operations Manager 2005)

Figure 3.8: Microsoft Operations Manager 2005

Self Assessment Questions

Fill in the blanks
3. _____ is mainly concerned with allocating time slots for different jobs.

Caselet 1
MakTel is a national telecom provider. The customer utilisation of ISDN
was less; therefore, the company faced poor sales of ISDN services for
several years. Also, the quality of the service delivery was low. The
company applied Pareto analysis to extract the reasons for the failures in
the service delivery. The analysis showed that the problem is poor quality
of network terminals and unqualified technicians for provisioning of the
ISDN service. MAkTel rectified the problems and energised the company
sales.

3.4 Industry Best Practices

Each industry would have developed over years or decades. During this
development materials would have changed and processes would have
changed. As all products or services are meant to serve needs of the
customers, they undergo continuous changes both in shapes and features.

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Materials and methods go on improving incessantly because of the research

that is conducted. The companies that were at the front innovate to stay in
business as new entrants would be adopting the latest techniques that the
pioneers had taken decades to establish. So, the various firms in any
industry would end up adopting almost similar methods of getting an output
required. Such practices would get refined to a great extent giving rise to
what we call industry best practices. These tend to get stabilised or changed
owing to the development of new equipments which are designed.
A manufacturer, with an eye on growing markets, demands for higher quality
and reduced prices. Competition benefits those who can use all these to
their advantage. Industry best practices open up the field for benchmarking
by companies which need to improve their performance.
3.4.1 Pragmatic bench marking
Pragmatic bench marking is a method of measuring a company’s
processes, methods, and procedures; in a way that all functions in great
detail.
Benchmarking is used to understand how these got into the system and
what circumstances brought them about. It is a learning process, with a view
to find out whether some of the reasons have changed and to bring in new
processes for improvement. The metrics that could be used are the:
 Number of pieces per hour
 Cost per unit
 Number of breakdowns per week
 Customer alienation during a week
 Return on investment
 Number of returns from customers in a month
 Inventory turnover
 Many others
The figures obtained from the above determine the efficiency of the
organisation. To keep focused, many organisations, especially the large
ones, select a few processes for purposes of benchmarking. This helps in
ensuring constant and deep attention to those aspects which are to be dealt
with. The following are the types of benchmarking considered by various
firms.
 Process Benchmarking – Business Process
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 Financial Benchmarking
 Performance Benchmarking
 Product Benchmarking
 Strategic Benchmarking
 Functional Benchmarking
Tools like Pareto Analysis (an example is shown in figure 3.9) are used to
make the choice or choices from among many aspects in any one of the
above categories.

Figure 3.9: Example of Pareto Analysis

Planning, Analysis, Integration, and Action are the four steps recognised in
the process of benchmarking. The select criteria are compared with the
performance parameters of the company which is considered the best in the
industry. Targets are set and activities are conducted to reach them. Let us
discuss in detail, about the steps which are necessary for conducting a
benchmarking operation.
1. Planning: Planning determines the process, service or the product to be
benchmarked on which metrics are assigned for collection of data.
2. Analysis: Analysed data gives inputs for comparison with the target
company‟s performance on the parameter benchmark on which data
was collected. Measuring gaps helps in identifying the process which
should be improved for reaching the benchmark.
3. Integration: Resources are required across all functions to achieve the
target needs. Integration involves putting together resources like people,
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equipments, and communication, so that, progress is unhindered and all

activities reach their logical conclusions without loss of initiative or time.
4. Action: When changes are needed, actions have to be planned
according to the steps earlier stated. Teams are provided with
necessary leadership, authority, and supporting facilities to enable them
to complete all activities within the time frame set for the purpose. Since
benchmarking is done in specific areas, it is necessary to maintain the
focus, and implement actions without losing initiative, so that, results
become demonstrable.
A systematic approach to waste reduction is explained using „Alan
Robinsons 5W2H method‟. 5W2H method is the modified version of „Goal
The Famous 5W1H method‟. A Systematic Approach to Waste Reduction
(Cambridge, MA: Productivity Press 1991-Page 246) is explained in Table
3.1. (See Figure 3.10 Alan Robinsons 5W2H method)

Table 3.1: Systematic approach to waste reduction

Category 5W2H Typical Questions Goal

Subject What What is being done? Identify the focus of analysis

Purpose Why Why is this necessary? Eliminate unnecessary tasks

Location Where Where is it being cone? Improve the location

Why is it done there?
Is there a better place?
Sequence When When is it being done? Improve the sequence
Would it be better to do it
at another time?
People Who Who is doing it? Improve the output
Could someone else do it
better?
Method How How is it being done? Simplify/Improve
Is there a better way? tasks/methods
Cost How How much does it cost Effect cost reductions
much now? What would be the
new cost?

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Figure 3.10: Alan Robinsons 5W2H method

It is necessary to set achievable targets keeping in view the availability of

resources, technology, and to spread awareness about the importance of
what is attempted, and how success improves the image of the company.
This approach is recommended by the Total Quality Management (TQM)
guru Edwards Deming. His expression is “make them proud”.
This approach can be called pragmatic, because building up knowledge
based analysis of data, and achieving the targets, set the tone of continuous
improvement, and move the organisation towards excellence, which was the
reason we started benchmarking. Many times benchmarking is done
internally. When an enterprise has a number of plants, and some of them
adopt similar processes, it is likely that one group may have developed
techniques and methodologies of doing them better than others. Internal
benchmarking is resorted to as a measure of identifying strengths in the
organisation. By internal benchmarking, knowledge, and skills are shared
and complemented taking the organisation to a leadership position.

Remember
Pragmatic bench marking is a method of measuring a company‟s
processes, methods, and procedures; in a way that all functions in great
detail.
„Alan Robinsons has defined a systematic approach to waste reduction,
5W2H method – What, Why, Where, When, Who, How, and How much.

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Self Assessment Questions

Fill in the blanks
4. Tools like ___________ are used to make the choice or choices from
among many aspects in any one of the above categories.
5. ___________ is resorted to as a measure of identifying strengths in the
organisation.

3.5 Summary
You have focused upon the principles on which operations are conducted
and the processes involved in conducting them. Strategy is very important
for the operations, because, it guides the managers in implementing policies
which have long term implications for productivity, quality and customer
satisfaction. It is imperative that we measure up to the best in the industry
by bench marking and being competitive.

3.6 Terminal Questions

1. What are the components of operations management?
2. Explain how strategy is deployed for improving productivity.
3. How is the differentiation strategies implemented?
4. Give any three tools for implementation of operations.
5. What do you understand by „industry best practice‟?
6. List out different types of Benchmarking.

3.7 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. Organisation strategy
2. Requirement, Customer
3. Scheduling
4. Pareto Analysis
5. Internal Bench marking

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Answers to Terminal Questions

1. Refer 3.1
2. Refer 3.4
3. Refer 3.4.3
4. Refer 3.5
5. Refer 3.6
6. Refer 3.6.1

3.8 References
Operations Management, Krajewski and Ritzman – Prentice Hall India
(7th Edition, 2004)

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Unit 4 Production Techniques

Structure:
4.1 Introduction
Learning Objectives
4.2 Automated Production Systems
4.3 Automated Flow Lines
4.4 Automated Assembly Lines
4.5 Flexible Manufacturing Systems
4.6 Global Trends in Rapid Prototyping
4.7 Building Manufacturing Flexibility
4.8 Summary
4.9 Terminal Questions
4.10 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions
4.11 References

4.1 Introduction
Production techniques encompass the work systems, design of work
systems, and the processes of planning and production control techniques.
Work systems define and consolidate the processes of manufacture.
Choices will have to be made in the fields of:
 Deploying existing resources
 Reinforcing them with new equipments
 Identifying new vendors
 Updating their technology
 Resolving quality problems
 Identifying bottlenecks in the flow of materials and information
Suitability of various techniques and their combinations have to be viewed
with flexibility for increasing or decreasing capacity to meet the market
compulsions. Reducing inventory has become very important, because of
the necessity of the movement of materials as raw materials, components,
parts, spares, and products on a global scale. Parts are sourced from
different countries, assembled at various places – sometimes as sub-

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assemblies – and shipped to various destinations. Assurance of quality has

become fundamental for an organisation‟s existence because the processes
involved are automated and the flows cannot be interrupted. This would
create inventories all along the line.
Companies also need to develop new products at a faster pace, as
otherwise, they will lose the market. The evolution of computer aided
systems has reduced time taken in the production process. Also, new
technologies are being added to speed up the production process almost on
a daily basis. Manufacturing systems have to be designed to accommodate
rapid changes. With the increased variety of products and reduced lead
times at all stages of the supply chain, flexibility has become vital to effect
economies. Computerisation and information technology are facilitating the
various processes in being accurate and timely thus facilitating savings.
This unit, Production Techniques, focuses on the various techniques that
can be implemented for a fast, flexible and economical manufacturing. It
also focuses on the latest trends in manufacturing which help to stay ahead
in the business.
Learning Objectives
By the end of this unit, you will be able to:
 Describe the evolution of production processes
 Recognise the importance of automation for both customised and mass
manufacturing
 Recognise the importance of robotics for fast and economical production
 Recall the latest trends in manufacturing

4.2 Automated Production Systems

All operation systems are based on the following criteria.
 Output of the product – whether they are goods or services
 Specification of the product – standard or customised
 The flow pattern – whether it is job shop or batch production, assembly
or continuous
Let us see the evolution of the production systems.
Earlier, the goods required by society were produced in small quantities by
craftsmen who knew the needs of the community. The craftsmen produced

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goods by their own hands with simple tools. The tools were made by the
craftsman with the help of apprentices or by another craftsman. He would be
responsible for elements like the design, procurement of the required
materials, and the processes. Repeated performances would improve these
elements and as a result, the customers got the benefit of those
improvements which is the outcome of his skills and creativity. When the
demand increased, more apprentices were involved in the process with
more craftsmen and additional supplies.
The sources of power, apart from the humans, were horses and oxen.
Water was lifted from the wells using pulleys. Later on, windmills were used
for irrigation. Transportation was by horses. Wind sails were used for
transportation on water. All equipments were made to serve these purposes.
The advent of the steam changed much of all this. It needed coal to produce
steam. To generate and transfer steam, it needed some steam engines.
Thereby, the need for iron parts became necessary. Locomotives changed
the way people moved themselves as well as the materials. Spinning and
power looms changed the way clothes were made. More importantly, the
quantities produced could be distributed. The parts and components used to
make these machines had to be replaced when they wore-out. Making parts
so that interchangeability was achieved made setting up standards and
specifications important. Invention of the petrol and diesel internal combustion
engine led to mass production of components. The craftsmen gave way to
engineers, workers, supervisors, and inspectors. All these need proper
management. Frederick Taylor introduced the “science of management”.
Phases of production system
Competition has necessitated improved quality, reduced rates, and better
service to the customer. These have generated various methodologies of
achieving efficiencies in all aspects of business such as procurement,
manufacture, distribution, customer care, acquisition, and utilisation of funds.
 Observation, documentation, and analysis became the backbone of
achieving efficiencies.
 Division of labour became necessary to achieve efficiencies and the jobs
that became specialised.

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 Machines in huge numbers had to be placed to maximise production, to

achieve quality and gradually it lead to Special Purpose Machines,
Numerically Controlled Machines and Robots.
 Emphasis on Research and Development improved materials and new
processes to bring forth.
 Advent of computers and information technology has become the
biggest player in all aspects of business including operations.
 The equipments and processes selected depend on the volumes of
output.
 The important dimensions which are considered are job variety, flexibility
of the process and volume.
Automation
Automation is the use of scientific and technological principles in the
manufacture of machines that take over work normally done by humans.
-http://science.jrank.org/pages/679/Automation.html#ixzz0WiXIpMX0
Figure 4.1 shows a sample automation production process.

Figure 4.1: Automation

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For services, automation usually means increase in quality and productivity

using labour saving devices. Automation is ideal when the service provided
or the product manufactured is highly standardised. Some extent of
automation can be designed even with customisation, that is, product or
services meant to produce or deliver low volumes specific to a requirement.
The cost per unit determines the extent of automation required. Automation
systems cost huge sums of money and therefore, a deep analysis of the
various factors has to be done.
The advantage of automation is that it has low variability and will be more
consistent on a repetitive basis. On the shop floor variability causes loss of
quality.

Where is automation used?

 Automation in the banking sector has resulted in ATMs which save

a huge amount of bank‟s labour and it is found to have given
greater customer satisfaction.
 In education, long distance learning technology helps in
supplementing class room instruction. The facilitating goods that
are used in this case are e-courses, web sites and videos.

There are three kinds of automation: fixed, programmable, and flexible.

1. Fixed: By its very nature, fixed automation is rigid. They are designed
for high volume production and their rigidity ensures less variability.
They are not amenable to change in product or process. They need
minimal human intervention. Examples: Oil refineries and chemical
processing units.
2. Programmable: Programming devices enable machines to operate
automatically. The machines have sensing and control devices that
enable this. The simplest of them called machine attachments replace
human effort. They guide, locate, move, and achieve relative positions
by means of cams, optical sensing, and load sensing mechanisms and
activate the controls to remove human intervention. Numerically
controlled machines read instructions and convert them to machine

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operations. Computers are used for controlling one machine or a

number of them and they have programmes written into them for
operations. They are Computer Numerically Controlled or, for short,
CNC machines.
3. Flexible: Robots are higher in the order of automation as they perform a
variety of tasks. They are designed to move materials by holding them in
their arms and making precise movements according to programmes
written into the computers that reside in them. They simulate human
actions. They can grip and hold tools with the help of sensors. These
sensors are sensitive to touch and force to „know‟ that the material is to
be held with the requisite pressure for the conduct of operations. Vision
sensors are used for inspection, identification and guidance. They use
optics based instruments to gather data and feed them to the computers
for activating the other parts of the robot.
With the help of automation, 100% inspection of components can be done
which ensures highest quality. Identification and movement of materials are
helped by bar codes which are read and fed into the system for monitoring
quantity, location, and movement. They help the automated systems to sort
information and provide information for effecting any changes necessary.
To make effective use of automated machines, we need to have the
movement of materials from and to different stations as also stores,
automated. Automated Storage and Retrieval Systems (ASRS), receive
orders for materials from anywhere in the production area, collect materials
and deliver materials to the workstations.
Computers and information systems are used for placing orders for
materials, giving commands and adjusting inventory records which show the
location and quantity of materials available/needed. Continuous updating
gives a clear picture for all concerned to enable them initiate action to keep
the throughput smooth. Automated Guided Vehicle Systems (AGVS) like
pallet trucks and unit load carriers follow embedded guide wires or paint
strips to reach destinations as programmed.

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Remember
 Automation means increase in quality and productivity using labour
saving devices.
 Automated Storage and Retrieval Systems (ASRS), receive orders
for materials from anywhere in the production area, collect materials
and deliver materials to the workstations.
 Automated Guided Vehicle Systems (AGVS) like pallet trucks and
unit load carriers follow embedded guide wires or paint strips to reach
destinations as programmed.

Self Assessment Questions

Fill in the blanks

1. _________ in the banking sector has resulted in ATMs which save the
banks a huge amount of labour.
2. ______ receive orders for materials from anywhere in the production
area, collect materials and deliver materials to the workstations.

4.3 Automated Flow Lines

When several automated machines are linked by a transfer system which
moves the parts by using handling machines which are also automated, we
have an automated flow line. After completing an operation on a machine,
the semi-finished parts are moved to the next machine in the sequence
determined by the process requirements and a flow line is established. The
parts at various stages from raw material to ready for fitment or assembly
are processed continuously to attain the required shapes or acquire special
properties to enable them to perform desired functions. The materials need
to be moved, held, rotated, lifted, and positioned for completing different
operations. Sometimes, a few of the operations can be done on a single
machine with a number of attachments. They are moved further to other
machines for performing further operations. Human intervention may be
needed to verify that the operations are taking place according to standards.
When these can be achieved with the help of automation and the processes

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are conducted with self regulation, we will have automated flow lines
established. (See Figure 4.2 Automated flow lines)

Figure 4.2: Automated flow lines

The main consideration is to balance times that different machines take to

complete the operations assigned to them. It is necessary to design the
machines in such a way that, the operation times are the same throughout
the sequence in the flow of the martial. In fixed automation or hard
automation, where one component is manufactured using several
operations and machines, it is possible to achieve this condition. We
assume that product life cycles are sufficiently stable to invest heavily on the
automated flow lines to achieve reduced cost per unit.
The global trends are favouring flexibility in the manufacturing systems. The
costs involved in changing the set up of automated flow lines are high. So,
automated flow lines are considered only when the product is required to be
made in high volumes over a relatively long period. Designers now
incorporate flexibility in the machines which will take care of small changes
in dimensions by making adjustments or minor changes in the existing
machine or layout. The change in movements needed can be achieved by
programming the machines. Provisions for extra pallets or tool holders or
conveyors are made in the original design to accommodate anticipated
changes. The logic to be followed is to find out whether the reduction in cost

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per piece justifies the costs of designing, manufacturing, and setting up

automated flow lines. Group Technology and Cellular Manufacturing along
with conventional Product and Process Layouts are still resorted to, as they
allow flexibility for the production system.
As the methodologies of JIT and Lean Manufacturing have become
important and relevant in manufacturing, many companies have realised
that well designed flow lines suit their purpose well. Flow lines compel
engineers to put in place equipments that balance their production rates. It
is not possible to think of inventories (Work In Process) in a flow line.
Bottlenecks cannot be permitted. By necessity, every bottleneck gets
focused upon and solutions found to ease them.
Production managers see every bottleneck as an opportunity to hasten the
flow and reduce inventories. However, it is important to note that setting up
automated flow lines will not be suitable for many industries.

Self Assessment Questions

Fill in the blanks
3. In ____ where one component is manufactured using several operations
and machines it is possible to achieve this condition or very nearly.
4. It is not possible to think of ____ a flow line. ____ cannot be permitted.

4.4 Automated Assembly Lines

All equipments needed to make a finished product are laid out in such a way
as to follow the sequence in which the parts or sub-assemblies are put
together and fitted. Usually, a frame, body, base will be the starting point of
an assembly. The frame itself consists of a construction made up of several
components and would have been „assembled‟ or „fabricated‟ in a separate
bay or plant and brought to the assembly line. All parts or sub-assemblies
are fitted to enable the product to be in readiness to perform the function it
was designed to. This process is called assembly. Methodologies of
achieving the final result may vary, but the basic principle is to fit all parts
together and ensure linkages so that their functions are integrated and give
out the desired output. (See Figure 4.3)

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Figure 4.3 Automated assembly lines

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Caselet 1
Let us consider a caselet for Automated Assembly Line process in Juicy
Gulps, a juice production company. Figure 4.4 illustrates the automated
assembly line.
 Stage 1 is the empty bottle line flow line
 Stage 2a and 2b are the juice filling stations
 Stage 3 is the lid fixing station
 Stage 4 is the companies label printing station
 Stage 5 is the MRP printing station
The movement from one station to another station is done using
conveyor belts (arrows indicated in blue).

2a

1 3 4 5

2a

1: Empty Bottles line station

2 a & 2b: Juice filling stations
3: Lid fixing station
4: Companies label printing station
5: MRP printing station
: Conveyor belts
: Output – Finished product

Figure 4.4: Automated assembly line in Juicy Gulps

(Cont. in next page)

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(Cont. from previous page)

The material goes from station 1 to 5 sequentially. Operation 2, that is,

juice filling, takes longer time, say twice as long as the others. To see
that the flow is kept at the same pace two locations 2a and 2b are
provided for filling the juice in bottle. This way, operations 3, 4 and 5
need not wait. At 5, more personnel may be provided to complete
operations. The conveyor belts move the materials from station to
station.
The time taken at any of the locations should be the same. Otherwise the
flow is interrupted. In automated assembly lines, the moving pallets
move the materials from station to station and moving arms pick up
parts, place them at specified places and fasten them by pressing,
riveting, screwing or even welding. Sensors will keep track of these
activities and move the assemblies to the next stage. An operator will
oversee that the assemblies are happening and there are no stoppages.
The main consideration for using automated assembly lines is that the
volumes justify the huge expenses involved in setting up the system.

Product Layouts are designed so that the assembly tasks are performed in
the sequence they are designed. You will note that the same task gets
repeated at each station continuously (See Figure 4.5 Layout for the assembly
lines). The finished item comes out at the end of the line.

Self Assessment Questions

Fill in the blanks
5. __________ are designed so that the assembly tasks are performed in
the sequence they are designed.
6. In ______________ lines the moving pallets move the materials from
station to station.

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Assembly Product requirements &

Process product range definition

Sub-processes: Technology
Functions required Fields

Hardware & Software Functional requirements of

requirements sub-processes, operational
parameters

Interface Functional classes;

Specifications specifications

MODULES
--- Mauro Onori, The Royal Institute of Technology, Stockholm, Sweden, 2003

Figure 4.5: Layout for the assembly lines

4.5 Flexible Manufacturing Systems

Flexible manufacturing systems consist of production machines, material
handling, transferring machines, and a computer system.
The machines are arranged in a sequence to perform operations according
to the technical requirements. After each operation the material is picked up
and transferred to the next machine where it is held. During this process the
machines have to stop, release the material that has been worked upon and
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receive the component from the previous operation and clamped. The cycle
is programmed and the various actions of the machines are performed by
the controls that are executed by the computer system. The tools are
loaded, movements are effected, speeds controlled automatically without
the need for worker‟s involvement.
One system, as described above, is designed to produce components that
belong to a „group‟. A group of components will have similar shapes, though
varying in sizes, requiring a series of operations which are almost identical,
so that same machines can be programmed to produce them in batches by
changing the programme in the computers.
Since, reprogrammed operations are capable of producing different
components; we have flexibility in the manufacturing process. This flexibility
leads to better utilisation of the equipments. It reduces the numbers of systems
and aids in reduction of investment as well as space needed to install them.
One of the major concerns of modern manufacturing systems is to be able to
respond to market demands which have uncertainties. Continuous
development of products necessitates changes in parts. Flexibility is important
so that manufacturing systems are capable of accommodating these
changes. Automated systems help in reducing costs but, they demand huge
investments. Cellular layouts of arranging machines help in flexibility,
because, machines that have similar processes when grouped together to
make similar components skills, materials, and machine times can be shared.
Scheduling and sequencing become more efficient because volumes
required can be distributed or delayed or clubbed together to meet variation
in demands. The machines receive instructions from the computer regarding
settings, loading, and unloading of the machines.

Self Assessment Questions

Fill in the blanks
7. __________ of arranging machines helps in flexibility, because when
machines that have similar processes are grouped together.
8. Since _____________ are capable of producing different components,
we have flexibility in the manufacturing process.

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4.6 Global Trends in Rapid Prototyping

Prototyping is a process by which a new product is developed in small
numbers.
Prototyping is helpful to
 determine the suitability of the materials
 study the various methods of manufacture
 determine type of machinery required
 develop techniques to overcome problems that may be encountered
when full scale manufacturing is undertaken
Prototypes do meet the specifications of the components that enter a
product and performance can be measured on those. It helps in confirming
the design and any shortcomings can be rectified at low cost. If serious
defects or problems arise during manufacturing, a thorough change in
design or even its replacement may be considered. To arrive at decisions
and to make use of the advantages stated above, it is important that the
prototypes are made within the shortest possible time. Rapid prototyping
facilitates this.
Rapid prototyping uses virtual designs from Computer Aided Design (CAD)
or animation modelling which transforms dimensional data to 3-dimensional
views. The physical space of the product is amenable to have cross
sections made. Cross sections taken at very close positions gives thin
layers which enable the generation of a solid model of the designed product.
The data that is created helps build a solid model exactly as per the
drawings. Any shape can be generated in this method. Some of the other
advanced Rapid Prototype Modelling Processes are:
 Selective Laser Sintering (SLS)
 Fused Deposition Modelling (FDM)
 Laminated Object Manufacture (LOM)
 Electronic Beam Melting (EBM)
Since, the basis data about the product is already available in CAD; the
above processes can produce models in a matter of a few days.
Conventional machines like lathes, milling machines, grinding machines,
Electro Discharge Machining (EDM) also help in the production of

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prototypes. Due to their advantages, Rapid Prototyping is being increasingly

used. A bi-monthly magazine – TCT Magazine – calling the Rapid
Prototyping as Time Compressing Techniques is dedicated to the
publication of latest developments in this field as researched and developed
by practitioners around the world.

Remember
 Prototype is helpful to determine the suitability of the materials, study
the various methods of manufacture, type of machinery required, and
to develop techniques to overcome problems that may be
encountered when full scale manufacture is undertaken.
 The advanced Rapid Prototype Modelling Processes are:
 Computer Aided Design (CAD)
 Selective Laser Sintering (SLS)
 Fused Deposition Modelling (FDM)
 Laminated Object Manufacture (LOM)
 Electronic Beam Melting (EBM)

Self Assessment Questions (Cont. in next page)

Fill in the blanks
9. ___________ is a process by which a new product is developed in small
numbers so as to determine the suitability of the materials.

4.7 Building Manufacturing Flexibility

Flexibility has three dimensions in the manufacturing field. They are Variety,
Volume, and Time. Their demands will have to be satisfied. In that sense
they become constraints which restrict the maximisation of productivity.
Every business will have to meet the market demands of its various
products in varying volumes at different times. Production schedules are
made on the basis of records and forecasts using quantitative techniques.

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The volumes of different products at any given time will be at variance with
what had been scheduled. These introduce situations when manufacturing
sequences will have to be changed, set ups disturbed, stoppages of jobs
that are running. So, flexibility will have to be built into the system to
accommodate these changes, which must be implemented to meet
customer demands. This ability is a strategic which gives a firm advantage
of enhancing customer satisfaction.
Flexibility is also needed to be able to develop new products or make
improvements in the products fast enough to cater to shifting market needs.
By building excess capacities and carrying sufficient inventories, we can
take care of fluctuations. But these add to the cost of the product, which are
not acceptable. It is a challenge that gets addressed by all organisations to
maintain their competitiveness.

Self Assessment Questions

Fill in the blanks

10. Flexibility has three dimensions in the manufacturing field. They are
_____, ______, and _____.

4.8 Summary

We have discussed the various manufacturing operations involved in the

manufacturing processes. You have learnt how automation and robotics
help both customised and mass manufacturing to be fast and economical at
assure quality products. Manufacturing systems have flexibility built into
them to enable organisations meet global demand. You have understood
how the latest trends in manufacturing when implemented help firms to stay
ahead in business.

4.9 Terminal Questions

1. Explain the various automated systems for transfer of materials in the

production plant.
2. Explain the process of building manufacturing flexibility.

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4.10 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. Automation
2. Automated Storage and Retrieval Systems (ASRS)
3. Special purpose machine
4. inventories, Bottlenecks
5. Product layouts
6. Automated assembly
7. Cellular layout
8. Reprogrammed operations
9. Prototyping
10. Variety, Volume and Time

Answers to Terminal Questions

1. Refer to 4.3
2. Refer to 4.6

4.11 References

1. http://science.jrank.org/pages/679/Automation.html#ixzz0WiXIpMX0
2. Mauro Onori, The Royal Institute of Technology, Stockholm, Sweden,
2003

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Unit 5 Facility Management

Structure:
5.1 Introduction
Learning Objectives
5.2 Facility Planning Process
Planning the location of the plant
General factors
Specific factors
Rating methods
Rating plan method
Factor rating method
Point rating method
Break-even analysis
Centre of gravity method
Planning the manufacturing facility layouts
Product layout
5.3 Optimisation of Resource Utilisation
5.4 Using Material Flow Information to Evaluate Work Centre Locations
5.5 Summary
5.6 Terminal Questions
5.7 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions

5.1 Introduction
Facilities management is an important strategic level decision taken by an
organisation. It involves planning and management of the plant location and
layout. A plant location cannot be changed frequently since a large capital
needs to be invested to build the plant and machinery in the selected area.
Therefore, before selecting a plant location, a long range forecasting is to be
made to foresee the future needs of the company.
Location decisions are made on the basis of parameters which make it
suitable for various considerations of suppliers and markets. While locating
a plant, the following long range forecasting needs are to be considered:

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 The company’s expansion plan and policy

 Diversification plan for the products
 Changing market conditions
 The changing sources of raw materials
 Many other factors that influence the choice of the location decision
Layout means the positioning of various equipments, machineries, and
department facilities so as to maximise productivity and valuable space
utilisation. They are, in turn, linked to the inventory strategy, such as, make
or buy policies. The main concern of the operations manager will be the
extent of flexibility he/she has regarding:
 What is the list of quantities of different products?
 What operations have to be outsourced?
 How to deal with surge or wane in demand?
Considering the future needs, layout has to be prepared with a view to
accommodate additional machines. Some of the manufacturing systems
that have to be considered when layouts are planned are:
 Group Technology
 Flexible Manufacturing Systems
 Extent
 Kind of automation
Materials need to be stocked and moved to various locations for operations.
Since decisions in this area have long term implications, thorough analysis
and involvement of senior managers from all departments is essential. Multi-
locations for manufacturing and distribution to exploit situations of supplier
availability or market requirements also become important.
In this unit, you will learn about the various methodologies used to select the
location of plant, the ways in which machineries and other facilities are laid
to maximise productivity. You will also learn the methodology of flow of
information with materials to facilitate the production process.

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Learning Objectives
By the end of this unit, you will be able to:
 Describe facility management
 Discuss the facility planning process
 Explain different methods for selecting a suitable plant location
 Analyse the features and importance of different types of layouts

5.2 Facility Planning Process

Planning is the most important function of management. It is important
especially, when we have to deal with lands, buildings, and machineries.
Lands, buildings and machineries are costly and once fixed cannot be
moved easily. Planning, therefore, requires a lot of thought, data gathering,
and estimates for the future. These considerations are vital for the success
of any firm. Now to deeply understand the importance of planning in
operations management, we consider the planning into two parts.
1. Planning the location of the plant
2. Planning the manufacturing facility layouts

Remember
 Planning is very important when dealing with lands, buildings and
machineries.
 Facilities management involves planning and management of the
plant location and layout.

5.2.1 Planning the location of the plant

You will now study about planning for the location of a plant. You will also
study the various factors that affect the economics of competing locations
and helps in choosing the most optimal location.
Factors influencing Plant Location can be broadly divided into two types
namely: general factors and special factors (See Figure 5.1 Factors
influencing plant location).

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Figure 5.1: Factors influencing plant location

In this section, let us know in detail about the factors influencing plant
location.
5.2.1.1 General factors
The general factors that influence the plant location are listed below (See
Figure 5.2 General factors influencing plant location).
1. Availability of land: Availability of land plays an important role in
determining the plant location. Many-a-time, our plans, calculations
and forecasts suggest a particular area as the best to start an
organisation. However, availability of land may be in question. In such
cases, we will have to choose the second best location.
2. Availability of inputs: While choosing a plant location, it is very
important for the organisation to get the labour at the right time and
raw materials at good qualities. The plant should be located:
 Near to the raw material source when there is no loss of weight
 At the market place when there is a loss of weight in the material
 Close to the market when universally available, so as to minimise
the transportation cost

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Figure 5.2: General factors influencing plant location

3. Closeness to market places: Organisations can choose to locate the

plant near to the customers’ market or far from them, depending upon
the product they produce. It is advisable to locate the plant near to the
market place, when:
 The projection life of the product is low
 The transportation cost is high
 The products are delicate and susceptible to spoilage
 After sales services are promptly required very often
The advantages of locating the plant near to the market place are:
 Consistent supply of goods to the customers
 Reduction of the cost of transportation
4. Communication facilities: Communication facility is also an important
factor which influences the location of a plant. Regions with good
communication facilities viz. Postal and Tele communication links
should be given priority for the selection of sites.

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5. Infrastructure: Infrastructure plays a prominent role in deciding the

location. The basic infrastructure needed in any organisation are:
 Power: For example, industries which run day and night require
continuous power supply. So they should be located near to the
power stations and should ensure continuous power supply
throughout the year.
 Water: For example, process industries such as, paper,
chemical, and cement, requires continuous water supply in large
amount. So, such process industries need to be located near to
the water.
 Waste disposal: For example, for process industries such as,
paper and sugarcane industries facility for disposal of waste is
the key factor.
6. Transport: Transport facility is a must for facility location and layout of
location of the plant. Timely supply of raw materials to the company
and supply of finished goods to the customers is an important factor.
The basic modes of transportation are by Air, Road, Rail, Water, and
Pipeline. The choice of location should be made depending on these
basic modes. Cost of transportation is also an important criterion for
plant location.
7. Government support: The factors that demand additional attention
for plant location are the policies of the state governments and local
bodies concerning labour laws, building codes, and safety.
8. Housing and recreation: Housing and recreation factors also
influence the plant location. Locating a plant with the facilities of good
schools, housing and recreation for employees will have a greater
impact on the organisation. These factor seems to be unimportant, but
have a difference as they motivate the employees and hence the
location decisions.
5.2.1.2 Special factors
The special factors that influence the plant location are:
1. Economic stability – outside investments
2. Cultural factors
3. Wages
4. Joint ventures – support of big time players

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5.2.1.3 Rating methods

General factors or special factors – each factor has its own importance in
determining the location of a plant. Therefore, ranking them and giving
weightage for them is one of the ways of determining the location. The
methods which determine the most likely location are:
1. Rating plan method
2. Factor rating method
3. Point rating method
4. Break-even analysis
5. Centre of gravity method
In this section, you will study in detail the methods to determine the most
likely location.
5.2.1.3.1 Rating plan method
In rating plan method, the various factors for locating a plant are given
ratings depending upon the perception of the management. The location
which gets the maximum rating, considering all the factors, is chosen for
locating the plant.

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Caselet 1
Pavan is planning to start an industry in India. He has four options to
locate the plant, Chandigarh, Bhopal, Bangalore, and Cochin. He used
rating plan method to select the best location suitable for his business
needs. Pavan initially listed important factors of the business need (See
column 1 of table 5.1). According to Rating plan method, in column 2 of
the same table, he has given the proportional values for each factor in
percentages. For example, the proportionate values given to the factors
are 20%, 15%, 20%, 15% and so on. The total of the proportionate value
is 100%.

Table 5.1: Rating plan approach of Pavana

Factors Proportional Chandigarh Bhopal Bangalore Cochin
Value %age
Availability of 20 20 10 15 05
labour
Raw material 15 15 10 15 10
sources
Market 20 20 20 15 10
proximity
Site 15 10 10 15 10

Government 10 5 10 5 10
Policies
Infrastructure 10 10 5 10 5
for
employees
Scope for 10 10 10 5 5
expansion
Total 100 90 85 80 55

When individual ratings are given to the factors for each city (See
Column 3, 4, 5 & 6 of Table 5.2) we see that Chandigarh has maximum
rating (90 out of 100) and therefore, Pavan has chosen, Chandigarh for
locating the plant.

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5.2.1.3.2 Factor rating method

In factor rating method, each of the factors for location is rated and the
rating of the competitive locations is considered. Then, the products of the
rating are added and the location which gets the maximum product of rating
is selected.
Now, let us consider an example for better understanding the Factor rating
method. Table 5.2 gives factor rating and location rating of three locations.

Example 1
Table 5.2: Example of factor rating method
Sl. Factor Factor Location Product of rating
no rating rating
A B C A B C
1 Suitability of labour 6 8 6 5 48 36 30
2 Proximity to suppliers 7 6 9 6 42 56 42
3 Transportation facilities 5 8 7 9 40 35 45
4 Tax Advantage 4 3 8 7 12 32 28
5 Power 7 8 6 9 56 42 63
6 Water 6 8 8 8 48 48 48
7 Housing 3 5 7 9 15 21 27
8 Education 4 6 6 8 24 24 32
9 Climate 3 5 9 6 15 27 18
10 community 3 5 6 5 15 18 15
11 Availability of land 5 6 8 7 30 40 35
12 Owner’s preference 3 4 6 5 12 18 15
Total score : 357 397 398

Column 3 of table 5.2 shows the factor rating of each factor as

determined by the managers. For example, the factor rating of Housing
is determined to be 3. Similarly for remaining factors the manager has
listed the factor ratings.

(Cont. in next page)

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(Cont. from previous page)

Column 4 – Location rating, displays the ratings of location A, B, and C

as determined by the managers. For example, for suitability of labour
factor, the manager has rated 8 for Location A, 6 for Location B, and 5
for Location C. Similarly, the location rating for remaining factors is listed
in the table.
Column 5 – Product of rating, lists the product of ratings of location A, B,
and C. For example, the calculation of product of rating for the factor
suitability of labour is as follows:
 Product of rating A: Factor rating x Location rating A = 6 x 8 = 48
 Product of rating B: Factor rating x Location rating B = 6 x 6 = 36
 Product of rating C: Factor rating x Location rating C = 6 x 5 = 30
When we add product of ratings of location A, B & C, you can see that
the total of location C got the maximum product of rating, 398, when
compared to A and B.

However, you find that both B and C have almost the same total. In such
cases, personal preference or reconsideration of any of the factors may be
advisable. So, one of these places for setting up the plant is chosen. This
rating method is amenable to the consideration of various other factors
which are relevant for locating the plant. The decision may even be
changed, looking into the expansion programmes or the development of
nearby places, which may be suitable for a particular industry.

Caselet 2
Ravi is planning to start a new industry in India. For locating the plant, he
tabulated the factor rating and the location rating of 2 locations - Goa and
Cochin. Find the best location based on the factor rating method with the
details given in table 5.3.
(Cont. in next page)

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(Cont. from previous page)

Table 5.3: Factor rating approach of Ravi

Sl. Location factor Factor Rating
No. rating Goa Cochin
1 Facility Utilisation 7 3 5
2 Total production per month 4 4 3
3 Tax Advantage 7 4 5
4 Land and construction costs 5 1 2
5 Employee preferences 3 5 3

Solution:
Let us calculate the factor rating of the locations - Goa and Cochin as
shown in table 5.4
Table 5.4: Product rating
Sl. Location factor Factor Location rating Product of rating
No. rating Goa Cochin Goa Cochin
1 Facility utilisation 7 3 5 21 35
2 Total production per 4 4 3 16 12
month
3 Tax Advantage 7 4 5 28 35
4 Land and 5 1 2 5 10
construction costs
5 Employee 3 5 3 15 9
preferences
Total 85 101

The total score for location Cochin is higher than that of location Goa.
Hence location Cochin is the best choice.

5.2.1.3.3 Point rating method

In point rating method, we apportion a fraction of a suitably selected total
rating and see how many points we can allocate to the locations under
consideration. You should compare the totalled ratings and decide the
preference.

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Example 2
Consider the data in table 5.5. In column 3, Max Points, if you decide to
have 1000 points as the maximum possible score considering all factors,
you can then evaluate each location and allocate points. Column 4, 5, 6,
& 7 indicates the maximum rating for each factor. By adding the given
ratings for factors of each location, you get 540 for Location A, 670 for
Location B, 690 for Location C, and 745 for Location D. The location
which gets the maximum rating would be chosen, that is, Location D is
chosen.

Table 5.5: Example of point rating method

Sl. Factor Max Location Location Location Location
No. points A B C D
1 Proximity to 250 150 120 200 175
suppliers
2 Proximity to 350 200 300 250 250
Customers
3 Labour 200 100 150 150 175
availability
4 Educational 100 60 60 30 70
facilities
5 Climate 100 30 40 60 75
Total 1000 540 670 690 745

5.2.1.3.4 Break-even analysis

Every manufacturing company will have three major contributors to cost:
1. Investments made for land, plant and machinery resulting in interest
and depreciation
2. Recurring expenses, which are not proportional to the quantity of
production
3. Variable costs, which are directly proportional to the quantities
produced
For our calculations, we combine the first two costs together and call them
fixed costs. We call those costs that depend on the quantity of production as
variable costs. (See Figure 5.3 Companies contributing the cost)

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We compare the total costs for different locations on estimated amounts per
annum and select whichever location costs the least. However, we will have
to consider the possible variations in production levels during the
foreseeable time spans and take a decision.

Figure 5.3: Companies contributing the cost

5.2.1.3.5 Centre of gravity method

Centre of gravity method is used mainly when:
 Transportation costs, either for distribution of products or collection of
materials from different suppliers, is the main criterion
 Production rates are high
 The volume and weights of materials that have to be moved are huge
 Time taken, either to receive material from suppliers or delivery to
customers, is critical
It is better to locate the facility at such a place, which caters to the different
points most optimally. The vital factor is the load, that is, number of items, or
the weights that need to be moved from the central location to the existing
or demanding points. We use this method when, both distance and load
have to be considered for optimality in terms of cost.

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Example 3
Consider five locations, say, five towns which need to supply to a plant
which would be supplied with tonnages as given in table 5.6.
Table 5.6: Loads and Coordinates of five locations

Load Coordinates (X, Y)

Location A 2100 (50, 250)
Location B 3800 120,500
Location C 3200 475, 610
Location D 1200 680,370
Location E 2500 470,120

Locate the five places in a graph using the X and Y coordinates and then
locate the centre of gravity point P. The graphical representation of all
the five locations A, B, C, D, and E, and center of gravity point P is given
in figure 5.4. We will calculate the X, and Y co-ordinates of the central
location (P) such that the cost of shipment from such central location
gives the minimum cost in the following way:

CX 
L i Xi
CY 
L i Yi
SLi SLi

(Cont. in next page)

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(Cont. from previous page)

The table 5.7 lists the calculations of LX and LY of Locations A, B, C, D, &

E.
Table 5.7: Calculating LX and LY
Location Coordinates
(X, Y)
Load (Li) Lx (or) L i Xi Ly (or) L i Yi

Location A (50, 250) 2100 105000 525000

Location B (120,500) 3800 456000 1900000
Location C (475, 610) 3200 1520000 1952000
Location D (680,370) 1200 816000 444000
Location E (470,120) 2500 1175000s 300000
Total 12800 3977500 5121000

From the above table, we get the center of gravity CX and CY:

CX 
L i Xi
CY 
L i Yi
SLi SLi
3977500 5121000
CX   318 CY   400
12800 12800

Figure 5.4: Centre of gravity point

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Caselet 3
A new facility is going to be established in Bangalore. Table 5.8 shows
the co-ordinates for the center of each location, along with the projected
populations, measured in thousands. Customers will travel from the
seven locations to the new facility when they need service. Details of the
seven centers and co-ordinate distances along with the population for
each center are given below in the table 5.8. Find the target area’s
center of gravity for the new facility.
Table 5.8: Example of Center of gravity method
Sl. No Centres Co-ordinate distances (xi, yi) Population (L)
1 A (3, 4.5) 6
2 B (2.2, 5) 5
3 C (10,4.5) 2
4 D (5,2) 14
5 E (6, 6) 8
6 F (9, 3) 18
7 G (9,4) 15

Solution:
To calculate the center of gravity, first calculate co-ordinates of loads of
each center (LX, LY). The calculations are tabulated in table 5.9.
Table 5.9: Calculating LX and LY
Sl. No. Centres (x, y) Population (L) Lx Ly
1 A (3, 4.5) 6 18 27
2 B (2.2, 5) 10 22 50
3 C (10,4.5) 2 20 9
4 D (5, 2) 14 70 28
5 E (6, 6) 8 48 48
6 F (9, 3) 18 162 54
7 G (9, 4) 15 135 60
Total 73 475 276

(Cont. in next page)

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(Cont. from previous page)

Next we find, the target areas center of gravity co-ordinates, CX and CY.

CX 
L i Xi
SLi
475
CX   6.5
73

CY 
L i Yi
SLi
276
CY   3.78
73
The center of gravity calculated is (6.5, 3.78). Managers can now search
in the vicinity for the optimal location using the center of gravity as
starting point.
(Cont. in next page)

Remember
Ranking the factors and giving weightage for them is one of the ways of
determining the plant location. The methods used to determine the
location are ‘Rating plan method’, ‘Factor rating method’, ‘Point rating
method’, ‘Break-even Analysis’, and ‘Centre of gravity method’.

5.2.2 Planning the manufacturing facility layouts

Different types of machinery layouts are in vogue, depending upon the
product, the process, and the type of production. The considerations in
machinery layout are listed below:
 The processes involved in getting things done have to be detailed out
in terms of materials required, the sequence of the various activities of
the process and their movements from one location to another.
 The equipments required, their capabilities, and the personnel required
to man them have to be determined and provided for.

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 Quantities that need to be moved, balancing the loads to meet the

production requirements will have to meet the plans that have been
formulated.
 Another main consideration is the material handling that is required for
the raw materials, goods in process, and the finished goods.
The essence of planning is the determination of activities that need to be
performed at a future date to meet demands that have been forecast based
on market surveys and forecasting.

Remember
The considerations in machinery layout are:
1. The processes involved in getting things done
2. Equipments required and their characteristics
3. Balancing the loads to meet the production requirements
4. Material handling

5.2.2.1 Product layout

Product layout is also called as production lines or assembly lines. They are
designed and laid out in such a way that only a few products are capable of
being manufactured or assembled. Materials flow through the various
facilities. These use special machines to perform specific operations to
produce only one product at one time. So, companies should set different
set of machines for different products. Workers perform a narrow range of
activities to complete the operations on the product as it moves in a flow
line. The operation times, the sequence of movements and routing
procedures are highly standardised to meet production requirements which
are synchronised with many such products to complete finished goods to
meet demands. Using special machines and implementing standardisation
in operations have many advantages which are listed below:
 The skill required of the workers is low
 Supervision is minimal
 Training needs are small
Precautions to be taken are:
 Constant check on the processes needs to be performed so that
quality is assured.

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 Corrective measures have to be implemented immediately to avoid

rejections, since, the quantities that get manufactured will be
continuous.
 Check for the behavioural attitude of the worker. As jobs are repetitive,
workers tend to be bored and lose concentration. This may affect
productivity and quality.

Example 4
Let us consider an example of a stainless steel manufacturing industry,
in which the operations turning, milling, and drilling happen in a
sequence. Testing is performed in each process to assure the quality.
The items are then sent to the assembly block. The items that arrive for
assembly are either bought-out items or made Item Components from,
elsewhere in the plant. The final product inspection is made and sent to
the packing dispatch. (See Figure 5.5 Sample product layout)

Turning Milling Drilling

Operation Machines Machines

Packing Inspection Assembly

Dispatch

Figure 5.5: Sample product layout

Remember
In product layout, operation times, sequence of movements, routing
procedures are highly standardised to complete finished goods to meet
demands.

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Self Assessment Questions

Fill in the blanks
1. Factors influencing plant location can be broadly divided into two types
namely ________ and ________.
2. Different types of layouts are in vogue depending upon _______and
_______.

5.3 Optimisation of Resource Utilisation

Resources can broadly be classified under three categories. Table 5.11,
lists the three categories:
Table 5.10: Categories of resources

Category 1 Land, Machinery, Equipments, Tools, Raw materials, Inventory,

and Power
Category 2 Processes, Technology, Techniques which have been
developed or acquired for making the products, and Delivering
the services for the customers
Category 3 People inside and outside the organisation, such as, employees,
suppliers, customers and members of the society

All the resources have inherent potential of enabling the realisation of the
goals of the organisation. It is the responsibility of the management to
identify the strengths that all these factors have and utilise them for
achieving productivity. Resources will have constraints in terms of their
availability, such as, quantities and timeliness. As mismatches will cause
either shortages or excess inventory, optimisation is necessary to reduce
the ill effects of both. Linear programming, queuing theory, inventory, and
simulation models are used to arrive at decisions to procure materials and
plan scheduling so as to minimise wastage of resources.
Just-In-Time philosophy, which focuses on balancing the system, considers
the following as wastes: (See Figure 5.6 Seven wastes)
1. Transportation
2. Product defects
3. Overproduction
4. Waiting time
5. Inefficient work methods

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6. Inventory
7. Unnecessary movement

Figure 5.6: Seven wastes

Inventory is necessary to avoid stock-out situations, which lead to machine

downtime and which has serious consequences for productivity. Lead times
and uncertainties of availability of materials make it mandatory to keep
buffer stocks. The question is how much? Historic data and projections
based on simulation or some other techniques help in optimising this aspect.
The reason why companies still build-up inventories is for the following
reasons:
1. Customer service created inventory helps speed up delivery, thus
meeting the need of the customer. An old customer tends to stay with
you if you are able to give immediate delivery or he may be tempted to
try a new supplier.
2. Ordering Cost - frequent reordering increases the cost of procurement.
Higher quantities may bring in entitlement for discounts. Further price
increases will not affect us.
3. In the shop floor, longer runs lead to higher productivity and minimise
the set up costs.
4. Labour and equipment utilisation will be high as quantities produced
per set up are high.
5. Transportation costs – both inbound and outbound – will be reduced.

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All the above are some of the reasons, why companies prefer to carry
inventories. The only way to utilise this resource is to optimise. Optimisation
is a process where the resultant effect of all factors both cost increasing and
decreasing elements in each of them is analysed. Decisions are taken with
some risks. Repeated implementation and study brings in organisational
learning and improves the outcomes of subsequent decisions. Utilisation of
resources adds to the profitability of the company. No manager can avoid
risk taking, but using scientific methodology reduces the ill effects.

Remember
In organisations, the wastage of resources are generally of seven types
– Transportation, Product defects, Overproduction, Waiting time,
Inefficient work methods, Inventory, and Unnecessary movement.

Self Assessment Questions

Fill in the blanks
3. ____________and projections based on simulation or some other
techniques helps in optimising this aspect.
4. ______is a process where the resultant effect of all factors both cost
increasing and decreasing elements in each of them is analysed.

5.4 Using Material Flow Information to Evaluate Work Centre

Locations

A work centre is a production facility comprising of one or more machines or

one or more workmen considered as a single unit for purposes of estimation
of capacity.
Work centre unit may have a single operation or a number of them
conducted on the input items. In the pipeline of production, each work
centre’s contribution is vital as materials are scheduled, routed and loaded
to be sent to it. In many organisations, they are even considered as cost
centres. Location just means relative positions of different centres so as to
fulfil the following:
 Minimise the movement of materials
 Meet technological sequences

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 Reduce congestion
 Maximise throughput
 Improve part tracking ability
 Avoid repetitive movements
In addition, another consideration is to be provided for expansion of
production. Each work centre receives information along with material that
enters it. The material also leaves the work centre with information. The
route sheet contains information about the material, process, quantities,
inspection procedures, and others. The drawings or instructions tell the
condition of the material at entry and the required condition at exit. In this
sense, every operation consists of material transformation occurring on the
basis of information. Activities conducted are on the basis of information that
flows with material. Different locations have to accommodate the constraints
of operations. Their positions are evaluated on the basis of deriving
maximum benefit of the information that is available. Basically, each location
is determined on the basis of ‘from and to’, that is, where does it receive
material from and to which centre the material goes. Some centres have to
close as a matter of necessity, some need not be and some need to be as
far away as possible.
This aspect has been given a rating scale in terms of alphabets as under:
a: Absolutely necessary to be close
e: Essential to be close
i: Important that they are close
o: Ordinary closeness
u: Unimportant that they are close or not
x: Not desirable that the centres are close
It can be seen that this is the only guide for location of the work centres as
there will be many competing factors that have to be accommodated.
Self Assessment Questions
Fill in the blanks
5. _______will have in terms of their______ - quantities and timeliness.
6. In the____________________, each work centre’s contribution is vital
as materials are scheduled, routed and loaded.

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5.5 Summary
Planning the facilities for manufacturing is a very crucial activity involving,
huge amounts of finance and thus requiring top management decisions.
Also, the way the machines are laid out is important to achieve the
maximum productivity and minimum movement of materials inside the plant.
Different types of layouts are considered depending to the variety of
products and their volumes.

5.6 Terminal Questions

1. State the important considerations for locating an automobile plant.
2. Explain the difference between product and process layout.
3. Explain how material flow information helps in work centre decision.
4. What do alphabets a, e, i, o, u, x stand for?
5. What is justification for a build up of inventory?

5.7 Answers to SAQs and TQs

Answers to Self Assessment Questions
1. The product process and the type of production
2. General Factors and Special Factors
3. Historic data
4. Optimisation
5. Resources, availability
6. Pipeline of production

Answers to Terminal Questions

1. Refer 5.3
2. Refer 5.3
3. Refer 5.5
4. Refer 5.5
5. Refer 5.4

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Unit 6 Total Quality Management

Structure:
6.1 Introduction
Learning Objectives
6.2 Quality Control as a System
Dimensions of quality
Systems view of quality
6.3 Quality Control Techniques
Quality at the source
Quality control tools
Acceptance sampling
6.4 Quality Based Strategy
6.5 Total Quality Management (TQM)
Introduction to TQM
Approaches to TQM
Deming wheel
Juran’s quality triology
Crosby’s absolutes of quality
Taguchi’s quality loss function
6.6 Towards TQM – ISO 9000 as a Platform – Working With Intranet
6.7 Total Productive Maintenance (TPM)
6.8 Summary
6.9 Terminal Questions
6.10 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions
6.11 References

6.1 Introduction
Quality has become a very important dimension of operations management.
Producing the items in required quantities at the right time is not enough to
satisfy the customers. Customers demand that quality be incorporated in the
product and in the service that goes along with it. You will appreciate that
without quality every other thing loses relevance. Thus, quality is a strategy
for survival and for expending the markets. Quality is a marketing strategy to

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enter a market or to compete with existing manufacturers. Quality is the

foundation for achieving customer’s satisfaction. Brands get created as a
consequence of that. Following are the important aspects which improve the
quality of a product.
Performance and Services: The basis of quality lies in the performance of
the product and the perception of service. The ingredients or components
which improve the performance of the product have to be built into the
design processes and operations. Also, proper care has to be taken while
delivering services either independently or as a part of the product.
 Identifying Defects: Statistical tools are used to identify sources of
defects in the processes. They are eliminated in a systematic method,
keeping records of the improvements that were possible. Every
opportunity to improve the system is used. Identifying the defects at the
operating levels even before they occur improves the performance and
the quality of the product. This encourages involvement and
commitment, which are essential for improving quality on a continuous
basis. This helps the organisation to get better feedbacks from the
customers.
 Efficiency: As cost has also become a major dimension of customer
satisfaction, efficiencies have to be built in all operations. Production,
material handling, maintenance, marketing, packaging, supply chain, and
after sales service have to become efficient by adopting policies.
 Innovation: Innovation has become vital to the development and
progress of the organisations. This enables an organisation to aspire to
be a leader in its field. All this is possible with commitment for quality
across all functions and all activities of the organisation. The principles
involved and the processes implemented to achieve them, form the part
of the study of Total Quality Management.
 Certification: Certification is another aspect of quality as it gives public
recognition to the company’s attainments. It improves compliance to the
processes and improves performance of the employees. As
measurements and observations are made by a competent and neutral
body, the certification agency bias is not seen and the compensation and
reward systems are seen to be transparent. Customer’s perception of

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adequacy, if not excellence, goes a long way in establishing long term

relationships which is the dream of every organisation.
Learning Objectives
By the end of this unit, you will be able to:
 Explain the importance of quality
 List the different methods by which quality is sought to be achieved
using various tools
 Recognise the concepts of TQM
 Recall the importance of designing and robust manufacturing systems

6.2 Quality Control as a System

6.2.1 Dimensions of quality

Before we consider quality control, let us see what quality means. Quality is
inherent in the product or service that is rendered to the customer. Since we
are attempting to measure the same, we will look into those aspects of
quality called dimensions of quality. (See Figure 6.1 for Dimensions of quality)
1. Quality of Design: A product is designed keeping in view of the
customers’ requirement. For designing a product the manufacturer or
service provider should be aware of the specifications of different
features required to incorporate in the product. Some of the features to
be known for designing a product include – material, dimensions, and
characteristics. The quality of the product is introduced by the design of
these features. Inspection of the manufacturing processes is of utmost
importance in ensuring quality of performance.
2. Conformance to Design: Conformance to design is the degree to which
the manufactured product or delivered service meets the parameters
that have been incorporated in the design. It verifies that the variability in
the process is within acceptable limits so as not to compromise the
functionalities that the designer wanted.
3. Utilisation Conditions: Utilisation conditions refer to the necessity of
the customer being informed / trained so that the purpose for which the
product was made is realised by the customer in total, thus enhancing
his satisfaction. Instructions, manuals, help-lines, and on-site training by
the manufacturers’ personnel improve the perception of quality.

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4. After Sales Service: There are so many reasons why products do not
function to the expected levels. It may be improper use, unexpected or
additional demands, improper assembly or even manufacturing defects.
There is a need to rectify these and make products or services perform
up to the expected standard. The firm should put in place a system by
which these possibilities are anticipated and attended to give customer
satisfaction. This is an important, but often neglected dimension of
quality.

Figure 6.1: Dimensions of quality

6.2.2 Systems view of quality

A system consists of a number of elements which have specific functions of
their own. They give support and receive support from one another to
deliver outputs. Structure, organisation, hierarchies, and integration go
to make it effective. Design ensures that information flow, feedback and
monitoring take place to make the system efficient. Quality control is
exercised mainly by two methods – Design and Process.
 Design: Designing the equipments, processes, manufacturing
methods, and technologies to ensure that quality parameters are
obtained without fail. Robustness is built into all aspects so that in the
inputs or extreme working conditions do not affect the quality
characteristics.
 Process: Variability is inherent in any process. All processes have
equipments, tools, methodologies, movements, facilitating goods, and

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people who have their behaviours exhibited depending on their

knowledge, skills, and abilities. To anticipate and plan for their proper,
designed performance within the permissible deviations so as not to
affect quality is the mechanism for assuring quality. Procedures have to
be established, data collected, evaluations made available at all nodal
points for dissemination of information for implementing actions
necessary to monitor the variables and bring them to acceptable levels.
This is the quality control system.

Self Assessment Questions

Fill in the blanks

1. TQM is management and control of _________.
2. Customer’s perception of adequacy, if not excellence, goes a long way
in establishing ____________.
3. Variability is inherent ________.

6.3 Quality Control Techniques

Quality control techniques are specific activities and procedures adopted
using data for determining a particular aspect of quality for arriving at
decisions which are conclusive. Each technique though developed and
tested by senior personnel or consultants will be simple enough to be
understood, implemented, and interpreted by the personnel for their
immediate use. The techniques to be used, the criteria to be adopted and
the way of interpreting data are handed over to them for use. Some of the
quality control techniques are:
 Quality at the source
 Quality control tools
 Acceptance Sampling
6.3.1 Quality at the source
The concept of quality makes the production worker responsible for
inspecting his own work and for taking corrective actions. Since inspection is
done immediately after a job is done, finding the cause of the error with
clarity aids in faster rectification.

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Often, some fundamental processing mistakes get identified and their

analysis improves the quality in the long run. Every worker has the authority
to stop production, if he finds some serious defect. This puts responsibility
for quality on the workers and gives them pride in their work. Help should
always be available from the Quality Control personnel to help workers
understand the implications of the above actions. This brings in cooperation
and improves the achievement of quality. The information generated may be
used to effect improvements at the suppliers’ end also. The entire process
brings in openness, commitment, and participation and helps in achieving
quality.
6.3.2 Quality control tools
Flow Chart, Check sheet, Histogram, Pareto Analysis, Scatter Diagram,
Control Chart, and Cause and Effect Diagram are the basic seven control
tools considered for achieving quality. (See Figure 6.2 for Quality control tools)

Figure 6.2: Quality control tools

a) Flow Chart: Flow chart is a visual representation of process showing the

various steps. It helps in locating the points at which a problem exists or
an improvement is possible. Detailed data can be collected, analysed,
and methods for correction can be developed using flow charts. The
various steps include:
 Listing out the various steps or activities in a particular job
 Classifying them as a procedure or a decision

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Each decision point generates alternatives. Criteria and consequences

that go with decisions are amenable to evaluation for purposes of
assessing quality. The flow chart helps in pin-pointing the exact points at
which errors have crept in. (See Figure 6.3 for Sample flow chart)

Inspect Inspect
Open Open Pack

Reject Reject
Figure 6.3: Sample flow chart

b) Check Sheet: Check sheets are used to record the number of defects,
types of defects, locations at which they are occurring, times at which
they are occurring, and workmen by whom they are occurring. The sheet
keeps a record of the frequencies of occurrence with reference to
possible defect causing parameters. It helps to implement a corrective
procedure at the point where the frequencies are more. (See Table 61. for
Sample check sheet)

Table 6.1” Sample check sheet

No. of
Defects 1 2 3 4 5
Day

1 // /// /// ///// //

2 / //// /// //// ///
3 // ////// //// // //
4 // //// /// // //
5 /// ////// /// / ///
6 // //// /// /// //

The table shows that the number of defects 1 and 5 are not many as
compared to defect no 2 which increased over the days and appears to
be stabilising at the higher side and therefore needs to be attended

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immediately. The column which shows days can be changed to

observed by the hour, if need be.
c) Histogram – Histograms are graphical representations of distribution of
data (See Figure 6.4 for Sample histogram chart). They are generally used
to record huge volumes of data about a process. They reveal whether
the pattern of distribution has a single peak, or many peaks and also the
extent of variation around the peak value. This helps in identifying
whether the problem is serious. When used in conjunction with
comparable parameters, the visual patterns help us to identify the
problem which should be attended to.

100
90
80
70
FREQUENCY

60
50
50
40 32
27 29
30
20
20 14
10
0
A B C D E F

Figure 6.4: Sample histogram chart

The values shown are the number of observations made regarding a

parameter. Sometimes, the percentages are shown to demonstrate the
relative contribution of each of the parameters.
d) Pareto Analysis: Pareto analysis is a tool for classifying problem areas
according to the degree of importance and attending to the most
important. Pareto principle, also called 80-20 rule, states that 80 percent
of the problems that we encounter arise out of 20 percent of items. If we
find that, in a day, we have 184 assemblies having problems and there
are 11 possible causes, it is observed that 80 percent of them, that is,
147 of them have been caused by just 2 or 3 of them. It will be easy to
focus on these 2 or 3 and reduce the number of defects to a great

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extent. When the cause of these defects has been attended, we will
observe that some other defect becomes predominantly observed and if
the process is continued, we are marching toward zero defects.
e) Scatter Diagram: Scatter diagram is used when we have two variables
and want to know the degree of relationship between them (See Figure
6.5 for Sample scatter diagram). We can determine if there is cause and
effect relationship between the variables and the degree of extent over a
range of values of the variables. Sometimes, we can observe that there
is no relationship, in which we can change one parameter being sure
that it has no effect on the other parameter.

VARIABLE 2
Figure 6.5: Sample scatter diagram

We can see that the change in variable 2 does not have much effect on
variable 1. The other interpretation can be that for a small change in
variable 1, the effect on variable 2 is more.
f) Control Charts: Control charts are used to verify whether a process is
under control. Variables, when they remain within a range, will render
the product and maintain the specifications. This is called the quality of
conformance. The range of permitted deviations is determined by design
parameters. Samples are taken and the mean and range of the variable
of each sample (subgroup) is recorded. The mean of the means of the
samples gives the control lines. Assuming normal distribution, we expect
99.97 percent of all values to lie within the Upper Control Limit (UCL)
and Lower Control Limit (LCL) – corresponding to + 3. The graphical

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representation of data helps in changing settings to bring back the

process closer to the target.

Example 1
A shaft is to be made with a diameter of 25mm. The area required to be
ground is between +0.01 and -0.02mm by a process of centre less
grinding. A sample of 5 numbers is taken every hour and the
observations are recorded as under. (See Table 6.2 for Sample check sheet)
Table 6.2: Sample check sheet
Samples
Time 1 2 3 4 5

9 AM 24.98 24.99 25.00 25.04 25.01

10 AM 25.01 25.02 25.00 25.01 25.00
11 AM 24.99 24.98 25.02 25.02 24.97
12 Noon 24.97 24.99 25.01 25.04 25.03
2 PM 25.01 25.02 25.00 25.03 25.01
3 PM 24.99 24.98 25.02 24.97 25.00
4 PM 24.97 24.99 25.01 25.04 25.03
5 PM 25.01 25.02 25.00 25.03 25.01
The method to be followed is as under.
1. Draw a line diagram taking the means of every hour
2. Draw the R chart and X charts and determine whether the process
is under control.
The procedure to find the range for the sample readings of each hour is:

1. Find the mean of the readings of each hour, that is, x

2. Add all the means calculated above and take the mean of the means.
Then you will get the mean for all samples. (See Table 6.3 for Mean of
all samples)

(Cont. in next page)

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(Cont. from previous page)

3. The UCL  x  3 where,  is the standard deviation of the

means of dimensions obtained on the dimensions of samples
obtained every hour. However, in drawing the control charts it is
customary to range and a constant that depends on the size of
the sample to calculate the UCL and LCL. The formulas are as
under.

3R 3R
UCL  x  LCL  x 
d2 n d2 n

d2 – values depend on the sample size

Table 6.3: Mean of all samples

Samples
Time 1 2 3 4 5
x
9 AM 24.98 24.99 25.00 25.04 25.01 25.02
10 AM 25.01 25.02 25.00 25.01 25.00 25.00
11 AM 24.99 24.98 25.02 25.02 24.97 24.99
12 Noon 24.97 24.99 25.01 25.04 25.03 25.00
2 PM 25.01 25.02 25.00 25.03 25.01 25.01
3 PM 24.99 24.98 25.02 24.97 25.00 24.99
4 PM 24.97 24.99 25.01 25.04 25.03 25.00
5 PM 25.01 25.02 25.00 25.03 25.01 25.01
Mean for all samples 25.00

On a graph sheet y-axis represents the dimension. The mean value is

drawn as a horizontal line near the middle of the y-axis while the
horizontal axis represents the serial number of the samples. Variations of
the dimensions get marked on both sides of the mean line.

g) Cause and Effect Diagram: Cause and effect diagram represents all
the possible causes which lead to a defect on quality characteristics.
These are arranged in such a way that different branches representing

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causes connect the stem in the direction of the discovery of the problem
(See Figure 6.6 for Sample cause and effect diagram). When each of them is
investigated thoroughly we will be able to pin-point some factors which
cause the problem. We will also observe that a few of them can have
cumulative effect or even a cascading effect.

Figure 6.6: Sample cause and effect diagram

When we observe that we have excessive defects from a machine, we

try to identify all possible sources of the causes of defects. We make a
study of each of them and try to correct it.
6.3.3 Acceptance Sampling
In acceptance sampling method of quality control, the supplier and customer
agree upon accepting a lot, by inspecting a small number taken randomly
from the bulk supply. Out of the sample, if a small number is determined and
accepted by both parties as defective, the lot is accepted. If the number of
defectives is more than the agreed size, the entire lot is rejected. Obviously,
risks for the producer and buyer exist. As the sample size increases and the
number of acceptable defectives decreases, the risk for the buyer
decreases. And the converse is true. That is the reason these numbers
cannot be fixed as they depend on the customer’s requirements. Sometimes
parties go for a doubling sampling plan. In this case a range of defectives is
fixed. If defectives are less, the lot is accepted. If it is more than the higher
number the lot is rejected. If the number of defectives falls between the
above two numbers another sample of a higher size is taken for inspection
and if the total number of defectives is less than another determined number
the lot is accepted.
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6.4 Quality Based Strategy

Strategy means planning and supplementing a series of activities based on
the evaluation of both internal and external environment, so as to maximise
the yield. Essentially short term and long term objectives are in the horizon.
The available resources, both present and future, are evaluated and within
the restraints they place on the system, the most beneficial activities are
planned. Most importantly an assessment of the competitors in all these
aspects is made to either confront it or bypass it for reaching the goals.
Unless these are not based on the quality of the product or service, the
effort is meaningless. Quality in design, manufacture, packing, delivery,
pricing, after sales service acts as an advantage and plays an important role
is ensuring customer satisfaction. So the foundation of any strategy should
be quality. These days, price is also a component of quality. To achieve
quality at low prices efficiencies in all processes have to be realised. This is
where we have Lean Manufacturing, Just-in-time, Flexible Manufacturing
Systems, and many others playing vital role in controlling costs. Working for
quality awards like Deming and Malcolm Baldrige Awards, increases
efficiencies in the organisation and builds confidence of the customers.

6.5 Total Quality Management (TQM)

6.5.1 Introduction to TQM
TQM is viewed from many angles – as a philosophy, as an approach and as
a journey towards excellence. The main thrust is to achieve customer
satisfaction by involving everybody in the organisation, across all functions
with continuous improvement driving all activities. TQM systems are
designed to prevent poor quality from occurring. The following steps are
implemented to achieve Total Quality.
a) Take all measures to know what the customer wants. Develop methods
that generate facts which can be used for decision making. Do not
ignore the internal customer which means the next person in the
process.
b) Convert the wants into design specifications, which meet or exceed
customer expectations.
c) Design processes so that they facilitate doing the job right the first time.
Incorporate elements that make it impossible to make mistakes. It is
called fail-safing or fool-proofing. The Japanese call it Pokayoke.
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d) Keep records of all occurrences, procedures followed, and

consequences. They help in validating the processes so that continuous
improvement becomes possible. More importantly any gaps can be seen
and rectified immediately.
TQM helps to improvise every aspect of the business process such as
finance and operations management. Search must be continuous to find
ways and means to improve the business. Complacency should never be
allowed to creep in at any time. In this aspect, culture plays an important
role. All these require commitment from top management.
6.5.2 Approaches to TQM
Being practiced worldwide by different organisations, TQM has different
approaches towards its achievement. The basic thrust of each of these is
realising excellence. All the approaches have a lot in common, but the
emphasis shifts from one other. Needless to say, each organisation will use
any of these or even a combination to suit its structure, culture, and need.
Some emphasise on the philosophy of TQM and the role of management
and employees in being aware, committed and active. Some expect us to
use statistics more intensely. Some give us an ‘integrated approach’.
6.5.2.1 Deming wheel
Deming's TQM helps organisations to improve the quality of the products
and services they offer. Deming’s approach is summarised in his 14 points.
1. Constancy of purpose for continuous improvement
2. Adopt the TQM philosophy for economic purposes
3. Do not depend on inspection to deliver quality
4. Do not award any business based on price alone
5. Improve the system of production and service constantly
6. Conduct meaningful training on the job
7. Adopt modern methods of supervision and leadership
8. Remove fear from the minds of everyone connected with the
organisation
9. Remove barriers between departments and people
10. Do not exhort, repeat slogans, and put up posters
11. Do not set-up numerical quotas and work standards
12. Give pride of workmanship to the workmen
13. Education and training to be given vigorously

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14. State and exhibit top management’s commitment for quality and
productivity
Using the above principles, Deming gave a four step approach to ensure a
purposeful journey of TQM (See Figure 6.7 for Deming Wheel). The slope is
shown to indicate that if efforts are let up the programme will roll back.
 Plan means that a problem is identified, processes are determined and
relevant theories are checked out.
 Do means that the plan is implemented on a trial basis. All inputs are
correctly measured and recorded.
 Check means that the trials taken according to the plan are in
accordance with the expected results.
 Act means when all the above steps are satisfactory regular production
is started so that quality outcomes are assured.

Figure 6.7: Deming wheel

6.5.2.2 Juran’s quality triology

Juran uses his famous Universal Breakthrough Sequence to implement
quality programmes. The universal breakthrough sequences are:
 Proof of need: There should be a compelling need to make changes.
 Project identification: Here what is to be changed is identified. Specific
projects with time frames and the resource allocation are decided.
 Top management commitment: Commitment of the top management is
to assign people and fix responsibilities to complete the project

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 Diagnostic journey: Each team will determine whether the problems

result from systemic causes or are random or are deliberately caused.
Root causes are ascertained with utmost certainty.
 Remedial action: This is the stage when changes are introduced.
Inspection, testing, and validation are also included at this point.
 Holding on to the gains: The above steps result in beneficiary results.
Having records or all actions and consequences will help in further
improvements. The actions that result in the benefits derived should be
the norm for establishing standards.
Juran has categorised cost of quality into four categories:
1. Failure costs - Internal: These are costs of rejections, repairs in terms
of materials, labour, machine time and loss of morale.
2. Failure costs - External: These are costs of replacement, on-site
rework including spare parts and expenses of the personnel, warranty
costs and loss of goodwill.
3. Appraisal costs: These are costs of inspection, including maintenance
of records, certification, segregation costs, and others.
4. Prevention costs: Prevention cost is the sequence of three sets of
activities, Quality Planning, Quality Control, and Quality Improvement,
forming the triology to achieve Total Quality Management.
Juran’s argument says that:
 Quality is the result of good planning considering the needs of both
internal and external customers and develops processes to meet them.
The processes are also planned to meet them. (See Figure 6.8 for Juran’s
quality triology)
 Quality is built into the system of manufacture, inputs and processes that
are on stream like raw material, spare parts, labour, machine
maintenance, training, warehousing, inspection procedures, packaging,
and others. All these have to follow standards and control exercises to
make sure that mistake do not occur often and that if mistakes do occur
then they are corrected at the source. (See Figure 6.8 for Juran’s quality
triology)

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 Quality improvement measures are essential to keep the quality culture

alive. Newer methods will be found, some operations can be eliminated,
improved technology available. In short, as experience is gained things
can always be done better. It is for the management to take the initiative
and encourage the employees to be on the lookout for opportunities for
improvement. (See Figure 6.8 for Juran’s quality triology)

Figure 6.8: Juran’s quality triology

6.5.2.3 Crosby’s absolutes of quality

Like Deming, Crosby also lays emphasis on top management commitment
and responsibility for designing the system so that defects are not inevitable.
He urged that there be no restriction on spending for achieving quality. In
the long run, maintaining quality is more economical than compromising on
its achievement. His absolutes can be listed as under:
 Quality is conformance to requirements, not ‘goodness’
 Prevention, not appraisal, is the path to quality
 Quality is measured as the price paid for non-conformance and as
indices
 Quality originates in all factions. There are no quality problems. It is the
people, designs, and processes that create problems
Crosby also has given 14 points similar to those of Deming. His approach
emphasises on measurement of quality, increasing awareness, corrective
action, error cause removal and continuously reinforcing the system, so that
advantages derived are not lost over time. He opined that the quality
management regimen should improve the overall health of the organisation
and prescribed a vaccine. The ingredients are:
1) Integrity: Honesty and commitment help in producing everything right
first time, every time
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2) Communication: Flow of information between departments, suppliers,

customers helps in identifying opportunities
3) Systems and operations: These should bring in a quality environment
so that nobody is comfortable with anything less than the best
6.5.2.4 Taguchi’s quality loss function
Taguchi’s contention is that quality comes from design. He advocated a
wide use of Design of Experiments for experimentation on variables and
obtains specifications which will result in high quality of the product. It helps
in bringing cost effective improvements in quality. He believed that
designers should make robust designs so that product can withstand the
variability which tends to be persistent and give quality for longer periods.
His objective in giving the loss function is to make manufacturers realise that
it is the target value of the specification that should be sought to be
achieved and not the permissible deviations. The loss caused is the square
of the deviation multiplied by a cost constant.

L  CX  T 
2

Where,
L = Total loss
C= Cost constant
X = Average value of the quality characteristic
T = Target value of the characteristic
Taguchi also talks about losses to society because of a dent in quality - both
the manufacturers and users in society will have to endure the
consequences of reduced performance as long as the product is used.

Self Assessment Questions

Fill in the blanks
4. The flow chart helps in ______ the ______at which errors have crept in.
5. _______ measures are essential to keep the quality culture alive.
6. Quality is measured as the price paid for ______ and as indexes.

6.6 Towards TQM-ISO 9000 as a Platform – Working with Intranet

In this unit, so far we have seen a number of methods of achieving quality
and also the prescriptions of the quality gurus. No particular model or

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methodology might be completely useful to any organisation. However with

the knowledge gained by becoming aware of the various tools, a company
should be in a position to implement the steps which will be suitable for
them. In this direction ISO 9000 set of standards which details out
requirements to be adhered to for certification – helps the organisation to be
on track in the journey towards TQM. International Standards Organisation
in Geneva brought out a set of standards to the practice of methods which
assure quality. The objectives can be briefly stated as under:
1) To maintain product quality in relationship to requirements and to
reinforce the organisational systems to improve
2) To give confidence to the management and other stakeholders,
especially the customers, that the organisation is run on quality lines
3) To instil a sense of pride in the employees which motivates them to
perform better
The key elements of ISO 9000 detail many functions of the organisation and
procedures that are to be adhered. Documents that they are being followed
have to be formulated and the personnel trained to use them.
Documentation is a very important requirement. It means everyone will have
to write what has to be done, and do what he or she has promised to do.
Certification is done by accredited agencies that are specially trained to do
the various inspections required before an organisation is certified. During
the process of implementation, a number of opportunities open up for
improving quality. Since documentation is done for all activities, the records
act as a guide for analysing problems and solutions can be sought. The
team work that is required results in better communication.
ISO 9000 acts as a starting point towards higher efforts for achieving TQM.
Six sigma projects can be taken up for a more rigorous implementation of
quality standards. The benefits of better communication with intranet cannot
be overlooked. Capturing data, analysis of them and distribution of relevant
data to users is an important facilitation process which intranet provides.
Verification, guidance, and monitoring become easy and all processes
whether design, manufacture or dispatch, can be conducted efficiently with
proper authorisations sought and received instantly. With video-
conferencing the inconvenience of putting people at one place for
discussion and decision making is avoided. Documents can be transferred,
edited and given effect to almost instantaneously. The time, energy, and
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money saved can be utilised for other activities, thus enhancing efficiency of
all the people concerned. All these enhance the quality of work of all
personnel.

Example 2
TQM is used in many fields of the today’s businesses, such as, Automobile,
Aerospace, Banking, Biotech, Chemical, Consumer Products, Diversified,
Defense, Electronics, Energy, Financial Services, Government, Health Care,
Insurance, Manufacturing, Pharmaceutical, Research, Telecommunications,
Technology, and Utilities.
Motorola is the pioneer in introducing the 'Six Sigma' quality program. Ford
Motor Company, GE, GE Consumer Finance, Dell Computer, Bank of America,
First Data Corporation, & Johnson Healthcare Systems, Johnson Controls, JP
Morgan Chase, Kodak, Korry Electronics, Rockwell Automation, Saint-Gobain,
Siemens, Sony, and Home Depot are some of the companies that profiled TQM
in their business.

Caselet 1
Bank of America is the world largest bank. Their goal is to be number one in
customer satisfaction. The bank achieved its goal by enhancing enterprise-wide
quality system. The quality system focused on:
 Aligning the company from top-to-bottom by organising the customer
segments.
 Linking the performance plans to strategic goals.
 Improving business process excellence
 Identifying critical business processes
 Using six sigma across business
 Hiring external six sigma master black belts and black belts to build
workforce
 Eliminating errors in core processes
 Expanding six sigma into sales environment for improving revenue growth
Within 2 years of implementing quality control Bank of America has achieved:
 20% growth in customer delight
 2.3 million Customer households
 29% reduction in customer complaints
 52% rise in stock value
 29% increase in earnings per share
 Rated number one company in 2002
– http://www3.best-in-class.com/

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Self Assessment Questions

Fill in the blanks
7. ____acts as a starting point towards higher efforts for achieving TQM.

6.7 Total Productive Maintenance (TPM)

Maintenance is a function in any operations system. Maintenance keeps the
equipments in good condition. Generally equipments deteriorate because
usage causes wear to the parts introducing inaccuracies on the products
made on them. When the deterioration produces components which exceed
the permitted deviations rendering them unacceptable, maintenance is
undertaken to bring back the machine to produce acceptable components.
Sometimes the failure is sudden and serious and the equipment stops
working. Disruption of production and emergency repair work are costly and
schedules are missed causing delays in supplies and consequent losses.
These breakdowns occur because the equipment was carrying hidden
defects which were not apparent. All these are attended to by the
maintenance department. Historical records indicate the probability of
failures over different periods thus enabling us to plan to attend to them.
With progress in automation, we have costly equipments. We have flow
lines and any one machine breaking down causes a series of machines to
be idle. So, we have to move towards zero breakdowns like we want to
move towards zero defects by implementing TQM tools.
TPM puts the responsibility of maintenance where it belongs to and the
operator who uses the equipment. It is a companywide activity which
involves all the people. The main thrust is eliminating all break downs. The
focus is on the operating personnel because they would know about
malfunctioning earlier and more than anybody else. They work on the
machine and are aware of the slightest variations that occur and thus should
be able to plan to remove the cause before it becomes serious. So every
planned maintenance activity reduces the probability of a breakdown.
Ownership of the operation and machine increases the commitment of the
workmen. Autonomy is the starting point for learning and excellence. The
worker can suggest better ways of improving quality, productivity, and
design. This helps in continuous improvement. Team work and participation
improves the quality culture. The principles of 5S – the housekeeping

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activities which improve efficiency at workplace is considered a measurable

standard to aid the implementation of TPM even in the office rooms.

Self Assessment Questions

Fill in the blanks
8. TPM puts the responsibility of ________ where it belongs to the
operator who uses the _________.

6.8 Summary
Importance of quality cannot be overemphasised. Achievement of quality is
not limited to the production department or the quality control department.
Modern concepts of quality go beyond maintaining dimensions and making
the products work well. Quality is to be incorporated into all functions of
management along with transport, accounting, and packaging. Total quality
envisages where suppliers and customers are treated as partners to
achieve total quality. Implementations of concepts like Six-sigma assure
enhanced customer satisfaction.

6.9 Terminal Questions

1. What are the dimensions of Quality?
2. Explain the concept of Quality at Source?
3. Which are the Quality Control Tools?
4. Why is acceptance sampling made?
5. Explain how cause and effect diagram helps in finding the root cause of
a problem?
6. What does Deming Wheel represent?
7. How does Crosby’s absolute of quality differ from Deming’s principles?

6.10 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. Quality-related activities
2. Long term relationships
3. In any process

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4. pin-pointing, exact place

5. Quality improvement
6. Non-conformance
7. ISO 9000
8. Maintenance, equipment

Answers to Terminal Questions

1. Refer 6.3.1
2. Refer 6.4.1
3. Refer 6.4.2
4. Refer 6.4.3
5. Refer 6.4.2
6. Refer 6.6.2.1
7. Refer 6.6.2.3

6.11 References
 http://www3.best-in-class.com/

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Unit 7 Business Process Modelling

Structure:
7.1 Introduction
Learning Objectives
7.2 Importance of Business Process Modelling
7.3 Business Process Modelling
Logical process modelling
Physical process modelling
7.4 Data Driven Approach to Process Definition
Constructing the process model diagram
7.5 Logical vs. Physical Database Modelling
7.6 Business Process
The ingredients
Business analyst
Workflow vs. Business process modelling
Impact on process modelling
7.7 The Way Forward
7.8 Summary
7.9 Terminal Questions
7.10 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions

7.1 Introduction
Coordinating a set of activities to produce a specific outcome is called a
process. There is a process involved in almost everything we do like
preparing tea, sending a mail and so on.
A business process is a process designed to achieve a particular business
objective. It refers to the techniques and activities used as part of Business
Process Management discipline. Management process gets exhibited in
corporate governance and strategic management. The operational
component of Management consists of workflow across the functions which
realise the objectives of the business. In this context, modelling acts as a

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guide for identifying the gaps in the processes and thus undertakes
measures to align them.
Processes have a tendency of deviating because of the dynamics of the
business. Models act as anchors to stabilise the responses to keep the
processes on track. Business Process Modelling is a change process. In
this unit, we will see the role of Business Process Modelling (BPM) in
achieving the overall business objectives.
Learning Objectives
By the end of this unit, you will be able to:
 Define business processes related terms
 Discuss the different models of business processes
 Recognise how dataflow improves processes
 Explain how modelling improves response to the dynamics of business

7.2 Importance of Business Process Modelling

Business Process is a total response that a business undertakes utilising
the resources and delivering the outputs that create a value for the
customer.
The business process:
 Has a goal
 Uses specific inputs
 Delivers specific outputs
 Collects resources
 Performs a number of activities in some order
 Creates value for the customer
Business Process Modelling refers to a set of activities undertaken to
optimise the business process.
The reasons for optimising the business process is to: (See figure 7.1
Optimising the business process)
 Improve the performance of the process
 Deliver better value for the customer
 Maximise the earnings of the organisation
 Keep its head above competition from outsiders

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Fig. 7.1: Reasons for optimising the business process

The business system contains a combination of people and the applications

organised to meet the business objectives. The applications are automated
timely and efficiently to enable information and reporting system to be
accurate. To meet the business objectives:
 Designers and programmers: The designers and programmers of the
modelling process, together:
 Put together the data and processes to provide optimum benefits
 Put in place the architecture which is capable of addressing these
needs
 Architecture: The architecture should be flexible to adapt new methods,
processes, and business plans.
All the elements of the business process have to be structured and
controlled for the purpose of analysis, evaluation, modification,
implementation, and correction. Some of the elements are activities, parts,
products, data, people, processes, software tools, delivery systems, and
performance measurement.
This is all what we are going to study under BPM. It is synonymously used
even for the software tools, because of the extensive use of various
software programmes for all the activities seen above.

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Self Assessment Questions

Fill in the blanks
1. The business system contains a combination of ____________
organised to meet business objectives.
2. ________ is used synonymously used for the software tools also.

7.3 Business Process Modelling

Business Process Modelling can be categorised into two parts – Logical
Processing Modelling and Physical Process Modelling. (See figure 7.2
Types of modelling)

Fig. 7.2: Types of modelling

In this section, let us know more in detail of the two processes of modelling.
7.3.1 Logical process modelling
Logical process modelling is the representation of putting together all the
activities of business process in detail and making a representation of them.
The initial data collected need to be arrange in a logical manner so that,
links are made between nodes for making the workflow smooth. The steps
to be followed to make the work smoother are given below:
1. Capture relevant data in detail to be acted upon
2. Establish controls and limit access to the data during process execution
3. Determine which task in the process is to be done and also the
subsequent tasks in that process
4. Make sure that all relevant data is available for all the tasks
5. Make the relevant and appropriate data available for that task

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6. Establish a mechanism to indicate acceptance of the results after every

task or process. This is to have an assurance that flow is going ahead
with accomplishments in the desired path
Some of these activities may occur in a sequential order whereas; some of
them may run parallel. There may even be circular paths, like re-work loops.
Complexities arise when the process activities are not connected together.
Logical process model consists of only the business activities and shows the
connectivity among them. The process model is a representation of the
business activities different from the technology dependent ones. Thus, we
have a model that is singularly structured only for business activities.
Computer programmes are also present in the total system. This allows the
business oriented executives to be in control of the inputs, processes and
outputs. The Logical Process Model improves, control on the access to
data. It also identifies, who is in possession of data at different nodes in the
dataflow network that has been structured.
A few of the logical modelling formats (See figure 7.3 Ways of representing
logical process modelling) are given below:
1. Process Descriptions with task sequences and data addresses
2. Flow Charts with various activities and relationships
3. Flow Diagrams
4. Function hierarchies
5. Function dependency diagrams
Every business activity, when considered as a logical process model, can
be represented by a diagram. It can be decomposed and meaningful names
can be given to the details. Verb and Noun form combinations can be used
to describe at each level. Nouns give the name of the activity uniquely and
are used for the entire model meaning the same activity.

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Fig. 7.3: Ways of representing logical process modelling

7.3.2 Physical process modelling

Physical process modelling is concerned with the actual design of data base
meeting the requirements of the business.
Physical modelling deals with the conversion of the logical model into a
relational model. Objects get defined at the schema level. The objects here
are tables created on the basis of entities and attributes. A database is
defined for the business. All the information is put together to make the
database software specific. This means that the objects during physical
modelling vary on the database software being used. The outcomes are
server model diagrams showing tables and relationships with a database.

Self Assessment Questions

Fill in the blanks
3. Every business activity can be considered as a __________ and
represented by a ________.
4. Physical process modelling is concerned with the design of ______
meeting the requirements of the business and represents using
_________.

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7.4 Data Driven Approach to Process Definition

In business process modelling, the purpose of the process is to be written in
a statement. The statement should carefully include only those purposes
that are relevant and capable of being achieved. Using this as a reference,
the business analyst will make notes regarding the inputs that are required.
When the purpose is referred to as continuous, irregularities come to light
either because the inputs are insufficient or the purpose may not be
achievable.
The activities stated above, are concerned with collecting data and verifying
whether they are sufficient or not. Before, we attempt to define the business
process; the data collected should be set in a logical order, making the
logical data model complete in all respects. The following steps should be
considered for setting the data in a logical order: (See figure 7.4 Steps to set
data in logical order)

Fig. 7.4: Steps to set data in logical order

1. Check whether the participants in the process that is, people, teams,
and electronic applications are sufficient or, any changes and additions
need to be made.

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2. Ensure that all the data expected is included or not. Generally, we start
with an initial set of data which we have. When we check them with the
requirements of the process for the desired outcomes, we find gaps.
These gaps help us in determining which subset of the data is
appropriate at each task in the process.
3. Check whether the data is sufficient for the implementation of the
process. This can be achieved by answering the following questions:
a. What is the path the process should take?
b. What decisions are to be made at any point in the process?
c. Are data available at those points?
4. State the rules used to define the various parts of the process. At this
stage, the naming conventions are also included. This is important to be
included at the process definition stage so that, all the participants use
different names to have them earnings that are attached to them.
5. Determine the disposition of data at the end of the process and decide
the following.
a. Do we plan to keep the data or delete them?
b. If they are to be stored, where and in what form is used?
c. What are the measures of security for access?
6. Determine the other elements depending upon the business process
and the need. The elements added must be questioned to collect a
detail data. It is better to go deeper into the details and collect data, and
make them available at this initial stage, so that better model can be
prepared. Then, the processes will be more successful in delivering the
desired output. Process definition enables us to go into details at every
stage of the process and verify the adequacy of data, the sequential
steps in the process and fill the gaps before attempting implementation.
The purpose of setting the data in a logical order is to, locate deficiencies
and remove them. Therefore, the decisions about process and sequence
can be taken and design a model which is useful in all perspectives.
7.4.1 Constructing the process model diagram
So far, we have seen how the process has to be defined. The business
analyst can now use process modelling software to construct diagrams and
graphically represent the business process under consideration. The
following are included in the diagrams.

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1. The starting point of the process: It is possible that we have multiple

beginnings and different activities starting simultaneously and running
parallel.
2. Tasks during process execution: The tasks that are done during
process execution and their sequence and dependencies.
3. Nodes in the path: Nodes in the path show the activities that should be
completed before starting further activities.
4. Decision points: Decision points take decision between choosing the
path or whether the process should continue or not.
5. Process path: The points, at which the process path divides, creating
two or more paths for activities, combine and lead to another activity.
6. More points: At the end of the process, we may have one or more
points.
The model is built upon the following constraints:
 Data that get input at various stages of the process
 Data that get accumulated at nodes for further distribution
 Identifying activities that go along the path
All through the diagrams, we ensure that data is available and desired
results are being obtained. Once the model is certified, software application
will take care of the implementation of the process. Logical Process
modelling will be of great assistance to system architects and developers, to
produce efficient and scalable applications.

Self Assessment Questions

Fill in the blanks
5. The data collected will be set in ________ making the logical data model
complete in all respects before we attempt to define the process.
6. _________ enables us to go into details at every stage of the process
and verify the _________.

7.5 Logical vs. Physical Database Modelling

Models are constructed to represent the proposed database in the visual
form, so that, business requirements can be easily associated with database

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objects. Diagrams are produced to illustrate business processes,

organisational units, rules, and entities.
An Entity Relationship Diagram (ERD) represents the entities or clusters of
information and their relationships maintained for the business.
Process flow diagrams represent various processes and the flow of
information, within and between different processes and entities. These are
called Database Models.
The logical model focuses upon the needs of the business, its activities,
their flow, and the data entities they create and are defined. Logical
modelling is concerned about the performance and the administration of the
database that is implemented.
The physical model is the creation of database by developers in association
with the business analyst to generate diagrams and documentation for
initiating physical modelling. This model is concerned about the server
model diagrams showing tables and relationships with a database.
The outcomes of the above, logical model and physical model, are called
the Entity Relationship Diagrams and Business Process Diagrams.

7.6 Business Process

In its widest sense, a business is a system which exists in a society. It uses
its resources to transform and produce consumable products and services.
This transformation is done by using processes, which yield profits to itself
and value for the rest. A process is the composition of a number of co-
ordinated activities which result in a specific outcome. Preparing a meal,
constructing a building or passing an examination are examples of
processes.
A process is said to be a successful process when:
 Resources are optimally consumed
 Activities are effectively conducted
 Outcomes are close to expectations
In the earlier parts of this section, we described how modelling helps us to
make business process efficient. At every stage, decision making is critical
for success. So to improve this ‘process’, we studied various methods.

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Implementing them is called Business Process Management. We will see

some of the important concepts for better understanding.
7.6.1 The ingredients
The ingredients that might be used in a business process can be briefly
outlined as shown below.
 The data which accomplishes the desired business objective
 Acquisition, storage, distribution, and control of data which
undertakes the process across tasks
 Persons, teams, and organisational units which helps to perform and
achieve the tasks
 Decisions which enhances the value of data during the process
We also have some behavioural aspects of the business process, mainly
the decision making process where humans are involved. Decision failures
are common and research has shown that, the failure of decisions is
because of:
 Biases in perception and fallacies in reasoning
 Tendency to act on assumptions, even when data are available easily
for verification and/or confirmation
 Tendency to bring out of memory the facts that reinforce our
assumptions and biased evaluation
 Tendency to accept evidence or fact as absolute which support our
hypotheses
The above listed factors result in faulty decision making. Being aware and
avoiding them consciously improves the processes of the business.
7.6.2 Business analyst
The responsibility of a business analyst is to:
 Collect in detail business problems and the requirements of the business
people
 Format the requirements and problems of the business
 Facilitate best solutions satisfying the business need and the business
people
To identify the best solutions for the business need of an organisation,
he/she has to:
 Act as a go-between the business people to break down data

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 See through the logical steps that need to be taken

 Fill the gaps to enable the experts in technology to provide solutions
For better forecasting the business needs, he/she should have following
skills, knowledge, and functions. (See figure 7.5 Skills, knowledge and
functions required for a Business Analyst). He /She should:
 Lead the team members to a consensus
 Identify or gather the requirements of the business process that are
critical. To do this, he/she needs to do the following tasks:
 Question concern people
 Verify the statements that are made
 Locate any gaps
 Arrange them in the logical process for creating uninterrupted
dataflow
 Identify the core requirements
 Question business area experts and seek relevant information
 Make sure that the requirements can be subjected to tests and the
results are verifiable. Analyst’s most important skill will be in his capacity
to separate the grain from the chaff, that is, to know which are critical,
vital and important bits of information from a huge mass of data he is
confronted with

Fig. 7.5: Skills, knowledge and functions required for a business analyst

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7.6.3 Workflow vs. Business Process Modelling (BPM)

Workflow contains a number of entities in a unidirectional path with nodes.
Each of these nodes may contain a number of elements – Material, Data,
Attributes, and Value. They all come together for integration or even for
division and will have transformation going on. The activities that make
these transformations are the sub-processes. So, there will be changes
taking place along the path and at the end, we have a completed process.
Every detail will be worked out, the outcomes verified and corrected and
brought into the flow so that nothing untoward occurs.
The only thing lacking is the flexibility that business situations demand all
the time. This is because, the enterprise has to perform and excel in
conditions of uncertainty, improvement, and competition. Fortunately these
are exceptions. While majority of the repeated tasks goes on smoothly, we
need to manage these exceptions. Notably, exceptions create new
processes, opportunities and help us get new insights into the processes. It
has been found that 80% of process costs arise out of managing
exceptions. These happen at many points in the value chain. Managing all
these is Business Process Management.
Workflow does not offer options in, the way processes are conducted. They
have fixed routes, activities, and schedules. Actually, there is not much
‘management’. BPM goes ahead not on a fixed track, but on bumpy roads,
swerving sharply to avoid collisions and overtaking the vehicles that are
ahead. It calls for all management skills.
7.6.4 Impact on process modelling
If BPM is not flexible in the path, then the activities or the way entities need
to be aligned to make it more flexible. Therefore, it is not any more
necessary to define the total process initially. The flow of the activities need
not be fitted into a ‘model’ to be followed continuously, but can be adapted
to suit the situations the process is in. The user has choices of subsequent
activities and can take advantage of the flexibility the process is allowed to
have.

Self Assessment Questions

Fill in the blanks
7. Managing ____________ is Business Process Management.

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7.7 The Way Forward

BPM has come a long way in a short period. The reason is the development
in information, technology, and the tools available for incorporating the
scientific concepts. With businesses going global, services becoming more
valuable, usage of resources have to be optimised. In this direction, we
have JIT, TPM, and TQM making operations cost effective. BPM is another
concept, when implemented makes workflow more productive. We will see
in the following points so as to what it is, what it does and what it promises?

Self Assessment Questions

Fill in the blanks
8. BPM is another concept, when implemented makes _________.

What all should we know about business processes?

 Definition of the firm’s business Process
 Differences between process view and functional view
 Advantages of the process view
 The size and complexity of the process
 The relationships between processes

How do we model the business process?

 Identify the various steps of the process
 Prepare an overview of the various techniques of modelling rules
and guidelines of modelling
 Prepare documents to support the modelling process

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How to improve the business process using model ‘As-is’

business process?
 Identify the problems or triggers that call for a change
 Analyse the problem
 Find if there are inappropriate workflows
 Find if any inadequate IT support activities
 Formulate the new ‘to-be’ business process
 Make the new ‘to-be’ business process acceptable

How to convert the new ‘to-be’ process from the Business

Modelling stage to specifying system requirement for
implementation?
 Identify the IT support requirements
 Document the above Integration of process modelling,
requirements definition and systems development
 Identify the skills required
 Provide training to get ready for managing change

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Caselet 1
Yummy Bakes is one of the leading Bakers in India with more than
10,000 outlets spread over. The goal of the Yummy Bakes is to serve
tasty food and fast delivery to customers at each outlet by ensuring fine-
tuning its operations. However, with the increasing outlets, the goals
were not achieved to the mark. This is due to the management failure.
The customers were upset with lousy food, slow service, and surly
employees. Yummy Bakes realised it when the customer complaints
were growing more frequently and the sales rate went down by 12%.
To optimise the business process, Yummy Bakes appointed a new
business analyst to solve the business problems. The business analyst
scrutinised every detail of the business requirements and problems, its
operation procedures, data, present earnings of the business, and many
other details related to the business.
With a zeal for measuring customer satisfaction, the act of go-between
the business people and sharing the data freely with operators, he pulled
off a turnaround that stunned everyone in the business with its speed
and scope. With the data he formatted the business problems and
provided solutions according to the need.
(Cont. in next page)

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(Cont. from previous page)

The solutions he provided for the improvement of the business are listed
below.
 Installing the massive Customer Relationship Management
(CRM) system along with inter-net based data management
system. The goal was to scrutinise every detail of its business in
real time.
 Initiatives were appointed to collect performance measures and
revamp Yummy Bakers processes to reach customers
expectations.
 Mystery shoppers were sent to the restaurants to conduct
anonymous reviews using a hard-number scoring system.
 Mystery dinners from outside survey firms jot down on a paper
check list their grades for: speed of service; food temperature;
presentation and taste; cleanliness of the counter; tables and
condiment of the Island; even whether the counter crew person
smiles at dinners.
 Training six-month and year-to-date results are posted on an
internal website so owners can compare their scores with
regional averages.
 400 operations missionaries were sent into the field, each visiting
stores multiple times to fine-tune processes while also conducting
day-long seminars where store managers could share tips from
corporate kitchen gurus.
 Yummy Bakes restored the more expensive ingredients in the
Yum Bake sauce and changed the salt-and-pepper seasoning in
the chicken patties.
 The process was changed back to toasting buns rather than
microwaving them, and lengthened the toasting time by 6
seconds, giving them an even sweeter caramelised flavour.
 Outdoor menu boards now have more pictures and fewer words.

(Cont. in next page)

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(Cont. from previous page)

 Initiatives were taken on Yummy Bakes fast lane. 6 seconds were

shaved- off on the weight time. The change has added a
percentage point to sales growth.
 LED display confirms what customer say, reducing confusion
later on.
 Premium sandwiches are put in boxes than in paper wrappers,
saving a few seconds.
 Boxes are colour coded by sandwich to improve speed and
accuracy
 Professional order takers with strong communication skills were
located at remote call-centers to handle drive-through orders.
 The orders might be taken better and the on-sight Yummy Bakes
employees can focus on delivery better customer services.
When customer stopped going to Yummy Bakes, so did investors. Now
that sales are on rise, the stock has regained its sizzle. By the start of
2009, the stock had more than doubled in 2 years. Performance
measurement and improving process to increase customer values pays-
off. To serve close to the customer, Yummy Bakes is now planning to
increase more and more branches.

7.8 Summary
Business Process consists of a number of coordinated activities to result in
outcomes which add value to the customer. Data that are needed to know
what the activities are, how they are done, how close it is to customer’s
requirement. We create a Business Process Model which is composed of a
Logical Process and a Physical Process. Logical process modelling deals
with the identifying the business requirements and produces diagrams and
charts to show relationship between business processes having parent-child
relationships among people, activities and data. Physical process modelling
is the design of the database to meet the requirements of the logical model.
The business analyst’s job is to understand the requirements of the
business and work with technology experts to create databases which

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interface with the applications in software. Workflow ensures the flow of

activities, sub-processes and data in a systematic manner. However, the
dynamics of a business needs the flexibility that BPM offers.

7.9 Terminal Questions

1. What are the characteristics of a business process?
2. What is Logical Process Modelling?
3. What is Physical Modelling?
4. Explain the ingredients of a Business Process?
5. What are the functions of a Business Analyst?
6. What area the different aspects of BPM?

7.10 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. Activities
2. Business Process Modelling
3. Logical process model, diagram
4. Database, tables
5. Logical order
6. Process definitions, adequacy of data
7. Information and workflow.
8. Workflow more productive

Answers to Terminal Questions

1. Refer to 7.3
2. Refer to 7.4.1
3. Refer to 7.4.2
4. Refer to 7.7.1
5. Refer to 7.7.2
6. Refer to 7.7

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Unit 8 Project Management–Planning Process

Structure:
8.1 Introduction
Learning Objectives
8.2 Project Management
Definition of „Project Management‟
Understanding project management
Definitions related to project management
Project
Management
Project cycle
Process
Resource
Scope
Project cost
Need for project management
8.3 Project Management Principles
Project management knowledge areas
The project manager (PM) and responsibilities of PM
Project failure
8.4 Essentials of project management philosophy
Characteristics of project mindset
Project evaluation and selection criteria
What is a project?
Project parameters for negotiation
How does project management “Add Value”?
Project management players, their roles and responsibilities
The players
Roles and responsibilities
8.5 Project Planning
Scoping
Tasks involved in scoping
Using the project plan
Planning tools
Work Breakdown Structure (WBS)

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8.6 Project Process Flows

Project processes
Process groups
Process interactions
Process interactions initiating processes
Planning processes
Executing processes
Controlling processes
Closing processes
Customisation
8.7 Summary
8.8 Terminal Questions
8.9 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions

8.1 Introduction
A production centre cannot work without proper planning. The processes
necessary for the planning is identified and explained in the form of various
concepts. One has to understand the process as a synonym for managing a
project.
In this unit, you will learn Project Management by way of definitions and
explanations of the various steps involved. You will also understand the
important issues related to Human Resources, which forms a much greater
part of Project Management. It is to be remembered that, people have to
take the initiative to drive processes. Only then the system will take the
initiative to drive the people.
Learning Objectives
By the end of this unit, you will be able to:
 Recall the fundamentals of project management
 Explain the importance of project management
 List the principles of project management
 Describe the project management philosophy
 Recognise the various project management processes

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8.2 Project Management

8.2.1 Definition of „Project Management‟
Managing a project is the practice of controlling the use of resources, such
as cost, time, manpower, hardware, and software involved in the project. It
usually starts with a problem statement and ends with delivery of a complete
product (See Figure 8.1 Project management). Project management involves
understanding the scope and various processes in a project cycle.

Figure 8.1: Project management

Some of the other definitions of project management are shown below.

“Project management is the complete set of tasks, techniques, and tools
applied during project execution”.
– DIN 69901 (German Organisation for Standardisation)

“Project management is the application of knowledge, skills, tools, and

techniques to project activities to meet project requirements”.
– PMBOK (Project Management Body of Knowledge, defined by
Project Management Institute (PMI))

8.2.2 Understanding project management

The economy of India has been growing over the last few years. It has been
a booming market for the evolution of industries in various sectors. Lots of

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money is being invested in various projects. The government is always

looking for growth of the country. In this perspective, it becomes very
important for managers to manage the projects effectively in order to
maximise the returns. Managing a project is an area faced with
unprecedented growth hence the need of proper and effective project
management. This profession, therefore, requires efficient and effective
project managers.
More and more companies across the globe are adopting the practices of
managing projects, looking out for skilled managers, and practitioners
thereby increasing the demand for project managers globally. An
organisation understands a project as an activity that starts with a
description of a mission and ends with the completion of a deliverable or
product. An effective project management will results in identifying the tasks
required to achieve the goals of the project and preparing an effective plan
by considering the man, material, cost, and time, which will help to complete
the project smoothly.
8.2.3 Definitions related to project management
8.2.3.1 Project
A Project is a temporary endeavour with a finite completion date undertaken
to create a unique product or service. Projects bring form or function to
ideas or needs.
A project is a set of activities which are networked in order and aimed
towards achieving the goals of a project. Upon the completion of all the
activities, the goals of the project would have been achieved. A project is
undertaken to achieve a purpose. Some examples of projects are listed
below.
 Commissioning a new industrial unit
 Construction of a house
 Setting up of an office
 Developing a technology
 Launching a new product in the market
8.2.3.2 Management
Management is the technique of understanding the problems, needs, and
controlling the use of resources such as cost, time, manpower and
materials.
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8.2.3.3 Project cycle

A project cycle consists of the various activities of operations, resources,
and the limitations imposed on them.
8.2.3.4 Process
A process is part of the project which consists of simple and routine
instructions to achieve a desired result of any activity of the project.
A process is responsible for bringing about the changes in the inputs fed to
the process and giving out the desired output.
8.2.3.5 Resource
The resource of a project refers to manpower, machinery, money, and
materials which are required in the project.
8.2.3.6 Scope
Scope of the project refers to the various parameters that affect the project
in its planning, formulation, and executions.
8.2.3.7 Project cost
Project cost is the budgeted expenditure of the project.
8.2.4 Need for project management
Project management is necessary because:
 A project requires huge investments which should not go waste
 A loss in any project would have direct or indirect impact on the society
 Failures may occur during the process of production (project
management prevents any failures and enables the project to run
smoothly)
 Scope of the project activity may undergo a change
 Technology used may change during the course of project execution
 Consequences of negativity in project related problems could be very
serious
 Changes in economic conditions may affect a project

Self Assessment Questions

State True or False
1. A project is a set of activities which are networked in order and aimed
towards achieving the goals of a project.

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2. A process is part of the project which consists of complex instructions

to achieve a desired result of any activity of the project.
3. Project management involves understanding its scope and various
processes in the project cycle.

8.3 Project Management Principles

Project management can be considered to have five dimensions which are
necessary to be managed. The dimensions are Features, Quality, Cost,
Schedule, and Staff. (See Figure 8.2 Dimension of project management)

Figure 8.2: Dimensions of project management

The five dimensions of project management are dependent of one another.

For example, if you add staff, the schedule may shorten and the cost might
increase. The trade-offs among the five dimensions of project management
are not linear. For each project, you need to decide which dimensions are
critical and how to balance the others so as to achieve the key project
objectives.
Each of the five dimensions can take one of three roles on any given
project:
1. Drive: A driver is a key objective of the project. It has low flexibility
towards the project team.

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2. Constraint: A constraint is the limiting factor beyond the control of

project team. It gives the project team virtually no flexibility.
3. Degree of Freedom (DoF): Any project dimension that is neither a
driver nor a constraint becomes a degree of freedom. A degree of
freedom provides wider latitude towards the project team for balancing
that dimension against the other four.
An important aspect of this model is not which of the five dimensions turn
out to be drivers or constraints on any given project, but that the relative
priorities of the dimensions be negotiated in advance by the project team,
customers, and management. A graphical way to depict these points is to
use a “Kiviat diagram”. (See Figure 8.3 Kiviat graphical representation)
A Kiviat diagram is a graph which allows us to plot several values of a
project. The Kiviat graph is a useful tool in project management to compare
the relative flexibility of the parameters considered. In this case, the five
parameters (features, quality, cost, schedule, and staff) of project
management can be graphically represented as an irregularly shaped
polygon on a set of normalised axes. The position of each point on its axis
indicates the relative degree of flexibility of that dimension for a particular
project. It is plotted on an arbitrary scale of 0 – 10.
 „0‟ would indicate – completely constrained
 „10‟ would indicate - completely flexible

Figure 8.3: Kiviat graphical representation

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8.3.1 Project management knowledge areas

The knowledge areas of project management are the following: (See Figure
8.4 Project management knowledge areas)
 Project integration management, cost management, communications
management
 Project scope management, quality management, risk management
 Project time management, human management, procurement
management
For a project to be successful, it is necessary to understand its relationship
with other management disciplines. Other management supporting
disciplines are business legal issues, strategic planning, logistics, human
resource management, and domain knowledge.

Project
management

Project Project Project

Integration Scope Time
Management Management Management

Project Project Project

Cost Quality HR
Management Management Management

Project Project Executing

Communication Risk Processes
Management Management

Figure 8.4: Project management knowledge areas

8.3.2 The project manager (PM) and responsibilities of PM

A project manager is a person who manages the project. The project
manager is responsible for carrying out all the tasks of a project.
Responsibilities of the project manager are:
 Budgeting and cost control
 Scheduling tasks
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 Allocating resources
 Tracking project expenditures
 Ensuring technical quality
 Managing relations with the customer and company
Life cycle of a project manager overlaps with the development life cycle in
the middle. Duties of a project manager start before the development and
continue after delivery of the product. The project manager is the one
person who carries joint responsibility for all aspects of a project.
8.3.3 Project failure
A project may fail because of one or more of the following reasons:
 Incidence of project failure
 Factors contributing to project success not emphasised
 Overview of Information and Communication Technologies (ICT)
projects
 Common problems encountered during projects
Let us know more in detail the reasons for the failure of a project in this
section.
 Incidence of project failure: The incidents of project failure are due to
following reasons:
 Projects being initiated at random at all levels
 Project objective not in line with business objective
 Project management not observed
 Project manager with no prior experience in the related project
 Non-dedicated team
 Lack of complete support from clients
 Factors contributing to project success not emphasised:
 Project objective in alignment with business objective
 Working within the framework of project management methodology
 Effective scoping, planning, estimation, execution, controls and
reviews, closure intertwined with quality
 Proactive approach towards project bottlenecks
 Communication and managing expectations effectively with clients,
team members, and stake holders
 Prior experience of project manager in a similar project

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 Overview of Information and Communication Technologies (ICT)

projects:
 Involve information and communications technologies such as the
World Wide Web, e-mail, fiber-optics, and satellites
 Enable societies to produce, access, adapt and apply information in
greater amounts, more rapidly and at reduced costs
 Offer enormous opportunities for enhancing business and economic
viability
 Common problems encountered during projects:
 No prioritisation of project activity from an organisational position
 One or more of the stages in the project mishandled
 Less qualified/non-dedicated manpower
 Absence of smooth flow of communication between the involved
parties

Remember
 The dimensions of project management are Features, Quality,
Cost, Schedule, and Staff. They are dependent of one another.
 The Kiviat graph is a useful tool in project management to compare
the relative flexibility of the parameters considered.

Self Assessment Questions

State True or False
4. The project management dimensions are dependent on one another.
5. A graphical way to depict the project management dimensions is to use
a “Kiviat diagram”.
Fill in the blanks
6. Project management dimensions are: features, quality, _____, ____ and
_____.
7. ICT Offer enormous opportunities for enhancing ___ and ___ viability.

8.4 Essentials of Project Management Philosophy

8.4.1 Characteristics of project mindset
Project Management is all about a mindset. The figure 8.5 captures all the
major characteristics of project mindset.

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Figure 8.5: Characteristics of project mindset

a) Time: It is an important parameter in framing the right mindset. It is

possible to improve the pace of the project by reducing the time frame of
the process. The mindset is normally to work out a comfort mode by
stretching the time limits.
b) Responsiveness: Responsiveness refers to quickness of response of
an individual. The vibrancy and liveliness of an individual or an
organisation are proportional to its capabilities to respond to evolving
processes and structure.
c) Information sharing: Information is power. Information is the master
key to today‟s business. Information sharing is an important
characteristic of the project mindset today. A seamless flow of
information is a key to build a healthy mindset among various
stakeholders in a project.
d) Processes: Project mindset lays emphasis on flexible processes. The
major difference in a process and a system is in its capabilities of

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providing flexibility to different situational encounters. Flexible processes

possess greater capabilities of adaptability.
e) Structured planning: Structured planning based on project
management life cycle enables one to easily and conveniently work
according to the plan. It also enables efficient use of project resources
and prioritisation of the activities based on resource planning.
Hence having a right mindset and flexible processes in place is very
important for sound project management.
8.4.2 Project evaluation and selection criteria
During project evaluation, the following nine criteria may be considered
important:
 Relevance:
 Is the project relevant to the defined scope in terms of the deliverable
product and service?
 State-of-the-art technical methodologies:
 Check if the state-of-the-art methodologies are adequately described?
 Relevance to market:
 Has any market analysis been done?
 Is there any documentation of the various market opportunities?
 Creativity: Creativity is required to understand and develop a project as
innovatively as possible and should be well described in its documents.
The project objectives may be creatively quantified for its
measurements.
 Are the outcomes of each such objective task clearly defined?
 Potential:
 Is there an adequate description of the project methodologies and its
dissemination which would be used in future?
 Are the potential products or services of future identified?
 Project management and work plan:
 Is there a project management and work plan?
 Are the roles and responsibilities of each project member clearly
defined?
 Effort justification:
 Are the efforts in-line with the work and the objectives to be achieved?

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 Is there enough competence for doing research?

 Is there any value addition to the project?
8.4.3 What is a project?
A project is a temporary endeavour with a finite completion date undertaken
to create a unique product or service. Projects bring form or function to
ideas or needs. Project has a start and an end date. Also, a project is:
 A programme of non-routine work bringing about a beneficial change
 Guided by at least one well-engaged sponsor who has both adequate
authorities and resources to charter the project effort
 A multi-disciplinary team brought together for the project
 Scope of work that is well defined
 Constrained by cost, time, and quality
8.4.4 Project parameters for negotiation
During the course of a project, a team negotiates for one or more of the
following constraints.
 Scope, cost and schedule objectives
 Changes to scope, cost or schedules
 Contract terms and conditions
 Resources
8.4.5 How does project management “Add Value”?
Projects may be completed with one or more of the following undesirable
outcomes:
 Stretched deadlines
 Over stressed team
 Wasted resources
 Unmet customer functional requirements
 Overshot budget
A good project management methodology provides a framework for the
processes. It provides guidelines for the execution of the project that greatly
increases the chances of the project being successful, and therefore
provides value to the project. Some of the steps of a good project
management are listed below.
 Define the project
 Set manageable tasks

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 Obtain resources
 Build a team
 Plan and allocate the tasks
 Monitor and control the work
 Report progress to higher officials
 Close down the project when completed
 Review the project
8.4.6 Project management players, their roles and responsibilities
8.4.6.1 The players
Project management players are individuals and organisations who are
involved in the project. The players of the project management are:
 Project manager: Project manager is the individual responsible for
managing the project.
 Customer: Customer is the individual or organisation that will use the
product, that is, the end result of the project.
 Performing organisation: Performing organisation is the enterprise whose
employees are most directly involved in doing the work of the project.
 Sponsor: Sponsor is the individual or group within or external to the
performing organisation that funds the project.
These players are also called “stakeholders” of the project. The individual
players are actively involved in the project and play an important role to
successfully complete the project. The players‟ interest may be affected
(positively or negatively) by the outcome (success or failure) of the project.
They have an exert influence over the project and its results.
8.4.6.2 Roles and responsibilities
The roles and responsibilities of players while managing projects are given
below.
 There are a number of projects which an organisation works on. It is not
possible for one individual to manage all the projects. There is a team of
managers who manage the projects.
 There may be different teams working on different projects.
 An experienced project manager and his team may manage more than
one project at a time.
 The project team is responsible for ensuring that the project upon
completion, shall deliver the gain in the business for which it is intended for.
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 The project team has to properly coordinate with each other working on
different aspects of the project.
 The team members are responsible for the completion of the project as
per the plans of the project.

Remember
 Time, Information Sharing, Processes, and Structured planning
are the main characteristics of project mindset.
 During project evaluation, the following nine criteria may be
considered important – relevance, state-of-the-art technical
methodologies, relevance to market, creativity, potential, project
management and work plan, and effort justification.
 Project manager, Customer, Performing organisation, and
Sponsor are the players of project management.

Self Assessment Questions

State True or False
8. A good project management methodology provides a framework for the
processes.
9. Time is not a characteristic of project mindset.
10. Project mindset does not lay emphasis on flexible processes.

8.5 Project Planning

8.5.1 Scoping
The main objective of scoping is to:
 Define the project boundaries
 State the objectives that the project will cover
 Provide directions to the project and to enable assessment of the final
products quality
Scoping of project will enable the manager to prepare an outline of the
project plan.
Outline of the project plan
For any project work to be undertaken, it is a good practice to prepare an
outline of the project. The outline is the template of the project preparation. It
comprises the following aspects.
 Context for the project: Describe the relevant economic, technological,
and political aspects of the business context, as well as business
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strategy, objectives, issues or problems, and a listing of the past events

pertaining to the project.
 Purpose and objectives of the project: The purpose of the project
indicates the reasons for undertaking the project, its benefits, goals, and
other aspects of the project deal. The objectives of the project are the
mean things that will be done to achieve the purpose.
 Tasks, Milestones, and Deliverables: The project manager decides
the tasks, milestones, and deliverables of the project. He/she would
make a list of all the tasks pertaining to the project, identify the person in
charge for each, duration for each task, along with the target time of
completing each such listed task.
A typical outline of the task is:
 Development of plan and approval of the plans
 Literature survey
 Data collection
 Data analysis
 Findings
 Interpretation and conclusions
 Recommendation on the project and presentation
 Documentation of report
 Uncertainties, Risks and Opportunities, and Planned Responses:
Prepare a list of all such events occurred in past and their chances of
occurrences in future, which may have negative or positive impact on
completion of the project
 Critical Success Factors: Identify at least four to five factors which must
go right for the project to succeed
 Use GANTT Chart of tasks to monitor and control the project
deliverables
GANTT chart
“A GANTT chart is a graphical representation of the duration of tasks
against the progression of time”.
– Source: http://www.ganttchart.com/

The figure 8.6 is a GANTT chart. A Gantt chart is a useful tool for planning
and scheduling projects as well as for monitoring and controlling the project
deliveries.
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Figure 8.6: GANTT chart

There are a number of advantages of Gantt charts. A Gantt chart:

 Uses a “fill in the bar” method to indicate the progress of the project
 Lays out the order in which the tasks need to be carried out
 Helps in planning the time required for completion of a project
 Shows dependencies between tasks
 Shows all the tasks to be achieved at any point of time
 Allows planning for the remedial actions, if any delay, to complete the
project back on time
 Along with a “milestone chart”, helps you to represent the planned bar
which indicates the deadlines and other significant events of the project
(See figure 8.7 GANTT chart representing progress bar and planned bar)

Figure 8.7: GANTT chart representing progress bar and planned bar
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8.5.1.1 Tasks involved in scoping

The tasks involved for the project manager while scoping of project are
listed below. He/she has to:
 Establish project objectives which could be identified from clients
through workshops and interviews. This will ensure project alignment
with the business direction of the organisation. Project objectives may
be formulated as S.M.A.R.T:
 S – Specific
 M – Measurable
 A – Achievable (recently Acceptable is used regularly as well)
 R – Relevant
 T – Time terminated (bounded)
 Establish scope of investigation in order to determine the dimension that
applies to the project and to identify the constraints, specific limitation or
exclusions pertaining to the project. Record any assumptions made in
defining the scope.
 Identify initial requirement and validate them against the project
objective(s).
 Identify the criteria for assessing the success of both the final project
and the process used to create it.
 Outline the solution to illustrate the feasibility of achieving the defined
business requirements for the project
 Identify training requirement to determine the probable client training
and technical writing.
 Review project scope by first reviewing the objectives, statements and
scope definition documents and then verify whether it has met the
standards.
8.5.1.2 Using the project plan
A project plan is a preliminary document that guides the execution of a
project.
The key stages work plans and the actual performance should be compared
with the project plan prepared for a particular stage. The project plan should
be tracked throughout for which various checklists could be used. The value
of certain key parameters must be measured. Issues such as how the task,
the effort and the defects will be tracked, what tools will be used, what

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reporting structure and frequency will be followed are decided at various

stages. In case of differences, the reasons behind the changes are analysed
and the deliverable in terms of cost, schedule, and effort are altered
accordingly.
8.5.1.3 Planning tools
There are several planning tools which may prove useful for coordinating a
project successfully. In this section we will discuss each of these tools.
a. Project organisation and structure:
 Identifying the key personnel
 Identifying the business areas that are within the scope or directly
interface with the scope boundary
 Listing the business areas in the „Business area‟ column of the project
assignment worksheet
b. Project management team: A senior management team will be
accountable for the project. They identify project sponsor, client
representative, and technical representative. A project management
team consists of:
 Stage managers who will plan and manage the project on a day-to-
day basis for this stage
 Project coordinators such as client coordinator and technical
coordinator who will clearly define these coordination, control activities
and identify the suitable personnel to carry them out
c. Key stakeholders: It is important to identify management level
personnel who are critical to the success of the project. The
responsibilities of the key stakeholders must be documented.
d. Stage teams: For each stage of project management life cycle,
appropriate personnel should be identified. After allocation of staff to the
stage, the team structure is defined and team leaders appointed. It is
important to document the time commitment and responsibilities to be
performed by the team members.
e. Key resources: Individuals assigned to a key resource role may work
towards gathering “Business key resources” and “Technical key
resources”. They are project coordinators and team invitees.

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f. Determine training requirements: Training involves:

 Assessing the capabilities and skills of all those identified as part of
the project organisation
 Establishing a training plan to acquaint the project team members with
the methodologies, technologies, and business areas under study
 Updating the project schedule to incorporate the scheduled training
activities

Remember
A GANTT chart is a graphical representation of the duration of tasks
against the progression of time. Planning, scheduling, monitoring,
and controlling the project deliveries are represented graphically.
The planning tools which may prove useful for coordinating a project
successfully are project organisation and structure, project
management team, key stakeholders, stage teams, key resources,
and determine training requirements.

8.5.2 Work Breakdown Structure (WBS)

The entire process of a project may be considered to be made up on
number of sub process placed in different stage called the Work Breakdown
Structure (WBS). A typical example of a WBS of a recruitment process is
indicated in figure 8.8.
WBS is the technique to analyse the content of work and cost by breaking it
down into its component parts. Project key stages form the highest level of
the WBS, which is then used to show the details at the lower levels of the
project. Each key stage comprises many tasks identified at the start of
planning and later this list will have to be validated.
WBS is produced by identifying the key elements, breaking each element
down into component parts and continuing to breakdown until manageable
work packages have been identified. These can then be allocated to the
appropriate person. The WBS does not show dependencies other than a
grouping under the key stages. It is not time based - there is no timescale
on the drawing.

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Figure 8.8: Example of work breakdown structure

What are Lead Time and Lag Time?

Lead time: It is an amount of time, which a successor task can
overlap with its predecessor task, i.e. the time before the completion
of the predecessor at which the successor can start.
Lag time: An amount of time, between a predecessor and a
successor task, i.e. the time after the completion of the predecessor
that the start of the successor is delayed

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Self Assessment Questions

Fill in the blanks
11. A project plan is a preliminary document that guides the _______ of a
project.
12. ____ is a technique to analyse the content of work and cost by
breaking it down into its component parts.

8.6 Project Process Flows

Project management is composed of interacting processes organised in
groups:
8.6.1 Project processes
8.6.2 Process groups
8.6.3 Process interaction
8.6.4 Customisation
8.6.1 Project processes
A project process is a series of activities to achieve the target. Project
process is classified into two main categories:
1. Project management process: Project management process is defined
by the organisation. It describes and organises the work of the project.
2. Product oriented process: Product oriented process is defined by the
life cycle. It specifies and creates products and related works.
8.6.2 Process groups
Project management processes can be categorised under five Process
Groups – Initiating processes, Planning processes, Executing processes,
Controlling processes, and Closing processes. The connection between
process groups in a phase is shown in Figure 8.9.
1. Initiating processes: Initiating processes give recognition to start and
establishing commitment.
2. Planning processes: Planning processes are meant for devising and
maintaining a workable scheme to accomplish the business needs.
Proper planning is essential to increase the efficiency and effectiveness
of the resources.
3. Executing processes: Executing processes are used for coordinating
people and resources to carry out the plan. As described earlier,

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improper execution even with a good planning will result into project
failure.
4. Controlling processes: Controlling processes monitor and measure
progress on continuous basis and take necessary remedial actions. This
helps in ensuring that the project is on schedule and under budget. Any
major deviations are also addressed as a part of this process.
5. Closing processes: Closing processes formalise acceptance and
bringing project to an orderly end.

Planning
Initiating
Processes
Processes

Executing
Controlling
Processes
Processes

Closing
Processes

Figure 8.9: Connection between process groups in a phase

8.6.3 Process interactions

These individual processes are linked by inputs and outputs. Central to
them are the tools and techniques. This is depicted in figure 8.10 below:

Fig. 8.10: Process interactions

 Inputs: Inputs refer to the client documents converted to action plans to

be acted upon. They also contain other necessary information required
to be acted upon in a particular process.
 Tools and techniques: They refer to the mechanisms applied on to the
inputs to create desired outputs. There are various standard tools and

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techniques available for each of the processes. Organisation may use

them or customise one according to their needs.
 Outputs: Outputs refer to the documents that are the results of the
process. These in turn may again act as an input for next process.
Let us now look at the interactions of each of the process groups.
8.6.3.1 Initiating processes
Every process is initiated by management group decisions which results in
the next phase of the project.
8.6.3.2 Planning processes
Interactions focus on planning. Planning processes are highly
interdependent. Hence, this makes it more important that things are planned
properly. If there is an overrun on one parameter, the entire project may go
for a toss. For example, if the cost is unacceptable, scope and time may
need to be redefined.
8.6.3.3 Executing processes
Interactions in this group depend on the nature of the work. They are
dynamic and dependent on team innovations and responsiveness.
8.6.3.4 Controlling processes
The interactions are aimed at measuring project performance [time, cost,
quality] and identifying the variances from the plan. Tracking the project
performance is a continuous process. In case of deviation from the planned
project, plans are updated and corrective actions are taken.
8.6.3.5 Closing processes
The interactions revolve around review of the project, findings and analysis
of the project performance with respect to various processes.
8.6.4 Customisation
At times, project management processes need to be customised based on
the requirement of the product. The following are some examples of
customisation:
 Large projects may need details – A detailed project management
plan might be necessary to indicate every detail in the initial stages.
 Smaller projects may need relatively less details – A detailed plan
may not be required in the initial stages.

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 Process details might change for other reasons – Resource

identification might be required for scope definition.
On the whole, it may be possible to represent the processes in general as a
model. The Schematic Flow Diagram of the processes can be represented
as a flow chart. (See Figure 8.11 Flow chart of the processes)

Figure 8.11: Flow chart of the processes

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Self Assessment Questions

Fill in the blanks
13. Process groups consist of _____, planning, _____, controlling, and
______ processes.
14. In the customisation process, smaller projects may need relatively
______ details.

Caselet 1
The cost of an oil refinery facility usually runs into billions of dollars.
The budgeting for these enormous projects involves many complex
engineering and materials considerations. Fluor Corporation - a
multinational engineering, construction and project management firm
in the oil and gas sector - has recently bought an expensive risk
management solution from Palisade. The company project managers
feel the investment in risk management was necessary for them to
deal with the „billion dollar uncertainties‟ in its estimates for clients.

8.7 Summary
After going through this unit, you have learnt:
 The fundamentals of project management and its importance
 The concepts of process and scope of project
 The idea of project cost and its principles
 The planning and scoping necessary in project planning
 The tasks involved and also the tools necessary
 The WBS and also the various process interactions like planning
processes, executing processes, controlling processes and closing
processes
 The customisation process

8.8 Terminal Questions

1. Define project cycle, project management, and scope of project.
2. What are the various project management knowledge areas?
3. What are the reasons for failure of a project?

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4. What are the various roles and responsibilities of various players in

project management?
5. What are the objectives and tasks involved in scoping?
6. Explain WBS.
7. Explain the various interacting processes in project management.

8.9 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. True
2. False
3. True
4. True
5. True
6. Cost, schedule and staff
7. Business and economics
8. True
9. False
10. False
11. Execution
12. WBS
13. Initiating, executing, closing
14. Less

Answers to terminal questions

1. Refer 8.3.3
2. Refer 8.4.1
3. Refer 8.4.3
4. Refer 8.5.6
5. Refer 8.6.1.1
6. Refer 8.6.2
7. Refer 8.7.3

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Unit 9 Project Implementation,

Control and Closure
Structure:
9.1 Introduction
Learning Objectives
9.2 Project Management Life Cycle
Phases of project management life cycle
Analysis and evaluation phase
Marketing phase
Design phase
Execution phase
Control-inspecting, testing and delivery phase
Closure and post completion analysis phase
9.3 Project Monitoring and Control
9.4 Change Control
Changing project management process
Tools for changing process
9.5 Risk Management
9.6 Project Closure
Completion of all activities and benefits
Post implementation review
Final project reporting and documentation
9.7 Summary
9.8 Terminal Questions
9.9 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions

9.1 Introduction
Project managers have to keep in mind the various problems that may be
encountered during the project. Associated with the project could be the
risks that may deter the project processes.

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It is therefore necessary for project managers to understand the controls

that are useful to manage a project. The manager must first understand the
change processes in a project to bring about any changes.
The important aspect of any such process introduction or any change is to
execute it correctly and then to review the process post execution and finally
to document it. In this unit all these aspects are explained.
Learning Objectives
By the end of this unit, you will be able to:
 Explain the project management life cycle and its phases
 Identify the risk in a project
 Manage the risks in projects
 Explain the procedure to monitor and control the project
 List the ways of conducting reviews on project completion
 Explain the documentation procedure of project reports on completion of
project

9.2 Project Management Life Cycle

A life cycle of a project consists of the following steps.
 Understanding the scope of the project
 Establishing objectives of the project
 Formulating and planning various activities
 Executing the project
 Monitoring and controlling the project resources
 Closing and post completion analysis
9.2.1 Phases of project management life cycle
Project management life cycle has six phases:
9.2.1.1 Analysis and evaluation phase
9.2.1.2 Marketing phase
9.2.1.3 Design phase
9.2.1.4 Execution phase
9.2.1.5 Control – inspecting, testing, and delivery phase
9.2.1.6 Closure and post completion analysis phase

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In this section, let us know about the six phases of project management life
cycle in detail. (See Figure 9.1 Project management life cycle)

Figure 9.1: Project management life cycle

9.2.1.1 Analysis and evaluation phase

Analysis and evaluation phase is the initial phase of any project. In this
phase, information is collected from the customer pertaining to the project.
From the collected information, the requirements of the project are
analysed. According to the customer requirement, the entire project is
planned in a strategic manner. The project manager conducts the analysis
of the problem and submits a detailed report to the top management.

Project Manager Analysis Report

The report should consist of the:
 Details of the project justification
 Details on what the problem is
 Methods of solving the problem
 List of the objectives to be achieved
 Estimation of project budget
 Success rate of completing the project
 Information on the project feasibility
 Information of the risks involved in the project

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The important tasks of the project manager during the phase of analysis and
evaluation include:
 Specification Requirements Analysis (SRA): SRA has to be
conducted to determine the essential requirements of a project in order
to achieve the target.
 Feasibility Study: Feasibility study has to be conducted to analyse
whether the project is technically, economically, and practically feasible
to be undertaken.
 Trade-off Analysis: Trade-off analysis has to be conducted to
understand and examine the various alternatives which could be
considered for solving the problem.
 Estimation: Before starting a project, estimation has to be conducted on
the project cost, effort required for the project, and the functionality of
various processes in the project.
 System Design: According to the customer requirement, a general
system design has to be chosen to fulfill the requirements.
 Project Evaluation: The project has to be evaluated in terms of
expected profit, cost, and risks involved.
9.2.1.2 Marketing phase
A project proposal is prepared by a group of people including the project
manager. This proposal has to contain the strategies adopted to market the
product to the customers.
9.2.1.3 Design phase
Design phase involves the study of inputs and outputs of the various project
stages. (See Figure 9.2 Study of inputs and outputs in design phase)
 Inputs received consist of: project feasibility study, preliminary project
evaluation details, project proposal, and customer interviews.
 Outputs produced consist of: system design specifications, functional
specifications of the project, design specifications of the project, and
project plan.

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Figure 9.2: Study of inputs and outputs in design phase

9.2.1.4 Execution phase

In execution phase, the project manager and the team members work on
the project objectives as per the plan. At every stage during the execution,
reports are prepared.
9.2.1.5. Control – inspecting, testing and delivery phase
During this phase, the project team works under the guidance of the project
manager. The project manager has to ensure that the team working under
him is implementing the project designs accurately. The project has to be
tracked or monitored through its cost, manpower, and schedule. The project
manager has to ensure ways of managing the customer and marketing the
future work, as well as ways to perform quality control work.
9.2.1.6 Closure and post completion analysis phase
Upon satisfactory completion and delivery of the intended product or service
the staff performance has to be evaluated. The project manager has to
document the lessons from the project. Reports on project feedback are to
be prepared and analysed. A project execution report is to be prepared.
Let us have a quick recap of what is involved in the above phases.
 Analysis and evaluation phase: The preparation stage involves the
preparation and approval of project outline, project plan, and project
budget.
 Assigning task to the team members: The next stage involves
selecting and briefing the project team about the proposals, followed by

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discussions on the roles and responsibilities of the project member and

the organisation.
 Feasibility study: The feasibility or research stage establishes whether
the project is feasible or not and establishes the risk factors likely to be
faced during the course of the project execution and the related key
factors to overcome the problems.
 Execution phase: A detailed definition and plan for the project and its
execution is prepared by the team and coordinated by the project
manager.
 Implementation stage: The implementation stage involves the
execution of the project as per the plan. This also involves careful
monitoring of the project progress and managing the changes, if any,
within the scope of the project framework.
 Closure and post completion analysis phase: The final stage involves
satisfactory delivery of the product/service to the customers. Upon
completion, a project review is to be conducted by the project manager
along with team members, sponsors, and customers. A project review
process involves discussions about the progress, performance, hurdles
that were overcome and problems faced, so that, such instances could
be avoided in future projects.

Self Assessment Questions

State True or False
1. A life cycle of a project consists of monitoring and controlling the project
resources as one of the phase.
2. SRA has to be conducted to determine the non-essential requirements
of a project in order to achieve the target.

9.3 Project Monitoring and Control

Any project aimed at delivering a product or a service has to go through
phases in a planned manner, in order to meet the requirements. It is
possible to work according to the project plan only by careful monitoring of
the project progress. It requires establishing control factors to keep the
project on the track of progress. The results of any stage in a project,
depends on the inputs to that stage. It is therefore necessary to control all

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the inputs and the corresponding outputs from a stage. A project manager
may use certain standard tools to keep the project on track. The project
manager and the team members should be fully aware of the techniques
and methods to rectify the factors influencing delay of the project and its
product.
To analyse the project, methodologies such as, PERT (Programme
Evaluation Review Technique) and CPM (Critical Path Method) may be
used.
 In the PERT method, one can find out the variance and use the variance
to analyse the various probabilistic estimates pertaining to the project.
 Using the CPM, one can estimate the start time and the finish time for
every event of the project in its WBS (Work Breakdown Structure).
The analysis charts can be used to monitor, control, track, and execute a
project. The various steps involved in monitoring and controlling a project
from start to end are listed below. (See Figure 9.3 Steps for monitoring and
controlling a project)

Figure 9.3: Steps for monitoring and controlling a project

1. Preliminary work: The team members must understand the project

plans, project stage schedule, progress controls, tracking schedules,
summary of the stage cost and related worksheets. All the members
have to understand the tolerances in any change and maintain a change
control log. They must realise the need and importance of quality for

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which they have to strictly follow a quality review schedule and

frequently discuss the quality agendas. They must understand the stage
status reports, stage end reports, stage end approval reports.
2. Project progress: The members must keep a track of the project
progress and communicate the same to other related members of the
project. They must monitor and control project progress, through the use
of regular check points, quality charts, and statistical tables; control the
quality factors which are likely to deviate from expected values as any
deviation may result in changes to the stage schedule. The project
manager ensures that these changes are made smoothly and organises
review meeting with the project management group. Thus all the
members are aware about the progress of the project at all times. This
helps them to plan well in advance for any exigency arising due to
deviation from planned schedule.
3. Stage control: The project manager must establish a project check
point cycle. For this, suitable stage version control procedures may be
followed. The details are to be documented stage wise. Project files
have to be frequently updated with suitable version control number and
revision status should be maintained for each change. Team members
are identified who will exercise controls at various points of the project.
4. Resources: The project manager has to plan the resources required for
various stages of the project. He has to brief both the project team and
the key resources about the objectives of every stage, planned activities,
products, organisation metrics, and the project controls. This increases
the visibility into the project performance and hence a quality control can
be achieved. Allocating a right resource at the right place and the right
time will significantly enhance the efficiency and effectiveness of the
resource.
5. Quality control: Quality control is very important in any project. Quality
control is possible if the project members follow the quality charts and
norms very strictly. The following lists the possible ways to control
quality: (See Figure 9.4 Phases of quality control)

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Figure 9.4: Phases of quality control

 Schedule quality review: Project members are recommended to

schedule the quality review at the beginning and also the end of
every stage. This helps the project manager and team members to
plan well in advance for any unforeseen deviation.
 Agenda for quality review: The project manager should create and
distribute a quality review agenda specifying the objectives,
products, logistics, roles, responsibilities, and time frames. This
increases the effectiveness of the review and also reduces the time
gap.
 Conduct quality review: The quality review is to be conducted in a
structured and formal manner. Quality review should focus on
product development and its quality factors. The project members
should check whether the review meets the prescribed quality
standards.
 Follow-up: Quality review complete product status is to be revised
from ‘In progress’ to ‘Quality review Complete’. Actions planned are
to be strictly followed up to ensure conformity to the standards.
 Review quality control procedures: The project members should
verify that the quality objectives for each product are appropriate.
They should also ensure that all participants are satisfied both with
the process and its outcome.

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6. Progress control: The progress control of a project can be achieved by

considering the following: (See Figure 9.5 Phases of progress control)

Figure 9.5: Phases of progress control

 Monitor performance: The first step for any project control

mechanism is to monitor the progress. There are numerous ways to
monitor and measure various project parameters. For example, the
team members log in details of actual start date, actual finish date,
actual hours worked per task, estimated hours to complete the task,
elapsed time in hours to complete the task, any miscellaneous costs
incurred during a stage. These inputs become the base to monitor
the performance of the project and its stages.
 Update schedule: Update the schedule for:
 Actual start date for tasks started
 Actual finish date for tasks finished
 Actual hours worked per task
 Latest estimated work in hours to complete the task
 Update costs: Update the stage cost summary worksheet with
actual costs incurred during the period and estimated remaining
costs. Miscellaneous costs will be automatically updated from the
scheduler, since they are calculated from actual work.

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 Re-plan stage schedule: Review the tracking Gantt and Cost

workbook and identify any deviation from the baseline. Analyse the
cause of the deviation. Refer back to the project control factors to
help determine the appropriate corrective action and adjust the
schedule accordingly. Determine if the stage has exceeded the
progress, cost and quality tolerance levels agreed with the project
management team. Review status of open issues and determine any
further action required on these issues. Review the status of any
outstanding quality reviews. Review any new change requests.
 Conduct team status review: Conduct a status meeting with the
project team. This is important to bring everyone on the same page
of the project progress. Typically, items for discussion are:
 Achievements of the completed activities
 Planned activities that are incomplete or overdue
 Activities for the next period
 New issues identified in the current period
 Issues closed in the current period
 Summary of results of quality reviews
 Summary of schedule and cost status
 Suggested revisions to the plan
 Create status report: The status report provides a record of current
achievement and immediate expectations of the project. The status
has to be effectively communicated to all concerned parties.
 Create flash report: Summarise the accomplishments for the
month, schedule status, upcoming tasks for the month and any
major issues. Distribute the same to all project team members and
stakeholders.
 Project status reports: As discussed earlier, the status report
provides a record of current achievements and immediate
expectations of the project. This is generated on a regular basis
depending upon the type, requirements and phase of the project.
Typically it is generated for a week. A weekly status report may
include:
 Accomplishments during the period
 Items not completed during the period
 Proposed activities for the next period

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 Any predicted slippage to the stage schedule, along with cause

and corrective action
 Any predicted cost overrun along with cause and corrective
action
7. Approvals: In any project, it is important to have top management or
project sponsors into confidence about all the aspects of the project.
This project stage reviews the decisions taken and actions planned and
get it approved by the top management. The goals of such review are to
improve quality by finding defects and to improve productivity by finding
defects in a cost effective and timely manner. The group review process
includes several stages like planning, preparation, overview of a group
review meeting, rework recommendations and follow-up.
Program Evaluation Review Technique (PERT) Chart
A PERT chart is a project management tool. It is used to schedule,
organise, and coordinate tasks within a project.
PERT chart is a popular project management charting method. Using PERT
chart, the collection of series and parallel tasks performed in complex
projects can be represented as a network diagram. It represents the
activities and milestones of the project. Project network models represent
activities and milestones by arcs and nodes (See Figure 9.6 Example of
PERT chart).

Figure 9.6: Example of PERT chart

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From the figure shown above, we can observe that the:

 Numbered rectangles are nodes and represent events or milestones
 Directional arrows or arcs, represent dependent tasks that must be
completed sequentially
 Diverging arrow directions (1-2 & 1-3) indicate possibly concurrent tasks
 Dotted lines (6-9) indicate dependent tasks that do not require resources
PERT chart is very useful for expecting project completion time and the
probability of completion before a specified date. It is used to estimate the
time start and end dates of an activity. The six steps involved in PERT
planning process are shown in Figure 9.7.

Figure 9.7: Steps involved in PERT planning process

1. Identify the specific activities and milestones: The project

manager should identify and list the specific activities and milestones
of a project. Activities are the tasks required to complete the project.
Milestones are the events marking the start and end of one or more
activity.
2. Determine the proper sequence of the activities: The identified
tasks of a project should be planned in sequence to determine the
activities to be performed. Tabulate the sequenced activities to be
performed for estimating the duration of the activities.

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3. Construct a network diagram: Draw a network diagram

representing the serial and parallel activities, using activities
sequence information.
4. Estimate the time required for each activity: The features of the
PERT for estimating the time required for each activity chart are:
 tO: Optimistic time
 tM: Most likely time
 tP: Pessimistic time
t o 4t m t p
 tE: Expected time = t E 
6
 Variance for each activity completion time is given as
2
 tp to 
V  
 6 
 
 Standard deviation SD is given as SD  V
5. Determine the critical path: Critical path is determined by adding
the times for the activities in each sequence and determining the
longest path in the project. Critical path determines the Earlier Start
Time (EST) and Latest Completion Time (LCT) using the expected
time for the relevant time.
6. Update the PERT chart as the project processes: According to
the project processes, update the PERT chart reflecting the new
situations of the project process.
Caselet 1
A project consists of the 7 activities and the details of the activities are
listed in the table 9.1.
Table 9.1: Project details
Activity Predecessor Probabilistic Time Estimate (wks)
to tm tp
1-2 - 10 13 16
1-3 - 2 5 8
1-4 - 4 6 14
3-2 1-3 5 6 7
3-4 1-3 4 5 6
2-5 1-2, 3-2 10 11 18
4-5 1-4, 3-4 7 9 11
(Cont. in next page)

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(Cont. from previous page)

Determine the project completion time, critical path, and find out the
probability of completing the project in 23 weeks by the variance method.

Solution:
Based on the information given in the table on activities and their
predecessors the network is represented as shown in the figure 9.8:
PERT chart.

1
3 5

Figure 9.8: PERT chart

t o 4t m t p
Calculate the tE for each activity by the formula: t E 
6
Similarly calculate variance and standard deviation (SD) using the
formulas given below:

2
 tp  to 
V   

 6 

SD  V

(Cont. in next page)

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(Cont. from previous page)

The values of tE, V, and SD are tabulated in Table 9.2.

Table 9.2: Values of tE, V, and SD
Probabilistic Time Estimate
Activity tE (d) V SD
(wks)
to tm tp
1-2 10 13 16 13 1 1
1-3 2 5 8 5 1 1
1-4 4 6 14 7 2.78 1.67
3-2 5 6 7 6 0.11 0.33
3-4 4 5 6 5 0.03 0.17
2-5 10 11 18 12 1.78 1.33
4-5 7 9 11 9 0.44 0.67

Calculate the EST and LCT for each node.

Forward Pass Computation:

ESTj = ESTi + dij

Backward Pass Computation:

For the first node - 1, consider EST = 0, LCTi = LCTj - dij

Then,
EST2 = EST1 +d12
EST2 = 0 + 13 = 13 wks
If at any node, there is more than one predecessor, calculate EST for
each one and take the maximum.
Similarly calculate EST for other nodes and tabulate.
EST of node 5 = 25 wks
Now calculate LCT,
LCT2 = LCT5 - d25
LCT2 = 25 - 12 = 13 wks
(Cont. in next page)

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(Cont. from previous page)

Similarly, calculate LCT for other nodes and tabulate.

If at any node, there is more than one successor, calculate LCT for each
one and take the minimum.
Obtain the slack at each node. The slack at a node is given as:
Slack = LCT – EST

Table 9.3, tabulates the values of EST, LCT, and Slack of the five nodes.
Table 9.3: Values of EST, LCT, and Slack
Critical(C) /
NODE EST LCT Slack
Non Critical(NC)
1 0 0 0 C
2 13 13 0 C
3 5 7 2 NC
4 10 16 6 NC
5 25 25 0 C

The activities connecting the critical nodes with slack=0 are the critical
activities. Therefore the critical path is: 1 – 2 – 5

The project completion time is the EST or LCT of node 5. In this problem
it is 25 weeks.

To determine the probability of completing the project in 23 weeks,

consider, TS= 23.

Consider, TE = 25, that is, the project completion time estimated. SD

along the critical path can be calculated as:

SD  Variance:along  critical  path

SD  11.78 1.67

(Cont. in next page)

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(Cont. from previous page)

TS  TE
Then, calculate Z (normal deviate), z
sdcp
23  25
z  1.2
1.67
From normal distribution table,
Area corresponding to z = -1.2 is 11.5
Therefore the probability of completing the project in 23 weeks is 0.115,
which is very low.

Self Assessment Questions

State True or False
3. The project members must keep a track of the project progress and
need not communicate to other related members of the project.
4. Project files have to be frequently updated with suitable version control
number and revision status should be maintained for each change.

9.4 Change Control

Uncertainties are a part and parcel of any project and hence, we need to be
adaptive and flexible enough to accommodate such changes. Controlling
the changes in the project is possible through a proper Change
Management process and using necessary tools for controlling the change.
Change control is necessary to control the increase of work at various
stages of project and to manage effectively the disruptions in the stages, if
any. These factors may affect the progress of the project, resulting in
deviations from the stage schedules, project and stage cost and project
scope.
9.4.1 Changing project management process
The project members should be responsive enough to handle the changes
demanded by the situation. The processes involved in bringing about a
change are the following. The same is also illustrated in figure 9.9.
a) Request for a change: The need for the change is identified first.
Based on the need a formal request is made. This request can come

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from either a member of the project team or a client or a coordinator or

key stakeholder.
b) Identify alternate solutions: Evaluate the change request and identify
several alternative solutions. Assess the alternatives with respect to the
functional scope, schedule, effort, and cost.
c) Decide on the actions for the change: Present the change request,
alternative solutions and recommendation to the project management
team. The project management team is required to accept the
recommendation, choose an alternative solution, or request further
investigation. Based on this a final action plan for the change is
selected.
d) Implement change: Once the project management approves a solution
for the change, make appropriate schedule and other project plan
adjustments to accommodate the change, communicate these to team
members, monitor progress, and execute quality control on the changes.

Figure 9.9: Steps for changing project management process

9.4.2 Tools for changing a process

There are various tools which can be used to bring about a change in a
process. All such tools can be mainly classified into two types – Change
Management System and Configuration Management. (See Figure 9.10
Tools for changing a process)

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Figure 9.10: Tools for changing a process

1. Change Management System (CMS): CMS is a methodology which

requires collection of all formal documented procedures, defining:
 How project performance will be monitored and evaluated
 How project plans could be updated
 How various measures can be implemented to control the change
process
These procedures may be unique to an organisation based on their
project needs. It also includes procedures to handle the changes that
may be approved without prior review, so that the evolution of baseline
can be documented.
2. Configuration Management (CM): Configuration management
involves:
 Identifying the configuration items
 Define the naming and numbering scheme
 Structure the changes
 Define a backup procedure
 Follow the methods for tracking the status of configuration items
 Define the responsibility and authority of the CMS.

Self Assessment Questions

Fill in the blanks
5. ______ is necessary to control the increase of work at various stages
of project.
6. _______ is a methodology which requires collection of all formal
documented procedures, defining how project performance will be
monitored and evaluated.

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9.5 Risk Management

What is Risk?
Risks are those events or conditions that may occur and whose occurrence
has a harmful or negative impact on a project.
What is Risk Management?
Risk management aims to identify the risks and then take actions to
minimise their effect on the project.
Risk management entails additional cost. Hence, risk management can be
considered cost-effective only if the cost of risk management is considerably
less than the cost incurred if the risk materialises.
Four important components in risk management are risk assessment, risk
control, risk prioritising, and risk mitigation. (See Figure 9.11 Components of
risk management)

Figure 9.11: Components of risk management

1. Risk assessment: Risk assessment identifies the possible risks and

assesses the consequences by means of checklists of possible risks,
surveys, meetings and brainstorming, and reviews of plans, processes
and products. The project manager can also use the process database
to get information about risks and risk management on similar projects.
2. Risk control: Identify the actions needed to minimise the risk
consequences. This is also known as risk mitigation. Develop a risk

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management plan. Focus on the highest prioritised risks. Prioritisation

requires analysing the possible effects of the risk event, in case it
actually occurs. This approach requires a quantitative assessment of the
risk probability and the risk consequences. For each risk, determine the
rate of its occurrence and indicate whether the risk is low, medium or of
high category. If necessary, assign probability values in the ranges as
prescribed based upon experience. If necessary assign a weight on a
scale of 1 to 10.
3. Risk prioritising: Rank the risks based on the probability and effects on
the project. For example, a high probability, high impact item will have
higher rank than a risk item with a medium probability and high impact.
In case of conflict use judgment.
4. Risk mitigation: Select the top few risk items for mitigation and tracking.
Refer to a list of commonly used risk mitigation steps for various risks
from the previous risk logs maintained by the project manager and
select suitable risk mitigation step. The risk mitigation steps must be
properly executed by incorporating them into the project schedule. In
addition to monitoring the progress of the planned risk mitigation steps,
periodically revisit the risk perception for the entire project. The results of
this review are reported in each milestone analysis report. To prepare
this report, make fresh risk analysis to determine whether the priorities
have changed.

Self Assessment Questions

State True or False
7. Risks are those events or conditions that may occur and whose
occurrence has a harmful or negative impact on a project.
8. The risk mitigation step must be properly executed by incorporating
them into the project schedule.

9.6 Project Closure

Any project that is planned properly and executed as per the plan will also
close successfully. For successful completion of a project, every aspect of
the project should be monitored and controlled. Such aspects include the
resources used, time and efforts invested and the cost analysis.

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9.6.1 Completion of all activities and benefits

The closure of a project is followed by its analysis and performance
measured against its scheduled baseline version. The closure of a project
may result in the following benefits.
 It implies that on successful completion of a project, it has not drifted
from its intended course and plans. Otherwise, it would have resulted in
a change and may also kick start another project affecting the main
project.
 The project members are acknowledged for the completion of the
project, motivating them to take up more projects, wherein, the members
would be able to confidently handle and take care of all the problems
based upon their learning from earlier project.
 It results in setting up of processes for continued development and
improvement of the final product of any project forthcoming.
 It results in setting up of improved standard process and estimating
models for this type of future projects.
 It enables resource re-deployment.
Moreover, the deliverable at the end of each stage could be:
 A set of specified outputs for each stage of the project
 New products or modified existing product
 Items that may be less easy to distinguish like parameter setup data
transfer, staff training.
9.6.2 Post implementation review
After every stage of a project is implemented, it may so happen that there
could be a minor change or modification which has to be reviewed. This is
known as post implementation review. The review is performed in four parts
as depicted in figure 9.12.
1. Final product review: The product obtained after every stage must
meet the requirements of that stage. If it completely meets the stated
objectives, then focus on the issues of maintenance of the processes
and product performance. If the final product does not completely meet
the objectives then identify the variations in the product and analyse the
variation. Study the factors responsible for the change and evaluate
each one separately.

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2. Outstanding project work review: Many times it is found that there

may be some item of the project which is still not in its stage finished
form. It may be insignificant as it may be a by-product of that stage
which may not be required immediately for the next stage. Then the
items that are open should be resolved and necessary steps be taken to
close such open items.
3. Project review: Every aspect of a project from start to end has to be
reviewed. The objectives, performance criteria, financial criteria,
resource utilisation, slips and gains of time, adherence to the project
definition, and plans have to be reviewed. All such review details and
reports have to be well documented for future use.
4. Process review: Every process is important in any project. One may
review the process to see, if any changes can be made to improve its
performance.

Figure 9.12: Post implementation review

Tools for post implementation review

There are various tools for post project implementation review that may be
considered for improving and developing processes of the project. Reports
are prepared on the same which becomes the basis for all future discussion.
Some of the tools that may be considered for post implementation review
are the final product evaluation, outstanding project work evaluation, project
review questionnaire, and project evaluation. (See Figure 9.13 Tools of post
implementation review)

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1. Final product evaluation: Final product evaluation may be done

through regularly organised meetings and quality reviews.
2. Outstanding project work evaluation: All outstanding works of a
project can be reviewed to check its output quality and performance.
3. Project review questionnaire: Project review questionnaire may
become important if the reviews are to be structured. Group discussion
may be initiated depending upon the points to be discussed.
4. Process evaluation: Evaluation of any process is one of the key issues
of project.

Figure 9.13: Tools of post implementation review

9.6.3 Final project reporting and documentation

After completion of a project stage and the project as a whole, it is
documented. Reports are prepared to indicate the details. The objectives of
the stage and the project and the corresponding plans should be reviewed
and items that are still open should then be closed or resolved. The
outstanding items should be passed on to the person responsible for the
subsequent work. It is necessary to document every stage of the project.
Every review meeting by the project team and any other members of the
project organisation and follow-ups have to be well documented. The risks
that were managed have to be analysed and documented. Also, various
metrics could have been used during the course of the project and during
necessary changes in the stages. Effects of these on the process and on
the corresponding metrics should be evaluated and documented.

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Final project documenting

Some of the outcomes that need to be well documented are:
1. Key stages of the project
2. Project logic diagram
3. Key stages responsibility chart
4. Estimates for all key stages
5. Optimised project Gantt chart
6. Updated and reviewed project risk log
7. Risk management forms for new high risks and project operating
budget
This serves as a baseline for future project reference.

Self Assessment Questions

State True or False
9. The deliverable at the end of each stage could be a set of specified
outputs for each stage of the project.
10. For successful completion of a project every aspect of the project should
be monitored and controlled.

9.7 Summary
After going through this unit, you have learnt about the Project Management
life cycle and its phases. Concepts have been incorporated to make you
learn how to manage the risks in projects and how to monitor and control
the project. Step by step procedures to conduct a project review has been
explained. The procedures for conducting reviews on project completion and
subsequently the documentation of project reports on completion of project
have also been discussed.

9.8 Terminal Questions

1. Explain the various phases in project management life cycle.
2. What are the various steps in project monitoring and controlling a
project?
3. Explain change management systems and configuration management.

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4. Explain Risk management and its various components.

5. Explain the tasks to be done at end of a project.

9.9 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. True
2. False
3. False
4. True
5. Change control
6. CMS
7. True
8. True
9. True
10. True

Answers to Terminal Questions

1. Refer 9.3.1
2. Refer 9.4
3. Refer 9.5.2
4. Refer 9.6
5. Refer 9.7

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Unit 10 Modern Trends in Project

Management

Structure:
10.1 Introduction
Learning Objectives
10.2 Project Management Information System (PMIS)
10.3 Modern Trends in Project Management
Perception
The project development process cycle
Planning for review
Conducting the review
Take actions on findings
Do continuous improvement
Critical success factors
Results and benefits of the project quality reviews
Macro issues
Evolving Key Success Factors (KSF) upfront
Empowerment Title (ET)
Partnering Decision Making (PDM)
Management by Exception (MBE)
Knowledge (K) Factor
10.4 The Modern Mantra of Project Management
10.5 New Horizons in Project Management – Nine Steps
10.6 Summary
10.7 Terminal Questions
10.8 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions

10.1 Introduction
A manager is often faced with the challenges of newer competition arising
out of various business facets. The task is to understand, analyse and
implement methodologies to solve the problem. For this, the manager has to
know the recent trends in the industry. A problem may lead to another

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problem if not addressed properly. Finally, while dealing with that problem,
any lack of knowledge in modern trends may lead to the start of another
project to deal with this problem. This inevitably leads to the delay of the
project submission, exceeds the budget, and does not satisfy the customer
specifications. Therefore, the focus mainly is to understand the problem and
develop new solution techniques and models, to tackle similar problems
today and tomorrow. The procedure to follow is explained by means of
concepts presented in this unit.
Learning Objectives
By the end of this unit, you will be able to:
 Recognise the importance of Project Management Information System
in the organisation
 Identify the modern trends and mantras in project management
 Recall the new horizons in project management

10.2 Project Management Information System (PMIS)

An information system is mainly aimed at providing the management at
different levels with information related to the system of the organisation. It
helps in maintaining discipline in the system.
An information system dealing with project management tasks is the project
management information system. It helps in decision making in arriving at
optimum allocation of resources. The information system is based on a
database of the organisation. A project management information system
also holds schedule, scope changes, risk assessment and actual results.
The information is communicated to managers at different levels of the
organisation depending upon the need. Let us find how a project
management information system is used by different stakeholders.

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Who needs information and why?

Upper managers To know information on all projects regarding
progress, problems, resource usage, costs and
project goals. This information helps them take
decisions on the project. They should review
the projects at each milestone and arrive at
appropriate decision
Project manager To see each project schedule, priority and use
and department of resources to determine the most efficient use
managers across the organisation.
Project team To see schedule, task lists and specification so
members that they know what needs to be done next.

The four major aspects of a PMIS are:

1. Providing information to the major stakeholders
2. Assisting the team members, stakeholders, managers with necessary
information and summary of the information shared to the higher level
managers
3. Assisting the managers in doing what if analyses about project staffing,
proposed staffing changes and total allocation of resources
4. Helping organisational learning by helping the members of the
organisation learn about project management
Usually, the team members, and not the systems administrators of the
company, develop a good PMIS. Organisations tend to allocate such
responsibility by rotation among members with a well designed and
structured data entry and analytical format.
Self Assessment Questions
State True or False
1. An information system dealing with project management tasks is the
PMIS.
2. A good PMIS is possible to be developed from the systems manager
and not from the systems administrators of the company.
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10.3 Modern Trends in Project Management

There are a number of ways a manager can implement a project
successfully. As it is important to monitor and control the project activities
throughout various stages, it becomes much more important to resort to
effective and powerful tools to coordinate the activities. Modern trends in
project management have shown a number of ways that can be considered
to achieve good results in any project. Irrespective of whichever way one
wants to choose for effective outputs, the essential methods are as follows:
 meticulous planning of all the activities
 referring to checklist which could have been creatively designed
 adopting quality control measures and standards
10.3.1 Perception
As per the current trends in project management, the perception is that the
job of a manger is to obtain result. A more result-cum-profit oriented
corporate strategy lays greater emphasis on maximised efficiency of
operations. Some of the tools being used currently are shown in figure 10.1.

Figure 10.1: Corporate strategic tools in project management

Let us discuss each of these tools in brief.

a. Continuous Business Process Improvement: Continuous business
improvement is a process through which a project team passes on the
details of any system as recommendation for standardisation. It acts as
a business process element for the company as a whole. As part of
continuous business process improvement, a project team passes on

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the details of any system as a recommendation for standardisation of

future project processes.
b. Force Field Analysis: The analysis is done by adopting suitable
methods to identify external factors which may affect the project
progress. The external factors are the hurdles in a project. Use of
appropriate processes minimises and eliminates the hurdles resulting in
a smooth flow of activities and project progress. The external forces may
be related to customers, technology change, or shift in trends.
Various analysis techniques and procedures can be used to identify
major external factors or forces which could affect development process.
These forces could be related to customer profiles. The responsibility of
the analysis is entrusted with the senior most member of the team rather
than the leader or manager.
c. Information Risk Management: Various methods can be adopted to
reduce the risks in a project. A proper methodology is one that is based
on the quality control aspect which may even be automated and
integrated into the project process. The risks arising out of corruption,
age, field size variation and format mismatch have to be controlled.
Scientific, analytical and quite often automated system of quality control
of key input data connected with the project help reduce risks in the
project. Responsibility of information risk management normally rests
with the system administrator – a team member or an external member.
d. Management Assurance Measure: Management assurance measure
is a task performed by the project leader to convince management
against wavering. At the same time, it aims at preparing team members
to counter any unexpected storms in the project. This is the greatest
opportunity for a leader to mature and go up the ladder as well as an
equal opportunity for the member to emerge a leader through accepting
a challenge.
Management may consider measures to identify members who would
have managed to face the unexpected hurdles in the project and
overcome them by their creative skills. Some measures may be adopted
to encourage the member. It may be perceived as an opportunity to
promote the member. Many organisations even tend to nominate
leaders for different project teams.

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e. SEI-CMM & ISO Certification: SEI-CMM & ISO Certification is a well

established certification system. An organisation having a certification
will enable the management team to realise the importance of a process
and how effectively projects could be managed smoothly. Several world
organisations, are now working on P-CMM and total quality assurance.
f. Strategic Inflection Point: A real test for the project leader and the
management team is to accurately predict the exact point of the
development process where the team might face a massive problem.
These points may be related to political, geophysical and rarely to time.

Caselet 1
Force filed analysis helped Shiva to change his attitude in his office work.
Shiva never used to rectify his problem inspite of several warnings and
reprimands from his manager. The manager felts that he needed to find a
solution for the errors and behaviour of the Shiva. He felt force field
analysis is the correct option.
The manager began with understanding the forces that act on Shiva‟s
behaviour. He made a list of the driving forces that encourage Shiva to
produce error-free reports. They are:
 Developing fear that poorly written reports will affect his appraisal
 Ensuring that the reports are proofread before submition to the
manager
 Meeting his supervisor‟s expectations
Also, the manager thought of changing the department practices. They
are:
 Reducing closely placed deadlines
 Providing sufficient time for Shiva to proofread
 Allowing Shiva to delegate routine tasks during heavy workload
Authorising overtime when workload increases

10.3.2 The project development process cycle

Every company would be interested to improve their performance over their
previous performances in projects. In order to improve project performance,
the company must assure quality and quality control at every stage of the
project throughout the project life cycle. The various phases which may be

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considered in the development of the process cycle in any project are

shown in figure 10.2.

Figure 10.2: Quality control phases

In this section, let us know in detail about each step in the development of
the process cycle in any project.
10.3.2.1 Planning for review
In this phase the main focus is on collection of data. Data is the main input
requirement of any successful project information system and therefore the
project. The steps to follow in this phase include:
 Preparing a suitable plan for data analysis after the data has been
gathered
 Obtaining necessary commitment from management and team
members to participate actively and take actions on findings
 Ensuring that every project member gives his or her commitment to
participate and deliver the service/product in the project
 Ensuring that review is planned for every stage of the project
 Preparing schedule for each project review
10.3.2.2 Conducting the review
In this phase, the review is conducted as planned in the preceding phase.
The review leader is the project manager.
The steps to conduct the review include:
 Preparing an agenda before the review. The agenda should be well
structured in terms of time and content
 Making necessary arrangements to gather inputs for the review
 Incorporating points, which are external to the project. These external
points have to be well structured to be reviewed

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 Documenting key points of the meeting. A reporter should be

designated for this job
 Formulating an automated checklist for the session. Make use of
flipcharts to collect data from participants
10.3.2.3 Take actions on findings
In this phase, a project team takes actions on the findings of the review
meeting. The steps to follow in this phase include:
 Determining the points which are critical to the project and its
performance
 Having brain storming sessions to discuss critical points
 Making a list of all such items discussed and items suggested
 Grouping the data into categories and then prioritising, either by group
discussion or voting
 Identifying action items
 Assigning the task to a project member or a team
 Setting expectations of scope, investment, time, for each item and
sending a copy to the team
 Following up all the actions
 Placing review reports in the project documents file, in the
quality/productivity departments and in the library
 Making reports available to managers of the life process for similar
projects
10.3.2.4 Do continuous improvement
Continual improvement is one of the management mantras. Every
organisation wants to improve continuously. It is not possible to achieve
improvement unless sufficient measures are adopted to calculate
improvement. The steps to ensure continuous improvement include:
 Encouraging the quality managers to look for quality themes that
emerge from review meetings. The quality managers should highlight
trends and de-escalate chronic problems
 Acting on recommendations from previous projects as reviews are a
continuous check process in the “Plan-Do-Check-Act” cycle of a quality
management cycle

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 Capturing project data to check a retrospective analysis of the progress

and improvement
 Doing periodic project reviews that will trigger mid-project corrections
 Conducting immediate and informal retrospective analysis after solving
unexpected obstacles
 Understanding any impact on the remainder of the project
 Recognising people for extra efforts and noteworthy contributions
 Being open to attend reviews for other projects
 Learning from similar ventures, warranty failures, customer surveys and
experiences of other divisions and companies
 Being a part of continuous organisational learning program that includes
experimentation, evaluation and documentation with easy access and
retrieval
10.3.2.5 Critical success factors
It is necessary that a company identifies critical factors in a project. These
factors may slacken the project if not focused. Some of these success
factors are discussed below.
Routine tasks may be assigned to lower level team members as this may
relieve the project team from wasting their skill set on routine matters.
In terms of project delivery, the project office can relieve project managers
of tasks, like filling forms and templates, getting these forms signed off,
mailing, receiving and checking items.
The project office can also help the project manager in the project scope
definition, project kick-off preparation and planning tasks, through mentoring
and coaching services.
Regarding project quality reviews, the project management office adds
value providing processes, tools and project management experience but
any quality review process can be implemented by the team without
sponsorship from the management level.
These are the combining strengths that make the project manager move
forward and achieve the project success. It is necessary to identify all the
critical success factors. One of the critical success factors for the project
quality review process implementation is to convince and sell the benefits to
the management team of the organisation. The team should exhibit better
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control of their project portfolio and then demonstrate better control about
business profitability.
10.3.2.6 Results and benefits of the project quality reviews
The management expectations are crucial for the project success. However,
the project quality reviews add values to such expectations. The results and
benefits of a project quality review are that it:
 Displays a clear status of the project to the whole organisation
 Creates awareness and room for improvement
 Provides a clear idea about the lack of knowledge mistakes, errors,
deviations, and their reasons by a detailed reviewing process
 Helps the project manager and his/her manager to enable the
necessary adjustments
 Helps the project manager and his/her manager to take the actions
needed to achieve the project goals finishing the project on time,
scope and budget
 Helps the team members to improve themselves and helps to find
benefits for:
 The project manager because the review process will help in
terms of discipline and control
 The customer, because in the way that process is anticipating
results
 The sponsors, because this process helps him to know more
details about the project
The above steps can be represented in the form of a diagram to show
various process items in a project. These diagrams will help in the review
processes to pin point facts and figures of concerns post delivery. Every
flow and process can be studied and reviewed for enhancement in the
product or service deliverable in future.

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Example
Let us consider packing of a tonic bottle in a box. Figure 10.5, represents
the process of packing tonic bottle as a flow chart.

Outer Printed
Bottle Tonic Cap box label

Assemble Stick label

on box

Check the Check the

fitment of cap alignment and
on bottle position of label

Assemble

Packed Tonic
Bottle

Figure 10.5: Packing tonic bottles

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10.3.3 Macro issues

The macro issues of the project management are listed below:
10.4.3.1 Evolving Key Success Factors (KSF) upfront
10.4.3.2 Empowerment Title (ET)
10.4.3.3 Partnering Decision Making (PDM)
10.4.3.4 Management by Exception (MBE)
10.4.3.5 Knowledge (K) Factor
In this section, you will know in more about each of these.
10.3.3.1 Evolving Key Success Factors (KSF) upfront
In order to provide complete stability to fulfilment of goals, a project
manager needs to constantly evaluate the key success factors from time to
time. While doing so, he needs to keep the following aspects of KSFs in
mind:
 The KSF should be evolved based on a basic consensus document
(BCD).
 KSF will also provide an input to effective exit strategy (EES). Exit
here does not mean exit from the project but from any of the drilled
down elemental activities which may prove to be hurdles rather than
contributors.
 Broad level of KSF should be available at the conceptual stage and
should be firmed up and detailed out during the planning stage. The
easiest way would be for the team to evaluate each step for chances
of success on a scale of ten.
 KSF should be available to the management – duly approved by the
project manager – before execution and control stages.
 KSF rides above normal consideration of time and cost – at the levels
encompassing client expectation and management perception – time
and cost come into play as subservient to these major goals.
10.3.3.2 Empowerment Title (ET)
ET reflects the relative importance of members of the organisation at three
levels – Team members, Group leaders, and Managers. (See Figure 10.6
Empowerment title).

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Figure 10.6: Empowerment title

 Team members: Team members are empowered to work within

limits of their respective allocated responsibilities. The major change
from bureaucratic systems is an expectation from these members to
innovate and contribute to time and cost.
 Group leaders: Group leaders are empowered additionally to act
independently towards client expectation and are also vested with
some limited financial powers.
 Managers: Managers are empowered further to act independently
but to maintain a scientific balance among time, cost, expectation
and perception, apart from being a virtual advisor to the top
management.
10.3.3.3 Partnering Decision Making (PDM)
PDM is a substitute to monitoring and control. A senior, with a better
decision making process, will work closely with the project managers and
members of the project. The whole crew will plan together to find out what
best can be done to manage the future better from past experience. A good
tracking system will help the project team accomplish its project goals. The
key here is the active participation of members in the decision making
process.
The ownership is distributed among all, irrespective of levels. However, the
term levels should be avoided here since ownership is not quantifiable. The
right feeling of ownership is important. This step is most difficult since junior
members have to respond and resist to being pushed through sheer
innovation and performance; this is how future leaders would emerge. The
PDM process is made scientific through:

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 Earned Value Management System (EVMS)

 Budgeted Cost of Work Scheduled (BCWS)
 Budgeted Cost of Work Performed (BCWP)
 Actual Cost of Work Performed (ACWP)
10.3.3.4 Management by Exception (MBE)
“No news is good news”. If a member wants help he or she locates a source
and proposes to the manager only if such help is not accessible for free.
Similarly, a member should believe that a team leader‟s silence is a sign of
approval and should not provoke comments through excessive seeking of
opinions. In short leave people alone and let situation perform the
demanding act.
The bend limit of MBE can be evolved depending on the sensitivity of the
nature and size of the project. MBE provides and facilitates better
implementation of effectiveness of empowerment titles. MBE is more
important since organisations are moving toward multi-skilled functioning
even at junior most levels.
10.3.3.5 Knowledge (K) Factor
Knowledge is the most powerful mover of the wheels of progress.
Knowledge (K) factor is an index of the extent to which one can manage
today with yesterdays knowledge content and also the extent to which
today’s knowledge will be used tomorrow.
K factor would render the development process more productive. The K
factor of course, undergoes correction through obsolescence, since,
changes are now phenomenal. However, the corrections are the
opportunities for juniors to access information from new knowledge bases.
Seniority is no more an automate scale for knowledge. It is important for
leaders to recognise the knowledge potential of the younger members. It is
equally important for younger members not to suppress their knowledge
potential from its application.
Finally, as age and experience advance wisdom gains, but knowledge
should always be updated and utilised. It is the task of every team members
to maximise the K factor in all directions.

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Self Assessment Questions

Fill in the blanks
3. Reviews are a check process in the _____ cycle of a quality cycle.
4. The _______ should be evolved based on a basic consensus document.

10.4 The Modern Mantra of Project Management

The modern mantras of production management can be broadly identified
as - Define, Measure, Analyse, Improve, Standardise (DMAIS). (See Figure
10.8 for DMAIS cycle).

These modern mantras help in identifying, evaluating, and selecting the

right improvement solutions for managing a project. The mantras also help
in identifying the critical issues thus assisting the organisation to adapt to
the changes introduced through the implementation of different solutions.

Figure 10.8: DMAIS cycle

The phases associated with each modern mantra of production

management are:
1. Define: benchmark, customer requirement, process flow map, quality
function deployment, project management plan
2. Measure: data collection, defect metrics, sampling
3. Analysis: cause and effect, failure modes and effect analysis,
decision and risk analysis, root cause analysis, reliability analysis
4. Improve: design of experiments, modelling, and robust design

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5. Standardise: control charts, time series, procedural adherence,

performance management, preventive activities
Figure 10.9 displays the various phases of DMIAS.

Figure 10.9: Phases of DMIAS

Self Assessment Questions

Fill in the blanks
5. In DMAIS, „M‟ stands for ______________.
6. In DMAIS, „S‟ stands for ______________.

10.5 New Horizons in Project Management – Nine Steps

The concepts of project management keep evolving as new horizons
become prominent. Figure 10.10 lists some of them.
1. Believing in discontinuity and not continuity with incremental
improvements: Continuity or status quo is a function of quantum of
changes. Incremental improvements are valid only when the rate of
change is not excessive. Modern domains and development processes
are highly dynamic. Project management today demands discontinuity
and greater flexibility, with no hurdles to move into the future. An open
mind towards the unknown is the key. Members are not expected to be
rattled by sweeping changes demanded by the dynamically changing
objectives.

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Figure 10.10: New horizons in project management

2. Owning the problems and sharing the solutions: Experience is

gained through keeping an open mind to problems. Experience is now
not judged by number of years of service but by the number and
complexity of problems owned and solved. The fixed mould mentality of
passing the buck and expecting credit for discoveries is not appreciated
any more.
3. Breaking the status quo mentality: This implies that future is not an
extension of the present and therefore it needs to be tamed. Excessive
focusing on future may not however be appreciated. A proper balance is
a must. In most cases, a conflict between a present – centric manager
and a future centric project leader can only be solved by the innovative
predictive approach of a member – it is usually the member who is more
aware of future bugs and client centric problems.
4. Stepping out of comfortable zone: Momentarily, a member might feel
more comfortable to stay in the comfort zone and refrain from risks.
However, he or she should remember that a team leader has emerged
by stepping out of the comfort zone. On the other hand, if a member
decides to step out of the comfort zone and be innovative and contribute
then this would amount to emergence of a future leader. Promotions are
not time bound any more.

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5. Human capital by passing financial: Human capital has left financial

capital far behind. A member should therefore appreciate and maintain
self realisation of his importance in the organisation. However, to sustain
credibility, the member should remember that his or her value is not
related to the level or the salary but on the quantum of output, again not
on the volume of coding but on the value of the work done to the
product. Combining these two concepts of human capital and value, the
concept of return on the time invested has replaced return on investment
when it comes to valuation.
6. Transform work culture from 5 to 7 dimension: Conventionally we
live among the five dimension – X, Y, Z, time and mind. We need to add
passion and joy if we aim for any substantial progress. It is important for
a member to decide what he or she wants to do. Then the gap between
wish and reality is narrowed and the results can improve. A project could
well become a work of art.
7. Real number of encounters replacing number of years of
experience: The experience level is now judged by the number of
encounters of major problems solved rather than the number of years,
particularly in a typical situation of comparison between lookalikes.
Experience is then counted as wisdom. The secret formula for a
member is to build an inventory of encounters meaningful to his or her
own dream or passion profile.
8. Seeking meaning out of change: Change could be a threat or an
opportunity. If change is resisted, it is essential for the entire team,
through extraordinary team effort and brain storming, to weigh
consequences before drafting of a plan to match proposals for changes.
The key lies in extraordinary inter personal skills and communication.
9. Detachment from the fruits of results: To act is within one‟s control.
To get a reaction or a reward is not within his or her purview. Too much
attention to these factors would result in drop in productivity and further
hinder personal progress. The team members should rather analyse and
discuss among themselves and let results speak for themselves.
One should appreciate that there is every chance that a leader or a
manger can be issued marching orders if he or she fails to recognise

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results of individual performances. After all, it is his responsibility to build

a second line and move up the ladder himself. One matures by quickly
tiding over temporary disappointment with non-recognition and just
continuing.
Most organisations now encourage “presentation” by members as well
as self assessment reports. On the flip side, this may be one of the
reasons for heavy turnover, but the member should remember that he or
she is entering another organisation with greater maturity and perhaps
better chances of moving up. Managements now tend to constantly
watch the balance between retention and attrition.
Self Assessment Questions
State True or False
7. Continuity or status quo is a function of quantum of changes.
8. If a member decides to feel comfortable to step out of the comfort zone
and be innovative and contribute then this would amount to emergence
of a future leader.

10.6 Summary
After going through this unit, you have understood the trends in project
management. Concepts pertaining to developing and implementing new
processes and also the change control process are explained. The concept
of Project Management Information System is explained in this unit.
Students are also exposed to the new horizons in project management. The
concept of macro issues and the knowledge factor is explained with respect
to project management.

10.7 Terminal Questions

1. Explain Project Management Information Systems. What are the
aspects of PMIS?
2. Explain the macro issues involved in Project management.
3. Explain in detail the project development process cycle.
4. What are the modern mantras in project management?

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10.8 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. True
2. False
3. PDCA
4. KSF
5. Measure
6. Standardise
7. True
8. True

Answers to Terminal Questions

1. Refer 10.1
2. Refer 10.2.3
3. Refer 10.2.2
4. Refer 10.3

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Unit 11 Supply Chain Management

Structure:
11.1 Introduction
Learning Objectives
11.2 Domain Applications
11.3 SCM – The Breakthrough Article
Supply chain decisions
Supply chain modelling approaches
11.4 Supply Chain Management
A global perspective
How SCM works?
Definitions of SCM and ISCM
The imperatives
The seven principles
11.5 Views on Supply Chain
11.6 Bullwhip Effect in SCM
11.7 Collaborative Supply Chain
Internet and supply chain
11.8 Inventory Management in Supply Chain
11.9 Financial Supply Chain – A New Revolution within the SCM Fold
11.10 Summary
11.11 Terminal Questions
11.12 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions

11.1 Introduction
Supply Chain Management (SCM) is considered by many experts worldwide
as the ultimate solution towards efficient enterprise management. Many
management failures have been attributed to the lack of a system to bind
various sub-systems within a geographically widespread enterprise, which
true to modern trends, also includes an umbrella of customers, suppliers
and associates. Managers of tomorrow are therefore, expected to raise
themselves above the level of perpetual crisis management to one of
proactive, predictive, and performance-oriented management.

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Need and objectives

SCM is required by an enterprise as a tool to enhance management
effectiveness with the following organisational objectives:
 Reduction of inventory
 Enhancement of participation level and empowerment level
 Increase in functional effectiveness of existing systems like Enterprise
Resource Planning (ERP), Accounting Software, and Documentation
such as Financial reports/ Statements/ISO 9000 Documents
 Effective integration of multiple systems like ERP, communication
systems, documentation system and security
 Design / Research & Development (R&D) systems
 Better utilisation of resources like men, material, equipment, and money
 Optimisation of money flow cycle within the organisation as well as from
external agencies
 Enhancement of value of products, operations, and services. These
enhancements will consequently enhance the profitability of organisation
 Enhancement of satisfaction level of customers and clients, supporting
institutions, statutory control agencies, suppliers and vendors, employees
and executives
 Enhancement of flexibility in the organisation to help in easy
implementation of schemes involving modernisation, expansion and
diversification – even divestments, mergers and acquisitions
 Enhancement of coverage and accuracy of management information
systems

Learning Objectives
By the end of this unit, you will be able to:
 Define supply change management
 Identify the domain applications of SCM
 Explain the various views of SCM
 Recognise the inventory management in SCM
 Explain collaborative supply chain

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Self Assessment Questions

State True or False
1. Supply chain management is considered by many experts worldwide as
the ultimate solution towards efficient enterprise management.
2. The geographic placement of production facilities, stocking points, and
sourcing points is the last step in creating a supply chain.

11.2 Domain Applications

SCM can be easily applied and integrated with:
a. ERP systems
b. Design systems like auto-CAD, Pro-E
c. R&D systems
d. ISO 9000 systems
e. Accounting and financial systems
f. Costing systems
g. Manufacturing systems
SCM implementation involves the certain steps: (See Figure 11.1 Steps
involved for implementation of SCM):

Figure 11.1: Steps involved for implementation of SCM

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1. Study the strengths and weaknesses within the enterprise as well as of

external agencies involved.
2. Understand the organisation objectives.
3. Study the existing systems and identify the gaps and propose solutions
to plug the loopholes.
4. Evolve consensus and test fire individual solutions
5. Integrate solutions which are adjudged successfully into the mainstream.
6. Study overall impact after all proposals in a section are implemented,
review consensus.
7. Finalise SCM document, circulate, and implement the same

Self Assessment Questions

State True or False
3. SCM implementation involves test firing individual solutions as one of
the steps.

11.3 SCM – The Breakthrough Article

No book on SCM can be complete without a reproduction of the path

breaking article from two great names in SCM – Ram Ganeshan and Terry
P Harrison from the Department of Management Science and Information
Systems in Penn State University, University Park, USA.
A supply chain is a network of facilities and distribution options that performs
the function of procurement of materials, transformation of these materials
into intermediate and finished products, and the distribution of these finished
products to customers. Supply chains exist in both service and
manufacturing organisation, although the complexity of the chain may vary
greatly from industry to industry and from firm to firm.
Shown below is an example of a very simple supply chain for a single
product, where raw material is procured from vendor, transformed into
finished goods in a single step and then transported to distribution centers,
and ultimately customers.
 Step 1: Raw materials procured from vendors
 Step 2: Transformed to finished goods
 Step 3: Transported to distribution centers
 Step 4: Supplied to customers

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Realistic supply chains have multiple end products with shared components,
facilities, and capacities. The flow of materials is not always along a defined
path in a network, various modes of transportation may be considered, and
the bill of materials for the end items may be both deep and large.
Traditionally, marketing, distribution, planning, manufacturing, and the
purchasing organisations along the supply chain operated independently.
These organisations have their own objectives and these are often
conflicting. Marketing objectives of high customer service and maximum
sales often conflict with manufacturing and distribution goals. Many
manufacturing operations are designed to maximise throughput and lower
costs with little consideration for the impact on inventory levels and
distribution capabilities. Purchasing contracts are often negotiated with very
little information beyond historical buying patterns. The result of these
factors is that there is no single integrated plan for the organisation, but
there are as many plans as businesses. Clearly there is a need for a
mechanism through which these different functions can be integrated
together. SCM is a strategy through which such integration can be achieved.
SCM is typically viewed to lie between fully vertically integrated firms, where
the entire material flow is owned by a single firm and those where each
channel member operates independently. Therefore coordination between
various players in the chain is the key in its effective management. Cooper
and Ellram (1993) compared SCM to a well balanced and well practiced
relay team. Such a team is more competitive when each player knows how
to be positioned for the hand-off. The relationships are the strongest
between players who directly pass the baton, but the entire team needs to
make a coordinated effort to win the race.
11.3.1 Supply chain decisions
We classify the decisions for supply chain management into two broad
categories: Strategic and Operational Decisions (See Figure 11.2 Supply chain
decisions).

Figure 11.2: Supply chain decisions

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 Strategic decisions are made typically over a longer time horizon.

These are closely linked to the corporate strategy and guide supply
chain policies from a design perspective.
 Operational decisions are short term, and focus on activities over a
day-to day basis. The effort in these types of decisions is to effectively
and efficiently manage the product flow in the strategically planned
supply chain.
There are four major decisions areas in supply chain management:
Location, Production, Inventory, and Transportation and there are both
strategic and operational elements in each of these decision areas. (See
Figure 11.3 Decision areas in SCM)

Location
Transportation

Decision
areas in
SCM

Inventory
Production

Figure 11.3: Decision areas in SCM

a. Location decision: The geographic placement of production facilities,

stocking points, and sourcing points is the natural first step in creating a
supply chain. The location of facilities involves a commitment of

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resources to a long term plan. Once the size, number, and location of
the production are determined, the possible paths of product supply to
the final customer can be determined. These decisions are of great
significance to a firm since they represent the basic strategy for
accessing customer markets. They will have a considerable impact on
revenue, cost, and level of service. These decisions should be
determined by an optimisation routine that considers production costs,
taxes, duties and duty drawback, tariffs, local content, distribution costs,
and production limitations. Although location decision is primarily
strategic, they also have implications on an operational level.
b. Production decision: The strategic decisions include what products to
produce and which plants to produce, in allocation of suppliers to plants,
plants to distribution control system (DCS), and then DCS to customer
markets. As said before, these decisions have a big impact on the
revenues, costs, and customer service levels of the firm. These
decisions assume the existence of the facilities, but determine the exact
path through which a product flows to and from these facilities. Another
critical issue is the capacity of the manufacturing facilities – and this
largely depends on the degree of vertical integration within the firm.
Operational decisions focus on detailed production scheduling. These
decisions include the construction of the master production schedules,
scheduling production on machines, and equipment maintenance. Other
considerations include workload balancing, and quality control measures
at a production facility.
c. Inventory decisions: Inventory decisions refer to means by which
inventories are managed. Inventories exist at every stage of the supply
chain as either raw material, semi-finished or finished goods. They can
also be in process between locations. Their primary purpose is to buffer
against any uncertainty that might exist in the supply chain. Since
holding of inventories can cost anywhere between 20 to 40 percent of
their value, their efficient management is critical in supply chain
operations. It is strategic in the sense that top management sets goals.
However, most researchers have approached the management of
inventory from an operational perspective. These include deployment
strategies control policies – the determination of the optimal levels of
order quantities and reorder points, and setting safety stock levels, at
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each stocking location. These levels are critical, since they are primary
determinants of customer service levels.
d. Transportation decisions: Transportation decisions are closely linked
to the inventory decisions, since the best choice of the mode is often
found by trading-off the cost of using the particular mode of transport
with the indirect cost of inventory associated with that mode. While air
shipments may be fast, reliable, and warrant lesser safety stocks, they
are expensive. Meanwhile shipping by sea or rail may be much cheaper,
but they necessitate holding relatively large amounts of inventory to
buffer against the inherent uncertainty associated with them. Therefore,
customer service levels and geographic location play vital roles in such
decisions. Since transportation is more than 30 percent of the logistics
costs, operating efficiently makes good economic sense. Shipment
sizes, routing and scheduling of equipment are the keys in effective
management of the firm’s transport strategy.
11.3.2. Supply chain modelling approaches
Clearly each of the above two levels of decisions require a different
perspective. The strategic decisions are, for the most part, global or “all
encompassing” in that they try to integrate various aspects of the supply
chain. Consequently, the models that describe these decisions are huge
and require a considerable amount of data. Often due to the enormity of
data requirement, and the broad scope of decisions, these models provide
approximate solutions to the decisions they describe. The operational
decisions meanwhile address the day-to-day operation of the supply chain.
Due to their narrow perspective, these models often consider great details
and provide very good, if not optimal solutions to the operational decisions.
To facilitate a concise review of the literature, and at the same time
attempting to accommodate the above polarity in modelling, we divide the
modelling approaches into three areas:
1. Network design methods
2. Rough cut methods
3. Simulation based methods
The network design methods, for the most part, provide normative models
for the more strategic decisions. These models typically cover the four major

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decision areas described earlier and focus more on the design aspect of the
supply chain, the establishment of the network and the associated flows on
them.
Rough cut methods on the other hand give guiding policies for the
operational decisions. These models typically assume a single site and add
supply chain characteristics to it, such as explicitly considering the sites’
relation to the others in the network.
Simulation method is a method by which a comprehensive supply chain
model can be analysed, considering both strategic and operational
elements. However, one can only evaluate the effectiveness of a pre-
specified policy rather than develop new ones. Let us know in detail of the
three modelling approaches in this section.
1. Network design methods: As the very name suggests, these methods
determine the location of production, stocking and sourcing facilities and
paths for the delivery. Such methods tend to be large scale, and are
used generally at the inception of the supply chain. The earliest work in
this area, although the term supply chain was not in vogue, was by
Geoffrion and Graves (1974). They introduced a multi commodity
logistics networks design model for optimising annualised finished
product flows from plants to the DCS and from DCS to the final
customers. Breitman and Lucas (1987) attempt to provide a framework
for a comprehensive model of a production distribution system, Planets,
that is used to decide what products to produce, where and how to
produce it, which markets to pursue and what resources to use. Parts of
this ambitious project were successfully implemented at General Motors.
These network design methods add value to the firm in that they lay
down the manufacturing and distribution strategies far into the future. It
is imperative that firms at one time or another make such integrated
decision, encompassing production, location inventory, and
transportation. Thus, such models are indispensable. They are often
difficult to solve optimally. Most of the models in this category are largely
deterministic and static in nature. Additionally, those models that
consider stochastic elements are very restrictive in nature. Finally, there
does not seem to be a comprehensive model yet that is representative
of the true nature of material flows in the supply chain.

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2. Rough cut methods: These models form the bulk of the supply chain
literature, and typically deal with the more operational or tactical
decisions. Most of the integrative researches in the literature seem to
take on an inventory management perspective. In fact, the term “Supply
Chain” first appears in the literature as an inventory management
approach. The thrust or the rough cut models is the development of
inventory control policies, considering several levels or echelons
together. These models have come to be known as multi level or multi
echelon inventory control models. For a review the reader is directed to
Vollman et al.(1992)
Multi echelon inventory theory has been very successfully used in
industry. Cohen et al (1990) describe “OPTIMIZER” one of the most
complex models to date – to manage IBM’s spare parts inventory. They
develop efficient algorithms and sophisticated data structures to achieve
large scale systems integration.
Although current research in multi-echelon based supply chain inventory
problems shows considerable promise in reducing inventories with
increased customer service, the studies have several notable limitations.
First, these studies largely ignore the production side of the supply
chain. Their starting point, in most cases, is a finished goods stockpile,
and policies are given to manage these effectively. Since production is a
natural part of the supply chain, there seems to be a need for models
that include the production component in them.
Second, even on the distribution side, almost all published research
assumes an arborescence structure, that is, each site receives re-supply
from only one higher level site but can distribute to several lower levels.
Third, researchers have largely focused on the inventory system only. In
logistics, system theory, transportation, and inventory are primary
components of the order fulfillment process in terms of cost and service
levels. Therefore, companies must consider important interrelationships
among transportation, inventory, and customer services in determining
their policies.
Fourth, most of the models under the inventory theoretic paradigm are
very restrictive in nature, that is, mostly they restrict themselves to

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certain well known forms of demand or lead time or both, often quite
contrary to what is observed.
3. Internet and Supply Chain: Before widespread expansion of the
internet, most supply chains were operated according to the so called
Traditional Model, where companies doing business together did so
directly.
With the internet emerging as an important way to conduct business, an
alternative model has emerged, often called the Net Model, in which
intermediate nodes link many buyers and sellers. These internet nodes
can be exchanges or e-hubs.
Using the internet for information sharing and coordination will generally
result in lower inventory levels; a variety of factors lead to this result. To
the extent that the internet speeds up the administrative portion or
ordering, reduced lead times will tend to reduce safety stocks required in
the systems. In addition, if partners in the chain do collaborative
forecasting then, forecast errors would be expected to drop, again
reducing safety stocks.
The auction and reverse auction aspects of e-marketplaces provide the
opportunity for lower prices of purchased materials and components.
Various companies have had experience in this area, and for standard
parts and components the internet has provided the buyer with an
opportunity to reach a much larger set of potential suppliers. Generally
in such a situation the final prices tend to be lower than before. With a
large number of potential suppliers there is likely to be some supplier
who is willing to take a somewhat lower price for a variety of reasons:
current excess supply of raw materials or requirement for positive cash
flow are common examples.
Another way to achieve cost reduction is to improve logistics
management. The internet makes it possible to share real-time or
dynamic information with all parties, so that for example, a truck making
multiple deliveries can have its drop off load quantities dynamically
updated as time passes and customer demands alters target delivery
quantities at each store. Satya Instruments have recently implemented
an extensive planning and supply demand matching optimisation tool

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using the internet. Every two days they do a global supply/demand

match for over 45,000 products produced in 56 factories worldwide. 70%
of their customer orders are now online. They provide real time order
status information. Their system has factory level planning optimisation
with global inventory visibility.
The results of this improvement are a two-week reduction in customer
delivery times and an increase in factory utilisation of 2%. A two week
reduction in customer delivery times is clearly beneficial from a
competitive stand point. Also, while the increase in factory utilisation
may sound small, the impact of such a change on profitability is much
larger than 2% since one is earning additional revenue without any
increase in corresponding production capacity costs.

Self Assessment Questions

State True or False
4. The decisions for supply chain management are classified into two
broad categories – strategic and operational.
5. The strategic decisions are, for the most part, global or “all
encompassing” in that they try to integrate various aspects of the supply
chain.

11.4 Supply Chain Management

11.4.1 A global perspective
SCM is the practice of coordinating the flow of goods, services, information,
and finances as they move from raw materials to parts supplier to
manufacturer to wholesaler to retailer to consumer. This process includes
order generation, order taking, information feedback and the efficient and
timely delivery of goods and services. In the simplest terms, SCM lets an
organisation get the right goods and services to the place they are needed
at the right time, in the proper quantity and at an acceptable cost. Efficiently
managing this process involves overseeing relationships with suppliers and
customers, controlling inventory, forecasting demand and getting constant
feedback on what is happening at every link in the chain.

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11.4.2. How SCM works?

The supply chain involves several elements such as, Location, Production,
Inventory, and Transportation. (See Figure 11.4 Elements of supply chain)

Location

Elements
Transportation of Supply Production
Chain

Inventory

Figure 11.4: Elements of supply chain

 Location: It is important to know where production facilities, stocking

points, and sourcing points are located. These determine the paths
along which goods will flow.
 Production: An organisation must decide what products to create at
which plants, which suppliers will service those plants, which plants will
supply specific distribution centers and sometimes, how goods will get to
the final customer. These decisions have a big impact on revenue, costs
and customer service.
 Inventory: Each link in the supply chain has to keep a certain inventory
or raw materials, parts, subassemblies and other goods on hand as a
buffer against uncertainties and unpredictability. Shutting down an
assembly plant because an expected part shipment didn’t arrive is
expensive. But inventory costs money too, so it is important to manage
deployment strategies, determine efficient order quantities and reorder
points, and set safety stock levels.

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 Transportation: How do materials, parts, and products get from one link
in the supply chain to the next? Choosing the best way to transport
goods often involves trading off the shipping cost against the indirect
cost of inventory. For example, shipping by air is generally fast and
reliable. Shipping by sea or rail will likely be cheaper, especially for bulky
goods and large quantities, but slower and less reliable. So if you ship
by sea or rail, you have to plan further in advance and keep larger
inventories than you do if you ship by air.
Managing the chain: Once you have determined all the elements in the
supply chain, how do you manage the chain? There are three main paths in
the process: product flow, information flow, and financial flow. (See Figure
11.5 Managing the chain)

1. Product flow includes the movement of goods from a supplier to a

customer, as well as customer returns
2. Information flow involves transmitting orders and updating the status of
delivery
3. Financial flow consists of credit terms, payments and payment
schedules, plus consignment and title ownership
Juggling these elements involves record-keeping, tracking, and analysis by
many departments. Supply chain softwares, especially large, integrated
packages, combine many different technologies to give a single view of
supply chain data that can be shared with others. SCM applications fall into
two main categories – planning applications and execution applications.
Planning applications determine the best way to route materials and the
quantities of goods needed at specific points. When such applications work
well, they make possible the Just-In-Time delivery of goods. Execution
applications track financial data the physical status and flow of goods, and
ordering and delivery of materials.

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Figure 11.5: Managing the chain

A relatively new SCM option involves web based software with a browser
interface. Several major websites now offer auctions and other electronic
marketplaces for buying and selling goods and materials. Also, web-based
application service providers are now promising to provide part or all of the
SCM services for companies that rent their services.
SCM is so big that it can be difficult to plan the deployment of such a
system. Just remember, a chain connects one link to the next and an SCM
implementation can proceed similarly. Each added link brings more
efficiency.
When all of the links are in place and when the information, goods, and
finances are flowing properly, the benefits are enormous. This is truly a case
in which the whole is greater than the sum of its parts.
Implementation of SCM: Implementation is in the form of various
interconnected functional blocks of an organisation through which a smooth
flow of the product development is possible. A list of few of such functions is
given: Business processes, Sales and marketing, Logistics, Financing,
Purchasing, Customer Relationship Management (CRM), Manufacturing
strategy, Costing, Demand planning, Trade-off analysis, Environmental
requirements, Process stability, Integrated supply, Supplier management,
Product design, Suppliers, Customers, Material specifications.

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11.4.3. Definitions of SCM and ISCM

Supply chain is an integrated process where raw materials are transformed
into final products, then delivered to customers.
– Beamon (1999)
A system whose constituent parts include material supplies, production
facilities, distribution services and customer linked together by feed forward
flow of materials and feedback flow of information.
– Berry (1995)
An integrating process based on flawless delivery of basic and customised
services.
– Kalakota (2000)
Supply chain is a process of strategically managing the movement and
storage of materials, parts and finished inventory from suppliers through the
firm and on to the customers.
– Johnson (1995)
Supply chain is a network of facilities and distribution options that performs
the functions of procurement of materials, transformation of these materials
into intermediate and finished products, and distributions of products to
customers.
– Ganeshan and Harrison (1999)
Integrated Supply Chain Management (ISCM): ISCM is the process to
integrate and manage the SCM as one entity. Its constituent parts include
suppliers, production, distribution, services, and customers’. These entities
are linked together by the feed forward flow of material and feedback flow of
information, to satisfy customer needs at reasonable cost and best practices
involved in the fields related to these constituent parts.
11.4.4 The imperatives
The important aspects of SCM that require a great attention by managers
working on SCM are:
a. The level of competition existing in the market and the impact of
competitive forces on the product development
b. Designing and working on a strategic logic for better growth through
value innovation

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c. Working out new value curve in the product development along with
necessary break point
d. Using IT to analyse markets and the economies in product design
e. Time, customer, quality of product and the concept of survival of fittest
11.4.5 The Seven Principles
Seven Principles of SCM are:
1. Group customer by needs: Effective SCM groups customers by
distinct service needs, regardless of industry and then tailors services to
those particular segments
2. Customise the logistics network: In designing their logistics network,
companies need to focus on the service requirement and profit potential
of the customer segments identified
3. Listen to signals of market demand and plan accordingly: Sales and
operations planners must monitor the entire supply chain to detect early
warning signals of changing customer demand and needs. This demand
driven approach leads to more consistent forecast and optimal resource
allocation
4. Differentiate the product closer to the customer: Companies today
no longer can afford to stockpile inventory to compensate for possible
forecasting errors. Instead, they need to postpone product differentiation
in the manufacturing process closer to actual consumer demand. This
strategy allows the supply chain to respond quickly and cost effectively
to changes in customer needs
5. Strategically manage the sources of supply: By working closely with
their key suppliers to reduce the overall costs of owning materials and
services, SCM maximises profit margins both for themselves and their
suppliers
6. Develop a supply chain wide technology strategy: As one of the
cornerstones of successful SCM, information technology must be able to
support multiple levels of decision making. It also should afford a clear
view and ability to measure the flow of products, services, and
information
7. Adopt channel spanning performance measures: Excellent supply
chain performance measurement systems do more than just monitor

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internal functions. They apply performance criteria to every link in the

supply chain – criteria that embrace both service and financial metrics

Self Assessment Questions

Fill in the blanks
6. ______ is the practice of coordinating the flow of goods, services,
information and finances as they move from raw materials to parts
supplier to manufacturer to wholesaler to retailer to consumer.
7. ______ is the process to integrate and manage the SCM as one entity.

11.5 Views on Supply Chain

The important views on supply chain are:
 SCM is an integrated process transforming raw materials into finished
products which are then delivered to the customer
 SCM is a system consisting of material supplies, production facilities,
distribution services, and customers which are tied together resulting in
material flow and information flow in the system
 SCM is a dynamic system of interconnected and interdependent
individuals, groups, companies, organisation, and relationships aimed at
satisfying the customers
 SCM optimises information and product flows from the purchase of raw
materials to the delivery of finished goods with a vision of achieving
significant strategic objectives involving productivity, quality, innovative
service, and collaborations
 SCM is a process of strategically managing the movement and storage
of materials, parts and finished inventory from suppliers through the firm
and on to the customers or an integrating process based on flawless
delivery of basic and customised services

11.6 Bullwhip Effect in SCM

An organisation will always have ups and downs. It is necessary that the
managers of the organisation keep track of the market conditions and
analyse the changes. They must take decisions on the resources and make
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necessary changes within the organisation to meet the market demands.

Failing to do so may result in wild swings in the orders. This may adversely
affect the functioning of the organisation resulting in lack of coordination and
trust among supply chain members. The changes may affect the information
and may lead to demand amplification in the supply chain. The Bullwhip
effect is the uncertainty caused from distorted information flowing up and
down the supply chain. This has its affect on almost all the industries, poses
a risk to firms that experience large variations in demand, and also those
firms which are dependent on suppliers, distributors and retailers. A
Bullwhip effect may arise because of:
 Increase in the lead time of the project due to increase in variability of
demand
 Increase in the stocks to accommodate the increasing demand arising out
of complicated demand models and forecasting techniques
 Reduced service levels in the organisation
 Inefficient allocation of resources
 Increased transportation cost
How to prevent it?
Bullwhip effect may be avoided by one or more of the following measures:
 Avoid multiple demand forecasting
 Breaking the single orders into number of batches of orders
 Stabilise the prices, avoid the risk involved in overstocking by
maintaining a proper stock
 Reduce the variability and uncertainty in Point Of Sale (POS) and
sharing information
 Reduce the lead time in the stages of the project
 Always keep analysing the past figures and track current and future
levels of requirements
 Enhance the operational efficiency and outsourcing logistics to a
capable and efficient agency

Self Assessment Questions

Fill in the blanks
8. The _____ is the uncertainty caused from distorted information flowing
up and down the supply chain.

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11.7 Collaborative Supply Chain

An organisation has to manage the flow of all the items in its supply chain.
Supply chain is the flow of materials, information, money, and services from
various sources to the customers. The total supply chain process can be
categorised into three types: Upstream supply chain, Internal supply chain,
and Downstream supply chain.
1. Upstream supply chain (or) Inbound logistics: Upstream supply
chain are the activities of a manufacturing company with its suppliers
2. Internal supply chain (or) In-house processes: Internal supply chain
is the activities that are undergone with-in the manufacturing company
for transformation of the inputs from the suppliers to the outputs
3. Downstream supply chain (or) Outbound logistics: Internal supply
chain involves activities in delivering the products to the final customers.
11.7.1 Internet and Supply Chain
In the present scenario, it is very difficult for any organisation to meet the
pace of the industry in meeting and supply the demanded service or
product. Technology has become one of the integral components of any
organisation to help the organisation in keeping up with the pace of ever
growing demands. Internet is one such technological invention which
organisations have greatly benefited from. It is necessary for organisation to
realise the significance of internet and its advantages and collaborate with
various agencies to get the best service for their product.
The collaborative use of technology to improve the operations of supply
chain activities as well as the management of supply chains is known as
collaborative supply chain. The success of the supply chain depends on:
1. The ability of all supply chain partners to view partner collaboration as a
strategic asset
2. Information visibility along the entire supply chain and help in integrating
the supply chain elements
3. Collaboration for the purpose of achieving efficient consumer response.
Some of the characteristics of good collaborators are that they are
flexible, proactive, dependable, professional, dedicated, efficient,
innovative, and have problem solving attitude, and good after sales
service

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Electronic tools used in communication helps the companies to store

information and demonstrate their product capabilities to the world through
their website. Companies can use the internet technology to network their
units located at different geographical locations situated thousands of
kilometers away and share information within fraction of seconds as though
they are sitting inside on building. Such is the power of internet.
Organisation can think of setting up special networks to manage their
operations on the net. Issues such as broadband connectivity, compatibility,
security and scalability can be easily addressed with the technology
available. Corporate portals can be setup, which can then offer employees,
business partners and customers an organised focal point for their
interactions with the firm. Portals may be generic (for customers, and
employees) in nature or functional (storing, retrieving, and querying) or
collaborative.

11.8 Inventory Management in Supply Chain

Inventory refers to a detailed list of all the items in the stock. It refers to the
working capital. It is necessary to manage the uncertainty and risks involved
in the usage of the stock items. Inventory refers to any stored resource
which is used to satisfy a current or a future need, also known as normal
inventory for current needs and buffered inventory for future needs.
Inventory is an expensive and important resource management technique.
Many times companies minimise costs by reducing the inventory levels.
However, often the customers become highly dissatisfied with it because of
stock-out. Companies could make a balance between extreme levels of
inventory by balancing the costs and gains. Inventories protect against
demand and lead time uncertainties. Suitable methods can be adopted to
manage the inventory. Methods are usually deterministic or non
deterministic in nature. Probabilistic models can also be considered to
analyse an inventory problem. Economic Order Quantity (EOQ) may be
computed which enables a company to maintain a balance between holding
cost and ordering/carrying cost. For analysis, one may consider the ABC
analysis, VED (Vital, Essential, Desirable) analysis, and HML (High,
Medium, Low) analysis for managing the inventory. These techniques add
value to the supply chain.

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Self Assessment Questions

State True or False
9. The collaborative use of technology to improve the operations of
supply chain activities as well as the management of supply chains is
known as collaborative supply chain.
10. Inventory Management is necessary to manage the certainties
involved in the usage of the stock items.
11.9 Financial Supply Chain – A New Revolution within the SCM
Fold
It is not possible to realise an effective SCM without streamlining the
balance among inflows, outflows, and parking of funds. The main objective
of financial supply chain management is:
1. Fiscal discipline and control: To create awareness among
functionaries regarding the need to realise the importance of
conservation of funds and maintain their own internal system and to
exercise as system of scientific control of utilisation of funds
2. Integrated networking of information: A well designed SCM could be
made to function better through a scientifically designed system of
information networking
3. Multi-dimensional financial management cockpit: While it is
extremely difficult for the most efficient finance manager to take
decisions, SCM would be in a position to place him a management
cockpit to take decisions easily
4. Control of inventory and idling of assets: SCM integration with
finance will provide an ideal platform for clarity with regard to the exact
level of inventory which is the bane of any organisation. The top
management will then the provided with greater clarity with regard to the
balance between justified and unjustified inventory. The finance
manager through SCM would be in a position to provide proactive
guidelines to various functionaries.

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Self Assessment Questions

Fill in the blanks
11. ________ may be avoided by multiple demand forecasting.
12. With the internet emerging as an important way to conduct business,
an alternative model has emerged, often called the ______, in which
intermediate nodes link many buyers and sellers.

Caselet 1
Whirlpool in the year 2000 was widely expanded worldwide. Due to the
expansion and acquisition, the company lead to high inventories and low
customer satisfaction. The supply of the products was reduced to a
greater extent. Also inventories began to raise. Company’s supply
systems such as, SAP ERP system was not well integrated.
Whirlpool feel fine-gaining of the supply chain system was necessary. In
2001, Whirlpool implemented an Advanced Planning and Scheduling
(APS) system. The suit consists of supply chain integration and
optimisation tools from i2 -- Supply Chain Planner for Master Scheduling,
Deployment Planning and Inventory Planning. The three modules
overhauled the supply chain system.

11.10 Summary

After going through this unit, students would have understood the concept
behind supply change management and its domain applications. The unit
brings out the various views of SCM along with the thrust on inventory
management in SCM. The need to collaborate and the importance of
Collaborative Supply Chain is brought out in this unit. The Bullwhip effect in
SCM is explained through simple concepts. The importance of internet and
SCM is explained. Students are also exposed to the new revolution within
the SCM fold of financial supply chain.

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11.11 Terminal Questions

1. Explain the necessity and objectives of SCM.
2. What are the steps involved in SCM implementation?
3. Explain the operational and strategic classification of SCM decision
making.
4. What are the seven principles of SCM?
5. Explain what is meant by bullwhip effect and how to prevent it.
6. What is the significance of collaborative SCM?

11.12 Answers to SAQs and TQs

Answers to Self Assessment Questions
1. True
2. False
3. True
4. True
5. True
6. SCM
7. ISCM
8. Bullwhip effect
9. True
10. False
11. Bullwhip effect
12. Net Model
Answers to Terminal Questions
1. Refer 11.1
2. Refer 11.3
3. Refer 11.4
4. Refer 11.5.4
5. Refer 11.7
6. Refer 11.8

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Unit 12 Material Handling

Structure:
12.1 Introduction
Learning Objectives
12.2 Balancing Material Flow
The line balancing problem
Johnson’s algorithm of sequencing
CDS algorithm for n jobs on m machines
12.3 Principles, Practices and Advanced Analysis for Order Picking
Equipments
Design consideration
12.4 Considerations when Planning and Implementing Integrated Material
Handling Systems
12.5 Ergonomics and Material Handling: A Task Oriented Assessment of
Needs and Solutions
12.6 Approaches for Shop Floor Sequencing of Material Handling Jobs
12.7 Summary
12.8 Terminal Questions
12.9 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions

12.1 Introduction
Material handling is an integral part of production and operations
management. Material Handling is defined as the movement, storage,
control, and protection of materials, goods, and products throughout the
process of manufacturing, distribution, consumption, and disposal.
The objective is to make the everyday businesses more efficient and cost
effective. The need is even more prevalent today owing to the globalisation.
Globalisation has compelled companies to seek specialised suppliers from
various countries. Assemblies take place at different locations and
distribution is across the world. Suppliers deliver the required quantities to
the places where they are required for further processing or assembly. To
reduce inventory, only required quantities have to be made and delivered at
appropriate times.
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This necessitates that flow lines are smooth. Balancing flow lines, different
equipments to achieve the same, and preparing layouts to achieve these is
the subject matter of this unit.
Learning Objectives
By the end of this unit, you will be able to:
 Recognise the importance of a good layout in enabling efficient material
handling
 Identify the principles involved in designing Integrated Material Handling
Systems
 Describe the movements of a human body when subjected to different
forces while handling material
 Recall the ways to balance the loads efficiently by regulating the
material flow

12.2 Balancing Material Flow

Production lines have a number of work centres in a particular sequence, so
that the material that gets processed has to move further without
encountering any bottlenecks. The factors taken into account during
production for material flow are: (See Figure 12.1 Factors influencing material
flow)
 Quantities produced
 Rate of production at each centre
 Number of operations
 Total production required

Fig. 12.1: Factors influencing material flow

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The purpose of balancing is to see that no shortages occur between work

centres and minimum inventory gets created. We use the principles of JIT
and Lean Manufacturing to achieve these. Linear programming, dynamic
programming, and other mathematical models are used to study material
flow problems. Some computer-efficient approximate algorithms have been
developed to help the material flow process.
12.2.1 The line balancing problem
Assembly lines are best suited for the study and analysis of the line
balancing problem, called Assembly Line Balancing (ALB). Ghosh and
Gagnon categorised the ALB problems into four categories – Single Model
Deterministic, Single Model Stochastic, Multi/Mixed Model Deterministic,
and Multi/Mixed Model Stochastic.
1. Single Model Deterministic (SMD): SMD model assumes that, the one
product that passes through the dedicated line has all tasks’ times
known. This model is useful when automatic machines or operations
have their times predictable with certainty.
2. Single Model Stochastic (SMS): SMS model allows the task times to
be variable. This is applicable when a single product goes through
machines where manual content is more, and the operations do not
have definite periods. Determining locations and sizes of buffers
required to keep the throughput is the purpose of this model.
3. Multi/Mixed Model Deterministic (MMD): In MMD case, task times are
known, but we have many products that go through the line. The
products are assembled in batches.
4. Multi/Mixed Model Stochastic (MMS): Here, the task times are
variable and we have many products that go through the production line.
The problem of balancing such lines is more. Decomposition of the
assembly into sub-assemblies, and having advanced handling
equipment may help to make inventories small and keeping the flow line
smooth.
Generally, the criteria for all the above cases are technical and economic
ones. The technical criterion seeks to maximise the line efficiency, that is,
throughput. The economic criteria can be minimised by minimising the:
 Number of workstations
 Number of operators
 Quantum of buffers
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Many times, a trade-off may be necessary. It is for the operations manager

to balance between the two competing requirements.
12.2.2 Johnson’s algorithm of sequencing
Johnson’s algorithm is used for sequencing of n jobs through two work
centres. The purpose is to minimise idle time on machines and reduce the
total time taken for completing all the jobs.
Let us consider an example to have a clear idea of the Johnson’s algorithm
of sequencing. When you are standing in line of a super market counter to
pay for 1 juice bottle and if the person standing before you with a basket full
of groceries allows you to go ahead to pay first, then you will feel that you
have saved 5 minutes of your time. If the one before you does not let you
pay first then probably, you might have to spend 5 more minutes to get your
turn to pay for a bottle of juice which takes just half a minute. Thus, if the
one before you allows you to pay first then he is using a well known rule for
scheduling single processor systems.
The same principle is being used in Johnson’s algorithm. As there are no
priority rules since all job have equal priority, sequencing the jobs according
to the time taken may minimise the idle time taken by the jobs on machines.
This reduces the total time taken.
The algorithm can be fulfilled in the following steps.
1. Step 1: Find the minimum among the time taken by machine 1 and 2 for
all the jobs.
2. Step 2a: If the minimum processing time is required by machine 1 to
complete the job, place the associated job in the first available position
in the final sequence. Then go to step 3. (If it is a tie you may choose
either of them, for applying the above rule.)
3. Step 2b: If the minimum processing time is required by machine 2 to
complete the job, place the associated job in the last available position
in final sequence. Then go to step 3. (If it is a tie you may choose either
of them, for applying the above rule.)
4. Step 3: Remove the assigned job from consideration and return to step
1 until all the positions in the sequence are filled.
The above algorithm can also be analysed using the flowchart given below
in figure 12.2.

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Start

Find the minimum processing

time among various ti1 and ti2.

Machine 1 For which machine Machine 2

is the processing
time required,
minimum?

Place the associated job Place the associated

in the first available job in the last available
position in sequence. position in sequence.

Remove the assigned

job from consideration

Positions in
the sequence
Yes are filled? No

Sequence
obtained and end

Fig. 12.2: Johnson’s algorithm flow chart

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Caselet 1
Time taken by two machines on various jobs in a factory, are tabulated
below in table 12.1.
Table 12.1: Processing time in hours
Job Processing Time in Hours
Machine 1 Machine 2
A 2.5 1.5
B 3.5 2.0
C 1 3.25
D 2.25 2.75
E 3.75 1.75
F 1.25 4.0

Steps to be taken to solve the algorithm are as follows:

1. From the above table we find that Job C, machine 1 is taking least
time - 1 Hour. So, load it first. Eliminate the row which contains 1 and
3.25 that is job C. Hence the sequence now is ‘C X X X X X’. Where
X is a job, which is, still not placed in the sequence.
2. Time 1.25 is the next least time taken and it is on machine 1. Load
job F and eliminate the row. Hence the sequence now is ‘C F X X X
X’.
3. Time 1.5 is the next least time taken and it is on machine 2. Load it
last. Hence the sequence now is ‘C F X X X A’.
4. Time 1.75 is the next least time taken and it is on machine 2. Load it
last. Hence the sequence now is ‘C F X X E A’.
5. Time 2.0 is the next least time taken and it is on machine 2. Load it
last. Hence the sequence now is ‘C F X B E A’.
6. D is the last job left. So fill the sequence with D in the place left over.
The sequence now is ‘C F D B E A’.
Therefore, the answer for the algorithm (loading sequence for the given
jobs and machines) is given in the box below:
C F D B E A

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12.2.3 CDS algorithm for n jobs on m machines

CDS algorithm was given by Campbell, Dudek and Smith. It is used to find
the optimal sequence of the jobs to be followed when there are m numbers
of machines. We do this by converting the m number of machines to 2. This
is done by considering different combinations – like 1 and m, then 1+2 and
(M-1)+M, then 1+2+3 and (M-2)+(M-1)+M, and so on. This gives m-1
sequences and we can choose the most optimal among them by calculating
the time taken by each of the obtained m-1 sequences.
The sequence that takes the minimum time will be the most optimal job
order sequence according to the CDA algorithm. This process is useful,
when the number of machines is small but more than 2.
In order to calculate the time taken by each of the sequences obtained, we
have to calculate the time-in and time-out of the jobs in the sequence for
each machine. In order to calculate this, consider the sequence in case let 1
and follow the following steps.
Tabulate the information as shown below in table 12.2.

Table 12.2: Processing time

Processing Time
Job Machine 1 Machine 2
Time-in Time-out Time-in Time-out
C
F
D
B
E
A

Remember that except for M1, other machines may have to wait to start
their operations, until the previous operation is over. You have to include
idle times at the beginning, middle or the end. So the initial value, which is
the time-in under machine 1 for the first job in the sequence, will be zero.
The time-in for the further jobs will be Maximum of (the time-out of the
previous job in the sequence under the same machine, the time-out of the
next job in the sequence under the previous machine).

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Time-out of a machine = Time-in of that machine (from the previous step) +

The original time taken by the job under the respective machine (from table
12.1)
That is, time-out of the jobs under machine 1 is calculated below:
Time-out of job C = 0 + 1 = 1
Time-out of job F = 1 + 1.25 = 2.25
Time-out of job D = 2.25 + 2.25 = 5
Time-out of job B = 5 + 3.5 = 8.5
Time-out of job E = 8.5 + 3.75 = 12.25
Time-out of job A = 12.25 + 2.5 = 14.75
Time-out of the jobs under machine 2 is calculated below:
Time-out of job C = 1 + 3.25 = 4.25
Time-out of job F = 4.25 + 4 = 8.25
Time-out of job D = 8.25 + 2.75 = 11
Time-out of job B = 11 + 2 = 13
Time-out of job E = 13 + 1.75 = 14.75
Time-out of job A = 14.75 + 1.5 = 16.25
Now, table 12.2 can be filled with the above values as shown in table 12.3
Table 12.3: Computing Time-in and Time-out of Machines 1 & 2
Processing Time
Job Machine 1 Machine 2
Time-in Time-out Time-in Time-out
C 0 1 1 4.25
F 1 2.25 4.25 8.25
D 2.25 5 8.25 11
B 5 8.5 11 13
E 8.5 12.25 13 14.75
A 12.25 14.75 14.75 16.25

As time-out of the last job is 16.25 the time taken to process the optimal
sequence will be 16.25.
The above algorithm can also be analysed using the flowchart given below
in figure 12.4.

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Start

Find the sequence for the jobs in machines 1

and m, 1+2 and m-1 + m........

n=0

n=n+1

No n<=m-1
Yes

Xi =Sum of the total time taken

for this sequence

No Yes
Xi<Xi+1

X=Xi+1 X=Xi
Y=sequence of Y=sequence
i+1 of i

Y is the best optimal sequence

Finish

Fig. 12.4: Flow chart of CDS algorithm

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Caselet 2
Time taken by four machines on five jobs in a factory is tabulated below
in table 12.4. Find out the optimal sequence to be followed to minimise
the idle time taken by the jobs on the machines.
Table 12.4: Time taken by four machines on five jobs
Job Machine 1 Machine 2 Machine 3 Machine 4
(M1) (M2) (M3) (M4)
A 6 8 7 4
B 4 5 3 6
C 5 5 7 3
D 3 4 6 2
E 4 3 4 7

Steps to be taken to solve the algorithm are as follows:

1. Take column M1 and M4, ignoring M2 and M3. Get the sequence
by applying Johnson’s rule.
2. Next Combine M1 and M2 – Make it as one machine MX and
combine M3 and M4 and call it MY. Get the sequence.
3. Next Combine M1 and M2 and M3 – and call it MC. Similarly
combine M2 and M3 and M4. Call it MD. Find the sequence.
4. Calculate the total time taken to process all jobs A, B C, D and E.
Choose whichever given the total time.
5. According to the steps mentioned above the job order sequence of
machines 1 and 2, that is, MA can be derived with the help of the
following table (Table 12.5).
Table 12.5: Sequence of MA
Job Machine 1 Machine 4
(M1) (M4)
A 6 4
B 4 6
C 5 3
D 3 2
E 4 7

(Cont. in next page)

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(Cont. from previous page)

Table 12.5: Sequence of MA

Job Machine 1 Machine 4
(M1) (M4)
A 6 4
B 4 6
C 5 3
D 3 2
E 4 7

Using Johnson’s algorithm, the job order sequence obtained is:

MA = B E A C D

The time taken (TA) by sequence MA is now calculated as shown in

table 12.6.
Table 12.6: Time taken (TA) by sequence MA
Processing Time
Job Machine 1 Machine 2 Machine 3 Machine 4
Time- Time- Time- Time- Time- Time- Time- Time-
in out in out in out in out
B 0 4 4 9 9 12 12 16
E 4 8 9 12 12 16 16 23
A 8 14 14 22 22 29 29 33
C 14 19 22 27 31 36 42 36
D 19 22 27 31 36 42 42 44
The time taken (TA) to complete the sequence obtained above is 44.
The job order sequence of machines (1, 2) and (3, 4), that is, MB can be
derived with the help of the following table (Table 12.7).

(Cont. in next page)

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(Cont. from previous page)

Table 12.7 Sequence of MB

Job M1+M2 M3+M4

A 14 11
B 9 9
C 10 10
D 7 8
E 7 11
Using Johnson’s algorithm, the job order sequence obtained is:

MB = D E B C A
The time taken (TB) by sequence MB is now calculated as shown in
table 12.8.
Table 12.8: Time taken (TB) by sequence MB

Processing Time
Job Machine 1 Machine 2 Machine 3 Machine 4

Time- Time- Time- Time- Time- Time- Time- Time-

in out in out in out in out

D 0 3 3 7 7 13 13 15

E 3 7 7 10 13 17 17 24

B 7 11 11 16 17 20 24 30

C 11 16 16 21 21 28 30 33

A 16 22 22 30 30 37 37 41

The time taken (TB) to complete the sequence obtained above is 41.
The job order sequence of machines (1, 2, 3) and (2, 3, 4), that is, MC
can be derived with the help of the following table (Table 12.9).

(Cont. in next page)

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(Cont. from previous page)

Table 12.9: Sequence of MC

Job M1+M2+M3 M2+M3+M4

A 21 19
B 12 14
C 17 15
D 13 12
E 11 14
Using the Johnson’s algorithm, the job order sequence obtained is:

MC = E B A C D

The time taken (TC) by sequence MC is now calculated as shown in

table 12.10.
Table 12.10 Time taken (TC) by sequence MC

Processing Time
Job Machine 1 Machine 2 Machine 3 Machine 4

Time- Time- Time- Time- Time- Time- Time- Time-

in out in out in out in out
E 0 4 4 7 7 11 11 18
B 4 8 8 13 13 16 18 24
A 8 14 14 22 22 29 29 33
C 14 19 22 27 29 36 36 39
D 19 22 27 31 36 42 42 44
The time taken (TC) to complete the sequence obtained above is 44.
Thus, we get values: TA = 44, TB = 41, and TC = 44.
From the three values, TB is the minimum. Therefore, the optimal
sequence for the given 5 jobs under the 4 machines is MB.

MB = D E B C A

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12.3 Principles, Practices, and Advanced Analysis for Order

Picking
Order picking is a process by which items or products for which supply is to
be made have to be retrieved from specific storage locations. It is found
to take 60% of labour activities in the warehouse. Since it is critical for the
business to meet customer’s demand expeditiously and accurately, lot of
attention is being given to this aspect of operations. In the manufacturing
arena, we desire to move towards the following:
 Small lot sizes
 Point-of-use-delivery
 Cycle time reductions
These are necessary to meet the targets of JIT, which have economic
implications. Efficient order picking is necessary for being competitive. In the
supply chain, storage, retrieval, and delivery do not add value to the
product, but are necessary.
12.3.1 Equipments that help bringing efficiency to a process
First we will see the types of equipments that help us in bringing efficiency
to the process.
1. Horizontal travel: Horizontal travels are in the aisle. The picker is a
worker, who walks or rides a vehicle, and picks the item or product, and
puts into the cart or vehicle. He may also pick a place of the item on a
conveyor. The storage system could be one of the following:
 Pallet racks
 Shelves
 Storage drawers
 Gravity flow racks
The pallet racks can have only one or two levels.
2. Person aboard: In Person aboard system, the picker is on a platform of
the vehicle. He can move up and also horizontally along the aisle.
3. Part to picker: Part to picker are mechanised systems. Here a
storage/retrieval device carries the trays or bins to the person picking.
These act on the instructions received through a remote control device
with the picker. More than one picker can also access the system.

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4. Special equipment: For high throughput and space efficiency, special

equipment are made which are in the form of:
 Moveable shelves
 Rotary racks
 Mobile shuttles that travel in lanes
 Automatic item picker which has dispensing mechanisms that eject
items on a conveyor belt
5. Workplace equipment: Items can be kept on a work bench and be
picked up. The carts are also used to keep items for being picked up.
It should be noted that any of the systems described above have to suit the
purpose and economies that can be derived. Before implementing any of
these, a detailed study of alternatives, a plan for expansion or reduction in
the requirement of a particular product or a probable shifting of the location
and so on will have to be undertaken. Some of the factors effecting the
selection of equipment are listed below. (See Figure 12.5)
 Material properties
 Size, weight and nestability
 Carton counts, pallet counts
 Value
 Fragility
 Environment – temperature, humidity
 System requirements for the product
 Volume per product
 Number of order to be shipped
 Response time
 Supporting processes – labelling, pricing
 Growth factors
 Economic factors
 Investment required
 Project life
 Rate of return

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Fig. 12.5: Factors effecting the selection of equipment

12.3.2 Design considerations

Design considerations arise mainly due to the following factors. Some of the
factors mentioned so far are also relevant for the purpose of design.
1. Total number of products that are to be stored
2. Number of products received per shift
3. Total numbers retrieved per shift
4. Variability in the above: These will determine the dimensions of the
building required for the purpose. Sizes of bins, racks, and pallets are
also fixed on the basis of above. Choice between carts, carousals,
vehicles, conveyors, and automatic item pickers can be made and also
the space for locating and moving them
5. Labour force
6. Management Information System

Self Assessment Questions

State True or False
1. In the supply chain, storage, retrieval, and delivery do not add value to
the product, but are necessary.

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12.4 Considerations When Planning and Implementing

Integrated Material Handling Systems
Material handling systems need to be made efficient, so that, resources
used help in maintaining the flow of material with minimum bottlenecks and
maximum throughput. Integration is between various equipments,
processes, information and a system of control. Inevitably, we use computer
systems and some amount of automation to bring in efficiencies, which
otherwise would be lost.

12.5 Ergonomics and Material Handling: A Task Oriented

Assessment of Needs and Solutions
Ergonomics can be defined as a discipline of equipment design, for a
workplace, in order to maximise productivity and reduce the stress and
discomfort of the operator. Ergonomics is taken from the Greek words,
“Ergon” and “Nomos”. „Ergon‟ means „Work‟ and „Nomos‟ means „Laws‟,
when combined the word means Laws of Work.
In ergonomics, the body is studied as if it were a machine that performs the
following physical activities are done:
 Moving limbs
 Bending knees
 Bending hands to the back or griping
 Lifting weights at different positions of the back
The dynamic motions that the body and the organs are subjected to, are
studied with a view to design the systems, so that, injuries are avoided.
Dr. Bill Marris developed a technology called Lumbar Motion Monitor by
studying the low back injuries, which is famous as, LMM. It allows
measurement of the forces that cause bending and twisting at work. This is
especially helpful in material handling stations where workmen have to lift
weights, raise them to awkward potions to find a place, move them, hold
them, and push them. When the same movements are to be repeated a
number of times, workers may get injuries or chronic pains from them.
Knowing the problems these movements can cause can get us to design
equipments to reduce difficulties faced by the workers.

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Operators and supervisors, who worked for many years in different job
situations, formulate certain methodologies for machine shop operations or
material handling. They set these methodologies from their personal
experiences. So, these are said to be the best practices. Thus, it is
important to implement any of these methodologies.
The particular needs for the products which are handled by the workers like
the shapes, volumes, and the type of handling like lifting, storage, retrieval,
and loading can be formulated and projected. This data will be of a great
use to get solutions. Solutions that are required should be considered for
long term usage and it should also anticipate any possible changes in the
system.

12.6 Approaches for Shop Floor Sequencing of Material

Handling Jobs
Sequencing decides the order in which jobs are loaded on different
machines. The purpose is to take the job through the technological steps in
which the processing needs to be done for the transformation that is to be
effected on the material that is getting processed. The major concerns are
about the quantities that need to be processed and the time that the
different operations require. In case the product has to enter assembly along
with other parts that are being manufactured in parallel, all the required
parts have to arrive at that point at the same time. To handle different parts,
we have material handling equipments such as cranes, lifting forks, and
trucks, and so on. (See figure 12.6). The problem for the manager is the
limited supply of these equipments and the need to optimise utilisation of the
equipment and see that the manufacturing line has a smooth flow. Our
concern is to reduce inventory, minimise movement, and make things
available on time. This needs an integration of information about all the
factors, and decision making which accommodate and optimise utilisation of
resources.

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Cranes Lifting forks Trucks

Fig. 12.6: Shop floor equipments

Self Assessment Questions

Fill in the blanks
2. Material handling systems are mostly __________ and the __________
of the contractor will be of great help.

12.7 Summary
In this unit, we have considered various factors that affect the layout of the
manufacturing place to provide the efficient utilisation of the floor space vis-
a-vis workflow. For sequencing of jobs, Johnson’s algorithm is a useful
staring point and CDS algorithm is the advanced methodologies used for
sequencing multiple jobs. Balancing the production is a very important
aspect of achieving maximum throughput and reduce inventory. Material
handling systems are also considered.

12.8 Terminal Questions

1. What do you understand by Line Balancing?
2. What is the importance of order picking in material handling?
3. Why does material movement in a manufacturing plant consider
economics important? How are its principles applied?
4. Describe a successful computer integrated material handling system.
5. Explain Johnson’s rule for sequencing and how it is different from CDS
algorithm.

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12.9 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. True
2. Outsourced, Expertise

Answers to Terminal Questions

1. Refer to 12.3.1
2. Refer to 12.4
3. Refer to 12.6
4. Refer to 12.6
5. Refer to 12.3

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Unit 13 Just-In-Time
Structure:
13.1 Introduction to Just-In-Time
Learning Objectives
13.2 Characteristics of JIT
13.3 Key Processes to Eliminate Waste
Kanban for material flow
High quality production
Small and uniform workloads
Suppliers as partners
Flexible workforce and training
Total productive maintenance
13.4 Implementation of JIT
Pre-requisites for implementation
Shop floor control
Purchasing
Vendor managed inventory
13.5 JIT Inventory and Supply Chains
13.6 Summary
13.7 Terminal Questions
13.8 Answers to SAQs and TQs
Answers to Self Assessment Questions
Answers to Terminal Questions

13.1 Introduction to JIT

Just-In-Time (JIT) manufacturing is a process by which companies don't
keep lots of excess inventory; instead, they manufacture a product as an
order comes in. It is a management philosophy of continuous and forced
problem solving.
The objective of JIT manufacturing system is to:
 Eliminate waste that is, minimise the amount of equipment, materials,
parts, space, and worker’s time, which adds a great value to the product
 Increase productivity

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JIT means making what the market demands when it is in need. It is the
most popular systems that incorporate the generic elements of lean
systems. Lean production supplies customers with exactly what the
customer wants, when the customer wants, without waste, through
continuous improvement.
Deploying JIT results in decrease of inventories and increases the overall
efficiencies. Decreasing inventory allows reducing wastes which in turn
results in saving lots of money. There are many advantages of JIT. JIT:
 Increases the work productivity
 Reduces operating costs
 Improves performance and throughput
 Improves quality
 Improves deliveries
 Increases flexibility and innovativeness
For industrial organisations to remain competitive, cost efficiencies have
become compulsory. JIT helps in this process. It is extended to the shop
floor and also the inventory systems of the vendors. JIT has been extended
to mean continuous improvement. These principles are being applied to the
fields of Engineering, Purchasing, Accounting, and Data processing.
However, for organisations to completely implement JIT manufacturing
system, they need to have a proper commitment along with the following
basic facilities - proper material, quality, equipment, and people
involvement.

What are the challenges of JIT?

One of the main challenges for JIT is frequent changes in production
schedules owing to the changes in demand. This causes the
procurement plans to change. In the present day scenario, disruptions
have a cascading effect, because most manufacturing concerns
depend upon a number of suppliers, who in turn may outsource parts
and services. However, there is a limit to the agility that a company can
build into the system. Communication right through the supply chain
helps in reducing inventories and keeps the flow lines smooth. Success
of JIT depends upon a lot of preparation and committed
implementation.

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In this unit, you will know more about JIT, its key elements, processes of
eliminating waste, applications, process of implementing, and its failures
and successes.

Learning Objectives
By the end of this unit, you will be able to:
 Identify the key elements of JIT
 Explain the key processes to eliminate the wastes according to JIT
 Recognise the key business practices and applications of JIT
 Explain how JIT is implemented
 Recognise how organisations fail or succeed by implementing JIT

13.2 Characteristics of JIT

In this section, we will study different methods by which inefficiency is
reduced and unproductive time is minimised. The consequent savings are to
be utilised for reducing cost and rendering better service to the customer.
Shigeo Shingo an authority on JIT at Toyota classifies the wastes to be
eliminated as follows. (See Figure 13.1. Seven wastes)
The seven wastes to be eliminated according to JIT are:
1. Over production
2. Inventory
3. Waiting time
4. Movement
5. Effort
6. Defective products
7. Over processing

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Figure 13.1: Seven wastes

1. Over production: Over production is to manufacture products before it

is actually needed. If the demand for that product decreases, the extra
parts or products produced may not be useful or needed. Also over
production results in high storage costs and is also difficult to detect
defects. So, over production is considered a waste.
2. Inventory: Excess procurement or production builds up stock of
materials which are not immediately used, thus locking space and
funds carrying heavy costs. The figure 13.2, illustrates the inventories
at different levels of an organisation – Supplier distribution, Production,
and Customer distribution.

Figure 13.2: Inventories in an organisation

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3. Waiting time: Waste of time happen when goods are not moving or
being processed. The operator, the machine or the part will either be
not working or be worked upon. The duration of waiting is can be said
to be unproductive and may create more serious consequences.
4. Movement: Any unnecessary movement is a waste of energy; it
causes blockages, disrupting movements and delaying the flow of other
items creating delays.
5. Effort: The people, who work, do not make a study as to how the
products on which they are making are utilised and do not realise the
purpose for which they are made. This lack of education will lead to
waste of resources. Finally, they end up in shortage of resources when
needed.
6. Defective products: The defective products lead to a tremendous loss
to the company. This is because they use up the same equipments,
workmen and the time that would be used to make good products.
Thus defective products use up resources and result in losses.
7. Over Processing: Some steps like unnecessary processing or
production do not add value to the final output. As a result, it is waste of
all the inputs that go into the process.
Since these wastes have to be eliminated, a thorough study of how they
occur and what steps would result in their elimination is of paramount
importance. The next section focuses on some of them.

13.3 Key Processes to Eliminate Waste

The key processes to eliminate the wastes are listed below:
13.3.1 Kanban for material flow
13.3.2 High quality production
13.3.3 Small and uniform workloads
13.3.4 Suppliers as partners
13.3.5 Flexible workforce and training
13.3.6 Total productive maintenance
Let us discuss in brief about each processes in this section.

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13.3.1 Kanban for material flow

Controlling material flow using cards through the manufacturing system
implementing JIT is called Kanban. These cards are used to tell a work
station to perform a certain function on materials.
Kanban means a ‘Visible Card’ and also ‘Signal’ in Japanese language.
These cards are used for communicating the quantities required at the
‘customers’ point for his use. This means that the operator next in line, who
is the customer, decides how many units he needs and asks for them. The
operator who receives the card should make only that many and supply.
Similarly, the operator makes a demand on his predecessor by a ‘kanban’
and receives only the required quantity. This is called the pull system.
See figure 13.3 for the operation of the Pull/Kanban system. It controls the
flow of resources in a production process when and where a customer order
is placed. This system helps to eliminate waste in handling, storing, and
delivering the product to the customer.

Figure 13.3: Example of a Kanban signal flow

The containers used in the material flow are designed to hold specific
components in certain numbers. Kanban system is a physical control
system which uses cards and containers, that is, materials must not be
removed without posting a card at the receiving post.
Advantages of Kanban processes are listed below.
 The orders are controlled and triggered from defined locations
 Inventory costs and Work in Progress (WIP) are reduced
 The control of stock in the inventory will be improved

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 The lead time to deliver is reduced

 The process demand can be visualised
 The process of deviation escalation and rectification of root cause of the
deviations in production can be improved

13.3.2 High quality production

JIT production is meant for products which are repetitive in nature. The
system has its origin in providing a solution to a manufacturing process,
where the finished product has a number of parts that get assembled. The
problems in such situations will be to keep the arrival of parts, components,
and sub-assemblies so that no shortages will occur while holding up
production. Therefore, it becomes vital that all parts that form the flow in
many streams are of high quality, so that the assembly does not get held up.
For JIT to be successful inventories have to be kept to the minimum and
every component produced must represent highest quality. It is relevant to
mention Taguchi’s insistence on achieving the target value to realise quality.
The permitted tolerances do not ensure high quality. Controlling variability
by strict adherence to best processes with built-in robustness to achieve Six
Sigma standards ensures high quality. These help in realising JIT, which
has economy in focus and provide an additional factor for competitiveness.
So, high quality production helps in reducing the waste of inventory space to
the maximum extent.

13.3.3 Small and uniform workloads

Manufacturing facilities have to produce a number of parts to meet the
requirements of a number of products. Offering variety in terms of products
is a strategy that most businesses practice.
Manufacturing all the products in large volumes and maintaining stocks at
various distribution centres is highly uneconomical and no organisation
would contemplate such a plan. The input resources like the raw materials,
bought-out-items, transportation, storage and funds, lay a heavy burden on
the system. Added to that, the costs and the operations involved in the
transformation process become unthinkable.
The solution is to be able to produce a variety of products in small numbers
and plan the production schedules in such a way that the production
facilities become more adept in meeting the market demands. The aim is to

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reduce inventories, but at the same time not to lose business. So, a small
load on various work centres, both at in-house facilities as well as those of
sub-contractors, is the answer.
Achieving uniformity of loading is important to avoid piling up of work in
process. Softwares are specially developed to tackle these problems which
help in achieving the desired result. However, any decision will have a trade
off. The frequent changes in set ups, increased transportation, production
hold ups owing to mismatch of the production of different parts. The costs
involved on both counts have to be weighed and then decisions are to be
taken.

13.3.4 Suppliers as partners

Suppliers are those companies which undertake supplying the
manufactured products of an organisation. Suppliers can be the dealers for
organisations or conduct some transformation activity on the materials
delivered by organisations to them. In all cases, since organisations do
business with them, they will have a profit for the service rendered by them.
If the technology they have is superior, if the equipments they use are
optimal and the workforce is efficient, the benefits would increase for them
at a cost to the organisation.
If there are a number of suppliers, the organisations would exploit the
situation and decrease the cost by choosing the one who charges the least.
With this exploitative environment, there are some disadvantages to the
organisation, such as:
 Commitment to meet the organisation needs is less
 Giving the benefit of their learning to the organisation has fewer chances
 Transferring organisation knowledge to the suppliers for improved
service would be absent
 Likelihood of quality suffers
As explained earlier, to be able to implement JIT, we need to change
schedules quite often either delaying or hastening the production of some
items almost on a daily basis, if not hourly. The main concern in such
situations will be a build up of inventory or stock out positions. Problems of
communication add to the difficulties. The following ways will ensure

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cooperation of the suppliers and timely delivery of supplies with good

quality.
 Treating suppliers as a part of the organisation’s business and sharing
information
 Providing technical and financial assistance
 Seeking supplier’s help in improving process
 Building up rapport between the employees of the supplier organisation
 Assuring business
Many times, the supplier, owing to his specialised operations, may
contribute to the organisation’s productivity. Quality enhancement
programmes can be implemented simultaneously for faster and better
results.

13.3.5 Flexible workforce and training

Flexible workforce consists of workmen who are capable of performing
many tasks. It may be at their specified workstations, or at other
workstations, where the skills required may be quite different from those
which they use regularly.
The operational managers can look for personnel’s who have an attitude for
learning other skills. They should give the personnel training so that when
shortages occur, they can be utilised to get over stoppages of work and
disruption in workflow. This flexibility ensures reliable customer service and
overcomes bottlenecks.
Part time and temporary employees also enable the company to overcome
surges in demand. In such cases specially trained regular workers can be
asked to take over tasks which require high skills and the non-regular
employees can be given jobs which are simple and can be handled by them
without causing any disturbance in the production.

13.3.6 Total productive maintenance

Maintenance of equipment is a fundamental requirement to increase the
productivity in required quantities with high quality. The presumption that
machines deliver these is the basis to JIT philosophy.
Generally, periodic and preventive maintenance is conducted by the
operator, sometimes with the help of the supervisor. These activities help
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them to understand the machine better and give an opportunity to sense

when the equipment may need a major repair or reconditioning. This is to be
done to bring back the machine to give the required quantities and not have
any impermissible variations.
Break downs generally occur as the symptoms are neglected. In total
productivity maintenance, the worker is trained to:
 Maintain the machine
 Keep record of the parts to be replaced on periodic basis
 Make arrangements to procure them or make them
This helps the worker to maintain his machine in a perfect order without
breakdown. It will be his responsibility to maintain the machine and his
assistance to others should be available. With these responsibilities, the
worker will also have the autonomy to undertake measures to ensure
productivity and quality.

Self Assessment Questions

Fill in the blanks
1. __________ generally occur as the symptoms are neglected

13.4 Implementation of JIT

JIT, Total Quality Management (TQM) and other developmental measures,
are possible only with top management commitment and a learning culture
in the organisation. The main handicap to any programme is the resistance
by the organisational members, even at the top, to make changes. This
resistance may take the form of non-cooperation and may enlarge to
become sabotage. These usually show up at the implementation stage. So,
communication of the goals is to be realised and the objectives of each
team are to be framed effectively. Initially, a milestone chart helps in
establishing various steps to be taken and correcting the activities as the
process is on. This is the best way of ensuring success. It is well to remind
you at this stage that JIT is not a destination, but an ongoing continuous
improvement programme in the process of achieving TQM.

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13.4.1 Pre-requisites for implementation

Like any advanced method of production and quality improvement, some
pre-requisites are needed to be in place so that, implementation is easy and
the results are identifiable. The following table 13.1, gives the requirements
from the design process to the measurement of performance.
Table 13.1: Pre-requisites for measurement of performance
a Design Flow Process 1. Link operations
2. Balance workstation capacities
3. Relay-out for flow
4. Emphasise preventive maintenance
5. Reduce lot sizes
6. Reduce set-up and changeover times
b Total Quality Control 1. Worker responsibility for quality
2. Measure – SQC
3. Enforce compliance
4. Fail-safe methods
5. Automatic inspection
c Stabilise Schedule 1. Level schedule
2. Under utilise capacity
d Kanban Pull 1. Demand pull
2. Back flush
3. Reduce lot sizes
e Work with Vendor 1. Reduce lead times
2. Frequent deliveries
3. Project usage requirements
4. Quality expectation
f Reduce Inventories 1. Look for other areas
2. Stores
3. Transit
4. Carousels
5. Conveyors
g Improve Product Design 1. Standard product configuration
2. Standardise and reduce number of
parts
3. Process design with product design
4. Quality expectations

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The above activities lead to:

a. Solving problems concurrently
1. Root cause
2. Solve permanently
3. Team approach
4. Line and specialist responsibility
5. Continual education
b. Measuring performance
1. Emphasise improvement
2. Track trends
Source: Richard B. Chase, Nicholas J. Aquilano, F Robert Jacobs – Production and
Operations Management, Eighth Edition, Irwin McGraw-Hill Publications

You will observe that when above requirements are met, we achieve JIT to
a very close extent.

13.4.2 Shop floor control

Realistic planning and scheduling takes the frequency with which setups
have to be changed to manage material flow without building up inventories
into consideration, and leads to JIT manufacturing.
SMED (Single Minute Exchange of Dies) gives flexibility for production
process. Advocated by Shigeo Shingo, SMED method calls for designing,
making fixtures, and tooling which are instrumental in changing setups so
that, changes are to be effected within a minute. The de-clamping and
clamping elements should be made for this purpose.
Application of Kanban, wherever suitable is another mechanism for
controlling flow of material. Maintenance of machines and periodic shop
floor inspection is necessary. Verifying whether the processes are delivering
components within the tolerances specified is needed.

13.4.3 Purchasing
The essence of JIT purchasing, lies in treating the purchaser as a
participant in your activities. Cooperative relationship leads to the
development of the supplier who understands company’s requirements and
in situations where he confronts any difficulty, he should be in a position to
approach the company for its solution. Being open and trusting helps the

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organisations to identify the problems and go to the source which is like

implementing TQM.
Every problem or discovery of a defect is considered an opportunity, which
the supplier and the company together get a deeper understanding of the
problem, and the solutions will not only solve that problem, but also ones
that were hidden. It is also the practice of many companies who procure a
large number of parts manufactured from their vendors to have supplies
made to the assembly in specific quantities to meet the needs just in time.
Self certification by the vendor is resorted to ensure quality of the material.
The actual users are given autonomy to demand from the supplier, the
quantities required as well as the time of its need. Any change in demand is
conveyed and complied. This requires cooperation and trust between the
supplier and the customer. This is how JIT purchases work.
13.4.4 Vendor managed inventory
The very purpose of JIT is to reduce inventory at all places in the supply
chain. Inventory is considered a waste because inventory is created by
using materials, machines and efforts of persons. All of these are resources
which have already been used up and that portion of it which is not
consumed and sent up the value chain causes a drag on the system.
However, inventories are inevitable because uncertainties exist at every
stage, making it necessary to provide a buffer so that demands do not go
unfilled. The challenge is to keep it to the minimum. To make this happen,
the calculations involving the following are necessary.
 Forecasts of the market demand
 Capacities of the equipments
 Worker absenteeism
 Suppliers’ lead times
 Quality of the produced components
Each of these will have many factors which affect them. JIT depends upon
accurate assessment of them and based on the decisions taken, activities
are initiated. These should result in holding materials as small as the
number of components or products as feasible to maintain flow of material
without disruption. Many companies make their suppliers hold their
inventories and request them to make timely supplies. This may be done at
a cost.
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Caselet 1
Anode Electronics produces different kinds of electronic products like
TVs and tape recorders. Since the world market of electronics was
moving towards high variety of products and the delivery of the orders
was getting shorter, the top managers of Anode Electronics were under a
great pressure to increase the competitive position of the company in the
market. One of the executive managers of Anode Electronics suggested
implementing a system called JIT with the hope that inventory levels
would be reduced and quality production would increase.
The main aspect in introducing JIT manufacturing system in a company
is to educate the staff about JIT. Four middle level managers were asked
to attend a seminar conducted by a company called Electrode
Combinations who have already implemented this system, so that they
could explain the whole company about JIT manufacturing system. A
group of managers, one from each department were a part of the team
who discussed what is to be done and how to implement JIT in their
company. According to their discussions, the following 5 activities were
called the 5 JIT principles.
 Classify materials on the shop floor based on its usefulness
 Place the value-added materials in handy positions
 Clean up the non-value-added materials
 Maintain the factory in a good looking shape
 Let the employees in the company have good habits and follow the
rules
With these activities, the working environment in Anode Electronics was
improved and the safety, quality, and productivity were increased. As the
JIT system was newly implemented in Anode Electronics, the company
started continuously improving the quality of the products.

(Cont. in next page)

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(Cont. from previous page)

The managers of each department formed an improvement committee to
look after the implementation of JIT in different areas of the company,
especially the shop floor. All necessary materials were posted with a ‘red
card’ and deposited for further rework. Thus all materials have been
identified in terms of their names, places, quantities, and so on. The
concept of visual management, which is management simply by eye
sight, has been strongly motivated and encouraged.
Tremendous resistance from suppliers and workers was faced during the
early stage of developing the JIT system. High level commitments of top
manager, determination of pushing JIT system and suppliers’
involvement have helped to achieve JIT material flow. With this, the
Anode Electronics Company has laid down a solid foundation for the JIT
system so that the production system can be operated smoothly to
improve safety, quality, and productivity over the years. The quality and
productivity problems ‘under the water’ have shown up and have been
solved.
A major success in the implementation of JIT system showed the
reduction in the amount of inventory and workers. Inventory level has
reduced by 63%, parts inventory has reduced by 50%, and the number of
workers has reduced from 1020 to 865 during the past four years. The
growth rate of the company has increased by 5% every year.

Self Assessment Questions

State True or False
2. The very purpose of JIT is to reduce inventory at all places in the supply
chain.

13.5 JIT Inventory and Supply Chains

Supply chain consists of a number of entities like organisations,
departments, workstations, counters in sequence that produce and deliver
products or services. Sequence starts from the basic suppliers of raw
materials and runs through the sequence of the following:
 Transporters

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 Warehouses
 Stores
 Sub-stores
 Machining centres
 Packaging department
 Wholesale dealers
 Retailers
 Consumers
The supply chain creates a value chain along its path. The functions and
activities that move the material along the chain are listed below.
 Forecasting
 Purchasing
 Inventory, that produces and delivers products or services
 Production scheduling
 Inspection
 Distribution
 Retailing
These are the subjects of study and management. Note that information
flows along with the materials and is the content for collection,
dissemination, analysis, and decision making. The purpose is to measure
the value that gets added and the costs involved in the progression. One of
the factors that add cost and not value is the hold-ups that occur along the
path. This is the inventory cost.
Forecasting determines the quantities to be produced at specified intervals
of time. All other functions get initiated and managers concerned try to
derive maximum value at the least cost. So, production scheduling is
meticulously done taking into consideration all the uncertainties. The better
the information the manager has, better the analysis and more efficient the
implementation, greater the value added for lesser cost.
The ideal situation, which JIT envisages, is that there should not be any
bottlenecks and no extra material lying at any of the points in the supply
chain. Different companies adopt different strategies depending on the
following:
 Products

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 Type of outsourcing they are able to develop and manage

 Extent of reach they have for customers
 Competition they face
Managing the supply chain efficiently helps in achieving JIT completely or as
much of it as possible.

Self Assessment Questions

Fill in the blanks
3. The supply chain creates a _______ along its path.
4. There should no bottlenecks and no extra martial lying at any of the
points in the ________.

13.6 Summary
JIT is a system that lays emphasis in achieving cost efficiencies by the
principles of waste reduction.
 JIT depends on the pull system of supply, manufacture, and delivery to
reduce inventory stage.
 JIT requires the use of a flexible force to overcome production hold ups,
even with lesser number of workers.
 JIT is possible only when parts and products are of high quality so that
all those produced are fit for use.
 Total productive maintenance is one of the essential requirements for
JIT.
 Economy of movement is necessary ensuring smooth throughput which
helps in reducing inventory.
 Cooperation of suppliers is vital for the success of JIT and they help in
managing inventories.
 Information flow is an inseparable activity of the supply and its efficient
management is the basis for successful implementation of JIT.

13.7 Terminal Questions

1. What are the characteristics of JIT?
2. What are the conditions for implementation of the JIT system with
success?
3. What do you understand by Vendor Managed Inventory (VMI)?
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13.8 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. Break downs
2. True
3. Value chain
4. Supply chain

Answers to Terminal Questions

1. Refer to 13.3
2. Refer to 13.5
3. Refer to 13.5.4

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Unit 14 Value Engineering

Structure:
14.1 Introduction
Learning Objectives
14.2 Value Engineering/Value Analysis
14.3 Relevance of VE in Modern Manufacturing
14.4 Process of Value Analysis
14.5 VE – Approaches and Aim
Pre-sourcing
Supplier evaluation and certification
14.6 Providing Value to the Customers
14.7 Benefits
14.8 Summary
14.9 Terminal Questions
14.10 Answers to SAQs and TQs
Answers to self assessment questions
Answers to terminal questions
14.11 References

14.1 Introduction
Value Engineering/Value Analysis has gained importance in today’s
manufacturing field because, of the necessity of making all components as
economically as possible. Every unnecessary component, every unwanted
operation has to be eliminated for economising. Materials may have to be
changed, tolerances in manufactures relaxed because value can be created
in terms of reduced volume, increased strength or longer service. Involving
the supplier and utilising their knowledge and experience are crucial for the
company’s success.
Let us know about Value Engineering in this unit.
Learning Objectives
By the end of this unit, you will be able to:
 Recognise the importance of Value Engineering/Value Analysis for a
manufacturing concern

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 Recognise the involvement of suppliers in realising the advantages of

Value Analysis
 Quote that design changes can affect the usage and utility of the product
and at the same time reduce the cost
 Explain how customers will be benefited by Value Engineering and bring
us increased volumes of business

14.2 Value Engineering/Value Analysis

Value Engineering (VE) or Value Analysis is a methodology by which we try
to find substitutes for a product or an operation.
The concept of value engineering originated during the Second World War.
It was developed by the General Electric Corporations (GEC). Value
Engineering has gained popularity due to its potential for gaining high
Returns on Investment (ROI). This methodology is widely used in business
re-engineering, government projects, automakers, transportation and
distribution, industrial equipment, construction, assembling and machining
processes, health care and environmental engineering, and many others.
Value engineering process calls for a deep study of a product and the
purpose for which it is used, such as, the raw materials used; the processes
of transformation; the equipment needed, and many others. It also questions
whether what is being used is the most appropriate and economical. This
applies to all aspects of the product.
Example 1
Let us consider a component which needs
a round brass rod as raw material of
diameter 21.5mm. The component has to
perform seven operations: cutting, drilling,
chamfering, boring, milling, plating, and
polishing.
Value analysis considers all aspects of each of these and investigates
whether any of them can be substituted by another material, a different
size, a different tool, a different machine, a different cot sequence, a
different tool for an operation, a different chemical, a different
concentration, a different voltage, shorter time or processing.

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For the above example, studies can be conducted to verify whether any
operation can be eliminated. Simplification of processes reduces the cost of
manufacturing. Every piece of material and the process should add value to
the product so as to render the best performance. Thus, there is an
opportunity at every stage of the manufacturing and delivery process to find
alternatives which will increase the functionality or reduce cost in terms of
material, process, and time.
The different aspects of value engineering can be encapsulated into a
sequence of steps known as a ‘Job Plan’. Value Engineering in
organisations helps to identify:
 The problem or situation that needs to be changed/improved
 All that is good about the existing situation
 The improvements required in the situation
 The functions to be performed
 The ways of performing each function
 The best ways among the selected functions
 The steps to be followed to implement the function
 The person who executes the function
It should be remembered that we are not seeking a cost reduction sacrificing
quality. It has been found that there will be an improvement in quality when
systematic value analysis principles are employed.

Remember
Value Engineering or Value Analysis is a methodology by which we try
to find substitutes for a product or an operation. It finds alternatives for
increasing the functionality or reducing cost in terms of material,
process, and time.

Self Assessment Questions

Fill in the blanks
1. __________ of processes reduces the cost of manufacture.

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14.3 Relevance of VE in Modern Manufacturing

Modern manufacturing can be seen from two important perspectives. One is
the management approach which consists of TQM, JIT, Kanban, concurrent
engineering, Lean Manufacturing, TPM, Group Technology, Cellular
Manufacturing, and others. These have basic philosophies based on which
techniques, tools, and methodologies are developed. To aid the process, we
have computers and software written to collect data, process them,
distribute them, and analyse them. We have Management Information
Systems which help in decision making, and this can be stated as the
second important perspective.
Optimisation at every level looks into the aspects of cost and benefit.
Modern machines like Automatic Machines, Special Purpose Machines, and
Robots are built to produce highly accurate components at greatly reduced
costs. New materials and processes have resulted in great advances in the
variety of products available to large numbers of people.
With globalisation, procurement and distribution are being conducted over
great distances. The main thrust is on quality and timely delivery at the least
price. These are the values that we put in the product.
Value Analysis looks at the manufacturing activities with a view to make the
components simpler, processes faster, and the products better. Since huge
investments are made on the machines, it is mandatory that every
component/part used is made as economically as possible. Fabrication,
erection, and installation being costly and having long term implications,
assessment of utility of the materials used and processes adopted is
important.
In the manufacturing activities, power drives many machine elements with
respect to one another to obtain the transformation on the materials that
result in becoming parts. Using machines with appropriate capabilities in
terms of power, voltage, distances moved, lifting and placing them – all
provide opportunities for value analysis. Modifications may be made to
effect savings.

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Self Assessment Questions

Fill in the blanks
2. Special Purpose Machines, Robots are built to produce _________
components at greatly ________.

14.4 Process of Value Analysis

The process of value analysis can be divided, into the following four steps –
Data Gathering, Analysis and Valuation of Functions, Idea Generation and
Evaluation of Substitutes, and Implementation and Regulation. (See Figure
14.1 Process of Value Analysis)

Figure 14.1: Process of Value Analysis

Let us discuss each step of Value Analysis in detail.

Step 1: Data Gathering
All relevant information concerned with the product and the parts that go to
make it are collected. The concerns at this stage are: the raw material used,
its dimensions, characteristics, availability, lead time, price, mode of
transport, storage, rate of consumption. All questions regarding each of
them are asked. The available information is recorded and when information
is not available, tags can be attached for information gathering at a later
date. No information should be considered unimportant or irrelevant. It will
be advantageous to record the source of information. Classification will be
helpful. Table 13.1 gives you a brief about the key questions, techniques,
and tasks that need to be performed in step 1.

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Table 14.1: Data gathering

Phase Data gathering
Objective Gather information of the product
Key  What is the product?
questions  Who is best able to gather information?
 What must be known to gather information?
 Whom to ask for the information?
Techniques  Solicit ideas
 Identify low /value/high cost areas
 Record available information
 Tag non-available information
 Allocate resources
Tasks  Select product
 List the product parts
 Classify relevant information
 Question to gather information
 Record the available information
 Submit to the management

Step 2: Analysis and Valuation of Functions

The function of each part is listed. They are categorised as basic functions
and secondary functions. The description should be cryptic – two or three
words. If there are many functions that any part has to perform – weightage
may be given to each of them. Considered with the cost of the part and the
weight, each function gets a value attached to it. Table 13.2 gives you a
brief about the key questions, techniques, and tasks that need to be
performed in step 2.

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Table 14.2: Analysis and valuation of functions

Phase Analysis and Valuation of Functions

Objective Analyse function and costs
Key questions  What is the worth of the basic function?
 What is the worth of secondary functions?
 What are high cost areas?
 Can any function be eliminated?
Techniques  Evaluate by comparison
 Put costs on specifications & requirements
 Put costs on key tolerances and finishes
 Put costs on key standards
Tasks  Analyse costs
 Analyse functions
 Evaluate value of function/cost
 Evaluate project potential
 Select specific study areas

Step 3: Idea Generation and Evaluation of Substitutes

Having collected data and analysed them and knowing the relative
importance of the functions, the next step is to identify the material or
process that is amenable to the application of Value Engineering. Since
there are a numbers of factors to be considered and to break away from the
conventional thinking, brain storming is preferred. Ideas are allowed to be
submitted to the group for discussion. A few of them will turn out to be worth
a more detailed evaluation. Debates about suitability or disadvantage of any
particular change envisaged are conducted. Facts are analysed and
consensus arrived as to what can be attempted. Many times the existing
material or process will be ideal and nothing need be done. But a discussion
and decision about this confirms that maximum value is being derived.
Table 13.3 gives you a brief about the key questions, techniques, and tasks
that need to be performed in step 3.

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Table 14.3: Idea generation and evaluation of substitutes

Phase Evaluation
Objective Evaluate alternatives
Key  How might each idea work?
questions  What might be the cost?
 Will each idea perform the basic function well?

Techniques  Choose evaluation criteria

 Refine ideas
 Put approximate probable cost on each main idea
 Evaluate by comparison

Tasks  Speculate on evaluation criteria

 Evaluate alternatives
 Select the best alternative

Step 4: Implementation and Regularisation

The decision taken after evaluation is conveyed to the top management and
clearances obtained for implementation. Teams are formed for each
implementation; concerned persons are involved and educated about the
impending change. Their cooperation is necessary for the change to be
effective. If any small changes are necessary when a few trials are taken,
they should be considered. After successful implementation, the change –
material change or the process change becomes the new norm or standard
for further operations. The methodology, adopted is on the lines of
Continuous Improvement. Table 13.4 gives you a brief about the key
questions, techniques, and tasks that need to be performed in step 4.
Table 14.4: Implementation and regularisation
Phase Implementation
Objective Implement alternatives
Key  Who is to implement change?
questions  How to amend present plans/contracts?
 Have all resources been allocated?
Techniques  Translate plan into action
 Overcome problems
 Monitor project
Tasks  Develop change document
 Implement approved alternatives
 Evaluate process

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Remember
The process of value engineering can be divided into:
1. Data Gathering
2. Analysis and Valuation of Functions
3. Idea Generation and Evaluation of Substitutes
4. Implementation and Regularisation

Self Assessment Questions

Fill in the blanks
3. Since there are a numbers of factors to be considered and to break
away from, the conventional thinking _____________is preferred.

14.5 VE – Approaches and Aim

Now-a-days, the principles of value engineering starts at the product
concept and design and is carried down the ‘value chain’. The aim of value
engineering is to effect economies by investigating every opportunity and
discovering new materials, methods to achieve high quality performance.
The aims of value engineering can be listed as:
1. Product simplification
2. Better and less costly materials
3. Improved product design
4. High efficiency in the processes
5. Economy in all activities

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Caselet 1
The concept of value engineering originated in 1947 in
General Electricals Corporation (GEC) when a
substitute for asbestos for flooring had to be found.
Specialised dealers could provide an equally good
‘material’ at a lesser price.
Initially, the practitioners were the people in charge of purchasing who
tried to locate substitute material which would be equally good, if not
better, at a lower price. This is the first and basic approach to value
engineering. As the concept percolated to the manufacturing
departments, engineers applied the same principles and found that, they
could use alternate materials which were cheaper giving the same
performance. It was also found that dimensions and tolerances could be
altered without affecting the performance of the part or the product. The
investigations took them on the path of eliminating some operations. The
focus was on the value of each bit of material, each operation. This
approach led to the design stage.

14.5.1 Pre-sourcing
The process of involving suppliers from the design stage is called pre-
sourcing.
As an extension of the internal processes where higher value is sought to be
realised for the same cost, suppliers of materials and services are involved
at the design stage. Suppliers are in a position to provide suggestions for
design changes that will help making operations more efficient. Their inputs
will help in ensuring higher quality at lower costs. Sometimes suppliers are
given total responsibility for design, procurement of materials, processing,
quality, and deliveries as per schedules. If a group of them act in
coordination, a number of parts that go in for assembly get sourced, so that,
guaranteed supplies are assured. The cost effectiveness of such
arrangements are considerable. This procedure of involving suppliers from
the design stage is called pre-sourcing.
However, careful analysis of the systems followed by the supplier and their
robustness in terms of capacity, capability, and commitment is compulsory.

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14.5.2 Supplier evaluation and certification

To ensure reliable supplies, firms adopt procedures for supplier evaluation
and certification. Evaluation is done for the processes and quality assurance
measures. It will be necessary to augment their equipment, training
programmes, and inspection methods and instruments. At first hand,
assessment by a team should look into the following facilities which are part
of the manufacturing system:
1. Material Procurement Procedures
2. Inspection and Issue Procedures
3. Production Planning and Control Systems
4. Quality Control methods
5. Process of Design and Evaluation
6. Management Information Systems
7. Labour Relations and Compensation Systems
8. Culture of Productivity and Quality
Some organisations empower their suppliers with self-certification which
means that the inspection conducted by the supplier is accepted as the
inspection done by the organisation’s inspectors. The confidence placed
gets converted to responsibility.
You will note that the above process tries to bring the environment of the
supplier organisation as close to the firm’s. The result that we will be able to
treat the supplier as our partner and this enhances involvement and
cooperation and the resultant synergy produces quality.

Self Assessment Questions

Fill in the blanks
4. Engineering starts at the product concept and design and is carried
down the ___________.

14.6 Providing Value to the Customers

The industries with VE approach will reduce the cost and improve the quality
of a product or service. The cost and quality of a product plays a major role
in determining the value, productivity and effectiveness of the product and
also the industry. However, in a broader perspective, implementing VE or

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value analysis alone does not provide a sharp competitive edge. Industries
should think beyond value management to suit customers’ priorities.
Here are some of the practices which all industries need to implement to
achieve the same.
1. Promote employee involvement in value work: Let us consider an
example which explains about promoting employee involvement in value
work adding a great value to the company. In Bharat Heavy Plates and
Vessels (BHPV), a group of employees implemented various value
promoting practices and achieved reduction of the cycle times of some
of their critical processes. BHPV aimed at exploiting the creativity of their
employees and thus achieved a great solution to their problems.
Therefore, involving employees in value work serves a great deal in
achieving growth in organisation and also customer satisfaction.
2. Act on customer’s voice: It is proved that the organisations that listen
to the customers’ priorities and needs, and modify their businesses
accordingly can achieve value and profits to their organisation. Let us
consider some of the organisations like MRF and Mahindra & Mahindra.
The top executives will personally visit their dealers and listen to them.
Such strong relationship with their customers enabled them to achieve
the heights of success in the leading market.
3. Enhance product reliability: Value analysis approach enables
organisations to evolve as a world-class company by improving the
customer satisfaction and inventory returns. Organisation should also try
to enhance reliability and performance of their products along with
customer satisfaction.
4. Ensure efficient procurement practices for better value: Most
companies are achieving a greater success by restoring to outsourcing.
Efficient procurement practice enables organisations to strengthen their
core-competencies. For example, suppliers of Honda have suggested a
few modifications in the design of Honda Accord. These few change
once incorporated in the design has helped to reduce the production
cost of the car to a greater extent.
5. Streamline business processes for quicker response: Organisation
should undertake practices to promote customer goodwill by reducing
process cycle time for quicker response.

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6. Provide comparative value mapping: Advertising about the company’s

product helps the customers to understand about the product quality and
prices. These days, it is very important for companies to update their
profile to the customers to be competitive with the outside market.

14.7 Benefits
The main benefits of the application of VE are:
1. Cost reduction
2. Overall cost consciousness
3. A culture of effecting saving across organisation
4. Streamlining of administration and creation of transparency in all
dealings even with outsiders
5. Development of reliable suppliers

When to implement Value Analysis?

It is better to implement value analysis (VA) at the product design and
development stage itself. Implementing VA at the product design and
development stage will help to analyse engineering drawings of
projected products. This will help to achieve efficient, effective, and
reliable designs, reduces the cost, avoids unwanted operations, and
improves quality at the initial stage itself.

Does implementing Value Analysis alone reduce unnecessary

costs?
Value analysis is helpful in reducing unnecessary costs. However, in
some cases even traditional VA tends to fail proper balance of cost. In
such cases, VA along with DFMA approach (Design For
Manufacturability and Assembly), is used attain a good balance of cost.
DFMA helps to minimise the number of components in various
assemblies of a product. It enhances design efficiency, quality and
reliability. Value Analysis and DFMA together help enhance the product
value and reduce the cost of production and improve the performance.

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Caselet 2
In implementation of VA, Ashok Leyland changed
gear material from phosphor bronze to a less
expensive cast iron and eliminated frequent field
complaint of gear seizure in trucks.

Caselet 3

T.V. Sundaram Iyenger & Sons (TVS) Limited is one

of the largest automobile distribution companies in
India.

During the mid of 1940s to 1960s, TVS based in Madurai was ranked as
the best bus transportation system in India. It could manage to run the
fleets for about 96% of the time.
TVS used the VE approach to restore the mobility of buses that had
broken down. They stocked their garage with some critical assemblies of
a bus. Whenever, a part or an assembly failed of a bus, they replaced it
immediately with a new one, thus restoring mobility within a couple of
hours.
When compared to the traditional method, this approach has gained
much more benefits to the company. It helped to save time, reduce cost,
efficient, quicker, and competitive.

Caselet 4
4 Hospital & Health Network in Pennsylvania approached Strategic Value
Analysis (SVA) solutions to find a right solution in reducing their non
salary expenses. Strategic Value Analysis in Healthcare (SVAH) took it as
a challenge to determine any non salary opportunities of the Health
Network system.
SVAH with their systematic approach analysed each and every part of the
Hospital Network and came out with the solution. The solution was to
implement teaching healthcare organisations and give advanced tools,

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training, strategies, and tactics. This solution was very helpful to manage
and control 4 Hospital & Health Network non-salary expenses more
successfully.
4 Hospital & Health Network were convinced with the solution and
implemented SVAH’s Strategic Value Analysis System and e-Value
Analysis Software. To enhance the Health Network’s value management,
SVAH provided three months of consulting, coaching, and facilitation
services. SVAH’s Strategic Value Analysis System has improved the
Health Network’s strategic plan and trained the Health Network’s value
team leaders, team members, and coordinators. The e-value software
helped to manage the members and the process of the 4 Hospital &
Health Network.
Finally, after 3 months of successful completion of the Health Network’s
value management program, 4 Hospital & Health Network could manage
to save 2.3 million dollars in non salary expenses.
– Source: http://www.strategicva.com/

Caselet 5
A cosmetic company came across the case of an empty packet of a
cream tube. A customer raised a complaint on that company, stating that
there was no cream tube in the packed box.
When the complaint came to the notice of the company officials, the
authorities isolated the problem to the assembly line engineers. The
management asked engineers to solve the problem. Engineers worked
hard and found a solution for the problem. They devised a high resolution
X-ray machine which would help to monitor all the packed boxes that pass
through the assembly line. Though, the X-ray devise was costly,
management compromised to buy the devise. Management felt that the
devise would help them to avoid such unforeseen errors.
Engineers ordered the floor managers to fix the X-ray machines at the
assembly line to ensure all packaged boxes have cream tube in it, before
delivering to the delivery department. Also, two employees were
appointed to check the flow line and to maintain the record of the empty
boxes.

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When the two employees were working on it, one of them got a better
solution for the problem. He thought that his idea would solve the problem
much better and it involves less costly equipment. The idea was to place
a strong industrial electric fan near to the assembly line, which would blow
off the empty boxes passing through the line, if any, thereby ensuring zero
errors.
When his idea was placed in front of the management he was awarded
for his intellectual skills.
Here are a few companies that implemented Value Engineering for
providing value to their customers.
Example 2

Modi Xeror designed the VE-d low cost copier 1025

ST, which uses a single tray. The advantage of new
design is that it is easy to operate and the cost is
also very low.
The Six Sigma quality is deployed in Motorola to
enhance value to customers.

Sundaram Fastener incorporated ‘Zero defect

approach’ to enhance product quality. This
approach also enhanced to achieve zero deviation
from delivery schedules

In order to provide customers with exceptional

handling, fuel economy, majestic style and easy
maintenance, Maruthi Zen employed the ‘Value-for-
Money approach’.

Titan Watches’ introduced new designs by adopting

a ‘strategy of innovation’.

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ITC Welcomgroup implemented the ‘time guaranteed’

room service strategy. This was done to enhance
customer satisfaction.

14.8 Summary
VE provides an opportunity for finding substitutes for materials and
processes to reduce cost without sacrificing quality. Suppliers are taken into
confidence to achieve reliable supplies and improve profits.

14.9 Terminal Questions

1. What is value engineering?
2. What is the contribution of VE in reducing production cost?
3. What are the steps involved in VA?
4. What are the objectives of VE?

14.10 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. Simplification
2. Highly accurate, reduced costs
3. Brain storming
4. Value chain

Answers to Terminal Questions

1. Refer to 14.3
2. Refer to 14.4
3. Refer to 14.5
4. Refer to 14.6

14.11 References
 http://www.strategicva.com/

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Unit 15 Quantitative Modelling and

Workforce Management

Structure:
15.1 Introduction
Learning Objectives
15.2 Quantitative Models
Quantitative approach
Types of quantitative models
15.3 Quantitative Methods for Decision Making
15.4 Workforce Management
15.5 Work Practices
Work study
Work measurement
Methods study
Machine worker interaction
15.6 Ergonomics
15.7 Work Environment
15.8 Workforce Productivity
Learning curve
Incentive schemes
15.9 Summary
15.10 Terminal Questions
15.11 Answers to SAQs and TQs
Answers to self assessment questions
Answers to terminal questions

15.1 Introduction
Whenever we have to make decisions in management, we have two
approaches to arrive at a decision.
One approach is to consider the available facts, identify various options for
action and the likely consequences, and evaluate all the options based on
the experiences we had and the gut feeling as to what might happen and
take a decision. In this approach, the quality of the decision depends on the

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individual’s knowledge, analytical capability, and judgment. However, this

approach is useful when the matter concerned is small or personal in
nature, as the consequences are not very serious. If the decision involves
complex issues, we choose the second approach.
The second approach involves complex issues and complex decision
makings skills. In this approach, the factors of different fields have different
impacts on the result. We try to quantify data, devise some models for
predicting the likely consequences, and some techniques to arrive at
decisions. Historical data guide us to formulate the relationships between
the variables. Uncertainties about the activities and results can be
anticipated based on probabilities and choices made.
The approaches we choose depend on the type of situations. In the
operations field, we need to schedule various activities for completion of a
job or project. The time for each activity is known approximately or not
exactly. At a particular stage, a number of activities have to be completed
for further progress. Delay in one of the activities creates shortage in the
inventory of materials which have arrived from another stream. Some
materials or machines or men or all of them will remain idle as they have not
received the materials scheduled to be there. There are a number of
reasons which might cause imbalance in the production system. Imbalance
in the system might happen due to:
 Rate of production
 Absenteeism of workers
 Breakdown of equipment
 Delayed arrival of material
 Uncertain lead times
Planning will have to be done with respect to resources allocated and
products promised to avoid this. We make models, apply quantitative
techniques and try to conduct activities so that minimum disruptions take
place. The workforce that conducts activities have to be allocated work,
trained, and motivated for improving the performance. We will go into detail
about the various aspects of the quantitative modelling and work-force
management in the following pages.

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Learning Objectives
By the end of this unit, you will be able to:
 Define the key elements of Quantitative Modelling
 Identify how models are formed to understand business processes
 Describe the various quantitative methods and their utility in decision
making
 Recall the process of managing workforce for efficient outcomes

15.2 Quantitative Models

In this section, we consider the different ways of solving problems, using
quantitative approach and various other models. The business implications
are wide, as solutions are used for decision making in all aspects of
business like:
 Procurement of material
 Allocating funds
 Scheduling production
 Carrying of inventory
The aim is to optimise all these, so that costs are reduced and profits are
increased.
15.2.1 Quantitative approach
Solving a problem using the quantitative approach involves three steps:
defining the problem, constructing a mathematical model, and testing the
model and its solutions. (See figure 15.1)

Figure 15.1: Quantitative approach processes

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Let us discuss each step in brief and see how quantitative approach is
helpful in solving problems.
1. Defining the problem: When a problem arises, we have to:
 Determine the purpose of studying the problem
 Consider the various factors such as Resources, Constraints,
Uncertainties involving them, Costs involved, Time available, and
Issues that have utmost importance.
After considering these, we have to determine which problem needs
our attention, the factors that affect it, and the interrelationships
between them.
2. Constructing a mathematical model: For constructing a mathematical
model for the problem, we follow certain steps. We:
a. Reformulate the physical problem into a form which can be
analysed.
b. Convert it into a model. The models play a vital role in engineering,
science, and business.
c. Make models of dams, steel structure, chemical reactions,
organisation structure, graphs showing variation of share prices and
others. Many of these are capable of being expressed in terms of
mathematical equations.
d. Solve the mathematical equations for solving the problem. Equations
can be solved, if the values of some variables are known or
presumed.
3. Testing the model and its solution: In business we do not have
complete or reliable data most of the times. We have formulated the
equations with presumptions. So, we can verify whether the solution we
have obtained is acceptable by testing the solutions with the help of
some known outcomes for known variables. This tests the model, as
well as the presumptions we might have made. We may have to change
the model or the presumptions if, the results obtained are not right.
15.2.2 Types of quantitative models
There are different quantitative models (See figure 15.2)
1. Linear Programming: Linear programming technique is often used for
optimising a given objective like: profit or revenue maximisation, or cost
outgo minimisation. Distribution of the resources is the critical issue,
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when there are limited resources and they have to meet competing
demands.
2. Transportation Model: Transportation model is concerned with goods
from manufacturing centres or warehouses which have to be supplied to
depots or retail outlets. The demand and supply position of the places
where they are required or produced and the cost of transportation are
considered in the model. We use this model to economise.
3. Assignment Model: Allocating jobs or persons to machines, awarding
different projects to contractors is done so that maximum returns occur
or less expense are incurred. Hence, calls for the use of this model.
4. Inventory Control Model: Inventory control model considers the:
 Frequency of placing orders
 Quantities per order considering the cost of placing an order
 Number of pieces that are to be kept in reserve
 Rate of consumption
 Lead time required for the supplier
 Costs involved in storage
We have different models which give solutions to optimisation
depending upon the probabilities of patterns of consumption and supply.
5. Waiting Line Models: Queues are formed when the rate of service is at
a variance with the rate of arrival. They are formed when the rate of
production is less at particular points compared to the previous ones.
Sometimes we see multiple service points and a single queue are
formed for feeding them. Number of items which includes the following is
studied with some special techniques.
 People to be serviced
 Rate of service
 Type of queue discipline that is intended to be followed
 Policy of priority
 Tolerable amounts of waiting
 Others
6. Simulation Models: Simulation models are used when we will not be
able to formulate mathematical models. So, we develop a model which
resembles a real life situation. Based on this pattern, we predict and
plan our procurement, production, delivery and other actions.

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7. PERT (Project Evaluation and Review Technique) and CPM (Critical

Path Method) Models: When projects are undertaken with a number of
activities, some happens in sequence, with gaps of weeks or months
and some happens simultaneously. It is important to estimate the time
required for completion of the project. A lot of coordination is needed
while supplying the resources. It is also equally important to identify the
bottlenecks and smoothen resources so that time schedules are
maintained. Delayed completion may entail penalties. In this model, we
adopt special methods to make the system efficient.

Figure 15.2: Quantitative models

Self Assessment Questions

Fill in the blanks
1. The ________ model is used when we are not able to formulate a
mathematical model
2. __________are formed when the rate of service is at variance with the
rate of arrival.

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15.3 Quantitative Methods for Decision Making

We choose the quantitative model that closely resembles the situation which
we want to analyse for making decisions like:
 Provide funds
 Assign people
 Place order for certain quantities
 Delay or hasten some activities
 Open one more counter or buy machines
 Change location of manufacturing units
 Shift distribution centres
 Postpone the launch of a product
Decisions may vary from buying two dozen bolts, to importing equipment for
a few crores, or even launching a new product requiring investment of a few
hundred crores. The decisions are taken with some risks arising out of a
number of uncertainties with no perfect answers. Historical data act only as
a guide for projecting into the future. We use a number of statistical tools
like the following to establish relationships between factors that affect
decisions.
 Regression
 Forecasting
 Decision trees
 Probability theory
 Game theory
 Markov Analysis
One more major limitation to make our decision process effective is the
quantum of data that we can collect. For example, we cannot inspect all
dimensions of all components we manufacture in a plant. Nevertheless, we
want to be certain that all the parts that go for assembly are of high quality.
So we take samples at random and inspect them. The number of samples,
number of defects, and the range within which they are expected to lie are
to be certified that they are good. The frequency of inspection and the
confidence level which we need to have, require statistical tools. Then we
need to be sure that the processes are under control. So, quantitative
methods deal with using models for a particular situation and applying

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statistical tools to analyse data and make decisions which help us in

meeting our objectives.
Self Assessment Questions
State True or False
3. Models represent the object in all respects.
4. Decisions taken with the help of Statistical Tools are perfect.

15.4 Workforce Management

In this section, we will consider various concepts of workers’ contribution for
productivity. We will also study the following points in the rest of the unit.
 How is work measured?
 How do the workers get benefit for superior performance?
 How is productivity influenced by the environment in the organisation?
Productivity is achieved by creating an environment which is favourable for
doing efficient work. If workers are willing to become partners in the process
of manufacturing by adopting good practices, it instils a sense of purpose,
cooperative behaviours, and openness in the organisation. This gives them
life and pride. Rewards are important for recognising good work that is
done. For that purpose measurement of work and determining efficiency
levels is important.

15.5 Work Practices

Work practices are ways of doing any work which has been in vogue and
found to be useful. These are determined by motion and time study
conducted over years and found to be efficient and practiced. Any method
improvement that is conducted may be adopted to change the practice, but
only after trials they have shown that, they increase the comfort of the
worker and get the job done faster.
15.5.1 Work study
We say that work study is being conducted when analysis of work methods
is conducted during the period when a job is done on a machine or
equipment. The study helps in designing the optimum work method and
standardisation of the work method. This study enables the methods
engineer to search for better methods for higher utilisation of man and
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machine and accomplishment of higher productivity. The study gives an

opportunity to the workmen to learn the process of study thus making them
able to offer suggestions for improved methods. This encourages workmen
participation and they can be permitted to make changes and report the
advantages that can be derived from those. This course is in alignment with
the principle of continuous improvement and helps the organisation in the
long run. Reward systems may be implemented for recognising
contributions from the workmen.
Work study comprises of work measurement and method study. Work
measurement focuses on the time element of work, while method study
focuses on the methods deployed and development of better methods.
15.5.2 Work measurement
Work measurement can be defined as a systematic application of various
techniques that are designed to establish the content of work involved in
performing a specific task.
The task is performed by a qualified worker. With this we arrive at the
standard time for a task. This will be used to fix performance rating of other
workers. It forms the basis of incentives, promotion, and training for
workmen and assessment of capacity for the plant. Hence, training the
workers is very important. (See figure 15.3)
ILO defines a qualified worker as “one who is accepted as having the
necessary physical attributes, possessing the required intelligence and
education, and having acquired the necessary skill and knowledge to carry out
the work in hand to satisfactory standards of safety, quantity, and quality”.

Figure 15.3 Training workers

15.5.3 Methods study

Method study focus is on studying the method currently being used and
developing a new method of performing the task in a better way. Operation

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Flow charts, Motion Charts, Flow Process charts, which are the elements of
the task, are studied to find the purpose of each activity, the sequence in
which they are done, and the effect of these on the work. The study may
help in changing some of them and even eliminate some of them to effect
improvements. The new method should result in saving of time, reduced
motions, and simpler activities.
15.5.4 Machine worker interaction
Machine worker interaction study consists of studying the amount of time an
operator spends on the machine before it is activated and the time he has
nothing to do. In many modern manufacturing centres, where we have
automated systems of manufacturing, the role of the worker is limited to,
observing various screens, dials, indicator lamps to see that the process is
going on smoothly. In some cases, his job may be to load the jobs on the
machines and check the settings. What is of concern to us, is to see
whether the operations permit for enabling an operator to look after two or
three machines, without affecting of the performance of the machine or man.

15.6 Ergonomics
Ergonomics is the study of physical human factors and their functioning. We
study the movements, the amount of energy that is required for certain
activities, and the coordination among them. In operations management, we
use these factors at two places.
The first is when we design the machines which are operated, the way the
operator does the tasks on the machine using different controls. Levers,
wheels, switches, pedals (See figure 15.4) have to be positioned so that the
operators have maximum comfort for long working hours.

Levers Wheels Switches Pedals

Figure 15.4: Equipment positioned to enable maximum comfort

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The other factor is the consideration given for the type of loads the body can
take at various positions. When doing jobs like lifting, clamping, moving, and
holding, energy is expended by different organs for which racks, tables,
pallets, are positioned and designed to suit workers’ physical features.

15.7 Work Environment

The work environment in which tasks are performed affects productivity
greatly. The combination of temperature, humidity, and air movements
produce a level of comfort or discomfort considering whether they are within
a range. These depend on the conditions to which employees are
accustomed. Providing following conditions may also help increase in
productivity.
 A temperature range of 24 to 32 degrees Celsius would be suitable
 Good illumination at the workplace helps productivity
 Using pleasing colours for the walls and surroundings
 Providing ear plugs to the workmen if noise of the machines is
inevitable. Noise levels, when they are continuous and high, affects the
concentration of the employees and affects their work. They even
become irritable and their interaction with other people produces
confusion and conflict.

15.8 Workforce Productivity

Productivity is the ratio of the number of pieces produced to the number of
hours spent on them.

Number of pieces produced

Pr oductivity 
Number of hours spent on them
This figure takes into consideration a number of things like machine
capability, worker’s skill, his motivation, the environment, and so on. There
are various methods by which productivity is sought to be improved. Some
of them are mentioned here. (See figure 15.5)
1. Measure all aspects across all functions of the organisation, so that
nobody is spared or favoured. Uniformity and fairness ensure
performance.

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2. Establish reasonable goals of production. They should neither be too

low as to let in complacency nor too high to be attempted.
3. Treat complaints about the working conditions as opportunities to make
corrections and seek higher productivity.

Figure 15.5: Methods to increase productivity

15.8.1 Learning curve

Learning curve principle is that, people take less time to do the same job
subsequently, as the effort and skill expended in earlier activities has
resulted in learning. Learning improves performance. But the rate of
improvement declines as the repetitive acts increase. Suppose a job takes
15 minutes for the first piece, it takes 13 for the second, 12 for the third, and
so on. But this improvement is not continuous. If the 100th piece takes 6
minutes, the 101th piece will not take any less time. It is to achieve that
6-minute performance that training helps. For improving productivity, training
is necessary.
15.8.2 Incentive schemes
Incentive schemes are monetary and non-monetary benefits that the
management gives in recognition of superior performance. They can be
calculated on individual, team, group, department, or the plant basis. Most
of the times, these are negotiated with labour unions. There are many ways
the incentives are calculated, wherein the basis will be a standard level of
production. A proportion of the additional production is distributed as
incentives. This is a motivational factor for increasing productivity.

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Caselet 1
Voice is a mobile telecommunication service provider in India. It provides
both voice and data communication services. It covers more than 5
crores customers across India and over 20 crores customers across the
world. It also extended its business over 10 countries, which is really vast
to maintain.
It became difficult for them to service all customers and there was major
chaos among the customer care managers because of the complaints
from the customers. As the problem is to maintain the workforce, they
incorporated workforce management system into their company.
By following the work force management system, Voice is now able to
schedule the agents throughout the world who could solve the
customer’s complaints very efficiently. The steps taken to incorporate
workforce management are listed below.
 To ensure that complaints were solved as fast as possible, they had
to estimate the time taken by each complaint and plan accordingly.
For this, a statistical tool called forecasting was used. According to
this tool, Voice considered the historic data over a period where the
data was accurate, and forecasts were generated with reference to
those. Time taken by each type of complaint was estimated and
schedules of the agents were planned accordingly. An internal agent,
ILO, was also scheduled in this process to ensure fairness during this
process of forecast.
 The company encountered a major confusion when the agents
booked leaves, though letters and phones and the information did not
reach the Voice’s workforce planning specialists on time. Now,
agents throughout the world are allowed to book leaves directly
through a web station, which has reduced the strain on the
specialists.
 Training the employees on new advancements, new projects, and
developing inter-personal skill have served to solve major
bottlenecks.

(Cont. in next page)

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(Cont. from previous page)

 Flexible shifts of the agents have greatly improved service level
performance as well, with a running record of 268 days on target.
 Outsourcing also helped the organisation for better management.
Things are more accurately accounted for, in the overall workforce
management plan. Voice's quick turnaround in workforce management
has resulted in dramatic savings while also providing much greater
customer coverage and service. The change has given customer care
managers back the time they need to ensure delivery of great customer
service.

Caselet 2
Rapo was initially a small customer care service provider who was
efficient enough to handle about 500 customer calls per day. The
management of Rapo thought of expanding the call center to handle
about 3,000 calls per day. As they started expanding the business, it
became difficult and confusing for them to handle the customer calls.
Rapo observed that many companies were seeing a significant increase
in customer communication by implementing workforce management in
their firms. So, the management of Rapo asked the managers to
implement workforce management even in their firm, to improve
communication with the customers. The managers then concentrated on
scheduling the customer service executives to customer’s calls as
scheduling employees is one of the major activity in workforce
management.
But, scheduling too few executives was driving away the customers and
scheduling too many executives was getting costly for the company. So,
the management asked the managers to staff their call centres so that,
number of calls handled is maximum when the cost involved is optimal.
In order to maintain staff as told above, a method was suggested by the
managers. This is nothing but maintaining a record of the percentage of

(Cont. in next page)

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(Cont. from previous page)

calls answered (PCA) within a specified time interval, termed the service
objective (SO). According to this method, the PCA ranged 83 to 89
percent, and the SO ranged 18 to 40 seconds in Rapo. With more agents
on the staff at a certain time, the better were the PCA.
But they still encountered a problem, because the requirements for
agents were changing over time. For example, if 2000 calls were handled
on a Wednesday morning in August, the volume dropped by 60 percent
when New Year’s Day happened to fall on a Wednesday. The total daily
hours of contact time wasn’t constant either. Also, the callers were
speaking in different languages.
So, workforce management specialists suggested workforce
management software to help the managers cope with this complexity.
The specialists suggested sophisticated forecasting models that can
estimate call volumes taking into consideration.
 Customers who receive by using signals
 Customers who hang up before an agent answers
 Call volume patterns that are dependent on special events
The forecasting also models the project language skill requirements, in
order to provide a better picture of multi skilled agents the call centre
needs for each shift. Agents were also given training before they can
effectively help customers. By implementing all these factors of
workforce management, Rapo was finally able to handle 3000 calls per
day very efficiently.

Self Assessment Questions

Fill in the blanks
5. Performance of workforce can be achieved by establishing __________
__________of production.
6. The range of temperature which is considered to make it comfortable for
workmen is between ________ and ______ degrees Celsius.

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15.9 Summary
Models represent a physical system in a mathematical form so that by
changing the variables, depending on the factors under consideration, we
will be able to predict the effect on the outcomes. These are used to take
decisions for deployment of resources so that optimisation is achieved. We
have seen a few popular and useful models that help us to understand the
business process. We have also discussed the concept of Learning Curve
and the utility of the same in understanding workforce productivity.

15.10 Terminal Questions

1. What are the different models used in quantitative analysis approach?
2. How do statistical tools help in improving decision making?
3. What do you understand by ergonomics? How does it help the
production manager?
4. How is the study of Learning Curve help in work study methods?

15.11 Answers to SAQs and TQs

Answers to Self Assessment Questions

1. Simulation
2. Queues
3. False
4. False
5. Reasonable goals
6. 24 and 32

Answers to Terminal Questions

1. Refer to 15.3.2
2. Refer to 15.4
3. Refer to 15.7
4. Refer to 15.9.1

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Bibliography
1. Norman Gaither and Greg Frazier, Operations Management, 9th Edition,
Thomson South Western.
2. Ninth Printing, R. Panneerselvam, Production and Operations
Management, Prentice-Hall India.
3. S. N. Chary, Production and Operations Management, 3nd Edition, Tata
McGraw-Hill.
4. Operations Management, 8th Edition, William J. Stevenson, Tata
McGraw Hill.
5. Operations Management – Processes and Value Chains – 7th Edition,
Lee Krajewski and Larry P. Ritzman – Prentice-Hall India.
6. Buffa E. S., Operations Management: The Management of Productive
Systems, John Wiley, New York, 1976.
7. Drucker, Peter F., Managing in turbulent times, Pan Books London,
1981.
8. Porter, Michael E., Competitive Advantage, The Free Press, New York,
1985.
9. Gopalakrishnan P. and M. Sundaresan, Materials Management – An
Integrated Approach, Prentice-Hall, New Delhi 1977.
10. Kalakota, Ravi and A. B. Whinston, Frontiers of Electronic Commerce,
Addison Wesley, 1996.

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