Pom 2

MODULE 1
INTRODUCTION TO PRODUCTION AND OPERATIONS

MANAGEMENT
Among different functions in any organization, production and operation function is a vital function
which does the job of value addition to products services respectively. Maximizing the value
addition automatically results in productivity improvement.
An organization consists mainly of four functional subsystems, viz. marketing, production, finance
and human resource management. The marketing function of an organization aims to promote its
products among customers which help it to obtain sales orders. This, in turn, is communicated to
the production subsystem which is concerned with the management of physical resources for
production of an item or provision of services. This means that the available facilities also need to
be managed to meet the current market requirements. To manufacture the product as per the
specifications, the production function needs to organize its resources (raw material, equipments
labor and working capacity) according to predetermined production plans. The finance function
provides authorization and to control to all other subsystems to utilize money more effectively
through a well defined finance plan. The human resource management function plans and provides
manpower to all other subsystems of the organization by proper recruitment and training programs.
It also monitors the performance of the employees by proper motivation for targeted results.
Thus we can see that all the subsystems of an organization are mutually interlinked. They cannot
work in isolation. A complete integration of all the functions /subsystems of an organization are
absolutely essential for the effective functioning and achievement of desired results.
The concern of any organization today is the pursuit of creating more value for the customer. This
value end focus provides the competitive advantage that has become of necessity today. 09
Production and operation management provides the means to explore and implement initiatives on
how to avoid waste, how to create value and how the organization can differentiate itself from its
competitors. This differentiation has become the means to survive in this brutal world of
competition. In fact “Operations” greatly influences, directly or indirectly, the value creation logic
PREPARED BY: NIKITA GAJJAR 1

of the organization. Production and operation management is the science-combination of
techniques and systems – that guarantee production of goods and services of the right quality, in
the right quantities and at right time with the minimum cost within shortest possible time. The
essential features of a production and operation function is to bring together people, machines and
materials to provide goods and services for satisfying customer needs.
Definition of production management:

One cannot demarcate the beginning and end point of Production and Operation Management in
an establishment. The reason is that it is interrelated with many other functional areas of business
viz. marketing, finance, industrial relations policies etc .Alternately, Production and Operation
Management is not independent of marketing, financial, and personnel management due to which
it is difficult to formulate some single appropriate definition of Production and Operation
Management. The following definitions try to explain main characteristics of Production and
Operation Management:
• In the words of Mr. E.L. Brech: “Production and Operation Management is the process of
effective planning and regulating the operations of that section of an enterprise which is
responsible for the actual transformation of materials into finished products”. This definition limits
the scope of operation and production management to those activities of an enterprise which is
associated with the transformation process of inputs into outputs. The definition does not include
the human factors involved in production process. It lays stress on materialistic features only.
Production and Operation Management deals with decision making related to production
processes, so that the resulting goods and services are produced in accordance with the quantitative
specifications and demand schedule with minimum cost. According to this definition design and
control of the production system are two main functions of production and operation management.
Production and Operation Management is a set of general principles for production economies,
facility design, job design, schedule design, quality control, inventory control work study and cost
band budgeting control. This definition explains the main areas of an enterprise where the
principles of production and operation management can be applied.

In short, the main activities of operation and production management can be listed as;
• Specialization and procurement of input resources namely management, material and labor,
equipment and capital.
• Product design and development to determine the production process for transforming the input
factors into output goods and services.
• Specialization and control of transformation process for efficient production of goods and
services.
Productivity:
Productivity is a relationship between the output (product/service) and input (resources consumed
in providing them) of a business system. The ratio of aggregate output to the aggregate input is
called productivity.
Productivity = output/Input
For survival of any organization, this productivity ratio must be at least 1.If it is more than 1, the
organization is in a comfortable position. The ratio of output produced to the input resources
utilized in the production.
OPERATION MANAGEMENT: A SYSTEMS PERSPECTIVE
Operations Management is best understood using systematic approach. It involves understanding

the nature of issues and problems to be studied, establishing measures of performance, collecting
relevant data, using scientific tools, techniques, and solution methodologies for analysis, and
developing effective as well as efficient solutions to the problem at hand.
Inputs such as
TRANSFORMATION output like
material, Labour,
goods and
Capital, Energy, PROCESS
services
Method etc.

Basic inputs inan operating system are labor, material and capital.
Second important element of this system is processing unit. This includes the various activities
that an operating system undertakes to convert the raw material into useful products for customers.
This part includes activities such as product and process design, purchasing and inventory control,
operations planning and control, material and capacity planning etc.
The output of operation system consists of goods and services. An organization that manufactures
two - wheelers will provide many variants of the two- wheelers. On the other hand, a hair - dresser
may provide various styles of hair design. In several manufacturing organizations, services are
also offered in the form of after- sales support and warranty.
Finally, an operation system also has feedback loop. In any system, the feedback loop serves the
purpose of identifying the deviation paths and highlighting the areas that need immediate
correction. In a common operation system three feedback loops, namely, quality management,
maintenance management, and process improvements are available. These activities provide
checkpoints to identify the areas requiring improvement and ensure that corrective measures are
indeed taken.
Demand of goods and services plays important role in design of operation system. From a systems
perspective, the demand is an exogenous variable. However, planning for production, and capacity
is directly depended on demand data. Estimating future demand of products with respect to
different time horizon is an important aspect of operation management.
SCOPE OF PRODUCTION AND OPERATIONS MANAGEMENT
Production and operations management concern with the conversion of inputs into outputs, using
physical resources to provide the desired utilities to the customer while meeting the other

organizational objectives of effectiveness, efficiency and adoptability. It distinguishes itself from
other functions such as personnel, marketing, finance, etc., by its primary concern for ‘conversion
by using physical resources.’ Following are the activities which are listed under production and
operations management functions and scope:
Location of facilities
Location of facilities for operations is a long-term capacity decision which involves a long term
commitment about the geographically static factors that affect a business organization. It is an
important strategic level decision-making for an organization. It deals with the questions such as
‘where our main operations should be based?’
The selection of location is a key-decision as large investment is made in building plant and
machinery. An improper location of plant may lead to waste of all the investments made in plant
and machinery equipments. Hence, location of plant should be based on the company’s expansion
plan and policy, diversification plan for the products, changing sources of raw materials and many
other factors. The purpose of the location study is to find the optimal location that will results in
the greatest advantage to the organization.
Plant layout and material handling

Plant layout refers to the physical arrangement of facilities. It is the configuration of departments,
work centers and equipment in the conversion process. The overall objective of the plant layout is
to design a physical arrangement that meets the required output quality and quantity most
economically.
According to James Moore, “Plant layout is a plan of an optimum arrangement of
facilities including personnel, operating equipment, storage sp ace, material handling
equipments and all other supporting services along with the design of best structure to
contain all these facilities”.
‘Material Handling’ refers to the ‘moving of materials from the store room to the machine and
from one machine to the next during the process of manufacture’. It is also defined as the ‘art and
science of moving, packing and storing of products in any form’. It is a specialised activity for a
modern manufacturing concern, with 50 to 75% of the cost of production. This cost can be reduced
by proper section, operation and maintenance of material handling devices. Material handling

devices increases the output, improves quality, speeds up the deliveries and decreases the cost of
production. Hence, material handling is a prime consideration in the designing new plant and
several existing plants.
Product design
Product design deals with conversion of ideas into reality. Every business organization have to
design, develop and introduce new products as a survival and growth strategy. Developing the new
products and launching them in the market is the biggest challenge faced by the organizations. The
entire process of need identification to physical manufactures of product involves three functions:
marketing, product development, and manufacturing. Product development translates the needs of
customers given by marketing into technical specifications and designing the various features into
the product to these specifications. Manufacturing has the responsibility of selecting the processes
by which the product can be manufactured. Product design and development provides link between
marketing, customer needs and expectations and the activities required to manufacture the product.
Process design
Process design is a macroscopic decision-making of an overall process route for converting the
raw material into finished goods. These decisions encompass the selection of a process, choice of
technology, process flow analysis and layout of the facilities. Hence, the important decisions in
process design are to analyze the workflow for converting raw material into finished product and
to select the workstation for each included in the workflow.
Production planning and control

Production planning and control can be defined as the process of planning the production in
advance, setting the exact route of each item, fixing the starting and finishing dates for each item,
to give production orders to shops and to follow up the progress of products according to orders.

The principle of production planning and control lies in the statement ‘First Plan Your Work and
then Work on Your Plan’. Main functions of production planning and control includes planning,
routing, scheduling, dispatching and follow-up.
• Planning is deciding in advance what to do, how to do it, when to do it and who is to do
it. Planning bridges the gap from where we are, to where we want to go. It makes it possible
for things to occur which would not otherwise happen.
• Routing may be defined as the selection of path which each part of the product will follow,
which being transformed from raw material to finished products. Routing determines the
most advantageous path to be followed from department to department and machine to
machine till raw material gets its final shape.
• Scheduling determines the programme for the operations. Scheduling may be defined as
‘the fixation of time and date for each operation’ as well as it determines the sequence of
operations to be followed.
• Dispatching is concerned with the starting the processes. It gives necessary authority so as
to start a particular work, which has already been planned under ‘Routing’ and
‘Scheduling’. Therefore, dispatching is ‘release of orders and instruction for the starting of
production for any item in acceptance with the route sheet and schedule charts’.
• The function of follow-up is to report daily the progress of work in each shop in a
prescribed proforma and to investigate the causes of deviations from the planned
performance.
Quality control
Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of quality
in a product or service’. It is a systematic control of various factors that affect the quality of the
product. Quality control aims at prevention of defects at the source, relies on effective feedback
system and corrective action procedure.
Quality control can also be defined as ‘that industrial management technique by means of
which product of uniform acceptable quality is manufactured’. It is the entire collection of activities
which ensures that the operation will produce the optimum quality products at minimum cost.
The main objectives of quality control are:

• To improve the companies income by making the production more acceptable to the
customers i.e., by providing long life, greater usefulness, maintainability, etc.
• To reduce companies cost through reduction of losses due to defects.
• To achieve interchangeability of manufacture in large scale production.
• To produce optimal quality at reduced price.
• To ensure satisfaction of customers with productions or services or high quality level, to
build customer goodwill, confidence and reputation of manufacturer.
• To make inspection prompt to ensure quality control.
• To check the variation during manufacturing.
Materials management
Materials management is that aspect of management function which is primarily concerned with
the acquisition, control and use of materials needed and flow of goods and services connected with
the production process having some predetermined objectives in view.
The main objectives of materials management are:
• To minimize material cost.
• To purchase, receive, transport and store materials efficiently and to reduce the related cost.
• To cut down costs through simplification, standardization, value analysis, import substitution,
etc.
• To trace new sources of supply and to develop cordial relations with them in order to ensure
continuous supply at reasonable rates.
• To reduce investment tied in the inventories for use in other productive purposes and to
develop high inventory turnover ratios.
EVOLUTION OF PRODUCTION AND OPERATION MANAGEMENT
Operation Management has been variously known as Industrial Management, Management

Science, Operation Research, Production management and Production and Operation
Management. The concepts associated with Operation Management, perhaps, have their roots
embedded in the development of early organizations. The class of problems represented by
Operation Management came in the era after Industrial Revolution. This was a period of radical

changes. People got replaced by machines and water and mule power replaced human muscular
efforts. These developments changed the nature of production. As production moved from the
cottage to factory, the seeds of operation management sprouted on fertile ground.
Time and Motion studies—Scientific Management:

It has passed through various stages to reach the present stage. Its roots go back to the concept of
“division of labor” advocated by Adam Smith in his book “The Wealth of Nations” in 1776. He
recognized the economic benefits of specialization of lab our, He recommended breaking the job
down into subtasks and reassigning workers to specialized tasks in which they would become
highly skilled and efficient. In the early twentieth century, Frederick W. Taylor implemented
Smith’s theories and enunciated his theory of “scientific management”. The basis of scientific
management was a focus on machines and system of their utilization. This concept led to “time
and motion study “Early in the 20th.century , Frank and Lillian Gilbreth developed a more
systematic and sophisticated method of time and motion study taking into account the limits to
physical and mental capacity and importance of good physical environment. The Hawthorne
Studies by Elton Mayo, in 1927, resulted in the Human Resource Movement. These developments
changed the way operations were managed in many businesses during that period.
World War II – Operation Research ---1940—1980:

Before World War II the focus of ‘scientific management’ was based on the micro-environment
in the manufacturing sector. During the war, the focus moved from micro-environment to macro-
environment. There was rapid development in the concepts ‘theory and techniques of production
and operation management after World War II. The operation Research techniques evolved during
defense operations in the World War II found useful operations e.g. linear programming and
network analysis.
A new multi-disciplinary approach to problem solving called ‘Operation Research’ was developed.
This was quantitative approach basically concerned with the efficient allocation and control of
resources. Operation Research is the application of scientific methods to study and devise solutions
to managerial problems in decision making using mathematical models and system approach.
Operation Research has helped solve resource allocation, scheduling, processing, inventory,
location layout and control problems replacement methods, and advent of computers introduced

the field of automation. The demand of manpower in defense operations in Second World War
necessitated evolving production systems requiring lesser labor force. This resulted in detailed
time and motion studies and standard machine tool designs to improve the efficiency of reduced
work force.
Future of production and operation management:

If we assess the past, covering a period of 200 years after Adam Smith, it can be observed that
total production capacity as well as productivity has expanded considerably. Production and
Operation Management has become an empirical science. Undoubtedly, during this period, we
have responded to the expansion of markets and large scale business units by using concepts of
division of labor and progressive mechanization in order to achieve economies of large scale
production. There has been continuous improvement in design, layout and equipment of
production processes by:
• With efficient use of labor, material and equipment economies in production,
• Using sophisticated production control techniques to produce goods and services of desired
specialization at the desired time and with minimum cost,
• Improvement in production line e.g. automation in industries.
TRENDS IN OPERATION MANAGEMENT
Recently several developments that affect operations management practices have taken place in
the market place. These changes have been due to economic policies at the national and
international levels, advent of new sectors of industry and new technologies. The following
represent a brief projected perspective on what operation managers should look at when they think
of future. These are the emerging trends and future challenges which will have a profound impact
for operation strategy.
Dismantling of Trade Barriers:

One of the recent developments which could potentially affect the operation management practices
in the country is the opening up the Indian market to foreign competition. Beginning 1991, the

Union Government brought new reforms for easy import of foreign goods in India. In addition to
cost pressures from overseas players Indian manufacturing firms had to face large scale dumping
of goods. Therefore the new market scenario sets new priorities for operation management and
manufacturing firms need to face up to the new challenge. Besides this new challenge, Indian
manufacturing firms have greater chances for market expansion, on account of liberalized
economy, for two important reasons. The first is the overall attractiveness of Indian firms due to
factor cost advantage, because of relatively low cost of labor. The second advantage for India is
the large installed base of technical manpower, manufacturing know-how and experience in
manufacturing and operation management .These developments are likely to affect operation
management practices in the country.
Shift in Economic Activity:

In the beginning of the 21’st century the global economy shows significant structural changes with
a swing of service sector. Reserve Bank of India Annual Report for the year 1998-99 notes that
the services have emerged as the fastest growing sector. From 41.3%share in 1990-91 of services
the real gross domestic product has increased to 51.2% in 1998-99. Increasing economic activity
in service sector that employment pattern will shift from manufacturing sector to service sector.
Out sourcing as a major wave:

India is the direct beneficiary of the phenomenon of dismantling of trade barriers. Based on the
successful experience of outsourcing software jobs in India, firms in developed countries are
increasing variety of other jobs, thus creating an ‘outsourcing wave’ .Business process outsourcing
(BPO) is an arrangement by which some of the business processes are done by a third party on
behalf of the organization. The key motivation for a firm to outsource some of its processes stems
from three factors:
(i) Cost
(ii) Capacity
(iii) Competency.
Excellence in operations is a prerequisite for being successful in the BPO sector. Since the primary
consideration for a BPO is cost operation strategy thus a BPO firm must emphasize cost leadership,
otherwise the BPO activities may be shifted to competitor. Another critical performance measure

is quality. Since an organization often outsourcers the entire operations pertaining to business
process to third party, quality considerations are followed as per stringent norms. Therefore,
developing strategic planning for high level of quality is another important implication for BPO
organizations. In several other cases, in addition to cost and quality requirements, stringent
delivery requirements may also have to be met as the processes may be in the intermediate stages
of value creating process.
Collaborative Commerce through the Internet:

One of the most recent developments is the advent of Internet in commerce and trade. Using the
huge IT infrastructure, consisting of network connectivity, client-service architecture and several
computers, it is possible to connect remote trading partners. Collaborative commerce opens up
new areas for consideration in the operations management. Many of traditional methods of
operation management can either be replaced or supplemented by new procedures using the
electronic methods. Two important areas of significant interest are (i) procurement and supply
management practices using electronic means (ii) design and new product development by means
of CAD.
Technological Change:
There is a tremendous growth in the use of robots in automatic machine loading. The robot is used
to load position and then unload and transfer work pieces. Welding processes use robots
extensively. Project management techniques of PERT/CPM are very effective tools of planning
and control of various projects. Computer simulation, computer-aided design and manufacturing
(CAD/CAM), group technology (GT) and cellular manufacturing systems (CMS) are being
introduced in future. Lean Manufacturing concept conceived by Toyota Corporation in Japan is
widely adopted. Lean redefines the organization’s means, methods and mission. In lean philosophy
non-value added activities (NVA’s) are excluded.
The Environment:
Technologies, to make products more earth friendly will be developed. Stringent legislations and
their compliance will be mandatory. Recycling and reuse of waste will be adopted in many
industries. New technologies will be developed to provide benefits to the organizations.

In an organization production manager has to administer a great variety of activities. He assembles
appropriate resources and direct the use of resources, be they people, machines, processing etc. in
transforming material and time of people into products and services. Managers also have to
respond to others forces from the external environment such as government regulation, labor
organization as well as local, regional, national and international economic conditions Thus
managers have to pay more attention to not only what their customers might buy but also to
increasing government regulations and behavior of consumers and environment protection groups.
PROCESS DESIGN
Process design is concerned with the overall sequence of operations required to achieve the product
specifications. It specifies the type of work stations that are to be used, the machines and equipment
necessary and the quantities in which each are required.
A successful process design has to take into account the appropriateness of the process to overall
organization objective. Process design requires a broad view of the whole organization and should
not have a myopic outlook. And the process should deliver customer value with constant
involvement of the management at various stages.
In order to achieve a good process design, effective process strategy is required, which deals with
singular line items required to manufacture the end product. Effective process strategy deals with
raw material procurement, customer participation, technology investment, etc.
Over a period of time process design has undergone change and new concepts like Flexible
Manufacturing Systems have been developed, which delivers efficient and effective production
design and analysis. The sequence of operations in the manufacturing process is determined by
• The nature of the product

• The materials used
• The quantities being produced
• The existing physical layout of the plant
TYPES OF PROCESS

As a business grows the scale of its operations, it often needs to change its method of production
to allow greater production capacity. if the product is intended for much larger, mass markets,
then alternative methods of production may be required in order for the product to be
produced efficiently. A key production method in these circumstances is flow production.
Flow production involves a continuous movement of items through the production process.
This means that when one task is finished the next task must start immediately. Therefore, the time
taken on each task must be the same.
Flow production involves the use of production lines such as in a car manufacturer where doors,
engines, bonnets and wheels are added to a chassis as it moves along the assembly line. It is
appropriate when firms are looking to produce a high volume of similar items. Some of the big
brand names that have consistently high demand are most suitable for this type of production.
There are two types flow process:

• Continuous flow process
• Line flow process
1) CONTINUOUS FLOW PROCESS

Continuous production system involves a continuous or almost continuous physical flow of
materials. It makes use of special purpose machines and produces standardized items in large
quantities. The examples are petrochemical, cement, steel, sugar and fertilizer industries, etc.
In a Continuous Production System, the items are produced for the stocks and not for specific
orders. Before planning manufacturing to stock, a sales forecast is made to estimate the
likely demand of the product and a master schedule is prepared to adjust the sales forecast based
on past orders and level of inventory. Here, the inputs are standardized and a standard set of
processes and sequence of processes can be adopted. Due to this, routing and scheduling for the
whole processes can be standardized.
After setting out a master production schedule, a detailed planning is carried out. Basic production
information and bill of materials are recorded. Information for the machine load charts, equipment,

personnel and material needs are tabulated. In continuous production, each production-run
manufactures in lot sizes and the production process is carried out in a definite sequence of
operations in a predetermined order. In process storage is not necessary, which in turn reduces
material handling and transportation facilities. First-in-First-out method is followed in the system.
Characteristics of Continuous Production System

• Standard products are manufactured, which have large demand throughout the year.
• Standardized inputs and standardized sequence of operations, machine tools and equipment
are used.
• Division of labor is made more efficient.
• Minimum and constant material handling.
• Minimum flow of work at any point of time.
• Small work in progress is involved.
• Use of productivity techniques is feasible.
• Minimum cost of production per unit is possible.
• Rigid quality control is exercised.
• More maintenance is required.
Advantages of Continuous Production System

• Reduced Labor cost,
• High accuracy,
• Reduced material handling,
• Simple control process,
• Minimum wastage,
• Better materials /inventory control,
• Higher return on investments.
Disadvantages of Continuous Production System

• Heavy loss during slack demand period
• Rigid maintenance and upkeep of machines

• Customers’ tastes cannot be met as only one standard product is manufactured.
• Difficult to adjust to new situations and specifications.
• Special purpose machine tools are required.
Suitability of Continuous Production System

Continuous system is best suited to organizations which intend to produce a limited variety of
products on a large scale. The heavy fixed costs of specialized equipment that are utilized for
operating at low cost per unit can be distributed over a high volume of output. Continuous
production system can be applied to those industries which satisfy the following requirements:
• Uniform demand,
• High volume of production,
• product standardization, and
• Process balancing.
2) LINE FLOW PROCESS
Flow line manufacturing is used to manufacture high volumes of products with high production
rates and low costs. Separate dedicated flow line is created for each product. Dedicated machines
are used to manufacture the products at high production rates. These machines are generally
expensive. A large volume of the products must be produced in order to justify the cost of such
expensive machines. Flow line manufacturing is most suitable to manufacture high volumes of
products continuously. Flow line manufacturing is used in such industries where raw materials are
fed at one end and finished products are produced continuously at the other end. Thus flow line
manufacturing is utilized in mass production industries. Flow line manufacturing is shown here.
Flow line layout is also called a product layout.

Advantages of flow line manufacturing are as per the following.
1. Smooth and logical flow of materials
Smooth and logical flow of materials are achieved in flow line manufacturing because dedicated
machines are used to manufacture the products at high production rates and separate dedicated
flow line is created to manufacture each product.
2. Simplified production planning and control

Manufacturing operations are simple in flow line manufacturing which simplify production
planning and control. Scheduling jobs, controlling materials and performing machines operations
become very simple in flow line manufacturing.
3. Reduced material handling cost

Material/parts are moved within small areas during manufacturing process. Machines are ready to
accept a job during various stages of manufacturing, almost no need to store and protect materials
between two machines. Status & location of materials are easy to track and control. Thus cost of
moving, storing, protecting and controlling materials becomes low in flow line manufacturing
which ultimately reduces material handling cost.
4. Shorter production lead time

Waiting time is minimal for each part during manufacturing process in flow lines and flow of
materials is uninterrupted. This causes shorter production lead time and high production rates in
flow line manufacturing.
5. Small amount of work in progress inventory

Amount of work in progress inventory is small in flow line manufacturing because of shorter
production lead time.
Disadvantages of flow line manufacturing are as per the following.

1. Lack of flexibility
Major drawback of flow line manufacturing is lack of flexibility to manufacture products for which
they are not designed. This drawback is inherently present in flow line manufacturing because
dedicated machines are setup to execute limited operations and they are not allowed to be
reconfigured. Flow line manufacturing is not suitable in such cases where variety of products to
be manufactured changes frequently.
2. High investment in machines and equipments

Similar machines are not grouped together in flow line manufacturing. High investment in
machines and equipments is required and capacity of machines is not fully utilized because of
duplication of machinery inherently present in flow line manufacturing.
3. Lack of specialization in supervision

Manufacturing processes are executed in one line and different types of machine are installed in
one line. In job shop manufacturing, a supervisor is supposed to have the specialized knowledge
about his/her departmental activities, machines and processes. But in flow line manufacturing, a
supervisor is supposed to have detailed knowledge of all the machines, processes and activities
causing lack of specialization in supervision.
4. Work stoppage because of breakdown

If one machine in the flow line fails then other machines in that flow line stops functioning and
thus manufacturing process will be stopped.
3) JOB SHOP PROCESS
Under this method peculiar, special or non-standardized products are produced in accordance with
the orders received from the customers. As each product is non- standardized varying in size and

nature, it requires separate job for production. The machines and equipment’s are adjusted in such
a manner so as to suit the requirements of a particular job.
Job production involves intermittent process as the work is carried as and when the order is
received. It consists of bringing together of material, parts and components in order to assemble
and commission a single piece of equipment or product. Some of the prominent features of job
shops are:
• A variety of small quantity orders (jobs) are received from customers with
unpredictableprocess requirements at unpredictable times
• Jobs may have different quantities, material requirements, routings, priorities, target lead
times and margins
• An order may involve producing a set of similar components or producing different typesof
components and making subassemblies and a final assembly from those components
• Several jobs may simultaneously move through the system along the respective
routingswhile competing for shared resources
• Processing of a job may include some external operations
• Production operations for a job may be sequential or they may have certain
precedencerelations
• The set of operations and precedence relations may vary with job
• Setup times and cycle times of any operation may vary with job
• Setup times for operations may also depend on job sequence
• An operation may require a single resource or it may simultaneously require
multipleresources like machines, workers, etc.
• Resources may be multi-functional machines and multi-skilled workers
• Resources may have individual calendars (working hours) and calendar exceptions
• A long operation may or may not be shared by several alternative resources for reducingits
duration.
• Material of a job may move through the system as a single batch or as small transfer batches
Advantages
Following are the advantages of Job-shop Production:

1. Because of general purpose machines and facilities variety of products can be produced.
2. Operators will become more skilled and competent, as each job gives them learning
opportunities.
3. Full potential of operators can be utilized.
4. Opportunity exists for Creative methods and innovative ideas.
Issues Faced by Job Shops

Job shop managers regularly face a lot of issues and challenges. The difficult issues faced bymany
of them include:
• Dealing with customer-imposed lead times and late changes in orders
• Finding rational lead times for new jobs based on material lead times, the existingworkload
and resource capacities
• Finding right start times for jobs for controlling production lead times and WIP
withoutcompromising the promised delivery dates
• Estimating completion times of jobs
• Foreseeing the imminent bottlenecks (due to changes in product mix) and mitigating
themin advance
• Revising production plan subject to material delays for some jobs
• Revising production plan subject to changes in job priorities
• Capacity planning for meeting due dates of jobs which are likely to become late
• Handling rush orders (hot jobs) for high margins with minimal effect on lead times of
theexisting jobs
• Estimating overtime requirements to handle rush orders without any adverse impact
onother orders
• Overcoming interruptions caused by machine breakdowns and worker absence to avoidlate
deliveries
• Overcoming the adverse impact of rework / rejections
• Managing overtime optimally to improve on-time delivery or accept rush orders
4) BATCH PRODUCTION
Batch production pertains to repetitive production. It refers to the production of goods, the quantity
of which is known in advance. It is that form of production where identical products are produced
in batches on the basis of demand of customers’ or of expected demand for products.
This method is generally similar to job production except the quantity of production. Instead of
making one single product as in case of job production, a batch or group of products are produced
at one time. It should be remembered here that one batch of products may not resemble with the
next batch.
Under batch system of production the work is divided into operations and one operation is done at
a time. After completing the work on one operation it is passed on to the second operation and so
on till the product is completed.
Batch Production Examples:

• Baked goods
• Computer chips
• Computer software
• Die- or mold-making
Batch production can fetch the benefits of repetitive production to a large extent, if the batch is of
a sufficient quantity. Thus batch production may be defined as the manufacture of a product in
small or large batches or lots by series of operations, each operation being carried on the whole
batch before any subsequent operation is operated. This method is generally adopted in case of
biscuit and confectionery and motor manufacturing, medicines, tinned food and hardware’s like
nuts and bolts etc.
The batch production method possesses the following characteristics:

• The work is of repetitive nature.
• There is a functional layout of various manufacturing processes.
• One operation is carried out on whole batch and then is passed on to the next operation and so
on.
• Same type of machines is arranged at one place.

• It is generally chosen where trade is seasonal or there is a need to produce great variety of
goods.
Advantages of Batch Production
There are a number of advantages to using batch production:

• It generally has lower capital costs.
• It has the flexibility to produce a variety of different product variations, or different
products.
• It works well when small production runs are needed, such as individual sandwich shops
baking only the cookies they need.
• It is ideal for custom or seasonal orders, or trial runs of a new product.
• It reduces inventory. This can be critical when spoilage or space are issues.
• It allows a single production system to be used for making different seasonal items.
• It makes sense when the demand for a product is not sufficient to keep a dedicated machine
or production process operating continuously.
Disadvantages of Batch Production
There are three major drawbacks to batch production.

• Reconfiguring the production system to produce something different results in downtime.
In lean manufacturing language, these are wasted resources.
• The production equipment uses a lot of space. When it's idle, this space is not being utilized
to make money.
• Labor is required to move items from one stage of the batch process to another, in addition
to the labor required for batch manufacturing.
5) PROJECT PROCESS
Projects represent one-of-a-kind production for an individual customer. They tend to involve large
sums of money and last a considerable length of time. For those reasons, customers are few and
customer involvement intense. Customers are heavily involved in the design of the product and
may also specify how certain processes are to be carried out. In some cases, the customer will have

representatives on site to observe the production process, or send in inspectors to certify quality at
critical stages of project development.
Most companies do not have the resources (or time) to complete all the work on a project
themselves, so subcontracting is common. The production process, as well as the final product, is
basically designed anew for each customer order. Thus, the process is very flexible. And given the
lengthy duration of a project, changes in customer preferences, technology, and costs cause
frequent adjustments in product and process design. Managing these engineering change
orders (ECO) is a major concern in project management. Another concern is keeping track of all
the activities that are taking place and making sure they are completed correctly and on time, so as
not to delay other activities.
Cutting-edge technology, project teams, and close customer contact make project work exciting.
But projects can also be risky with their large investment in resources, huge swings in resource
requirements (as new projects begin and old ones end), limited learning curve, and dependence on
a small customer base.
Examples of projects include constructing a building, airplane, or ship; planning a rock concert;
and developing a new product. Projects are managed very differently from other types of processes
Advantages
Workflow management
In project process, creates a system whereby workflow is measured and accounted for, ensuring
that resources are used judiciously in fulfilling the goals of the project. This type of planning
establishes expectations for staffers, provides clear directives and builds in procedures for quickly
addressing unexpected outcomes.
Cost containment
Managing projects from start to finish can help control project costs and help a project manager
retain control over his budget, identifying problems or issues before they turn into roadblocks.

This can also help a business ensure on-time delivery, retain satisfied customers and project an
image of competence and professionalism.
Productive staff utilization

In Effective projects, managers make determinations about appropriate staffing and team
formation in the early stages of project planning. This can help ensure the right people with the
most appropriate skill sets are assigned to tasks within the project, allowing the company to use its
human resources judiciously and effectively.
Disadvantages
Micromanagement
Project management, particularly micromanagement, has the potential to stymie innovative
thinking when all staffers are focused on a preset outcome within strict parameters. Staffers and
project managers may be heavily invested on maintaining budgets and timelines and overlook
issues such as quality control, problem-solving or different directions that could be more effective
once the project is underway.
Miscommunication cost
When miscommunication happens in project management, it can take place on a grand scale. For
example, if one phase of workflow development is misconstrued and sends a portion of the team
down the wrong path, not only does the team have to reverse direction, but they halt progress in
subsequent phases of the project as well. Clear communication guidelines should be issued to
ensure timely and accurate transmission of new, information and project updates to protect against
missteps.
Lack of creativity
Strict project process can discourage outside the box thinking and hamper creative efforts. Project
teams that experience collective creative block can slow progress, employ cost overages and
generally take a project off-track. Intervention and creativity-generating approaches, like
brainstorming sessions, may be necessary to refocus the group.

6) CELLULAR PROCESS
In this method of production, similar products using cells, or groups of team members,
workstations, or equipment, to facilitate operations by eliminating setup and unneeded costs
between operations. Cells might be designed for a specific process, part, or a complete product.
They are favorable for single-piece and one-touch production methods and in the office or the
factory. Because of increased speed and the minimal handling of materials, cells can result in great
cost and time savings and reduced inventory.
Cellular design often uses group technology, which studies a large number of components and
separates them into groups with like characteristics, sometimes with a computer's help, and which
requires the coding of classifications of parts and operations.
Cellular design also uses families-of-parts processing, which groups components by shape and size
to be manufactured by the same people, tools, and machines with little change to process or setup.
Regardless of the cell design (straight line, u-shape, or other), the equipment in the cell are placed
very near one another to save space and time. The handling of materials can be by hand, conveyor,
or robot. A cell supervisory computer must used to control movement between equipment pieces
and the conveyor when robots or conveyors are used.
1. Reduction in setup time

Setup time is defined as period required preparing a device, machine, processor system to be ready
to function or accept a job. Manufacturing cells are designed to process parts having similar shapes
and relatively similar sizes. So it is not required to change or adjust machines and tools within cells
to process similar parts. Thus setup time is greatly reduced in cellular manufacturing.
2. Reduction in work in progress

Work in progress refers to all materials and partly finished products that are at various stages of
the production process. Work in progress excludes inventory of raw materials at the start of the
production cycle and inventory of finished products at the end of the production cycle. With

reduced setup times, the amount of work in progress can be reduced. Work in progress can be
reduced by 50% when the setup time is cut in half.
3. Reduction in material handling cost and time

Material handling is the art and science of moving, storing, protecting and controlling material at
the lowest possible cost through the use of proper method and equipment. Hundreds and thousands
tons of materials are handled daily requiring the use of large amount of manpower, while the
movement of materials takes place from one processing area to another or from one department to
another department of the plant.
If proper method is not employed in material handling then total manufacturing cost & time is
significantly increased. In cellular manufacturing, each part is processed completely within a
single cell (where possible) which reduces part travelling distance & time. Almost no effort is
needed in cellular manufacturing to store, protect and control materials. In cellular manufacturing,
machines are close together under one or more workers in each cell. Thus it becomes easy to move
materials from one machine to another. Reduction in work in progress also reduces material
handling cost in cellular manufacturing.
4. Reduction in material flow distance

Material flow distance is defined as total distance travelled by all parts/materials to manufacture a
single product or a variety of different products. By reducing it we can significantly reduce total
manufacturing cost & time. Material flow distance is low in cellular manufacturing because every
parts travel only in a small area (cell). In each cell, machines are close together. By efficient layout
design of machines in each cell, 30 to 70% reduction in material flow distance can be achieved.
5. Improvement in machine utilization

In cellular manufacturing, single machine can be used to manufacture one or more products in
each cell. Unnecessary machines are identified and removed from the manufacturing process.
Reduction in setup time also reduces idle time for machines thus machine utilization is improved
in cellular manufacturing.

6. Reduction in production lead time
Production lead time is defined as period between receipt of an order and until when it is available
for packing or shipment. Production lead time is reduced in cellular manufacturing because of
reduction in setup time, reduction in work in progress, reduction in material handling time,
reduction in material flow distance and improvement in machine utilization.
7. Improvement in quality
In cellular manufacturing, most or all operations occur in one area and among a small team. This
focuses responsibility and motivates the team to avoid similar defects in the future. Feedback on
quality problems is faster and surer thus quality is improved in cellular manufacturing.
8. Better worker morale

By achieving all above listed advantages of cellular manufacturing, manufacturing industry profit
increases more and more day by day and because of increment in profit, worker will get high
incentive (bonus) apart from salary. Manufacturing processes become simple in cellular
manufacturing. High incentive and simplified manufacturing processes boost worker morale.
Limitations of cellular manufacturing may be as follows:
1. Setup times or change over times may not always be significantly reduced just because the
components in the family bear apparent similarity. Some of the literature on Group
Technology reports that a major proportion of the features of a group of components must
be virtually identical for the education in the setup times to take place.
2. Similarly the assumptions regarding raw material ad work in process inventories need to
be checked during the design of the cells. In a process layout, the machines share a common
pool of inventories whereas in an ill-designed cellular system, machines may require own
individual stocks of materials.
3. Improper cell formation, whether based on component shapes/features or on production
flow analysis would turn out be in efficient in terms of time, investment and humanistic
aspects. Load balancing situation of non-key machines and the placement of bottleneck
machines are issues that need to be addressed during cell formation.
4. Inadequacies in employee education training and involvement could come in the way of
proper implementation.
Difference between continuous and intermittent operations
PRODUCT CLASSIFICATION BY CUSTOMER ORDERS
MAKE TO ORDER
Make to order (MTO) is a business production strategy that typically allows consumers to purchase
products that are customized to their specifications. The make to order (MTO) strategy only
manufactures the end product once the customer places the order, creating additional wait time for
the consumer to receive the product but allowing for more flexible customization compared to
purchasing directly from retailers' shelves.
Traditional production methodologies produce products and stock them as inventory until a
customer buys them. This is known as make to stock or MTS. However, this system was prone to
wastage and obsolescence. In order to manage inventory levels and provide an increased level of
customization, some companies adopted the make to order production system.

Make to order, also referred to as build to order (BTO) or made to order (MTO), is a manufacturing
process in which the production of an item begins only after a confirmed customer order is
received. This type of manufacturing strategy is referred to as a pull-type supply chain operation
because products are only made when there is a firm customer demand. This pull-type production
model is employed by the assembly industry where the quantity needed to be produced per product
specification is one or only a few. This includes specialized industries such as construction, aircraft
and vessel production, bridges, and so on. MTO is also appropriate for highly configured products
such as computer servers, automobiles, bicycles or products that are very expensive to keep
inventory.
The main advantage of the MTO system is being able to fulfill an order with the exact product
specification required by the customer. Sales discounts and finished good inventory is also reduced
and stock obsolescence is managed. However, for an MTO system to succeed, it should be coupled
with proactive demand management. It should also be considered that the MTO system is not
appropriate for all types of products.
MAKE TO STOCK
Making to stock means production without actual requirements. The Sales Order does not drive
the production program but the forecast does. Incoming Sales Orders use existing inventory for
the delivery which keeps the customer lead time to a minimum.When your product is a commodity
that can be sold out of a catalog and is defined and specified through a master record, it can be
planned; if it is somewhat predictable. A steady consumption in the past helps predicting the future;
however, there may be events in the future which require a more forward-looking planning process.
In any case, if you can somewhat predict what will happen, you may consider a Make To Stock
strategy. Even if it is hard to predict the future, but the customer does not accept long delivery
times, you might be required to make some of your product to stock.Once your product is identified
as a ‘Make To Stock’ the availability check in the Sales Order must look for inventory and not
place additional load in the production program. If there is no stock your service level degrades
and the customer needs to wait for the next receipt from production.

In MTS (Make to Stock), products are manufactured based on demand forecasts. Since accuracy
of the forecasts will prevent excess inventory and opportunity loss due to stock out, the issue here
is how to forecast demands accurately.
MTS (Make to Stock) literally means to manufacture products for stock based on demand
forecasts, which can be regarded as push-type production. MTS has been required to prevent
opportunity loss due to stock out and minimize excess inventory using accurate forecasts. In the
industrialized society of mass production and mass marketing, this forecast mass production urged
standardization and efficient business management such as cost reduction.
If demand can be accurately forecasted to some extent then there is no problem in creating a
forecast production schedule. If MTO (Make To Order) is like an elevator because MTO starts by
receiving an order as an elevator starts by pressing a button, MTS (Make to Stock) is like a train
schedule (supply schedule) for which the number of passengers (forecast demand) for each time
period can be prospected from the past data. Most of daily necessities such as processed foods,
sundries, and textiles are MTS-type products and quick response to consumers' needs (i.e. filling
retailer's inventory) will minimize opportunity loss.
MAKE TO ASSEMBLY
Make to assemble is a manufacturing production strategy where a company stocks the basic
components of a product based on demand forecasts, but does not assemble them until the customer
places an order. This allows for order customization. MTA production is basically a hybrid of two
other major types of manufacturing production strategies: make to stock (MTS) and make to order
(MTO).
With MTS, businesses base their production on demand forecasts and final products are assembled
before customers have ordered them. Customers can thus get items quickly, but only if the correct
quantities have been manufactured, and businesses risk overproduction. At the opposite end of the
spectrum, MTO creates items to customer specifications after they are ordered, so it is sometimes
a slow process. The MTA production strategy is not as flexible for businesses as the MTO strategy,
but it allows customers to get their orders sooner.

VERTICAL INTEGRATION
The larger the number of processes performed by a company in the chain from raw materials to
product delivery, the higher is the vertical integration. Vertical integration is a strategic decision
that should support the future growth direction of the company. Vertical integration is a good
strategic option when there are high volumes of a small variety of input materials, as is the case
with continuous operations. The reason is that the high volume and narrow variety of input material
allows task specialization and cost justification. Recall the example of Dole Pineapple. The
company’s product is canned pineapple. The input material is fresh pineapple. Since one input
material is needed in large volume the company has chosen to be vertically integrated so as to have
greater control of costs and product quality.
It is typically not a good strategic decision to vertically integrate into specialized processes that
provide inputs in small volumes. This would be the case for intermittent operations. For example,
let’s consider a bakery that makes a variety of different types of cakes and pies. Maybe the bakery
purchases different fillings from different sources, such as apple pie filling from one company,
chocolate filling from another, and cream filling from a third. If the company were to purchase
production of the apple filling, it would not gain much strategically because it still relies on other
suppliers. However, if the bakery shifted its production to only making apple pies, then the vertical
integration may be a good choice.
In summary, vertical integration is typically a better strategic decision for continuous operations.
For intermittent operations it is generally a poor strategic choice.
MANUFACTURING SYSTEMS
FLEXIBLE MANUFACTURING SYSTEMS (FMS)

A flexible manufacturing system (FMS) is a type of automation system that provides the flexibility
of intermittent operations with the efficiency of continuous operations. As you can see by the
definition, this is a system of automated parts not only one machine. An FMS consists of groups

of computer-controlled machines and/or robots, automated handling devices for moving, loading,
and unloading, and a computer control center.
Based on the instructions from the computer control center, parts and materials are automatically
moved to appropriate machines or robots. The machines perform their tasks and the parts are then
moved to the next set of machines with the parts automatically loaded and unloaded. The routes
taken by each product are determined with the goal of maximizing efficiency of the operation.
Also, the FMS “knows” when one machine is down due to maintenance or if there is a backlog of
work on a machine, and it will automatically route the materials to an available machine.
Flexible manufacturing systems are still fairly limited in the variety of products that they handle.
Usually they can only produce similar products from the same family. Flexible manufacturing
systems are not very widespread. One of the primary reasons is their high cost. A decision to use
an FMS needs to be long term and strategic, requiring a sizable financial outlay.
COMPUTER-INTEGRATED MANUFACTURING (CIM)
Computer-integrated manufacturing (CIM) is the use of computer techniques to integrate
manufacturing activities. These activities encompass all functions necessary to translate customer
needs into a final product. CIM starts with the development of a product concept that may exist in
the marketing organization; includes product design and specification, usually the responsibility
of an engineering organization; and extends through production into delivery and after-sales
activities that reside in a field service or sales organization. Integration of these activities requires
that accurate information be available when needed and in the format required by the person or
group requesting the data. Data may come directly from the originating source or through an
intermediate database according to Jorgensen and Krause. CIM systems have emerged as a result
of the developments in manufacturing and computer technology. According to Kusiak the
computer plays an important role integrating the following functional areas of a CIM system:
• Part and product design. There are four phases that are crucial in part and product design.
They include preliminary design, refinement, analysis, and implementation.
• Tool and fixture design. Tooling engineers using computer-aided design (CAD) tools to
develop the systems or fixtures that produce the parts.

• Process planning. The process planner designs a plan that outlines the routes, operations,
machines, and tools required. He or she also attempts to minimize cost, manufacturing
time, and machine idle time while maximizing productivity and quality.
• Programming of numerically controlled machines and material handling systems.
• Production planning. There are two concepts used here including materials requirement
planning (MRP) and machine loading and scheduling.
• Machining. This is part of the actual manufacturing process, including turning, drilling,
and face milling for metal removal operations.
• Assembly. After they are manufactured, parts and subassemblies are put together with
other parts to create a finished product or subassembly.
• Maintenance. Computers can monitor, intervene, and even correct machine malfunctions
as well as quality issues within manufacturing.
• Quality control. This involves three steps including system design, parameter design, and
tolerance design.
• Inspection. This stage determines if there have been errors and quality issues during the
manufacturing of the product.
• Storage and retrieval. These tasks involve raw materials, work-in-process inventory,
finished goods, and equipment.
COMPUTER-AIDED DESIGN (CAD)

Computer-aided design (CAD), also known as computer-aided design and drafting (CADD),
involves the entire spectrum of drawing with the aid of a computer—from straight lines to custom
animation. In practice, CAD refers to software for the design of engineering and architectural
solutions complete with two- and three-dimensional modeling capabilities.
Computer-aided manufacturing (CAM) involves the use of computers to aid in any manufacturing
process, including flexible manufacturing and robotics. Often outputs from CAD systems serve as
inputs to CAM systems. When these two systems work in conjunction, the result is called
CADCAM, and becomes part of a firm's computer-integrated manufacturing (CIM) process.
CADCAM systems are intended to assist in many, if not all, of the steps of a typical product life
cycle. The product life cycle involves a design phase and an implementation phase. The design
phase includes identifying the design needs and specifications; performing a feasibility study,
design documentation, evaluation, analysis, and optimization; and completing the design itself.
The implementation phase includes process planning, production planning, quality control,
packaging, marketing, and shipping.
CAD systems can help with most of the design phase processes, while CAM systems can help with
most of the implementation processes. The contributions of CAD and CAM systems are described
below.
GROUP TECHNOLOGY
Group technology (GT) is a concept that currently is attracting a lot of attention from the
manufacturing community. The essence of GT is to capitalize on similarities in recurring tasks in
three ways:
• By performing similar activities together, thereby avoiding wasteful time in changing from
one unrelated activity to the next.
• By standardizing closely related activities, thereby focusing only on distinct differences
and avoiding unnecessary duplication of effort.
• By efficiently storing and retrieving information related to recurring problems, thereby
reducing the search time for the information and eliminating the need to solve the problem
again.
GT offers a number of ways to improve productivity, according to studies of companies in batch

manufacturing. One senior executive in the agriculture machinery business told us, “The
fundamental reason for our adoption of GT was to improve cost and quality through reduction of
design proliferation, response time, and work-in-process inventories through standardization and
simplification of manufacturing planning and through creation of more efficient plant layouts.”
EVALUATION OF PROCESS
PRODUCT PROCESS MATRIX

Hayes and Wheelwright proposed with the Product/Process matrix a simplified model to link two
life cycles, i.e. the product and the process life cycle. The product life cycle model describes the

evolution over time of a product, from its introduction, over growth and maturation, to the phase
of commodity or decline.
Typically a high variety of products is offered in the early phases, and the product variety declines
in the later phases. Similarly, the product volume per model increases over time as the product
evolves through the subsequent life cycle phases. Another interesting evolution lies in the form of
competition. Typically, in the introduction phase, competition focuses on the product
characteristics. It shifts to quality and availability in the growth phase. The maturation phase is
characterized by a competition on price and dependability. In the final phase companies appear to
compete on price. The process life cycle model suggests that a production process evolves from a
fluid, uncoordinated process (a job shop process), towards increasing standardization,
mechanization and automation (a batch process or assembly line), until it eventually becomes very
efficient, capital-intensive, interrelated and less flexible (a continuous flow line).
The Manufacturing Product-Process Matrix

BREAK-EVEN ANALYSIS
Break-even analysis is a technique widely used by production management and management
accountants. It is based on categorizing production costs between those which are "variable" (costs
that change when the production output changes) and those that are "fixed" (costs not directly
related to the volume of production) Total variable and fixed costs are compared with sales revenue
in order to determine the level of sales volume, sales value or production at which the business
makes neither a profit nor a loss (the "break-even point")
Fixed costs are those business costs that are not directly related to the level of production or output.
In other words, even if the business has a zero output or high output, the level of fixed costs will
remain broadly the same. In the long term fixed costs can alter - perhaps as a result of investment
in production capacity (e.g. adding a new factory unit) or through the growth in overheads required
to support a larger, more complex business.
Variable costs are those costs which vary directly with the level of output. They represent payment
output-related inputs such as raw materials, direct labor, fuel and revenue-related costs such as
commission.
NET PRESENT VALUE (NPV)

Net present value (NPV) of a project is the potential change in an investor's wealth caused by that
project while time value of money is being accounted for. It equals the present value of net cash
inflows generated by a project less the initial investment on the project. It is one of the most reliable
measures used in capital budgeting because it accounts for time value of money by using
discounted cash flows in the calculation. Net present value calculations take the following two
inputs:
▪ Projected net cash flows in successive periods from the project.
▪ A target rate of return i.e. the hurdle rate
Where,Net cash flow equals total cash inflow during a period, including salvage value if any, less
cash outflows from the project during the period.

PROCESS PERFORMANCE
The performance of the process can be determined by following factors:
• On-Time Delivery to Commit – This metric is the percentage of time that manufacturing
delivers a completed product on the schedule that was committed to customers.
• Manufacturing Cycle Time – Measures the speed or time it takes for manufacturing to
produce a given product from the time the order is released to production, to finished goods.
• Time to Make Changeovers – Measures the speed or time it takes to switch a
manufacturing line or plant from making one product over to making a different product.
• Schedule or Production Attainment – A measure of what percentage of time a target
level of production is attained within a specified schedule of time.
• Availability. This metric is the ratio of operating time to planned production time.
Operating time is simply the planned production time minus downtime, which is any period
of time where production is stopped. The result is a direct indicator of availability for
production.
• Capacity utilization. Operations staff love this metric because it indicates how much of
the total manufacturing output capacity is being utilized at a given point in time. In other
words, to what degree are your potential output levels are being met or used? Displayed as
a percentage of total potential output, this metric gives insight into the overall slack that is
in your facility. So when your facility is said to be working at full capacity, there is 100%
capacity utilization.
PRODUCT DESIGN
Product design is one of the crucial stages in Operations Management. The design of a product
or a service is one of the most important steps. This will definitely affect the earnings from the
product. The basic limiting characteristics of the production system design are set during
the product design phase. In designing the product, or the item to be processed in
nonmanufacturing systems, the product designer specifies materials, tolerances, basic
configurations, methods of joining parts and the like, and through these specifications sets the
minimum possible production cost. The conscious effort to design for low manufacturing cost is
often referred to as production design. Given the product design, process planning for manufacture
must be carried out to specify the process required and the sequence of the processes.
The two basic steps in designing a product are functional design and production design
• Functional Design
In the functional design step the product is designed to be functional. Decisions are made
on dimensions, materials to be used, type of final finish required for appearance and so on.
At this stage, the designer is more concerned with the product itself than the methods of
production. The main concerns are functional considerations, customer appeal, cost and
ease of operation and maintenance.
• Production Design
In the production design stage, the designer considers introduction of modifications and
new concepts into the product to make it more suitable for production.
TYPES OF PRODUCTS
Product can be classified in following categories:
Customized products
They are designed to meet customer’s specifications. There is extensive collaboration between the
designers and customers during the designing of such products. The designer tries to understand
the precise requirements of customer. Products are produced in small quantities. Every step in
manufacturing process is monitored carefully to ensure that product conforms to the requirements
of the customers and is of high quality.
Standard products
Standard products are designed and produced by a company. They are produced in large numbers
and hence per unit cost of production is low and quality standards are easier to achieve. Customers
do not participate in inn design process and the company carries out market research to find out
the benefits that the product should provide and features that it should have. Standard products are
sold from inventory and hence they are immediately delivered to the customers.

Modular products
They are assembled from standard components according to customer’s specifications. The
company designs and produces the components and the customer selects the components that
would become part of his product. The component is made in large quantities and hence per unit
cost of production is low and quality standards are easy to maintain. The company assembles the
product after it has received the order, so customers have to wait for the delivery of the product.
PRODUCT DEVELOPMENT PROCESS

See from notes.
PRODUCT LIFE CYCLE
The product life cycle is a well-known framework in marketing. Products typically go through
four stages:
• Introduction
• Growth
• Maturity
• Decline
• Introduction Stage
This is the initial stage of product in the market. Product is introduced in the market and there is
huge amount of investment by companies.
Situation of Product
1. Slow growth/ slow sales
2. Low profit or no profit
3. Cost still high
4. No competition as competitors are relaxed that product may not survive
Organizational Strategies
1. Pricing strategy (skimming or penetration)
2. Focus on most ready buyer
3. Offering basic product i.e. without guarantee, warranty or accessories
4. Strong advertisements to create awareness about the product & attributes
5. Selective distribution

• Growth Stage
After successful launching of product, in growth stage the sales must start picking up or rise more
rapidly. For example iPods were introduced in 2001 and currently iPod are in growth stage of its
PLC. Most of the electronic items are in also in growth stage.
Situation of product
1. Sales climbing quickly
2. Customer become aware & increased
3. Profit increased & market share developed
4. Cost start decreasing
5. Competitors emerged
1. Increase the production of product
2. Product modification
3. Market modification
4. Reduce price due to emergence of competitors
5. Provide Guarantee, warranty, accessories & repair services
• Maturity Stage
This is the peak and the longest phase for most of the products. The main objective of companies
at this stage is to protect their market share.
Situation of Products
1. Sales at peak & static
2. High profit & market share at peak
3. Customer become well familiar
4. Strong competition
1. Market & product modification

2. Market mix modification i.e. decrease price & increase promotions
• Decline Stage
At this stage the sales of product falls and profit downs. Typewriters and Rexona soup are in the
decline stage of the product life cycle.
Situation of Product
1. Market share down
2. Sales falls/ very low
3. Competitors zero
1. Cut of brand
2. Harvesting ( decrees quality, expenses & price)
3. Or make more investment but this happen in very rare cases
Summing up all together, product life cycle is very important for the marketer and companies
because until an organization does not know the situation of their product, that cannot make
updated strategy for their products. So it helps in better decisions making process on revenue and
cost, within a particular stage. It also helps marketing managers and top level management to make
better decisions on pricing aspects. At different stages of product there is different manufacturing
strategies are used with different process.
GREEN DESIGN
Green design is philosophy that treats environmental attributes as design objectives and not as
constraints. It aims at incorporating those attributes without compromising performance, quality,
functionality, and the useful life of the item. Green product design, also known as eco-design or
design for environment, is becoming an important element in new product development. Any
decisions made in this stage could have a profound environmental impact throughout its entire

product life cycle. The following design principles will enable design of products that are less
environmentally damaging and less costly to produce:
• Material: reduced usage, introduce recycled materials when possible, choose the best fit for the
product.
• Structure: simplified, standardized and modularized.
• Manufacturing: low pollution, with less resource consumption and less impact to the
environment.
• Packaging: use less material and adopt reused and recycled material as much as possible.
• Transportation and Distribution: by means of low pollution, low resource consumption methods.
• Consumption: high efficiency, low-energy consumption, low pollution and long product life are
the keys to elevating consumer satisfaction.
• Disposal: disposed products are reused or recycled whenever possible for extended life and value
that benefits future development.
EVALUATIONS OF DESIGN PROCESS
See from notes.

MODULE: 2
FACILITY LAYOUT
For an organization to have an effective and efficient manufacturing unit, it is important that
special attention is given to facility layout. Facility layout is an arrangement of different aspects
of manufacturing in an appropriate manner as to achieve desired production results. Facility layout
considers available space, final product, safety of users and facility and convenience of operations.
An effective facility layout ensures that there is a smooth and steady flow of production material,
equipment and manpower at minimum cost. Facility layout looks at physical allocation of space
for economic activity in the plant. Therefore, main objective of the facility layout planning is to
design effective workflow as to make equipment and workers more productive.
Objective
A model facility layout should be able to provide an ideal relationship between raw material,
equipment, manpower and final product at minimal cost under safe and comfortable environment.
An efficient and effective facility layout can cover following objectives:
▪ To provide optimum space to organize equipment and facilitate movement of goods and to
create safe and comfortable work environment.
▪ To promote order in production towards a single objective
▪ To reduce movement of workers, raw material and equipment
▪ To promote safety of plant as well as its workers
▪ To facilitate extension or change in the layout to accommodate new product line or
technology up gradation
▪ To increase production capacity of the organization
An organization can achieve the above-mentioned objective by ensuring the following:
▪ Better training of the workers and supervisors.

▪ Creating awareness about of health hazard and safety standards
▪ Optimum utilization of workforce and equipment
▪ Encouraging empowerment and reducing administrative and other indirect work
Factors Affecting the Plant Layout Decision
The decision of the plant layout is affected by the following factors:

1. Type of production:The layout for an engineering unit will be quite differentfrom that of a
flour factory, similarly layout of a paper mill will be differentfrom a tool room and layout of an
engine assembly line is different from toymaking facility.
2. Production System:The plant layout in a continuous production systemwill be totally different

from the under the intermitted production system.
3. Scale of Production:The plant layout and material handling equipment inthe large scale
organization will be different from that in the small scalemanufacturing activity.
4. Type of Machines:The use of single purpose and multipurpose machinessubstantially affects

the plant layout. Similarly noisy and vibrating machines require special attention in the plant layout
decision.
5. Type of building facilities:The plant layout in a single story building willbe different from that
in a multi storey building.
6. Availability of Total Floor Area:The allocation of space for machines,work benches sub
stores, aisles, etc is made on the basis of the availablefloor area. Use of overhead space is made in
case of shortage of space.
7. Possibility of Future Expansion:Plant layout is mad in the light of the future requirements and
installation of additional facilities.
8. Arrangement of Material Handling Equipment:The plant layout andthe material handling

services are closely related and the latter has a decisive effect on the arrangement of production
process and plant services.

DESIGN OF FACILITY LAYOUT
Principles which drive design of the facility layout need to take into the consideration objective of
facility layout, factors influencing facility layout and constraints of facility layout. These principles
are as follows:
▪ Flexibility: Facility layout should provide flexibility for expansion or modification.
▪ Space Utilization: Optimum space utilization reduces the time in material and people
movement and promotes safety.
▪ Capital: Capital investment should be minimal when finalizing different models of facility
layout.
In a good plant layout:

(1) Material handling and transportation is minimized and efficiently controlled.
(2) Bottlenecks and points of congestions are eliminated (by line balancing) so that the raw
material and semi-finished goods move fast from one work station to another.
(3) Work stations are designed suitably and properly.
(4) Suitable spaces are allocated to production centers and service centers.
(5) The movements made by the workers are minimized.
(6) Waiting time of the semi-finished products is minimized.
(7) Working conditions are safer, better (well ventilated rooms, etc.) and improved.
(8) There is increased flexibility for changes in product design and for future expansion.
(9) There is the utilization of cubic space (i.e., length, width and height).
(10) There are improved work methods and reduced production cycle times.
(11) Plant maintenance is simpler.

(12) There is increased productivity and better product quality with reduced capital cost.
A good layout permits materials to move through the plant at the desired speed with the lowest
cost.
TYPES OF FACILITY LAYOUT
1) PROCESS LAYOUT
It is also called functional layout. All machines performing similar type ofoperations are grouped
at one location in the process layout e.g., all lathes, milling,machines, cutting machines etc. in the
engineering shop will be clustered in their likegroups. Thus all forging will be done in one area
and all the lathes will be placed inanother area. In this layout, several products may share a machine
to make its full use.
The sequential arrangement of the machine group is generally, but not necessarily madeon the
basis of labor operations. In this type of layout, the process rather than theproduct has dominating
role. The product is given secondary consideration and is movedfor the purpose of operations to
the process section with like machines stationed at aparticular point. This type of layout is more
suitable to job order type of production.
Insuch production the operation differ from product of product. So, it is desirable toarrange the
machines on the basis of process rather than on the products. The typicalarrangement of the
machines in the process layout will be as under:

Car ‘A’ and Car ‘B’ with their differential sequence will be routed for the processingin the manner
as shown in the previous figure.
Advantages:
The process layout avails of the following advantages:

(i) It eliminates the duplication of machines and enables the optimum use ofinstalled capacity
(ii) It facilitates the flexibility in production. It is more flexible than a line layout.
Different products can be made without the changes in the arrangements ofmachine. The
production capacity is not arranged in rigid sequence and fixedrated capacity with line balancing.
(iii) The breakdown of one machine does not interrupt the entire productionflow.
(iv) Specialization in supervision becomes possible.
(v) Individual incentive schemes can be developed.
Disadvantages:
The following are the main disadvantages of the process layout.

(i) Due to lack of straight line sequence of production, it is impossible to maintainthe line balancing
in production. So the problems of bottleneck and waitingand the idle capacity
(ii) The cost of material handling increases due to long routing and back trackingbetween the
processes.
(iii) The processing time is prolonged which reduce the inventory turnover andincreases the
investments in inventories.

(iv) The inspection cost increases. Due to frequent changes in the machine setup, inspection is
required at each stage of the process.
(v) The cost of supervision increases due to specialist supervisors and morenumber of supervisors
are required at each process unit.
(vi) The production planning and control becomes difficult due to complexitiesarising in routing,
scheduling, dispatching and follow-up.
(vii) It is not possible to implement the group incentive schemes on the basis ofquantity of the
products manufacturing.
(viii)More space is required for internal storing, reservoir of materials and provision for the
expansion of the particular process section.
2) PRODUCT LAYOUT
In this type of layout, the machines are arranged in the sequence as required bythe particular
product. All machines as required to balance the particular product lineare arranged in a sequential
line but not necessarily in the straight line. It is also knownas “ the product line layout.” In this
layout, one product goes through all the machineslined up, in the order required by its manufacture.
The best known example of this typeof layout is seen in motor car production. To make this layout
successful, the work loadon the various machines must be balanced. The process of getting even
loading at eachstage of production is called line balancing.
In this type of layout, the product is dominating over the process, in the sensethat the product is
given the primary importance and the process machine mustremain present at a point where the
product needs its services. Thus, unlike theprocess layout, the process is given secondary
importance in relation to the product.
Product layout is more suitable for continuous flow-production with few items ofproduction. It
does not require frequent changes in machine set up. The typicalarrangement of the machines in
the product with separate independent product lines for the Product A and Product B will be as
shown in the following figure:

Advantages:
The product layout is advantageous as under:

(i) Reduced material handling cost due to straight- line production flow.
(ii) Mechanization of material handling between fixed points.
(iii) Line balancing may eliminate bottlenecks and idle capacity.
(iv) Shorter operating cycle due to shorter and speedy movement of materials.
(v) Maximum utilization of machine and labor capacity through developingproper balance
between them.
(vi) Effective control over production with reduced supervision by generalist’s supervisor. By
reducing the manufacturing to simple steps we can often useless skilled labor.
(vii) Effective quality control with reduced inspection points. It does not require frequent changes
in machine set-up.
(viii)Effective production planning and control. Unlike process layout, the routing,scheduling,
dispatching and follow up are relatively easier.
(ix) Maximum use of space due to straight production flow and reduced need ofinterim storing.
(x) It facilitates the implementation of group incentive schemes for the workers.
(xi) It is relatively easy to control.
Disadvantages:
The following are the main disadvantages of the product layout:

(i) The duplication of machines and equipment necessitates the increasedinvestments in them
sometime resulting in idle capacity.
(ii) The production flow is regulated through the straight line sequence and fixedrated capacity,
and thus makes it highly inflexible.
(iii) The breakdown of one single machine in the line interrupts the entireproduction flow.
(iv) Unlike process layout, the benefits of specialized supervision is not possible.
(v) As the entire production is the result of the joint efforts of all operations inthe line, it is difficult
to implement individual incentive schemes.
(vi) They are less flexible than others. Any change in product requires rebalancingthe line.
3) FIXED POSITION LAYOUT:
This type of layout is the least important for today’s manufacturing industries. In this type of layout
the major component remain in a fixed location, other materials, parts, tools, machinery, man
power and other supporting equipment’s are brought to this location.
The major component or body of the product remain in a fixed position because it is too heavy or
too big and as such it is economical and convenient to bring the necessary tools and equipment’s
to work place along with the man power. This type of layout is used in the manufacture of boilers,
hydraulic and steam turbines and ships etc.
Advantages:
(i) Material movement is reduced
(ii) Capital investment is minimized.
(iii) The task is usually done by gang of operators, hence continuity of operations is ensured
(iv) Production centers are independent of each other. Hence, effective planning and loading can
be made. Thus total production cost will be reduced.

(v) It offers greater flexibility and allows change in product design, product mix and production
volume.
Disadvantage:
(i) Highly skilled man power is required.
(ii) Movement of machines equipment’s to production centre may be time consuming.
(iii) Complicated fixtures may be required for positioning of jobs and tools. This may increase the
cost of production.
4) CELLULAR LAYOUT
Cellular manufacturing is a type of layout where machines are grouped according to the process
requirements for a set of similar items (part families) that require similar processing. These groups
are called cells. Therefore, a cellular layout is an equipment layout configured to support cellular
manufacturing.
Processes are grouped into cells using a technique known as group technology (GT). Group
technology involves identifying parts with similar design characteristics (size, shape, and function)
and similar process characteristics (type of processing required, available machinery that performs
this type of process, and processing sequence).
Workers in cellular layouts are cross-trained so that they can operate all the equipment within the
cell and take responsibility for its output. Sometimes the cells feed into an assembly line that
produces the final product. In some cases a cell is formed by dedicating certain equipment to the
production of a family of parts without actually moving the equipment into a physical cell (these
are called virtual or nominal cells). In this way, the firm avoids the burden of rearranging its current
layout. However, physical cells are more common.
An automated version of cellular manufacturing is the flexible manufacturing system (FMS). With
an FMS, a computer controls the transfer of parts to the various processes, enabling manufacturers
to achieve some of the benefits of product layouts while maintaining the flexibility of small batch
production.

Some of the advantages of cellular manufacturing include:
• Cost. Cellular manufacturing provides for faster processing time, less material handling,
less work-in-process inventory, and reduced setup time, all of which reduce costs.
• Flexibility. Cellular manufacturing allows for the production of small batches, which
provides some degree of increased flexibility. This aspect is greatly enhanced with FMSs.
• Motivation. Since workers are cross-trained to run every machine in the cell, boredom is
less of a factor. Also, since workers are responsible for their cells' output,
more autonomy and job ownership is present.
LINE BALANCING:
Line balancing is an analysis method of developing balanced product layouts. Product layouts are,
as shown in figure 2 also having lines of consecutive workstations. Line balancing helps in equally
dividing the work to be done among workstations so that the number of workers or workstations
required on a product line is minimized. Following are some important terms taken in regard of
line balancing.
(1) Cycle Time: This is the time in minutes, seconds or in hours (rarely) between products coming
off the end of a production line.
(2) Workstation: These are physical locations where a particular set of tasks is performed.
(3) WorkCentre: It is a physical location where two or more identical workstations are located.
FACILITY LOCATION
Facility location is the process of determining a geographic site for a firm’s operations. Managers
of both service and manufacturing organizations must weigh many factors when assessing the
desirability of a particular site, including proximity to customers and suppliers, labor costs, and
transportation costs.

Location conditions are complex and each comprises a different Characteristic of a tangible (i.e.
Freight rates, production costs) and non-tangible (i.e. reliability, frequency security, quality)
nature.
Location conditions are hard to measure. Tangible cost based factors such as wages and products
costs can be quantified precisely into what makes locations better to compare. On the other hand
non-tangible features, which refer to such characteristics as reliability, availability and security,
can only be measured along an ordinal or even nominal scale. Other non-tangible features like the
percentage of employees that are unionized can be measured as well. To sum this up non-tangible
features are very important for business location decisions.
While selecting a site, it is necessary to consider technical, commercial and financial aspects and
then select a site that may provide maximum advantages. The need for selecting a suitable site or
location to house the factory may arise in the following situations:
1. While starting a new factory;
2. during the expansion of the existing plant;
3. When the existing plant is to be re-located at some other place, to remove the drawback of the
present location or to gain the benefits of a still better locations.
The various steps involved in selection of site are as follows:
• Selection of the Region: — generally, the geographical area is divided on the basis of
natural regions or political boundaries within the nation (for example Maharashtra, U.P.
etc.). The suitability of various regions is considered on the basis of comparative cost
advantage available out of the possible regions.
• Selection of the Locality: — after selecting the region, the specific locality with the region
is considered. Generally, the following alternatives are open in selecting the locality—
urban area, rural area, and suburban area in the vicinity of the urban area. The comparative
advantages of each locality are considered at this stage.
• Selection of the Site: — while selecting the site, the type of development of land, cost of
leveling etc., possibility of plant expansions, and other infrastructure facilities like
transport, banking , power, communication, postal facilities etc. are considered.

Factors Affecting the Plant Location
When the location of an industrial unit is preplanned, many factors are taken into consideration.
The factors of location planning can be divided into the following categories:
Primary Factors
1. Supply of Raw Materials: It is necessary to consider the adequate supply of raw materials and
the nature of raw materials. The cost of raw materials is an important element of the total cost of
production. If the supply of raw materials is not regular, it may lead to frequent stoppages and
breakages in production. The time and the cost of transporting raw materials is also important.
Therefore, industrial units are located near sources of raw materials.
2. Nearness to market: Every producer wants to sell his product in the market. Nearness to market
is important from the point of view of his control over the market. In those industries where raw
materials are obtained from different sources, nearness to the source of raw materials is not as
important as nearness to the market. Nearness to the market is important for supplying goods to
the customers in a minimum period of time adjusting supply according to changes in demand and
gaining control over the market.
3. Transport Facilities: Speedy transport facilities are needed for the regular and timely supply of
raw materials at low cost and for transporting finished products on time to the market. Transport
facilities are important for getting control over foreign markets.
4. Supply of Labor: The supply of labor at low cost is important. The importance of labour supply
has not lessened in spite of mechanization.
5. Power: Power is necessary for the process of production and for transporting finished goods and
raw materials. Power may be electrical, diesel and tropic energy. Power shortages lead to
tremendous losses due to the stoppage of machinery. Therefore, industries must have sufficient
and regular supply of power if continuity in production is to be maintained and if industries are to
operate at the full capacity.

6. Supply of Capital: Industries require capital for initial promotion and expansion. Therefore, a
capital market must be developed in industrial centers.
7. Government Subsidies and Facilities: The government may encourage the dispersal of industries
in underdeveloped areas by making capital, land, water and power available at subsidized rates.
Secondary Factors
8. Facilities: An enterprising spirit, innovation, technical know-how and an industrious nature of
population- all these factors taken together and a favorable government policy create a favorable
atmosphere for the purpose of the establishment of industries.
9. Natural Factors: Land, water, climate, sources of raw materials and agricultural climate are some
natural factors which are important for some industries like cotton textile, sugar nd jute. These
industries depend on a good climate and source of natural raw materials
10. Political Factors: The government’s policy of licensing and encouraging the development of
industries in underdeveloped regions also determines the location of industries.
11. Historical and Religious Factors: Some industrial cities are of historical importance. Some of
them are having religious importance – e.g., Benaras, Prayag, Kolhapur, Nasik, etc,. Industries
grow at this religious centre because these are places of historical importance.
12. Initial Start and Goodwill: Some industries get located at a place because some industrialists
start the industry at that place at an early stage—e.g., Jamshedpur (Tatas) was developed into’ an
industrial city; the iron and steel industry received its initial start there.
13. Personal Factors: In business history, it is found that personal considerations have decidedly
affected the location of certain industrial units. There is no rationale for such considerations;
however, when there is possibility of multiple locations, this factor plays a decisive role in
vocational consideration. Henry Ford started the automobile industry in Detroilt (U.S.A) because
it was his home town.

14. Miscellaneous Factors: The following factors also affect the location of the industrial unit:
• Sufficient water supply, if water is consumed in large quantities in the production
processes.
• Disposal of waste water.
• Strategic factors like dangers of air-attacks.
• Availability of fire-fighting facilities.
• Availability of recreational, medical and educational facilities.
• Quality of life because of facilities like schools, hospitals, post-office, parks etc enjoyed
by the community.
• Community attitudes.
• Ecological and environmental considerations.
• Regional aspirations of people and their political satisfaction.
AGGREGATE PRODUCTION PLANNING
Aggregate planning is the process of developing, analyzing, and maintaining a preliminary,

approximate schedule of the overall operations of an organization. The aggregate plan generally
contains targeted sales forecasts, production levels, inventory levels, and customer backlogs. This
schedule is intended to satisfy the demand forecast at a minimum cost. Properly done, aggregate
planning should minimize the effects of shortsighted, day-to-day scheduling, in which small
amounts of material may be ordered one week, with an accompanying layoff of workers, followed
by ordering larger amounts and rehiring workers the next week. This longer-term perspective on
resource use can help minimize short-term requirements changes with a resulting cost savings.
In simple terms, aggregate planning is an attempt to balance capacity and demand in such a way
that costs are minimized. The term "aggregate" is used because planning at this level includes all
resources "in the aggregate;" for example, as a product line or family. Aggregate resources could
be total number of workers, hours of machine time, or tons of raw materials. Aggregate units of
output could include gallons, feet, pounds of output, as well as aggregate units appearing in service
industries such as hours of service delivered, number of patients seen, etc.

Aggregate planning does not distinguish among sizes, colors, features, and so forth. For example,
with automobile manufacturing, aggregate planning would consider the total number of cars
planned for not the individual models, colors, or options. When units of aggregation are difficult
to determine (for example, when the variation in output is extreme) equivalent units are usually
determined. These equivalent units could be based on value, cost, worker hours, or some similar
measure.
Aggregate planning is considered to be intermediate-term (as opposed to long- or short-term) in

nature. Hence, most aggregate plans cover a period of three to 18 months. Aggregate plans serve
as a foundation for future short-range type planning, such as production scheduling, sequencing,
and loading. The master production schedule (MPS) used in material requirements planning
(MRP) has been described as the aggregate plan "disaggregated."
Steps taken to produce an aggregate plan begin with the determination of demand and the
determination of current capacity. Capacity is expressed as total number of units per time period
that can be produced (this requires that an average number of units be computed since the total
may include a product mix utilizing distinctly different production times). Demand is expressed as
total number of units needed. If the two are not in balance (equal), the firm must decide whether
to increase or decrease capacity to meet demand or increase or decrease demand to meet capacity.
In order to accomplish this, a number of options are available.
Aggregate production planning by increase in demand
Options for situations in which demand needs to be increased in order to match capacity include:
1. Pricing. Varying pricing to increase demand in periods when demand is less than peak.
For example, matinee prices for movie theaters, off-season rates for hotels, weekend rates
for telephone service, and pricing for items that experience seasonal demand.
2. Promotion. Advertising, direct marketing, and other forms of promotion are used to shift
demand.
3. Back ordering. By postponing delivery on current orders demand is shifted to period when
capacity is not fully utilized. This is really just a form of smoothing demand. Service

industries are able to smooth demand by taking reservations or by making appointments in
an attempt to avoid walk-in customers. Some refer to this as "partitioning" demand.
4. New demand creation. A new, but complementary demand is created for a product or
service. When restaurant customers have to wait, they are frequently diverted into a
complementary (but not complimentary) service, the bar. Other examples include the
addition of video arcades within movie theaters, and the expansion of services at
convenience stores.
Aggregate production planning by increase in supply
Options which can be used to increase or decrease capacity to match current demand include:
1. Hire/lay off. By hiring additional workers as needed or by laying off workers not currently
required to meet demand, firms can maintain a balance between capacity and demand.
2. Overtime. By asking or requiring workers to work extra hours a day or an extra day per
week, firms can create a temporary increase in capacity without the added expense of hiring
additional workers.
3. Part-time or casual labor. By utilizing temporary workers or casual labor (workers who
are considered permanent but only work when needed, on an on-call basis, and typically
without the benefits given to full-time workers).
4. Inventory. Finished-goods inventory can be built up in periods of slack demand and then
used to fill demand during periods of high demand. In this way no new workers have to be
hired, no temporary or casual labor is needed, and no overtime is incurred.
5. Subcontracting. Frequently firms choose to allow another manufacturer or service
provider to provide the product or service to the subcontracting firm's customers. By
subcontracting work to an alternative source, additional capacity is temporarily obtained.
6. Cross-training. Cross-trained employees may be able to perform tasks in several
operations, creating some flexibility when scheduling capacity.
7. Other methods. While varying workforce size and utilization, inventory
buildup/backlogging, and subcontracting are well-known alternatives, there are other, more
novel ways that find use in industry. Among these options are sharing employees with

counter-cyclical companies and attempting to find interesting and meaningful projects for
employees to do during slack times.
Costs associated with Aggregate Plans
• Straight - time laborcost: - Straight time labor rates are paid to labors. Normally8 hrs. Per
day for a six day week are considered straight time. The sources of labor are full time and
part time present employees, new hires, and workers whohave been laid off and can be
recalled.
• Overtime Cost: - Cost associated with payments for overtime work. Overtimework is done
after normal working hours. Rates of overtime is normally morethan straight time rates.
• Inventory holding Cost: - Cost associated with holding extra production in previous periods
for shipment in later time periods.
• Subcontracting Cost: - Cost associated with production of products by suppliers.
• Back ordering Cost: - Cost in terms of penalties for fulfilling previous periodsdemand in
subsequent periods.
STRATEGIES IN AGGREGATE PRODUCTION PLANNING
LEVEL STRATEGY
A level strategy seeks to produce an aggregate plan that maintains a steady production rate and/or
a steady employment level. In order to satisfy changes in customer demand, the firm must raise or
lower inventory levels in anticipation of increased or decreased levels of forecast demand. The
firm maintains a level workforce and a steady rate of output when demand is somewhat low. This
allows the firm to establish higher inventory levels than are currently needed. As demand
increases, the firm is able to continue a steady production rate/steady employment level, while
allowing the inventory surplus to absorb the increased demand.
A second alternative would be to use a backlog or backorder. A backorder is simply a promise to

deliver the product at a later date when it is more readily available, usually when capacity begins
to catch up with diminishing demand. In essence, the backorder is a device for moving demand
from one period to another, preferably one in which demand is lower, thereby smoothing demand
requirements over time.
A level strategy allows a firm to maintain a constant level of output and still meet demand. This is
desirable from an employee relations standpoint. Negative results of the level strategy would
include the cost of excess inventory, subcontracting or overtime costs, and backorder costs, which
typically are the cost of expediting orders and the loss of customer goodwill.
CHASE STRATEGY.
A chase strategy implies matching demand and capacity period by period. This could result in a
considerable amount of hiring, firing or laying off of employees; insecure and unhappy employees;
increased inventory carrying costs; problems with labor unions; and erratic utilization of plant and
equipment. It also implies a great deal of flexibility on the firm's part. The major advantage of a
chase strategy is that it allows inventory to be held to the lowest level possible, and for some firms
this is a considerable savings. Most firms embracing the just-in-time production concept utilize a
chase strategy approach to aggregate planning.
MIXED STRATEGY
Most firms find it advantageous to utilize a combination of the level and chase strategy. A
combination strategy (sometimes called a hybrid or mixed strategy) can be found to better meet
organizational goals and policies and achieve lower costs than either of the pure strategies used
independently.
Level and Chase Strategies are generic strategies for aggregate production planning. Mixed
Strategies are combinations of two pure strategies in different ways. Sometimes no hiring or firing
is done, but production rate is adjusted by varying the number of shifts or by subcontracting etc.
In most cases, we maintain level production during periods of low demand by stocking inventory
and chase the demand by additional alternatives during periods of high demand. Additional
alternatives are selected on the basis of total cost structure.
PROCESS OF AGGREGATE PRODUCTION PLANNING
This general procedure consists of the following steps:
1. Determine demand for each period.

2. Determine capacity for each period. This capacity should match demand, which means it
may require the inclusion of overtime or subcontracting.

3. Identify company, departmental, or union policies that are pertinent. For example,
maintaining a certain safety stock level, maintaining a reasonably stable workforce,
backorder policies, overtime policies, inventory level policies, and other less explicit rules
such as the nature of employment with the individual industry, the possibility of a bad
image, and the loss of goodwill.
4. Determine unit costs for units produced. These costs typically include the basic production
costs (fixed and variable costs as well as direct and indirect labor costs). Also included are
the costs associated with making changes in capacity. Inventory holding costs must also be
considered, as should storage, insurance, taxes, spoilage, and obsolescence costs. Finally,
backorder costs must be computed. While difficult to measure, this generally includes
expediting costs, loss of customer goodwill, and revenue loss from cancelled orders.
5. Develop alternative plans and compute the cost for each.
6. If satisfactory plans emerge, select the one that best satisfies objectives. Frequently, this is
the plan with the least cost. Otherwise, return to step 5.
MASTER PRODUCTION SCHEDULE (MPS)
Master scheduling follows aggregate planning. It expresses the overall plans in terms of specific
end items or models that can be assigned priorities. It is useful to plan for the material and capacity
requirements.
Time interval used in master scheduling depends upon the type, volume, and component lead times
of the products being produced. Normally weekly time intervals are used. The time horizon
covered by the master schedule also depends upon product characteristics and lead times. Some
master schedules cover a period as short as few weeks and for some products it is more than a year.
Functions of MPS
Master Production Schedule (MPS) gives a formal detail of the production plan and converts this
plan into specific material and capacity requirements. The requirements with respect to labor,
material and equipment are then assessed. The main functions of MPS are:

• To translate aggregate plans into specific end items: Aggregate plan determines level of
operations that tentatively balances the market demands with the material, labor and
equipment capabilities of the company. A master schedule translates this plan into specific
number of end items to be produced in specific time period.
• Evaluate alternative schedules: Master schedule is prepared by trial and error. Many
computer simulation models are available to evaluate the alternate schedules.
• Generate material requirement: It forms the basic input for material requirement planning
(MRP).
• Generate capacity requirements: Capacity requirements are directly derived from MPS.
Master scheduling is thus a prerequisite for capacity planning.
• Facilitate information processing: By controlling the load on the plant. Master schedule
determines when the delivery should be made. It coordinates with other management
information systems such as, marketing, finance and personnel.
• Effective utilization of capacity: By specifying end item requirements schedule establishes
the load and utilization requirements for machines and equipment.
ROUGH CUT CAPACITY PLANNING (RCCP)
Rough cut capacity is a preliminary check of MPS to determine the effect on theloading of the
production work centers. Objective is to identify any week in the MPSwhere under loading or
overloading of the production capacity occurs and revise theMPS as required.
Under loading: Not enough production of end items has been scheduled to fullyload the facility.
Overloading: Too much production of end items has been scheduled and capacityis insufficient.
RCCP verifies that you have sufficient capacity available to meet the capacity requirements for
your master schedules.RCCP is a long-term plan capacity planning tool that marketing and
production use to balance required and available capacity, and to negotiate changes to the master
schedule and/or available capacity. You can change your master schedules by changing master
schedule dates and increasing or decreasing master schedule quantities. You can change your
available capacity by adding or removing shifts, using overtime or subcontracted labor, and adding
or removing machines.

RCCP is a gross capacity planning technique that does not consider scheduled receipts or on-hand
inventory quantities when calculating capacity requirements. Your rough cut capacity plans are
therefore a statement of the capacity required to meet your gross production requirements.
Use RCCP to validate master schedules against key and critical resources before you use the
planning process to generate detailed MRP plans. This ensures that you use a realistic, achievable
master schedule to drive the planning process.
YIELD MANAGEMENT SYSTEM
Yield Management System is the revenue management system under which is based on the
customer’s expectations and response the differential prices are marked for profit maximization.
The different prices are generated for the same set of services provided to the customers.
The yield management system takes into account the constraints, the segments aimed at and the
price to be set so that there is overall profit maximization. The seat monitoring is done using
software which also takes abnormal conditions such as the terrorist attack, bankruptcy of airlines,
seasonal discounts, future holiday season etc.
Example:
In airline industry if the demand forecasted is less because of the season then an automatic decrease
in price takes place so that there is sufficient capacity utilization conversely during a holiday
season the prices are hiked because a high enough demand is anticipated and any deviation from
that would not result in lost sales. Other examples based on timing of days we see the electricity
rates being lower during the non peak hours (early mornings) or movie tickets being cheaper for
morning shows. All this makes a consumer self-adjusting to prices. It shifts the high demand to
the low demand period thereby maintaining the total number of units constant. It helps in
generating maximum profit using optimal number of units. They also react to various purchase
drivers and may reduce prices significantly during off peak period but only slightly raise prices
during peak hours thereby driving more demand and increasing their overall revenues.

MATERIAL REQUIREMENTS PLANNING (MRP)
Joseph Orlicky, author of the definitive Material Requirements Planning (MRP): The New Way of Life
in Production and Inventory Management, said, "Never forecast what you can calculate." Nowhere is
this rule more evident than in the manufacturing industry, where determining the right amount of raw
material for current demand is a challenge.
Material requirements planning (MRP) is a planning and control system for inventory, production, and
scheduling. MRP converts the master schedule of production into a detailed schedule, so that you can
purchase raw materials and components. Used mostly in the manufacturing and fabrication industries,
this system is a push type of inventory control, meaning that organizations use forecasting to determine
the customer demand for products. The manufacturing or fabrication company will forecast the amount
and type of products they will purchase, along with the quantity of materials to produce them. They then
push the products to the consumers. This contrasts with a pull system, where the customer first places an
order. The main disadvantage of a push system is its vulnerability when sales vary. In this scenario, the
forecasts become inaccurate, which for manufacturing, cause either a shortage of inventory or an excess
of inventory that requires storage.
Inventory is divided into two categories,
Independent and dependent demand. Independent demand is a desire for finished products, such as cell
phones or automobiles, whereas dependent demand is the demand for components, parts, or incomplete
assemblies (sometimes called sub-assemblies), such as phone screens or tires for automobiles. You
determine quantities for the dependent demand by determining quantities for the independent demand.
For example, if you forecast your independent demand for the number of completely assembled cell
phones that you expect to sell, you can forecast the quantities of your dependent demand materials, such
as your screens, processors, batteries, and antennas. These part quantities depend on the quantity of cell
phones you want to produce. This relationship between the materials and the finished product are shown
on a bill of materials (BOM) and are calculated with MRP.
The three key questions that you must ask when planning for dependent demand are:
• What components do we need?
• How many of each component do we need?

• When do we need the components?
In determining how much material your product needs, MRP differs from consumption-based planning
(CBP). MRP logic uses information received either directly from customers or from the sales forecast,
calculating the material required based on the dependencies of other materials. CBP calculates material
requirements only via historical consumption data. CBP does not consider the dependencies between
different materials, as it presumes that future consumption will follow the same pattern that the historical
data did.
MRP synchronizes the flow of materials, components, and parts in a phased order system, considering
the production schedule. It also combines and tracks hundreds of variables, including:
• Purchase orders
• Sales orders
• Shortage of materials
• Expedited orders
• Due dates
• Forecasts
• Marketplace demand
• Material
• Inventory
• Data
• Bill of material
For all companies, MRP has a few goals in common. These include making sure that the inventory level
is at a minimum, but high enough to provide for the customer need, and that you plan all of the activities,
including delivery, purchasing, and manufacturing.
Objectives of MRP
1. Inventory reduction: MRP determines how many components are required when they are required
in order to meet the master schedule. It helps to procure the materials/ components as and when
needed and thus avoid excessive build up of inventory.

2. Reduction in the manufacturing and delivery lead times: MRP identifies materials and
component quantities, timings when they are needed, availabilities and procurements and actions
required to meet delivery deadlines. MRP helps to avoid delays in production and priorities
production activities by putting due dates on customer job order.
3. Realistic delivery commitments: By using MRP, production can give marketing timely
information about likely delivery times to prospective customers.
4. Increased efficiency:MRP provides a close coordination among various work centers and hence
help to achieve uninterrupted flow of materials through the production line. This increases the
efficiency of production system.
Material Requirement Planning System Inputs:

Following are the basic three inputs of any MRP System:
A. Master Production Schedule (MPS):
This is the schedule of the quantity and timing of all end products to be produced over a specific
planning horizon. The planning horizon should be long enough to cover the cumulative lead times
of all components that must be purchased or manufactured to meet the end product requirement.
MPS is developed from customer’s orders or from forecasts of demand or both. MPS is the key
input which drives the MRP program as it tells what the company intends to produce. The
maximum length of time that is planned in a MPS will depend on the company’s ability to forecast
demand and its requirements, but a one year span is usually common.
b. Bill of Material (BOM) File:

A bill of material file, also known as product-structure file, is a computerized file listing all finished
products, the quantify of raw materials, parts, sub-assemblies and assemblies in each product.The
MRP program obtains information about the components needed to make an end product from
BOM file. A bill of material not only lists all the required parts but also is structured to reflect the
sequence of steps required to produce the end product.
The BOM has a series of levels, each of which represents a stage in the manufacture of the end
product. The highest level or zero level of BOM represents the end product or the finished goods.

The next lower level might represent the sub-assemblies that are combined to make the final
assembly.
The next lower level might represent the parts needed to make the sub-assemblies and the bottom
most level might represent the raw material from which the parts are made. Each component at
any level of the BOM is identified by a unique part number. Determining all the lower-level
components needed to make a finished product is called ‘exploding the requirements of the bill of
materials.
c. Inventory Status File:

This file contains important information such as what items should be ordered and orders should
be released. The file gives the complete and up-to-date information on the hand quantities, gross
requirements, scheduled receipts and planned order releases for the item. It also tells about lot
sizes, lead times, safety stock level, etc.
The gross requirements are total needs from all resources. Whereas the net requirements are ‘net’
after allowing for available inventory and scheduled receipt. Schedule receipts are quantities for
which order has already been placed with vendor and in-house shop.
Planned receipts are quantities that will be order on a vendor or in-house shop. Planned order
release indicates the quantity and date to initiate the purchase so that inventory will be received on
schedule after the lead time offset.
The inventory status file keeps the data about the projected use and receipts of each item and
determines the amount of inventory that will be available in each time period. If the projected
available inventory is not sufficient to meet the requirement in a period, the MRP program will
recommend that item to be ordered.
The MRP System outputs:

• Planned order schedule which is a plan of the quantity of each material to be ordered in
each time period. The order may be purchase order on the suppliers or production orders
for parts or sub-assemblies on production departments.
• Changes in planned orders (reschedule notices).

• Planning reports like inventory forecast, purchase commitment reports, stock-out
incidences, etc.
• To project capacity requirements.
An Outline of the MRP Process
An Outline of the MRP Process Starting with end items the MRP process goes through the
following steps
• Establish gross requirements.
• Determine net requirements by subtracting scheduled receipts and on hand inventory from the
gross requirements
• Time phase the net requirements.
• Determined the planned order releases
Gross requirements: The total expected demand for an end item or raw material during each time
period without regard to the amount on hand. For end items, these quantities are shown in the
master schedule; for components
Scheduled receipts: Open orders scheduled to arrive from vendors or elsewhere in the pipeline by
the beginning of a period.
Projected on hand: The expected amount of inventory that will be on hand at the beginning of
each time period, i.e., scheduled receipts plus available inventory from last period.
Net requirements: The actual amount needed in each time period.

Planned-order receipts: The quantity expected to be received by the beginning of the period in
which it is shown. Under lot-for-lot ordering, this quantity will equal net requirements. Under lot-
sizing ordering, this quantity may exceed net requirements. Any excess is added to available
inventory in the next time period for simplicity, although in reality, it would be available in that
period.
Planned-order releases: Indicates a planned amount to order in each time period; equals planned-
order receipts offset by lead time. This amount generates gross requirements at the next level in
the assembly or production chain. When an order is executed, it is removed from "planned-order
releases" and enter under "scheduled receipts."
Benefits of MRP:
MRP is a new way of managing manufacturing operations. It is not only to calculate how much
material to order and when. It is a decision support system which provides timely and valuable
information to operations managers.
The potential benefits of MRP system are:

a. Inventory:
MRP will substantially reduce inventory investment in dependent demand items while improving
operational efficiency by removing the risk of shortages associated with the EOQ. The MRP
system has numerous benefits over the fixed order size system (EOQ) for control of production
items.
MRP system focuses on actual requirements. It is product oriented. Whereas EOQ focuses on
replenishing supply and is part oriented. MRP is based on future production data while EOQ is on
past demand data.
b. Purchases:

MRP helps in generating purchase order and in case of any changes, reschedule notices are also
generated. These reports facilitate the purchase department in listing out the priority items and
making them available in time.
c. Planning, Engineering and Schedule:

MRP plans orders for purchasing and shop scheduling for the quantity of items that must be
available in each time period to produce the end items. The orders are planned for enough ahead
to allow adequate time for scheduled completion of the final product without having material
waiting unnecessarily for entry into a particular stage of the production process.
d. Production:
MRP can improve flow of work, thereby reducing intermittent delays and reducing the
manufacturing cycle time for the jobs.
e. Sales:
As one of the functions of MRP is to report the changes in demand, it improves the company’s
ability to react to changes in customer orders, improves customer services by helping production
meet assembly dates and helps to reduce delivery lead times.
Although MRP is an excellent tool for initial planning and scheduling, its greatest benefits may be
its ability to re-plan and reschedule in view of unforeseen contingencies. The MRP system can
predict shortages and overages soon enough so that something can be done to prevent them. It can
help order priorities to help up-to-date by planning and re-planning order due dates.
MRP provides exception reporting whenever a mismatch of timing between demand and supply
exists. It is a priority system: typical messages are to delay, expedite, or cancel an existing order,
launch a new order, etc. It attempts to make the due date and need date coincide, so operations
proceed as planned while inventory investment is minimized.
If a component to an assembly is not available when planned, MRP can reschedule all other
components for the same assembly to a later date while rescheduling shop priority. MRP does not

actually reschedule orders, but it prints messages specifying exactly where changes are
appropriate. The decision to make changes remains with management personnel.
Limitations of MRP:
The effective operation and efficiency of an MRP system depends on the integrity of the files and
records of relevant data. The quality is directly influenced by data accessibility, up-to-datedness,
and accuracy. Lack of record integrity is the major reason for the failure of MRP system.Computer-
based MRP, even more than manual, will not perform satisfactorily with poor files and records.
The outputs from computer-based MRP systems are dependent on its inputs.
• It assumes that lead times are known constants that are independent of the lot size.
• It requires fixed routing for the items. It is not able to access and plan for the use of alternate
routings.
• The sequencing logic priorities order only by period or date. It provides no priority for
sequencing with in a period based on similar set-ups, tooling, favored customers, etc.
• It is time consuming process as it requires let of processing and analytical times. This is
achieved usually by lot of iterations.
• To make MRP system effective, an organization must have effective communication system,
motivated personnel, right leadership and an effective computer system. It should also have
support and commitment of the top management.
Supplier lead times must be short and reliable. The MPS must be prepared before the start of actual
production. What is produced must be known with certainty and quantity and timing of receipts of
raw materials and components must be dependable. The implementation of an MRP system can
be effective only when there is a high degree of accuracy in the organization's operations. It
requires high commitment from the top management of an organization.
The management should educate its executives on the importance of MRP as a strategic planning
tool. The success of an MRP system, like that of any other system depends on proper
implementation and right application. Managers can derive more benefits if they use the MRP
system as a management-planning tool. MRP needs enormous human efforts and care in

continuously collecting the required information for the system. However, many organizations
prefer to adopt MRP systems, as the advantages of the system outweigh its disadvantages.
MRP VS. MRPII

MRP stands for material requirements planning and deals with bringing in the right amount of raw
material at the right time to support production. MRPII stands for manufacturing resource planning
and builds on MRP by adding shop floor production planning and tracking tools. A third-
generation system available at time of publication is called ERP, or enterprise resource planning,
which integrates all departments of the business, not just manufacturing and purchasing.
MRP
Material Requirements Planning, or MRP, was developed in the 1970s to help manufacturing
companies better manage their procurement of material to support manufacturing operations. MRP
systems translate the master production schedule into component- and raw material-level demand
by splitting the top level assembly into the individual parts and quantities called for on the bill of
materials, which reports to that assembly, and direct the purchasing group when to buy them based
on the component lead time which is loaded in the MRP system.
MRPII (manufacturing resource planning)
Manufacturing Resource Planning, or MRPII, goes several steps beyond MRP. While MRP
stopped at the receiving dock, MRPII incorporates the value stream all the way through the
manufacturing facility to the shipping dock where the product is packaged and sent to the end
customer. That value stream includes production planning, machine capacity scheduling, demand
forecasting and analysis modules, and quality tracking tools. MRPII also has tools for tracking
employee attendance, labor contribution and productivity.
ERP enterprise resource planning
A discussion of MRP and MRPII would be incomplete without mentioning Enterprise Resource
Planning. ERP is the next evolution of the MRP system. While MRP helped companies plan
material purchases, and MRPII added in-plant scheduling and production controls, ERP attempts
to integrate the information flow from all departments within a company: finance, marketing,
production, shipping, even human resources. While some argue that ERP does not deliver on its

promise, according to an article on CIO.com, a properly set up ERP system allows better
communication and monitoring than ever before, giving all departments access to the exact status
of a customer order at any point in time.
Limitations
MRP, MRPII, and ERP are iterations of the same type of system: A software program that aims to
help businesses better manage their costs, control inventory, meet customer delivery expectations,
and track and improve their internal processes. However, according to an article by the Business
Performance Improvement Consultancy, most implementations of any of the three systems fail to
achieve the desired results. This is based primarily on a lack of proper training and understanding
on the part of the business managers and the IT managers. A business manager with insufficient
IT understanding may set the system up incorrectly, while an IT manager who does not understand
the business needs may simply automate the current process flow without improving it. If you are
contemplating implementing any of these systems, it is critical to make sure that business
management and IT management are on the same page and that proper training has been invested
in.
JUST IN TIME PRODUCTI0N SYSTEM
Just in Time (JIT), as the name suggests, is a management philosophy that calls for the production
of what the customer wants, when they want it, in the quantities requested, where they want it,
without it being delayed in inventory.
So instead of building large stocks of what you think the customer might want you only make
exactly what the customer actually asks for when they ask for it. This allows you to concentrate
your resources on only fulfilling what you are going to be paid for rather than building for stock.
Within a Just in Time manufacturing system, each process will only produce what the next process
in sequence is calling for.
The British Motor Corporation plant in Australia originally developed the just-in-time production
system in the 1950s, but it was largely adopted by Japan in the 1960s and 1970s. Post-World War
II, Japan was seeking to rebuild industry but was short on cash and space. Rather than financing
the big-batch, large inventory production methods used elsewhere, they built smaller factories that

only housed the necessary materials to fill existing orders. This dramatically reduce inventory and
investment costs. Toyota played a key role in developing just-in-time manufacturing in Japan and
introducing the method to the United States; for this reason, it is often referred to as the Toyota
Production System (TPS).
Just-in-time manufacturing can be referred to in many different ways and incorporate diverse
elements — JIT production systems, the Toyota Production System (TPS), Kanban, continuous
improvement and total quality management (TQM), to name a few. However, the essential
principle behind these methods is the same: eliminate waste, inconsistencies and unreasonable
requirements to improve productivity.
Just-in-time manufacturing operates on a philosophy of complete elimination of waste. Rather than

working on a production-push basis, JIT manufacturing works on a demand-pull basis. Essentially,
actual orders dictate the exact quantities organizations manufacture: they make only what is
needed, when it is needed and in the amount it is needed. To do this successfully, organizations
must implement incredibly detailed plans concerning procurement policies and manufacturing
processes. They must employ technological systems, such as production scheduling software and
electronic data interchange, to provide necessary support. And finally, organizations must be
willing to continually reevaluate systems and implement new methods to meet their customers’
needs and improve efficiency.
PUSH OR CLASSICAL PRODUCTION SYSTEM
The push systems and processes are the more traditional option. If we look at the majority of
production facilities, we’ll notice that they require mostly external input to continue production at
a steady pace. When a company has implemented a push system, they make forecasts about the
expected demand, and make sure they keep production at a level that would be high enough to
meet that possible future demand. Besides quantities, companies that employ this mode of
operation need to predict exactly which products and models will sell more, and adjust quantities
preemptively. The reason most businesses use a push system is because it is easier to implement,
and it seems like the most useful and intuitive approach. In fact, many businesses think a push
system is the only logical approach.

A push system comes with some obvious disadvantages, once you understand what the
alternatives. While a company could employ a lot of sophisticated mathematical forecasting
models, none of them can be fully reliable and consistently accurate. Six Sigma techniques can be
useful, but the assumption is that historical patterns will be representative of the future, and over
the long run, that won’t be the case. In the end, the market is driven by humans who are emotional
and sometimes illogical beings, and demand can vary greatly in unpredictable ways. This often
leads to overproduction, which in turn inflates storage costs, production costs, and might often
lead to additional waste due to spoilage.
Those disadvantages are pretty significant, and make it quite difficult to manage capacities
efficiently. Generally speaking, this is a model that can be employed only when the capacity
available easily exceeds the market demand, and the business is not particularly limited by storage
or production costs. Still, if that is the case, the inefficiencies and waste created through this
method still impact the organization’s overall productivity and competitiveness, but allow it to
meet significant client demand on short notice.
Still, there are certain types of businesses that might find this approach quite beneficial and it might
allow them to meet larger than demand with smaller production capacities. This is very much the
case with seasonal products where the company can have a small daily capacity but through proper
planning and forecasting could ship very large quantities when their product is in high demand.
PULL ORJIT PRODUCTION SYSTEM
While push systems forecast the demand, and thus try to produce and push specific quantities to
the market, pull systems rely on the opposite approach. In pull systems, the pace of production is
dictated directly by customer demand for each specific product. The production process is always
triggered by a customer order, so companies relying on this approach produce only the quantities
that are going to be properly utilized. If such a system can be successfully implemented, it leads
to significant waste reduction and process optimization, so a business can utilize its production
capacity in full, as very little is produced without real customer demand. The success comes from
the fact that when problems occur, the problems are evident, and the process automatically stops.

This makes each problem more painful, but that forces the organization to improve, in order to
avoid these issues from occurring in the future.
Of course, pull systems come with their own set of challenges. For instance, it’s much easier for a
pull system to be pushed out of capacity by large demand peaks, because there aren’t significant
quantities that are produced in advance and kept in storage. Additionally, failures in the supply
chain or other unfavorable occurrences and factors could easily lead to orders being delayed. This
can have a severe impact on customer satisfaction, and thus hurt the company’s reputation and
profitability. Pull systems require very strong communications between your customers in order
to manage high peaks in demand and supply chain risks. Even though pull systems are more
complex to setup and maintain, the effort will result in better overall performance in the long run.
COMPARISION OF PUSH AND PULL PRODUCTION SYSTEM
Difference between push and pull manufacturing
Push manufacturing Pull manufacturing

Production approximation Production precision
Anticipated usage Actual consumption
Large lots Small lots
High inventory Low inventory
Waste Waste reduction
Poor communication Better communication
Elements of JIT include:

• Continuous improvement.
✓ Attacking fundamental problems - anything that does not add value to the product.
✓ Devising systems to identify problems.
✓ Striving for simplicity - simpler systems may be easier to understand, easier to manage
and less likely to go wrong.
✓ A product oriented layout - produces less time spent moving of materials and parts.
✓ Quality control at source - each worker is responsible for the quality of their own
output.
✓ Preventative maintenance, Total productive maintenance - ensuring machinery and
equipment functions perfectly when it is required, and continually improving it.
• Eliminating waste. There are seven types of waste:
✓ waste from overproduction.

✓ waste of waiting time.
✓ transportation waste.
✓ processing waste.
✓ inventory waste.
✓ waste of motion.
✓ waste from product defects.
• Good housekeeping - workplace cleanliness and organization.
• Set-up time reduction - increases flexibility and allows smaller batches. Ideal batch size is
1item. Multi-process handling - a multi-skilled workforce has greater productivity, flexibility
and job satisfaction.
• Levelled / mixed production - to smooth the flow of products through the factory.
Advantages Just-In-Time Systems

Following are the advantages of Adopting Just-In-Time Manufacturing Systems
• Just-in-time manufacturing keeps stock holding costs to a bare minimum. The release of
storage space results in better utilization of space and thereby bears a favorable impact on
the rent paid and on any insurance premiums that would otherwise need to be made.

• Just-in-time manufacturing eliminates waste, as out-of-date or expired products; do not
enter into this equation at all.
• As under this technique, only essential stocks are obtained, less working capital is required
to finance procurement. Here, a minimum re-order level is set, and only once that mark is
reached, fresh stocks are ordered making this a boon to inventory management too.
• Due to the aforementioned low level of stocks held, the organizations return on investment
(referred to as ROI, in management parlance) would generally be high.
• As just-in-time production works on a demand-pull basis, all goods made would be sold,
and thus it incorporates changes in demand with surprising ease. This makes it especially
appealing today, where the market demand is volatile and somewhat unpredictable.
• Just-in-time manufacturing encourages the 'right first time' concept, so that inspection
costs and cost of rework is minimized.
• High quality products and greater efficiency can be derived from following a just-in-time
production system.
• Close relationships are fostered along the production chain under a just-in-time
manufacturing system.
• Constant communication with the customer results in high customer satisfaction.
• Overproduction is eliminated when just-in-time manufacturing is adopted.
Disadvantages
Following are the disadvantages of Adopting Just-In-Time Manufacturing Systems
• Just-in-time manufacturing provides zero tolerance for mistakes, as it makes re-working
very difficult in practice, as inventory is kept to a bare minimum.
• There is a high reliance on suppliers, whose performance is generally outside the purview
of the manufacturer.

• Due to there being no buffers for delays, production downtime and line idling can occur
which would bear a detrimental effect on finances and on the equilibrium of the
production process.
• The organization would not be able to meet an unexpected increase in orders due to the
fact that there are no excess finish goods.
• Transaction costs would be relatively high as frequent transactions would be made.
• Just-in-time manufacturing may have certain detrimental effects on the environment due
to the frequent deliveries that would result in increased use of transportation, which in
turn would consume more fossil fuels.
Precautions
Following are the things to remember When Implementing a Just-In-Time Manufacturing System
• Management buy-in and support at all levels of the organization are required; if a just-in-
time manufacturing system is to be successfully adopted.
• Adequate resources should be allocated, so as to obtain technologically advanced software

that is generally required if a just-in-time system is to be a success.
• Building a close, trusting relationship with reputed and time-tested suppliers will minimize
unexpected delays in the receipt of inventory.
• Just-in-time manufacturing cannot be adopted overnight. It requires commitment in terms

of time and adjustments to corporate culture would be required, as it is starkly different to
traditional production processes.
• The design flow process needs to be redesigned and layouts need to be re-formatted, so as
to incorporate just-in-time manufacturing.
• Lot sizes need to be minimized.
• Workstation capacity should be balanced whenever possible.

• Preventive maintenance should be carried out, so as to minimize machine breakdowns.
• Set-up times should be reduced wherever possible.
• Quality enhancement programs should be adopted, so that total quality control practices
can be adopted.
• Reduction in lead times and frequent deliveries should be incorporated.
• Motion waste should be minimized, so the incorporation of conveyor belts might prove to
be a good idea when implementing a just-in-time manufacturing system.
INVENTORY CONTROL
Inventory control, also known as stock control, involves regulating and maximizing your
company’s inventory. The goal of inventory control is to maximize profits with minimum
inventory investment, without impacting customer satisfaction levels. Inventory control is also
about knowing where all your stock is and ensuring everything is accounted for at any given time.
Difference between inventory control and inventory management

At first glance, inventory control and inventory management seem similar. After all, they both
cover similar bases revolving around the question of “How much stock should I order?” However,
although these two terms are often used interchangeably, they actually deal with different aspects
of inventory optimization.
Inventory control involves warehouse management. This includes:

• Keeping track of the stock that is already in the warehouse. This includes knowing what
products are being stocked and how much of a particular item is available.
• Aspects of warehousing designs, such as knowing where everything is and ensuring that
the products are stored well.
Inventory management, on the other hand, involves:

• Stocking the right amount of inventory
• Paying the right amount for your inventory (Economic Order Quantity)
• Knowing your reorder point
• Ensuring you have the right amount of inventory in the right place
The Inventory control system is maintained by every firm to manage its inventories efficiently.
Inventory is the stock of products that a company manufactures for sale and the components or
raw materials that make up the product. Hence, an inventory comprises of the buffer of raw
material, work-in-process inventories and finished goods.
Methods and Techniques of Inventory Control

1. ABC analysis:
The basic work in this always better control analysis is the classification and identification of
different types of inventories, for determining the degree of control required for each. In many
firms it is found that they have stocks which are used at very different rates. So items are classified
under three broad categories A, B and C, on the basis of usage, bulk, value, size, durability, utility,
availability, criticality etc.; and should be controlled with due weightage to differential
characteristics.
The items included in group A involve largest investments and the inventory control should be
most severe to these items. C group consists of inventory items which involve relatively small
investments although the number of items remains large. These items deserve minimum attention
of control. In B group that items are included which are neither of A nor C.
The purpose behind the ‘distribution by value’ analysis is ‘Always Better Control’. Donald G. Hall
recommends that different attitudes shall be adopted in inventory management—aggressive for
class A items, active for class B items and loose for class C items; and that each category should
be given the attention as deserves.
2. Economic order quantity model:

The basic decision in an economic order quantity (EOQ) procedure is to determine the amount of
stock to be ordered, at a particular time so that the total of ordering and carrying costs may be

reduced to a minimum point. A firm should place optimum orders and neither too large nor to
small. The EOQ is the level of inventory order that minimizes the total cost associated with
inventory. The EOQ model is based on following four assumptions:
✓ A firm has a steady and known demand of D units each period for a particular input.
✓ The firm consumes the input at a uniform rate.
✓ The costs of carrying stocks are a constant amount C per unit per period.
✓ The costs of ordering more inputs are a fixed amount O per order. Orders are
delivered instantly.
3. Just in time
The Just In Time (JIT) method works to lessen the volume of inventory that a business has on
hand. It is considered a risky technique because you only purchase inventory a few days before it
is needed for distribution or sale so that the items arrive just in time for use.
JIT helps organizations save on inventory holding costs by keeping stock levels low, and
eliminates situations where deadstock sit on shelves for months on end. You need to conduct
thorough research into customer buying habits, seasonal demand, and source for reliable suppliers
and channels of transportation before implementing JIT into your business operations to minimize
risks and screw ups.
4. FSN Analysis
This analysis classifies inventory based on quantity, rate of consumption and frequency of issues
and uses. Here is the basic depiction of FSN Analysis:
F stands for Fast moving, S for Slow moving and N for Nonmoving items.
✓ Fast Moving (F) = Items that are frequently issued/used
✓ Slow Moving (S) = Items that are issued/used less for certain period of time
✓ Non-Moving (N) = Items that are not issued/used for more than certain duration
5. VED Analysis

This is an analysis whose classification is dependent on the user’s experience and perception. This
analysis classifies inventory according to the relative importance of certain items to other items,
like in spare parts.In VED Analysis, the items are classified into three categories which are:
✓ Vital – inventory that consistently needs to be kept in stock.
✓ Essential – keeping a minimum stock of this inventory is enough.
✓ Desirable – operations can run with or without this, optional.
6. HML Analysis
HML Analysis classifies inventory based on how much a product costs/its unit price. The
classification is as follows:
✓ High Cost (H) = Item with a high unit value.

✓ Medium Cost (M) = Item with a medium unit value.
✓ Low Cost (L) = Item with a low unit value.
7. SDE Analysis
This analysis classifies inventory based on how freely available an item or scarce an item is, or the
length of its lead time. This is how the inventory is classified:
✓ Scarce (S) = Items which are imported and require longer lead time.
✓ Difficult (D) = Items which require more than a fortnight to be available, but less than 6
months’ lead time.
✓ Easily available (E) = Items which are easily available
8. two-bin inventory control

Two-bin inventory control involves the storage of goods in two bins, one of which contains
working stock and the other containing reserve stock. The amount of inventory kept in the
reserve stock bin equals the amount the company expects to use during the ordering lead time
associated with that item. To use this system, reorder goods as soon as the working stock bin
is empty, and replacement parts should arrive before the reserve stock bin is empty. It is
possible to fine-tune the inventory investment by altering the amount of goods kept in the
reserve stock bin.
Inventory Forecasting
Forecasting is making an informed prediction about placing an order. Using forecasting models
such as determining reorder points and economic order quantities can help ensure optimal
inventory control. Certain boundaries have to be set in place to give the most accurate outcome:
✓ Forecast period: A forecast period is a specific amount of time which decides the forecast
quantity.
✓ Trend: A trend is an increase or decrease in demand over a certain period of time.

Identifying one such trend makes it easier to project future sales.
✓ Base demand: The base demand is simply the starting point for a forecast (i.e. current
demand).
Forecasting is in turn linked to determining reorder points and order quantities, both of which are
critical to optimizing inventory control.
PRODUCTION PLANNING AND CONTROL
Production Planning is a managerial function which is mainly concerned with the following
important issues:
• What production facilities are required?
• How these production facilities should be laid down in the space available for production?
• How they should be used to produce the desired products at the desired rate of production?
Production planning is dynamic in nature and always remains in fluid state as plans may have to
be changed according to the changes in circumstances.
Production control is a mechanism to monitor the execution of the plans. It has several important
functions:
• Making sure that production operations are started at planned places and planned times.
• Observing progress of the operations and recording it properly.
• Analyzing the recorded data with the plans and measuring the deviations.
• Taking immediate corrective actions to minimize the negative impact of deviations from
the plans.
• Feeding back the recorded information to the planning section in order to improve future
plans
OBJECTIVES OF PRODUCTION PLANNING AND CONTROL
a) Nature of Inputs:
To manufacture a product, different types of inputs are used. The quality of the product depends
upon the nature of the inputs are used. Hence the planning is done to determine the nature of
various types of inputs which is a complicated process.
b) Quantity of Inputs:
To achieve a level of production, determination of quantity of the inputs and their composition is
very important. A product can be prepared only when there is an estimate of the required
composition of inputs.
c) Proper Coordination:
It ensures the proper coordination among the workforce, machines and equipment. This leads to
avoidance of wastages and smooth flow of production.
d) Better Control:
Production planning is the method of control. For a better control, planning is a precondition. Only
then, one can compare the performance and calculate the deviations which lead control of the
production.
e) Ensure Uninterrupted Production:

The planning of materials ensures the regular supply of raw materials and other components. The
regular flow of materials and supplies are helpful in the uninterrupted production.
f) Capacity Utilization:
There is a need to use the available resources effectively. It is helpful in bringing down various
costs of production.

g) Timely Delivered:
If there is good production planning and control, there will be timely production and the finished
product will be rushed to the market in time. This also ensures the better relationship with the
customers.
FUNCTIONS OF PRODUCTION PLANNING AND CONTROL
PRODUCTION PLANNING FUNCTIONS:-
a) Estimating:
Estimating involves deciding the quantity of products to be produced and cost involved in it on the
basis of sales forecast. Estimating manpower, machine capacity and materials required to meet the
planned production targets are the key activities before budgeting for resources.
b) Routing:

Routing means, determination of path or route on which manufacturing operations will travel,
establishing the sequence of operations to be followed in manufacturing a particular product. This
route path is determined in advance. Routing information is provided by product or process
engineering function and it is useful to prepare machine loading charts and schedules.
c) Scheduling:
Scheduling involves fixing priorities for each job and determines the starting time and finishing
time for each operation, the starting dates and finishing dates for each part, sub assembly and final
assembly. Scheduling lays down a time table for production, indicating the total time required for
the manufacture of a product and also the time required for carrying out the operation for each part
on each machine or equipment.
d) Loading:
Facility loading means loading of facility or work center and deciding which jobs to be assigned
to which work center or machine. Loading is the process of converting operation schedules into
practice. Loading ensures maximum possible utilization of productive facilities and avoids
bottleneck in production.
PRODUCTION CONTROL FUNCTIONS:-
a) Dispatching:
The functions of routing and scheduling as discussed above are paper work only. No actual
production has yet been started. Dispatching is the part of production control that translates the
paper work into actual production in accordance with the details worked out under routing and
scheduling functions. Dispatching deals with setting the production activities in motion through
the release of orders and instructions in accordance with the previously planned timings as
embodied in production schedules.
b) Expediting/ Follow-up/ Progressing:

Expediting or progressing ensures that, the work is carried out as per the plan and delivery
schedules are met. Expediting includes activities such as status reporting, attending to bottlenecks

or holdups in production removing the same, controlling variations or deviations from planned
performance levels, following up and monitoring progress of work through all stages of
production, coordinating with purchase, stores, tool room and maintenance departments and
modifying the production plans and re-plan if necessary.
c) Inspection:
Inspection is the process of examining an object for identification or checking it for verification of
quality and quantity in any of its characteristics. It is an important tool for ascertain and controlling
the quality of a product. Inspection is an appraisal activity that compares goods or services to a
standard.
Production planning and control provides different kind of information to different departments.
It provides information about available manufacturing resources to marketing department.
Marketing department receives orders according to that information. Employment in production
planning and control depends upon education and experience. Working in production planning and
control is challenging task. It requires analytical skills and understanding of manufacturing
process. Production planning and control is an essential part to run any business in the market
because it can affect the quality of the product.

Module 3
OPERATION SCHEDULING
In the operations management or the production management, this technique of operations

scheduling forms a very important part and acts as the back – bone for the performance of the
manufacturing or the service organizations. With the help of the operations scheduling, two very
important factors or the aspects of the resources within an organization that can be pertained are
as follows –
1. Allocating the resources within an organization.
2. Setting up the timetable.
In today’s competitive world, the orders that are placed either from the side of the customer or
from the side of the assembly benches – are to be completed on or before the contracted or the
promised date. For fulfilling this, operations scheduling plays a very critical and an essential role
and completely ensures that these dates are met.
Operations scheduling helps in the confirmation or the revision of the tentative delivery date that
has been promised in the original quotation. Sometimes during the operations scheduling of the
work order, it may be discovered that the delivery date originally and tentatively promised cannot
be met. All this may be due to the several problems like the materials that are required may not be
available at that particular time or may not be available immediately. This problem can also occur
due to the increased plant loading while the customer is deciding whether or not to award the
quoted job to this company.
It has been observed that the operations scheduling has a direct affect on the effectiveness of the
production function and this relation was actually explained by Vollman.
According to Vollman, “The priority planning and the shop floor control and the scheduling
elements ultimately determine the performance of the production system.”

If the operations scheduling is carried out in an efficient manner, then there occurs a considerable
improvement in the performance in the delivery. Also helps in the achievement of the goals that
have been set by the company. Efficient operations scheduling playa a very critical part in the
reduction of the production lead times.
Scheduling in Production and Operation Management

Scheduling can be defined as “prescribing of when and where each operation necessary to
manufacture the product is to be performed.” It is also defined as “establishing of times at which
to begin and complete each event or operation comprising a procedure”. The principle aim of
scheduling is to plan the sequence of work so that production can be systematically arranged
towards the end of completion of all products by due date.
Principles of Scheduling
1. The principle of optimum task size: Scheduling tends to achieve maximum efficiency when
the task sizes are small, and all tasks of same order of magnitude.
2. Principle of optimum production plan: The planning should be such that it imposes an equal
load on all plants.
3. Principle of optimum sequence: Scheduling tends to achieve the maximum efficiency when
the work is planned so that work hours are normally used in the same sequence.
Inputs to Scheduling
• Performance standards: The information regarding the performance standards (standard times
for operations) helps to know the capacity in order to assign required machine hours to the
facility.
• Units in which loading and scheduling is to be expressed.
• Effective capacity of the work centre.
• Demand pattern and extent of flexibility to be provided for rush orders.
• Overlapping of operations. Individual job schedules.

Scheduling Strategies
Scheduling strategies vary widely among firms and range from ‘no scheduling’ to very
sophisticated approaches. These strategies are grouped into four classes:
Detailed scheduling:
Detailed scheduling for specific jobs that are arrived from customers is impracticable in actual
manufacturing situation. Changes in orders, equipment breakdown, and unforeseen events deviate
the plans.
Cumulative scheduling:
Cumulative scheduling of total work load is useful especially for long range planning of capacity
needs. This may load the current period excessively and under load future periods. It has some
means to control the jobs.
Cumulative detailed:
Cumulative detailed combination is both feasible and practical approach. If master schedule has
fixed and flexible portions.
Priority decision rules:

Priority decision rules are scheduling guides that are used independently and in conjunction with
one of the above strategies, i.e., first come first serve. These are useful in reducing Work-InProcess
(WIP) inventory.
Types of Scheduling
Types of scheduling can be categorized as forward scheduling and backward scheduling.
• Forward scheduling:
It is commonly used in job shops where customers place their orders on “needed as soon as
possible” basis. Forward scheduling determines start and finish times of next priority job by
assigning it the earliest available time slot and from that time, determines when the job will be

finished in that work centre. Since the job and its components start as early as possible, they will
typically be completed before they are due at the subsequent work centers in the routing. The
forward method generates in the process inventory that are needed at subsequent work centers and
higher inventory cost. Forward scheduling is simple to use and it gets jobs done in shorter lead
times, compared to backward scheduling.
• Backward scheduling
It is often used in assembly type industries and commit in advance to specific delivery dates.
Backward scheduling determines the start and finish times for waiting jobs by assigning them to
the latest available time slot that will enable each job to be completed just when it is due, but done
before. By assigning jobs as late as possible, backward scheduling minimizes inventories since a
job is not completed until it must go directly to the next work centre on its routing.
PROJECT MANAGEMENT
Project management is considered one of the most important functions of an operations manager.
A project can be of three types: materials management, service management or both.
While materials management is the primary form of project management, service management is
a recent addition to the project management portfolio. Increased competition among companies in
the recent times has resulted in additional responsibilities being added to just about every PM
portfolio. Services management is one of the areas an operations manager is usually expected to
look after. Â It is not unusual Â for Operations manager to have both service and material elements
in one project.
The scope of operations in both areas is indeed in the operations manager needs to ensure smooth
processes and also make sure that the products and services under his control generate profits.
Both materials management and service management assignments start from the moment the
company receives an order for products. The assignment, depending on the agreement with the
client, may or may not be a continuous process.
1) Project initiation stage

2) Project planning and design stage
3) Project execution and construction stage
4) Project monitoring, evaluation and controlling systems
5) Project completion (if not continuous)
6) Project execution stage (if continuous) with input from evaluation stage
For example, if the client purchases products and also pays for continued customer service, then it
is a continuous process.
The various activities related to project management are:
Requirements gathering: The firm understands client expectations from the client at this stage.
This stage is critical, as the operations manager needs to understand the requirements clearly so
that the deliverable clearly fulfills client requirements. You need to know deadline, project details,
time table for the project, and how success or failure will be measured of the ongoing project.
Supply chain management: The operations manager needs to get in touch with the suppliers and
inform them about the exact nature of supplies that are needed to fulfill the client requirements.
The operations manager needs to constantly ensure that the supplies are ready for the project on
time. It is especially important to find out where the problems might occur, what could be the
bottlenecks of the project. A Since encountering a significant bottleneck problem without
anticipating it can take days or even weeks and months for the larger projects.
Inventory management: The operations manager needs to develop a sound inventory

management system keeping the assignment in mind. The inventory must be in a position to store
the supplies well, and the firm must be able to retrieve the raw materials as and when required.
Often project gets hold up and fall behind the schedule because the inventory was not properly
prepared.
Quality management: The operations manager needs to be constantly in touch with the quality
assurance personnel so that the quality of the deliverables fulfills the agreed quality criteria. The
operations manager plays an important role in formulating the quality and compliance standards
for the deliverables. The operations manager needs to maintain a checklist and needs to evaluate,
with the help of the assurance personnel, whether the deliverable is fit to be delivered. This might
not affect time table of project, but it can certainly affect longevity of it. If new project is
manufacturing of car part, and the qualities of materials are low, project might be on time, but still
will fail in the long run due to returns and need to re manufacture
With globalization breaking through national boundaries, competition has moved beyond local
borders, and firms today are competing on an even field with the firms from other countries. Often
operations manager will have to wear a hat of project manager.
Waiting Line (Queue) Management
The waiting line or queue management is a critical part of service industry. It deals with issue of
treatment of customers in sense reduce wait time and improvement of service. Queue management
deals with cases where the customer arrival is random; therefore, service rendered to them is also
random.
A service organization can reduce cost and thus improve profitability by efficient queue
management. A cost is associated with customer waiting in line and there is cost associated with
adding new counters to reduce service time. Queue management looks to address this trade off
and offer solutions to management.
Waiting Line Problems
Waiting in line is common phenomena in daily life, for example, banks have customers in line to
get service of teller, cars queue up for re-filling, workers line up to access machine to complete
their job. Therefore, management needs to work on formulae, which will reduce wait time and
create delighted customers without incurring an additional cost.
Generally, queue management problems are trade off’s situation between cost of time spent in
waiting v/s cost of additional capacity or machinery.

Finite and Infinite Population
In a waiting line scenario, there are cases of finite population of customers and infinite population
of customers.
A finite population scenario considers a fixed or limited size of customers visiting the service
counter. It also assumes that customer once served will leave the line thus reducing overall
population of customers. However finite population model also considers a scenario where the
customer after getting served will re-visit the service counter for re-service, leading to increase in
finite population.
An infinite population theory looks at a scenario where subtractions and addition of customer do
not impact overall workability of the model.
Queuing System
To solve problems related to queue management it is important to understand characteristics of

the queue. Some common queue situations are waiting in line for service in super-market or banks,
waiting for results from computer and waiting in line for bus or commuter rail. General premise
of queue theory is that there are limited resources for a given population of customers and addition
of a new service line will increase the cost aspect to the business. A typical queue system has the
following:
Arrival Process: As the name suggests an arrival process look at different components of
customer arrival. Customer arrival could in single, batch or bulk, arrival as distribution of time,
arrival in finite population or infinite population.
Service Mechanism: this looks at available resources for customer service, queue structure to
avail the service and preemption of service. Underlining assumption here is that service time of
customers is independent of arrival to the queue.
Queue Characteristics: this looks at selection of customers from the queue for service. Generally,
customer selection is through first come first served method, random or last in first out. As a result,

customers leave if the queue is long, customer leave if they have waited too long or switch to faster
serving queue.
WAITING LINE MODELS WITHIN OM: HOW IT ALL FITS TOGETHER
Although it is unlikely that you calculate performance measures for the lines you wait in on a day-
to-day basis, you should now be aware of the potential for mathematical analysis of these systems.
More importantly, management has a tool by which it can evaluate system performance and make
decisions as to how to improve the performance while weighing performance against the costs to
achieve that performance.
Waiting line models are important to a company because they directly affect customer service
perception and the costs of providing a service. Several functional areas are affected by waiting
line decisions. Accounting is concerned with the cost of the waiting line system used. If system
average utilization is low, that suggests the waiting line design is inefficient and too expensive.
Poor system design can result in overstaffing or unnecessary capital acquisitions in an effort to
improve customer service.
Marketing is concerned about response time for customers—how long customers must wait in line
before being served and how long it takes to be served. Quick service or response can be a
competitive advantage. Long waits suggest a lack of concern by the organization or can be linked
to a perception of poor service quality. Purchasing must be sure to buy capital equipment capable
of achieving the proposed service rate. Operations uses waiting line theory to estimate queues or
waiting times at different processing points, to allow for a better estimate of lead time and improve
due-date delivery promising.
Operations are also affected by the system design. When single-phase systems are used, operators
must have greater skills. The organization needs to hire employees with higher skill levels or
provide training to upgrade the workforce. Waiting Line Examples
1. Orders waiting to be filled
2. Trucks waiting to be loaded or unloaded

3. Job waiting to be processed
4. Equipment waiting to be loaded
5. Machines waiting to be repaired
LINE BALANCING IN PRODUCTION AND OPERATIONS

MANAGEMENT
In production, line balancing is useful tool. Line-balancing strategy is to make production lines
stretchy enough to absorb external and internal indiscretion. This strategy involves setting a
planned rate of production for necessary materials to be fabricated within a particular time frame.
Additionally, successful line balancing requires assuring that every line segment's production
quota can be met within the time frame using the available production capacity. This is an efficient
device to develop the throughput of assembly lines and work cells while decreasing manpower
requirements and expenses. Line-balancing is slightly different from assembly line balancing.
Assembly line balancing involved the action of assemble different parts together. It involves many
production lines while normal Line-balancing may only involve one production line.
Assembly Line Balancing is the problem of assigning operations to workstations along an

assembly line, in such a way that the assignment be best in some sense. Since introduction of
assembly lines by Henry Ford, Line-balancing has been an optimisation problem of important
industrial importance. The efficiency difference between an optimal and a sub-optimal assignment
can yield economies reaching huge amount per year. Line balancing technique was used normally
in assembly line of the automotive industry which is called ALB. Most of the Small and Medium
Industries do not use line balancing method in the production line.
There are two types of line balancing that include Static Balance and Dynamic Balance. Static
Balance denotes long-term differences in capacity over a period of several hours or longer. Static
imbalance results in underutilization of workstations, machines and people. Dynamic Balance
refers to short-term differences in capacity such as over a period of minutes, hours at most.
Dynamic imbalance occurs from product mix changes and difference in work time dissimilar to
product mix.

The intent of Line balancing is to match the output rate to the production plan. This will help
organization to make sure on-time delivery and avoids build-up of surplus inventory. Johnson
articulates the problem of line balancing as “a set of non-divisible tasks to be performed, each task
has a known deterministic performance time. A partial ordering of tasks by precedence constraints
is specified.
The problem is to assign these tasks to assembly stations, so that the necessary number of station
is minimized.” Line balancing is usual practice to resolve problems occurred in assembly line. It
is a technique to reduce imbalance between workers and workloads in order to accomplish required
run rate (H.Jay and R.Barry, 2006). This can be performed by equalizing the amount of work in
each station and assign the smallest number of workers in the particular workstation. Here the job
is divided into small portion called “job element”. The objective is to uphold production at an
equal rate.
Line balancing operates under two circumstances:
1. Precedence Constraint: Products cannot progress to other station if it doesn’t complete

necessary task at that station. It should not across other station because certain part needs
to be performed before other activities.
2. Cycle time Restriction: Cycle time is maximum time for products spend in every
workstation. Different workstation has different cycle time.
Objective of Line Balancing: Following are major objectives of Line balancing procedure. It is
used to:
• Manage the workloads among assemblers.

• Recognize the location of bottleneck.
• Decide number of workstation.
• Decrease production cost.
• Assigning task to each work station in such a way that there is little idle time.

Terms in Line Balancing Technique
There is range of terms used in assembly line balancing system. Each of them has their meaning
and purposes.
I. Cycle Time: Maximum amount of time allowed at each station. This can be found by
dividing required units to production time available per day. This is the time expressed in
minutes between two simultaneous products coming of the end of production line. Gaither
and Fraizer (2001) described that cycle time demonstrates how often the production line
can generate the product with current resources and staffing. It is a precise indicator to
signify how the line is currently set up to run. The calculation of cycle time takes into
consideration of the entire production quantities. If multiple lines are producing the same
product, then the composite cycle time is less than the actual lapse time of any individual
line.
II. Lead Time: Summation of production times along the assembly line.
III. Bottleneck: Delay in transmission that slow down the production rate. This can be
overcome by balancing the line.
IV. Task Precedence: It is the sequence by which tasks are carried out. It can be represented
by nodes or graph. In assembly line the products have to obey this rule. The product cannot
be moved to the next station if it doesn’t complete at the previous station.
V. Idle time: A period when system is not in used but is available.
VI. Productivity: Defined as ratio of output over input. Productivity depends on several
factors such as workers skills, jobs method and machine used.
VII. Takt times: The time needed by competent worker or unattended machine to perform a
task. This is usually expressed in minutes. Heizer and Render (2010) stated that takt time
is pre-requisite procedure in doing line balancing task. Takt time is the swiftness of
production that aligns production with client demand. It shows how fast the need to
manufacture product in order to fill the customer orders (Vome lean Briefs, 2006).

Producing faster than takt time results in overproduction which is a type of waste whereas
producing slower than takt time results in bottlenecks where the customer orders may not
be fulfilled in time. There are numerous benefits of using takt time
(Heizer and Render, 2010). These include,
• Achieve a steady and continuous flow of production.
• Eliminate the waste of overproduction by producing actual customer demand.
• Improves accuracy of planning.
• Encourage the development of standardize work instructions, promoting quality and
efficiency.
• Set real time targets for production that shows operators exactly where their work
output should be at any given point of time.
• Establish what-if scenario for customer demand based on flexible manning.
VIII. Work station: A physical area where a worker with tools / one or more machines or
unattended machines such as robot perform specific task in a production line.
IX. Downtime: Downtime explained as the time that is non value added (Chase, et al.
2000). It is often associated with the seven wastes as under:
a. Defects: Defect is direct costs of a company.
b. Overproduction: One of the severe wastes discourages a smooth flow of goods and
services, which may lead to unnecessary lead and storage time. It will lead to the
defects which cannot be detected earlier and then the products may deteriorate. It
will also lead to excess work-in-progress stocks.
c. Waiting: It occur when the goods are not moving or being worked on. It affects
both goods and workforce where the waiting time should be used for some value
added activities such as training and maintenance.
d. Transportation: Any movement in factory can be considered as waste. Double

handling and excessive movements are likely to cause damage and deterioration
with the distance of communication between processes proportional to time taken.
It takes to feedback reports of poor quality and needs corrective action.

e. Unnecessary inventory: There is a problem with extra inventory. Inventory will
increase the lead time, preventing quick identification of problems and increasing
space. Significant storage costs are wasted which absolutely lower the
competitiveness of the organization of value stream.
f. Unnecessary motion: Involve the ergonomics of production where operation might

have to stretch, bend and pick up when these actions actually could be avoided. It
not only tires the workers but also leads to poor productivity.
g. Inappropriate processing: Over-complexity of a process discourages ownership and

encourages the employees to over produce to recover the large investment in the
complex machines. It encourages poor quality and takes corrective action.

MODULE-4 QUALITY MANAGEMENT
QUALITY
In manufacturing, a measure of excellence or a state of being free from defects, deficiencies

and significant variations. It is brought about by strict and consistent commitment to certain
standards that achieve uniformity of a product in order to satisfy specific customer or user
requirements. ISO 8402-1986 standard defines quality as "the totality of features and
characteristics of a product or service that bears its ability to satisfy stated or implied needs."
If an automobile company finds a defect in one of their cars and makes a product recall,
customer reliability and therefore production will decrease because trust will be lost in the
car'squality.
Different meaning could be attached to the word quality under different circumstances. The
word quality does not mean the quality of manufactured product only. It may refer to the quality
of the process (i.e., men, material, and machines) and even that of management. Where the
quality manufactured product referred as or defined as “Quality of product as the degree in
which it fulfils the requirement of the customer. It is not absolute but it judged or realized by
comparing it with some standards”.
Quality begins with the design of a product in accordance with the customer specification
further it involved the established measurement standards, the use of proper material, selection
of suitable manufacturing process etc., quality is a relative term and it is generally used with
reference to the end use of the product.
Crosby defined as “Quality is conformance to requirement or specifications”. Juran defined as

“Quality is fitness for use”. “The Quality of a product or service is the fitness of that product
or service for meeting or exceeding its intended use as required by the customer.”
THE DEFINITIONS OF QUALITY
The degree to which a product or a service successfully satisfies its intended purpose has the
following four primary definitions

• Design. Quality of design refers to the intention of designers to include or exclude
certain features in a product or service. Marketing may organize focus groups of
customers to express their views on a product or service. Designers must ascertain that
designs are manufactural; that is, production or service has the equipment, capacity,
and skills necessary to produce or provide a particular design. The best workmanship
in the world may not be enough to achieve the desired quality; similarly, a superior
design usually cannot offset poor workmanship.
• How well it conforms to the design. Quality of conformance refers to the degree to
which goods and services conform (i.e., achieve) the intent of designers. This is affected
by factors such as the capability of equipment used; the skills, training, and motivation
of workers; the extent to which the design lends itself to production; the monitoring
process to access performance; and the taking of corrective action when necessary.
• Ease of use and user instructions. They increase the chances, but do not guarantee, that
a product will be used for its intended purposes and in such a way that it will continue
to function properly and safely. Instructions need to be clearly visible and easily
understood. Some examples include the doctor who fails to specify that a medication
should be taken before meals and not with orange juice and the attorney who neglects
to inform a client of a deadline for filing a claim.
• Service after delivery, including recall and repair of a product, adjustment, replacement,
or buyback, or revaluation of a service.
VIEWS OF QUALITY EXPERTS
1. DR. WILLIAM EDWARD DEMING
According to Deming,
System is responsible for low quality and its manager’s responsibility to install the right design
and production systems. Management must ensure that designer’sunderstandcustomers’
requirements and design that these requirements and then management must install the
production system which will faithfully convert the design into product.

THE 14 POINTS
Dr. Deming's Ideas Dr. Deming's famous 14 Points, originally presented in “Out of the
Crisis”, serve as management guidelines. The points cultivate a fertile soil in which a more
efficient workplace, higher profits, and increased productivity may grow.
1. Create a constant purpose toward improvement.

• Plan for quality in the long term.
• Resist reacting with short-term solutions.
• Don't just do the same things better – find better things to do.
• Predict and prepare for future challenges, and always have the goal of getting better.
2. Adopt the new philosophy.

• Embrace quality throughout the organization.
• Put your customers' needs first, rather than react to competitive pressure – and design
products and services to meet those needs.
• Be prepared for a major change in the way business is done. It's about leading, not
simply managing.
• Create your quality vision, and implement it.
3. Stop depending on inspections.

• Inspections are costly and unreliable – and they don't improve quality, they merely find
a lack of quality.
• Build quality into the process from start to finish.
• Don't just find what you did wrong – eliminate the "wrongs" altogether.
• Use statistical control methods – not physical inspections alone – to prove that the
process is working.
4. Use a single supplier for any one item.

• Quality relies on consistency – the less variation you have in the input, the less variation
you'll have in the output.
• Look at suppliers as your partners in quality. Encourage them to spend time improving
their own quality – they shouldn't compete for your business based on price alone.
• Analyse the total cost to you, not just the initial cost of the product.
• Use quality statistics to ensure that suppliers meet your quality standards.

5. Improve constantly and forever.
• Continuously improve your systems and processes. Deming promoted the Plan-Do-
Check-Act approach to process analysis and improvement.
• Emphasize training and education so everyone can do their jobs better.
• Use kaizen as a model to reduce waste and to improve productivity, effectiveness, and
safety.
6. Use training on the job.
• Train for consistency to help reduce variation.

• Build a foundation of common knowledge.
• Allow workers to understand their roles in the "big picture."
• Encourage staff to learn from one another, and provide a culture and environment for
effective teamwork.
7. Implement leadership.
• Expect your supervisors and managers to understand their workers and the processes
they use.
• Don't simply supervise – provide support and resources so that each staff member can
do his or her best. Be a coach instead of a policeman.
• Figure out what each person actually needs to do his or her best.
• Emphasize the importance of participative management and transformational
leadership.
• Find ways to reach full potential, and don't just focus on meeting targets and quotas.
8. Eliminate fear.
• Allow people to perform at their best by ensuring that they're not afraid to express ideas
or concerns.
• Let everyone know that the goal is to achieve high quality by doing more things right –
and that you're not interested in blaming people when mistakes happen.
• Make workers feel valued, and encourage them to look for better ways to do things.
• Ensure that your leaders are approachable and that they work with teams to act in the
company's best interests.
• Use open and honest communication to remove fear from the organization.
9. Break down barriers between departments.

• Build the "internal customer" concept – recognize that each department or function
serves other departments that use their output.
• Build a shared vision.
• Use cross-functional teamwork to build understanding and reduce adversarial
relationships.
• Focus on collaboration and consensus instead of compromise.
10. Get rid of unclear slogans.
• Let people know exactly what you want – don't make them guess. "Excellence in
service" is short and memorable, but what does it mean? How is it achieved? The
message is clearer in a slogan like "You can do better if you try."
• Don't let words and nice-sounding phrases replace effective leadership. Outline your
expectations, and then praise people face-to-face for doing good work.
11. Eliminate management by objectives.

• Look at how the process is carried out, not just numerical targets. Deming said that
production targets encourage high output and low quality.
• Provide support and resources so that production levels and quality are high and
achievable.
• Measure the process rather than the people behind the process
12. Remove barriers to pride of workmanship.

• Allow everyone to take pride in their work without being rated or compared.
• Treat workers the same, and don't make them compete with other workers for monetary
or other rewards. Over time, the quality system will naturally raise the level of
everyone's work to an equally high level.
13. Implement education and self-improvement.
• Improve the current skills of workers.

• Encourage people to learn new skills to prepare for future changes and challenges.
• Build skills to make your workforce more adaptable to change, and better able to find
and achieve improvements.
14."Transformation" everyone's job.

• Improve your overall organization by having each person take a step toward quality.
• Analyse each small step, and understand how it fits into the larger picture.
• Use effective change management principles to introduce the new philosophy and ideas
in Deming's 14 points
THE DEMING CHAIN REACTION
THE DEMING WHEEL/ CYCLE
Dr.Edward Deming, provided a simple yet highly effective technique that serves as a practical
tool to carry out continuous improvement in the workplace. This technique is called PDCA
Cycle or simply Deming Cycle. PDCA is acronym of Plan, Do, Check and Action. Deming
Cycle provides conceptual as well as practical framework while carrying out Kaizen
activities by the employees.
• PLAN stage involves analyzing the current situation, gathering data, and developing
ways to make improvements.
• The DO stage involves testing alternatives experimentally in a laboratory establishing
a pilot process, or trying it out with small number of customers.
• The CHECK stage requires determining whether the trial or process is working as
intended, whether any revisions are needed, or whether it should be scrapped.
• The ACT stage focuses on implementing the process within the organization or with
its customers and suppliers.
Once all this stages are completed to the fullest satisfaction, the improvement is standardized.
The standardized work or product is the result of improvement initiative but it is not stopped

here. With the changing circumstances or new techniques this standardized work, process,
product or service is again subjected to further improvement thus repeating the Deming Cycle
again and again.
2. DR JOSEPH MOSES JURAN
Joseph Moses Juran is considered to be the father of Quality Control. His Quality Control
Handbook is the number one reference for quality practitioners.
Joseph M. Juran is notable for his fitness for use work. This fitness for use principle goes
beyond just thinking of quality in terms of defect levels, instead, it asks, was the output of the
project what we set out to produce at the outset? Fitness for use is very customer focussed,
reflecting the customer’s and stakeholder’s view of quality.
Juran introduced the Three Basic Steps to Progress, which, in his opinion, companies
must implement if they are to achieve high quality.
1. Accomplish improvements that are structured on a regular basis with
commitment and a sense of urgency.
2. Build an extensive training program.
3. Cultivate commitment and leadership at the higher echelons of management.
QUALITY THEMES OF DR. JURAN
Quality of design: the product design should provide the benefits and have features that
customers expect. Designers set specifications of components such that when they are
assembled together, the product provides the desired benefits and has the desired
features
➢ Quality of performance: the production system produces components as per the

specifications set by designers
➢ Availability: customers can use the product without interruption. The product
does not fail unexpectedly; it is reliable. And even when it fails, it is rectified
quickly.
➢ Safety: customers are not harmed in any way when they are using the product
➢ Support: customers have easy access to repair and service facilities which
enables them to use the product without interruption.
3. PHILIP CROSBY
According to Crosby,
Quality is free. A quality management program would lead to such levels of saving that
it would pay for itself. Bad quality costs money. Defective products have to be either
rectified or scraped if they are identified before reaching customers and if they reach
customers, they might have to be recalled or repaired at the customer’s premises
Awareness of quality requirements and attitude towards quality determine improvement

that will be made. When a company decides to produce only good quality products, it
focus on installing the right equipment, setting the right production proc esses, and
training the workers.
CROSBY’S ABSOLUTES OF QUALITY MANAGEMENT
➢ Quality means adherence to specifications. For example if the rod should be between
10+/-0.10 cm, all rods should be within 10.1cm and 9.9 cm. bad quality is non-
conformance to specification.
➢ Quality means conformance to requirements, not goodness.
➢ Quality is achieved by prevention, not appraisal.
➢ Quality has a performance standard of Zero Defects, not acceptable quality levels.
DIMENSIONS OF QUALITY
A product provides different values to customers and satisfies them in different ways, and
hence quality is multidimensional. The dimensions are as follows:
1. Performance:
It involves the various operating characteristics of the product. For a television set, for example,
these characteristics will be the quality of the picture, sound and longevity of the picture tube.
2. Features:
These are characteristics that are supplemental to the basic operating characteristics. In an
automobile, for example, a stereo CD player would be an additional feature.

3. Reliability:
Reliability of a product is the degree of dependability and trustworthiness of the benefit of the
product for a long period of time.
It addresses the probability that the product will work without interruption or breaking down.
4. Conformance:
It is the degree to which the product conforms to pre- established specifications. All quality
products are expected to precisely meet the set standards.
5. Durability:
It measures the length of time that a product performs before a replacement becomes necessary.
The durability of home appliances such as a washing machine can range from 10 to 15 years.
6. Serviceability:
Serviceability refers to the promptness, courtesy, proficiency and ease in repair when the
product breaks down and is sent for repairs.
7. Aesthetics:
Aesthetic aspect of a product is comparatively subjective in nature and refers to its impact on
the human senses such as how it looks, feels, sounds, tastes and so on, depending upon the type
of product. Automobile companies make sure that in addition to functional quality, the
automobiles are also artistically attractive.
8. Perceived quality (brand name):

An equally important dimension of quality is the perception of the quality of the product in the
mind of the consumer. Honda cars, Sony Walkman and Rolex watches are perceived to be high
quality items by the consumers.
FOCUS ON QUALITY
Most organizations have their own quality policy. Concern for quality is reflected in the
mission statement of most organization. These organization believe that quality is crucial for
long term survival. Following are the feature s of the organization.
Strategy and quality: as per quality target set the goals of organization

Quality orientation: give training and motivation to employee so that they can understand
importance of quality
Zero defects program: zero defects programs are an attempt to improve quality by changing
workers attitude to install in them the concept of “do it right the first time and every time”
COST OF QUALITY AND QUALITY COST AUDIT
Quality costs are the costs associated with preventing, detecting, and remediating product
issues related to quality. Quality costs do not involve simply upgrading the perceived value
of a product to a higher standard. Instead, quality involves creating and delivering a
product that meets the expectations of a customer. Thus, if a customer spends very little
for an automobile, he will not expect leather seats and air conditioning - but he will expect
the vehicle to run properly. In this case, quality is considered to be a vehicle that functions,
rather than a luxury experience.
QUALITY COSTS
Quality costs fall into four categories, which are:
PREVENTION COSTS
Prevention costs are incurred to prevent or avoid quality problems. These costs are associated
with the design, implementation, and maintenance of the quality management system. They are
planned and incurred before actual operation, and they could include:
• Product or service requirements—establishment of specifications for incoming

materials, processes, finished products, and services
• Quality planning—creation of plans for quality, reliability, operations, production, and
inspection
• Quality assurance—creation and maintenance of the quality system
• Training—development, preparation, and maintenance of programs
APPRAISAL COSTS
Appraisal costs are associated with measuring and monitoring activities related to quality.
These costs are associated with the suppliers’ and customers’ evaluation of purchased

materials, processes, products, and services to ensure that they conform to specifications. They
could include:
• Verification—checking of incoming material, process setup, and products against
agreed specifications
• Quality audits—confirmation that the quality system is functioning correctly
• Supplier rating—assessment and approval of suppliers of products and services
INTERNAL FAILURE COSTS

Internal failure costs are incurred to remedy defects discovered before the product or service is
delivered to the customer. These costs occur when the results of work fail to reach design
quality standards and are detected before they are transferred to the customer. They could
include:
• Waste—performance of unnecessary work or holding of stock as a result of errors, poor
organization, or communication
• Scrap—defective product or material that cannot be repaired, used, or sold
• Rework or rectification—correction of defective material or errors
• Failure analysis—activity required to establish the causes of internal product or service
failure
EXTERNAL FAILURE COSTS

External failure costs are incurred to remedy defects discovered by customers. These costs
occur when products or services that fail to reach design quality standards are not detected until
after transfer to the customer. They could include:
• Repairs and servicing—of both returned products and those in the field
• Warranty claims—failed products that are replaced or services that are re-performed
under a guarantee
• Complaints—all work and costs associated with handling and servicing customers’
complaints
• Returns—handling and investigation of rejected or recalled products, including
transport costs
Quality costs can arise anywhere in a company. There may be product design issues that
begin in the engineering department, as well as manufacturing problems that can create

product flaws. Further, the procurement department may acquire substandard components
that result in product flaws. In addition, the order entry department may have incorrectly
entered a customer order, so that the customer receives the wrong product. These issues
all result in quality costs.
Quality costs can comprise a major portion of the total expenses of a business, though they
are hidden within its normal cost recording system, which is oriented more toward
recording by responsibility centre than by quality issue. The mitigation of quality issues
can greatly increase the profitability of a business, as well as enhance the level of customer
retention.
STATISTICAL PROCESS CONTROL
Statistical process control (SPC) is the application of statistical techniques to determine

whether the output of a process conforms to the product or service design. It aims at achieving
good quality during manufacture or service through prevention rather than detection. It is
concerned with controlling the process that makes the product because if the process is good
then the product will automatically be good. Application of statistical methods and
procedures (such as control charts) to analyse the inherent variability of a process or its
outputs to achieve and maintain a state of statistical control, and to improve the process
capability. Also called statistical quality control.
VARIATION IN PROCESSES
There is conflict between two facts:

-variation or non-uniformity is inevitable when two outputs are not alike.
-products and use of products are most economical when the products are of uniform quality.
There is non-uniformity because
• People behave differently
• Materials are different
• Machines are not constant

• Worker adopt different method
TYPES OF VARIATIONS
Natural or random variable

The variability that is contained within a process that cannot be determined. These fluctuations
and variations are caused by erratic and irregular actions that are the result of random chance.
These random variations cannot be eliminated or determined.
Assignable or non-random variation

An abnormal variation that is caused by a few factors, but causes a noticeable defects that are
easily detectable. In quality control, these can be identified and eliminated to ensure a high
quality of the process.
CONTROL CHARTS
SPC is implemented through control charts that are used to monitor the output of the process
and indicate the presence of problems requiring further action. Control charts can be used to
monitor processes where output is measured as either variables or attributes. There are two
types of control charts: Variable control chart and attribute control chart.
1. Variable control charts: It is one by which it is possible to measures the quality characteristics
of a product. The variable control charts are X-BAR chart, R-BAR chart, SIGMA chart.
2. Attribute control chart: It is one in which it is not possible to measures the quality
characteristics of a product, i.e., it is based on visual inspection only like good or bad, success
or failure, accepted or rejected. The attribute control charts are p-charts, np-charts, c-charts,
u-charts. It requires only a count of observations on characteristics e.g., the number of
nonconforming items in a sample.
Control charts

CHARACTERISTICS OF CONTROL CHARTS
A control chart is a time-ordered diagram to monitor a quality characteristic, consisting of:

➢ A nominal value, or centre line, the average of several past samples.
➢ Two control limits used to judge whether action is required, an upper control limit
(UCL) and a lower control limit (LCL).
➢ Data points, each consisting of the average measurement calculated from a sample
taken from the process, ordered overtime. By the Central Limit Theorem, regardless of
the distribution of the underlying individual measurements, the distribution of the
sample means will follow a normal distribution. The control limits are set based on the
sampling distribution of the quality measurement.
BENEFITS OF USING CONTROL CHARTS

Following are the benefits of control charts:
➢ A control chart indicates when something may be wrong, so that corrective action can
be taken.
➢ The patterns of the plot on a control chart diagnosis possible cause and hence indicate
possible remedial actions.
➢ It can estimate the process capability of process.
➢ It provides useful information regarding actions to take for quality improvement.
OBJECTIVES OF CONTROL CHARTS

Following are the objectives of control charts:
➢ To secure information to be used in establishing or changing specifications or in

determining whether the process can meet specifications or not.
➢ To secure information to be used on establishing or changing production procedures.
➢ To secure information to be used on establishing or changing inspection procedures or
acceptance procedures or both.
➢ To provide a basis for current decision during production.
➢ To provide a basis for current decisions on acceptance for rejection of manufacturing
or purchased product.
➢ To familiarize personnel with the use of control chart.
TOTAL QUALITY MANAGEMENT
Total Quality Management is a management approach that originated in the 1950s and has
steadily become more popular since the early 1980s. Total Quality is a description of the
culture, attitude and organization of a company that strives to provide customers with products
and services that satisfy their needs. The culture requires quality in all aspects of the company’s
operations, with processes being done right the first time and defects and waste eradicated from
operations.
Total Quality Management, TQM, is a method by which management and employees can
become involved in the continuous improvement of the production of goods and services. It is
a combination of quality and management tools aimed at increasing business and reducing
losses due to wasteful practices.
Some of the companies who have implemented TQM include Ford Motor Company, Phillips
Semiconductor, SGL Carbon, Motorola and Toyota Motor Company,
Total Quality management is defined as a continuous effort by the management as well

as employees of a particular organization to ensure long term customer loyalty and
customer satisfaction. Remember, one happy and satisfied customer brings ten new customers
along with him whereas one disappointed individual will spread bad word of mouth and spoil
several of your existing as well as potential customers.
Quality can be measured in terms of durability, reliability, usage and so on. Total quality
management is a structured effort by employees to continuously improve the quality of their
products and services through proper feedbacks and research. Ensuring superior quality of a
product or service is not the responsibility of a single member.

Every individual who receives his/her paycheck from the organization has to contribute equally
to design fool proof processes and systems which would eventually ensure superior quality of
products and services. Total Quality management is indeed a joint effort of management, staff
members, workforce, and suppliers in order to meet and exceed customer satisfaction level.
You can’t just blame one person for not adhering to quality measures. The responsibility lies
on the shoulder of everyone who is even remotely associated with the organization.
W. Edwards Deming, Joseph M. Juran, and Armand V. Feigenbaum jointly developed the
concept of total quality management. Total Quality management originated in the
manufacturing sector, but can be applied to almost all organizations.
Total quality management ensures that every single employee is working towards the
improvement of work culture, processes, services, systems and so on to ensure long term
success.
TQM is the foundation for activities, which include:
➢ Commitment by senior management and all employees

➢ Meeting customer requirements
➢ Reducing development cycle times
➢ Improvement teams
➢ Reducing product and service costs
➢ Systems to facilitate improvement
➢ Employee involvement and empowerment
➢ Challenging quantified goals and benchmarking
➢ Focus on processes / improvement plans
➢ Specific incorporation in strategic planning
This shows that TQM must be practiced in all activities, by all personnel, in manufacturing,
marketing, engineering, R&D, sales, purchasing, HR, etc.
Total Quality Management TQM, also known as total productive maintenance, describes a
management approach to long-term success through customer satisfaction. In a TQM effort, all
members of an organization participate in improving processes, products, services, and the
culture in which they work.

TOTAL QUALITY MANAGEMENT PRINCIPLES: THE 8 PRIMARY ELEMENTS
OF TQM
1. Customer-focused
The customer ultimately determines the level of quality. No matter what an organization does
to foster quality improvement—training employees, integrating quality into the design process,
upgrading computers or software, or buying new measuring tools—the customer determines
whether the efforts were worthwhile.
2. Total employee involvement

All employees participate in working toward common goals. Total employee commitment can
only be obtained after fear has been driven from the workplace, when empowerment has
occurred, and management has provided the proper environment. High-performance work
systems integrate continuous improvement efforts with normal business operations. Self-
managed work teams are one form of empowerment.
3. Process-centred
A fundamental part of TQM is a focus on process thinking. A process is a series of steps that
take inputs from suppliers (internal or external) and transforms them into outputs that are
delivered to customers (again, either internal or external). The steps required to carry out the
process are defined, and performance measures are continuously monitored in order to detect
unexpected variation.
4. Integrated system
Although an organization may consist of many different functional specialties often organized
into vertically structured departments, it is the horizontal processes interconnecting these
functions that are the focus of TQM.
➢ Micro-processes add up to larger processes, and all processes aggregate into the
business processes required for defining and implementing strategy. Everyone must
understand the vision, mission, and guiding principles as well as the quality policies,
objectives, and critical processes of the organization. Business performance must be
monitored and communicated continuously.
➢ An integrated business system may be modelled after the Baldrige National Quality
Program criteria and/or incorporate the ISO 9000 standards. Every organization has a

unique work culture, and it is virtually impossible to achieve excellence in its products
and services unless a good quality culture has been fostered. Thus, an integrated system
connects business improvement elements in an attempt to continually improve and
exceed the expectations of customers, employees, and other stakeholders.
5. Strategic and systematic approach

A critical part of the management of quality is the strategic and systematic approach to
achieving an organization’s vision, mission, and goals. This process, called strategic planning
or strategic management, includes the formulation of a strategic plan that integrates quality as
a core component.
6. Continual improvement
A major thrust of TQM is continual process improvement. Continual improvement drives an
organization to be both analytical and creative in finding ways to become more competitive
and more effective at meeting stakeholder expectations.
7. Fact-based decision making

In order to know how well an organization is performing, data on performance measures are
necessary. TQM requires that an organization continually collect and analyse data in order to
improve decision making accuracy, achieve consensus, and allow prediction based on past
history.
8. Communications
During times of organizational change, as well as part of day-to-day operation, effective
communications plays a large part in maintaining morale and in motivating employees at all
levels. Communications involve strategies, method, and timeliness.
These elements are considered so essential to TQM that many organizations define them, in
some format, as a set of core values and principles on which the organization is to operate. The
methods for implementing this approach come from the teachings of such quality leaders
as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa,
and Joseph M. Juran.

TOTAL QUALITY IMPLEMENTATION
When planning and implementing a total quality management system or quality management
strategy, there is no one solution for every situation.
Each organization is unique in terms of the culture, management practices, and the processes
used to create and deliver its products and services. The quality management strategy will then
vary from organization to organization; however, a set of primary elements should be present
in some format as follows,
• Top management learns about and decides to commit to TQM. TQM is identified as one of the
organization’s strategies.
• The organization assesses current culture, customer satisfaction, and quality management
systems.
• Top management identifies core values and principles to be used, and communicates them.
• A TQM master plan is developed on the basis of steps 1, 2, and 3.
• The organization identifies and prioritizes customer demands and aligns products and services
to meet those demands.
• Management maps the critical processes through which the organization meets its customers’
needs.
• Management oversees the formation of teams for process improvement efforts.
• The momentum of the TQM effort is managed by the steering committee.
• Managers contribute individually to the effort through planning, training, coaching, or other
methods.
• Daily process management and standardization take place.
• Progress is evaluated and the plan is revised as needed.
Constant employee awareness and feedback on status are provided and a reward/recognition
process is established.
CRITICISM OR CHALLENGES OF TQM
Demands a Change in Culture

TQM demands an organizational culture that focuses on continuous process improvement and
customer satisfaction. It requires a change of attitude and a reprioritization of daily operations.
TQM also requires a long-term management commitment and constant employee involvement.

According to Forbes, changing an organization’s culture is a difficult challenge, because
culture amalgamates an interlocking set of values, processes, attitudes, communication
practices, roles, goals and assumptions, and is often met with resistance by employees, who
view it as a threat to their jobs.
Demands Planning, Time and Resources

A good TQM system often takes years to implement, and that occurs only after significant
planning, time, long-term resource allocation and unwavering management commitment. Lack
of proper planning can cause a TQM system to ultimately fail.
Quality is Expensive
TQM is expensive to implement. Implementation often comes with additional training costs,
team-development costs, infrastructural improvement costs, consultant fees and the like. The
system also requires continuous investment in the form of refresher trainings, process and
machine inspections, and quality measurement. TQM is not suitable for very small companies,
because its implementation, training and execution costs far supersede its financial gains.
Takes Years to Show Results

TQM is a long-term process that shows results only after years have passed. It requires
perseverance, patience, dedication and motivation. Many organizations give up on it after
failing to see tangible results quickly. Organizations that function in highly competitive
environments cannot afford the luxury of time.
Discourages Creativity
TQM’s focus on task standardization to ensure consistency discourages creativity and
innovation. It also discourages new ideas that can possibly improve productivity.
SIX SIGMA
Six Sigma is a methodology for pursuing continuous improvement in customer satisfaction

and profit. It is a management philosophy attempting to improve effectiveness and efficiency.
Features of Six Sigma

• Six Sigma's aim is to eliminate waste and inefficiency, thereby increasing customer
satisfaction by delivering what the customer is expecting.
• Six Sigma follows a structured methodology, and has defined roles for the participants.
• Six Sigma is a data driven methodology, and requires accurate data collection for the
processes being analyzed.
• Six Sigma is about putting results on Financial Statements.
• Six Sigma is a business-driven, multi-dimensional structured approach for:
✓ Improving Processes
✓ Lowering Defects
✓ Reducing process variability
✓ Reducing costs
✓ Increasing customer satisfaction
✓ Increased profits
The word Sigma is a statistical term that measures how far a given process deviates from
perfection.
The central idea behind Six Sigma: If you can measure how many "defects" you have in a
process, you can systematically figure out how to eliminate them and get as close to "zero
defects" as possible and specifically it means a failure rate of 3.4 parts per million or 99.9997%
perfect.
KEY ELEMENTS OF SIX SIGMA PROCESS IMPROVEMENT:
The Customers:
Customers define quality. They expect performance, reliability, competitive prices, on-time
delivery, service, clear and correct transaction processing and more. This means it is important
to provide what the customers need to gain customer delight.
The Processes:

Defining processes as well as defining their metrics and measures is the central aspect of Six
Sigma.In a business, the quality should be looked from the customer's perspective and so we
must look at a defined process from the outside-in.
By understanding the transaction lifecycle from the customer's needs and processes, we can
discover what they are seeing and feeling. This gives a chance to identify weak areas with in
a process and then we can improve them.
The Employees:
A company must involve all its employees in the Six Sigma program. Company must provide
opportunities and incentives for employees to focus their talents and ability to satisfy
customers.It is important to Six Sigma that all the team members should have a well-defined
role with measurable objectives.
Six Sigma - Organization/Role areas

Under a Six Sigma program, the members of an organization are assigned specific roles to
play, each with a title. This highly structured format is necessary in order to implement Six
Sigma throughout the organization.
There are seven specific responsibilities or "role areas" in a Six Sigma program, which are as
follows.
Leadership
A leadership team or council defines the goals and objectives in the Six Sigma process. Just
as a corporate leader sets a tone and course to achieve an objective, the Six Sigma council sets
the goals to be met by the team. Here is the list of leadership Council Responsibilities:
• Defines the purpose of the Six Sigma program
• Explains how the result is going to benefit the customer
• Sets a schedule for work and interim deadlines
• Develops a mean for review and oversight
• Support team members and defend established positions
Sponsor

Six Sigma sponsors are high-level individuals who understand Six Sigma and are committed
to its success. The individual in the sponsor role acts as a problem solver for the ongoing Six
Sigma project. Six Sigma is generally led by a full-time, high-level champion, such as an
Executive Vice President.
Sponsors are the owners of processes and systems, who help initiate and coordinate Six Sigma
improvement activities in their areas of responsibilities.
Implementation Leader
The person responsible for supervising the Six Sigma team effort, who supports the leadership
council by ensuring that the work of the team is completed in the desired manner, is the
implementation Leader.
Ensuring success of the implementation plan and solving problems as they arise, training as
needed, and assisting sponsors in motivating the team are some of the key responsibilities of
an implementation leader.
Coach
Coach is a Six Sigma expert or consultant who sets a schedule, defines result of a project, and
who mediates conflict, or deals with resistance to the program.Duties include working as a go-
between for sponsor and leadership, scheduling the work of the team, identifying and defining
the desired results of the project, mediating disagreements, conflicts, and resistance to the
program and identifying success as it occurs.
Team Leader
It is an individual responsible for overseeing the work of the team and for acting as a go-
between with the sponsor and the team members.Responsibilities include communication with
the sponsor in defining project goals and rationale, picking and assisting team members and
other resources, keeping the project on schedule, and keeping track of steps in the process as
they are completed.
Team Member
An employee who works on a Six Sigma project, given specific duties within a project, and
has deadlines to meet in reaching specific project goals.Team members execute specific Six
Sigma assignments and work with other members of the team within a defined project
schedule, to reach specifically identified goals.
Process Owner
The individual who takes on responsibility for a process after a Six Sigma team has completed
its work.
Extended Definitions of Roles Belt - Colors

The assignment of belt colors to various roles is derived from the obvious source, the martial
arts. Based on experience and expertise following roles have evolved over the year. The belt
names are a tool for defining levels of expertise and experience. They do not change or replace
the organizational roles in the Six Sigma process.
Black Belt: The person possessing this belt has achieved the highest skill level and is an
experienced expert in various techniques. As applied to the Six Sigma program, the individual
designated as a Black Belt has completed a thorough internal training program and has the
experience working on several projects.
The black belt holder is usually given the role of a team leader, the person who is responsible
for execution and scheduling.
Master Black Belt:A person who deals with the team or its leadership; but is not a direct
member of the team itself. This may be equivalent to the role played by the coach, or for more
technical and complex projects.The Master Black Belt is available to answer procedural
questions and to resolve the technical issues that come up.
Green Belt:The Green Belt designation can also belong to the team leader or to a member of
the team working directly with the team leader.
A Green Belt is less experienced than a Black Belt but is cast in a key role within the team.
SIX SIGMA - METHODOLOGY

Six Sigma has two key methodologies:
• DMAIC: It refers to a data-driven quality strategy for improving processes. This

methodology is used to improve an existing business process.
• DMADV: It refers to a data-driven quality strategy for designing products & processes.
This methodology is used to create new product designs or process designs in such a
way that it results in a more predictable, mature and defect free performance.

There is one more methodology called DFSS - Design For Six Sigma. DFSS is a data-driven
quality strategy for designing or redesigning a product or service from the ground up.
Sometimes a DMAIC project may turn into a DFSS project because the process in question
requires complete redesign to bring about the desired degree of improvement.
DMAIC METHODOLOGY
This methodology consists of the following five steps.
Define --> Measure --> Analyse --> Improve -->Control
• Define: Define the problem or project goal that needs to be addressed.
• Measure: Measure the problem and process from which it was produced.
• Analyse: Analyse data and process to determine root causes of defects and
opportunities.
• Improve: Improve the process by finding solutions to fix, diminish, and prevent future
problems.
• Control: Implement, control, and sustain the improvements solutions to keep the
process on the new course.
DMADV METHODOLOGY
This methodology consists of five steps:
Define --> Measure --> Analyse --> Design -->Verify
• Define: Define the Problem or Project Goal that needs to be addressed.
• Measure: Measure and determine customers’ needs and specifications.
• Analyse: Analyse the process to meet the customer needs.
• Design: Design a process that will meet customer’s needs.
• Verify: Verify the design performance and ability to meet customer needs.
BENEFITS OF SIX SIGMA

Six Sigma offers six major benefits that attract companies:
• Generates sustained success
• Sets a performance goal for everyone
• Enhances value to customers

• Accelerates the rate of improvement
• Promotes learning and cross-pollination
• Executes strategic change
ISO 9000 STANDARDS

ISO stands for International Organization for Standardization. It is an international body, which
consists of representatives from more than 90 countries. The national standard bodies of these
countries are the members of this organization. Bureau of Indian Standards (BIS) are the Indian
representative to ISO, ISO and International Electro Technical Commission (IEC)) operate
jointly as a single system. These are non-governmental organizations, which exist to provide
common standards on international trade of goods and services.
ISO 9000 standards expect firms to have a quality manual that meets ISO guidelines,
documents, quality procedures and job instructions, and verification of compliance by third-
party auditors. ISO 9000 series has five international standards on quality managements. The
ISO 9000 series consists of five standards, ISO 9000 to ISO 9004. ISO 9000 is a guide for
selection and use telling how to use the system, select the standard, and tailor the model to
particular applications. ISO 9001 to ISO 9003 provide models for a supplier's quality system
by defining the quality system components expected to be in place. ISO 9004 provides
guidance to the supplier to implement the quality system. They are:
• ISO 9000 — Quality management and Quality assurance standards

• ISO 9001 — Quality systems: Quality in design
• ISO 9002 — Quality systems: Production and Installation
• ISO 9003 — Quality systems: Final inspection and test
• ISO 9004 — Quality management and systems
Objectives of ISO 9000 Series

The objectives of ISO 9000 series are listed in the following table.

Benefits of ISO 9000 Series
ISO 9000 series provides several tangible and intangible benefits which are listed below:
• This gives competitive advantage in the global market.

• Consistency in quality, since ISO helps in detecting non-conformity early which makes
it possible to take corrective action.
• Documentation of quality procedures adds clarity to quality system.
• ISO 9000 ensures adequate and regular quality training for all members of the
organization.
• ISO helps the customers to have cost effective purchase procedure.
• The customers while making purchases from companies with ISO certificate need not
spend much on inspection and testing. This will reduce the quality cost and lead-time.
• This will help in increasing productivity.
• This will aid to improved morale and involvement of workers.
• The level of job satisfaction would be more.
HEALTH AND SAFETY
Accidents
An accident is something harmful and takes place suddenly and unexpectedly. Accidents may
result in simple injuries to the body like bruises and cuts. But they may also result in major

complications like broken bones with heavy bleeding, failure to breathe, unconsciousness, or
even death.
Cause of accidents
• Plant- electrical short circuit
• Equipment- faulty machines
• Environment- inefficient light and high noise
• People- careless and untrained employees
• System- poor work procedures
Effects of accidents
• Injury- disability and pain to a worker

• Damage- to equipment and building
• Loss- of life, earning, output and time
• Emotional fallout- due to distress and pain of injury and death
Inspections of the workplace
Formal inspections can take different forms and you and your representatives will need to agree
the best methods for your workplace. Here are some of the ways inspections can take place.
• Safety tours - general inspections of the workplace

• Safety sampling - systematic sampling of particular dangerous activities, processes or areas
• Safety surveys - general inspections of particular dangerous activities, processes or areas
• Incident inspections carried out after an accident causing a fatality, injury, or near miss,
which could have resulted in an injury, or case of ill health and has been reported to the
health and safety enforcing authority.
HOW TO CONDUCT WORKPLACE INSPECTIONS
• Workplace Inspections
A workplace inspection is a planned walkthrough of a workplace or selected areas or locations

of a workplace. Inspections are needed to critically examine all factors (equipment, processes,
materials, buildings, procedures) that have the potential to cause injury or illness, and to
identify where action is necessary to control hazards. A schedule of planned inspections is an

essential element of a health and safety program in which standards are established and
compliance monitored.
• Who Should Conduct Inspections?
Ontario’s Occupational Health and Safety Act places responsibility on a worker health and
safety representative to conduct an inspection of physical conditions. However, the employer
still has the prime responsibility for providing a healthy and safe workplace. The
implementation of effective and regular inspections is one way in which an employer’s general
legal duties may be met. However, a joint inspection, consisting of both management and
worker representatives, would be in keeping with the participative approach of the Act.
• How Often Should Inspections be conducted?
The worker health and safety representative must inspect the workplace at least once a month.
However, if this is not practical, he or she shall inspect the physical condition of the workplace
at least once a year, inspecting at least a part of it every month. The inspection must be
conducted according to a schedule set by the joint health and safety committee or, in smaller
workplaces of 6 to 19 employees, by the employer and health and safety representative. In
drawing up the schedule, consider:
➢ The number of different processes or operations ƒ Hazardous equipment that must be

inspected at set intervals and, in some cases, as determined by legislation (for example,
cranes and slings)
➢ Processes with high hazard potential that may require separate and more frequent
inspections
➢ The number of shifts – inspections should not be confined only to one particular shift
because the nature of the activity may vary from one shift to another
➢ Special inspections whenever a new process or piece of machinery is introduced into the
workplace
• Preparing for the Inspection
The success of workplace inspections depends on having the necessary information. There
should also be an overall system of management controls which is flexible enough to allow for

changes to be made, for example in equipment or work practices, when needed. To properly
identify hazards, the person or persons conducting the inspection should have the necessary
training, which should include:
➢ The plant layout – a floor plan is helpful in preparing for the inspection, and recording
findings
➢ The potential hazards associated with the various machinery, equipment, materials, and
processes ƒ Existing controls, applicable standards and regulations
➢ How to use the information from:
➢ Ministry of Labour inspection reports/orders
✓ Results of previous inspections
✓ Accident data
✓ Maintenance reports
• Conducting the Inspection
To ensure that all items are covered during the inspection, it is useful to develop checklists
which contain reference, in point form, to all potential hazards. These checklists should never
be considered as permanent lists. They should be reviewed and added to or revised as necessary
– for example, when machinery or processes are changed or when accident experience reveals
previously unsuspected hazards. Figure 1 is a sample checklist for hazardous materials. In
addition to Hazardous Materials, the checklist should include references to the hazards of
Equipment and Machinery (tools, machinery and guarding, materials handling equipment) and
Physical Factors (floors, exits, lighting, work station layout, task design, noise).
Recording Observation It is necessary to review all the information collected and rank each
issue in terms of its importance. All identified hazards should be classified A, B, or C, as
follows:
➢ Class A Hazard: A condition or practice likely to cause permanent disability, loss of

life or body part, and/or extensive loss of structure, equipment or material. For example,
an unguarded saw.
➢ Class B Hazard: A condition or practice likely to cause serious injury or illness,
resulting in temporary disability or property damage that is disruptive but not extensive.
For example, spilled oil on the main aisle.
➢ Class C Hazard: A condition or practice likely to cause minor, non-disabling injury or
illness, or no disruptive property damage. For example, handling solvents without using
proper protective gloves.
Although the law does not specify an official reporting form, a good form is valuable in
ensuring that management, and others responsible for follow up, are made aware of problems.
Such a form can also serve as a valuable reference for spot inspections and periodic checks by
the supervisor, as well as for review by the joint health and safety committee.
• Review/Follow-Up
After each inspection, it is important that the information obtained is given careful
consideration and, where indicated, corrective action taken. The results of inspections are
indicators of the success or failure of management policies and practices and should be
examined for possible changes. Although all identified hazards should ultimately be eliminated
or minimized, the responsible supervisor or manager must be informed of hazards posing an
immediate danger so that corrective action can be taken quickly. The information obtained
from regular inspections should also be reviewed carefully to identify trends and to help
monitor the effectiveness of a company’s health and safety program. Over a period of time,
this review help:
➢ Highlight the need for training in certain areas

➢ Provide insight as to why accidents are occurring in certain areas;
➢ Establish priorities for corrective action
➢ Establish or improve safe work practices
➢ Indicate areas, equipment, etc., which may require more in-depth hazard analysis
PLANNING FOR SAFETY

LOOK INTO:
PLANT
PROCESS
TARGET ZERO
ACCIDENTS
WORKPLACE
PLANNING FOR CONTINUOUS REVIEW OF SYSTEM
SAFETY AND PROCESS
FACILITIES
CONTINUOUS SYSTEM
IMPROVEMENT OF
SYSTEM AND PROCESS
TRAINING
PROCEDURE

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MODULE 1

INTRODUCTION TO PRODUCTION AND OPERATIONS

PREPARED BY: NIKITA GAJJAR 1

Definition of production management:

PREPARED BY: NIKITA GAJJAR 2

OPERATION MANAGEMENT: A SYSTEMS PERSPECTIVE

Operations Management is best understood using systematic approach. It involves understanding

PREPARED BY: NIKITA GAJJAR 3

SCOPE OF PRODUCTION AND OPERATIONS MANAGEMENT

PREPARED BY: NIKITA GAJJAR 4

Plant layout and material handling

PREPARED BY: NIKITA GAJJAR 5

Production planning and control

PREPARED BY: NIKITA GAJJAR 6

PREPARED BY: NIKITA GAJJAR 7

EVOLUTION OF PRODUCTION AND OPERATION MANAGEMENT

Operation Management has been variously known as Industrial Management, Management

PREPARED BY: NIKITA GAJJAR 8

Time and Motion studies—Scientific Management:

World War II – Operation Research ---1940—1980:

PREPARED BY: NIKITA GAJJAR 9

Future of production and operation management:

TRENDS IN OPERATION MANAGEMENT

Dismantling of Trade Barriers:

PREPARED BY: NIKITA GAJJAR 10

Shift in Economic Activity:

Out sourcing as a major wave:

PREPARED BY: NIKITA GAJJAR 11

Collaborative Commerce through the Internet:

PREPARED BY: NIKITA GAJJAR 12

• The nature of the product

PREPARED BY: NIKITA GAJJAR 13

There are two types flow process:

1) CONTINUOUS FLOW PROCESS

PREPARED BY: NIKITA GAJJAR 14

Characteristics of Continuous Production System

Advantages of Continuous Production System

Disadvantages of Continuous Production System

PREPARED BY: NIKITA GAJJAR 15

Suitability of Continuous Production System

2) LINE FLOW PROCESS

PREPARED BY: NIKITA GAJJAR 16

2. Simplified production planning and control

3. Reduced material handling cost

4. Shorter production lead time

5. Small amount of work in progress inventory

PREPARED BY: NIKITA GAJJAR 17

Disadvantages of flow line manufacturing are as per the following.

2. High investment in machines and equipments

3. Lack of specialization in supervision

4. Work stoppage because of breakdown

3) JOB SHOP PROCESS

PREPARED BY: NIKITA GAJJAR 18

PREPARED BY: NIKITA GAJJAR 19

Issues Faced by Job Shops

Batch Production Examples:

The batch production method possesses the following characteristics:

PREPARED BY: NIKITA GAJJAR 21

Advantages of Batch Production