MANAGEMENT SCIENCE

UNIT–I:

INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT

Introduction. The very essence of any business is to cater needs of customer by providing
services and goods, and in process create value for customers and solve their
problems. Production and operations management talks about applying business
organization and management concepts in creation of goods and services.

Meaning of Production Management:

Production Management refers to the application of management principles to the
production function in a factory. In other words, production management involves
application of planning, organizing, directing and controlling the production process.

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The application of management to the field of production has been the result of at least
three developments:

(i) First is the development of factory system of production. Until the emergence of the
concept of manufacturing, there was no such thing as management as we know it. It is true
that people operated business of one type or another, but for the most part, these people
were owners of business and did not regard themselves as managers as well,

(ii) Essentially stems from the first, namely, the development of the large corporation with
many owners and the necessity to hire people to operate the business,

(iii) Stems from the work of many of the pioneers of scientific management who were able to
demonstrate the value, from a performance and profit point of view, of some of the
techniques they were developing. Manufacturing process is basically a complex activity,
concerned with people who've a broad number of disciplines and expertise and a wide
range of machinery, tools, and equipment with numerous levels of automation, such as
computers, robots, and other equipment. Manufacturing pursuits must be receptive to
several needs and developments.
Definition of Production Management:

It is observed that one cannot demarcate the beginning and end points of Production
Management in an establishment. The reason is that it is interrelated with many other
functional areas of business, viz., marketing, finance, industrial relation policies etc.

Alternately, Production Management is not independent of marketing, financial and

personnel management due to which it is very difficult to formulate some single appropriate
definition of Production Management.

Meaning of operation management

Operations management is basically people management. Most business departments

focus on very specific goals – marketing means getting more sales for your business, HR
keeps your employees happy, and so on.

Operations management, on the other hand, involves getting the most out of your company
resources. These can involve your employees (doing more work that creates
value), technology (maximum efficiency in manufacturing, for example), equipment (help
employees do more work), and so on.

Definition: Production / Operations Management is defined as the process which transforms

the inputs/resources of an organization into final goods (or services) through a set
of defined, controlled and repeatable policies. By policies, we refer to the rules that add
value to the final output.

Definition: Production / Operations Management is defined as the process which transforms

the inputs/resources of an organization into final goods (or services) through a set
of defined, controlled and repeatable policies. By policies, we refer to the rules that add
value to the final output.

Production (or Operations) management is an umbrella term which encompasses a gamut

of ideas within the jingoistic managerial circles, mostly exemplified by the varied literal
definitions of these terms based on the source. But we’ll confine ourselves to
straightforward (and understandable) definition to answer the basic question – ‘What is
operations management?

Production / Operations Management is defined as the process which transforms the

inputs/resources of an organization into final goods (or services) through a set of defined,
controlled and repeatable policies.
By policies, we refer to the rules that add value to the final output. The value added can be
in different dimensions, but the industrial set-up is mostly concerned with the duo
of quality and throughput.

Difference between Production and Operations Management

Production and operations management are more similar than different: if manufacturing
products is a prime concern then it is called production management, whereas management
of services is somewhat broader in scope and called operations management (because
manufacturing services sounds absurd, right?).

The line between products-based and services-based organizations is blurring rapidly as

well— car manufactures need to service their cars and the retailers manufacture their own
brand labels.

We will be referring to them jointly as POM from here on in this article, for the benefit and
convenience of all the parties involved.

The fuss about production and systems

 Production is a term which has caught the fancy of every industrialist ever since Adam
Smith propounded the idea of “specialization of labor”.

It is best envisioned as a piece-wise process (think about a typical production line with
every worker doing one and only one task at a frenetic speed), and this piece-wise
production enabled better quality, higher throughput, lower individual dependency and
lesser labor costs.

The production systems are frequently classified in the following buckets:

 Mass Production: Utilizes standardized discrete assemblies in a continuous process,

suitable for very large volumes of production—all outputs following the same path.
Generally associated with mind-numbing repetition, very specific machinery and a labor
force low on skill/creativity.

 Continuous Production: Non-flexible mode of production in which the whole sequence

of operations is pre-arranged in a definite set-up

 Batch production: American Production and Inventory Control defines batch production

as “a form of manufacturing in which the job passes through the functional departments
in lots or batches and each lot may have a different routing.” Enough said.
 Job Shop Production: Characterized by custom specifications by customers for a limited
quantity of products, use of general purpose machines and comparatively more
creative/skilled labor.
 ☺There are a few decision areas which are of utmost importance in POM, such as
design, quality, location selection, human resource allocation, supply chain
management and maintenance.
 The decisions arising from a POM perspective often decide the core priorities of an
organization: What makes us better than the competitors? Will we compete on cost,
quality, delivery time, design/form factor, ease of use, or something else? Et cetera et
cetera.

 There are some pre-defined objectives of production management, which can be broken
down into:
o Right quality,
o Right quantity,
o Right time and
o Right cost
 Production management can essentially be seen as an optimization problem: the goal is to
make the process as predictable as possible (as all of us do not share the same
enthusiasm for surprises).
 The objectives of operations management are a tad more extensive and take a couple of
things more into the fold: customer serviceand resource utilization.
o Almost all the things in operation management converge towards a single focal point: the
customer. Customer satisfaction is a barometer of things moving in the right direction.
o Resource utilization is equally imperative: the process of obtaining the output from input
through the path of least resistance, i.e. through least wastage and maximum utilization of
resources.
o Scoring high on one usually leads to deterioration in performance of the other (utilization v/s
customer service), and their balance is usually the nightmare of an operations manager —
but is definitely a worthy goal to look forward to.

Objectives of Production/Operations Management:

(i) Maximum customer satisfaction through quality, reliability, cost and delivery time.

(ii) Minimum scrap/rework resulting in better product quality.

(iii) Minimum possible inventory levels (i.e.,optimum inventory levels).

(iv) Maximum utilisation of all kinds of resources needed.

(v) Minimum cash outflow.

(vi) Maximum employee satisfaction.

(vii) Maximum possible production (i.e., outputs).

(viii) Higher operating efficiency.

(ix) Minimum production cycle time.

(x) Maximum possible profit or return on investment.

(xi) Concern for protection of environment.

(xii) Maximum possible productivity.

 Production Management v/s Operations Management

A high level comparison which distinct production and operations management can be done
on following characteristics:

 Output: Production management deals with manufacturing of products like (computer, car,

etc) while operations management cover both products and services.
 Usage of Output: Products like computer/car are utilized over a period of time whereas
services need to be consumed immediately
 Classification of work: To produce products like computer/car more of capital equipment
and less labour are required while services require more labour and lesser capital
equipment.
 Customer Contact: There is no participation of customer during production whereas for
services a constant contact with customer is required.

SCOPE OF PRODUCTION AND OPERATION MANAGEMENT

Production and operations management concern with the conversion of inputs into outputs,
using physical resources, so as to provide the desired utilities to the customer while meeting
the other organizational objectives of effectiveness, efficiency and adaptability. 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:

1. Location of facilities
2. Plant layouts and material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management.

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?’

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 space, material handling equipment’s
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
specialized activity for a modern manufacturing concern, with 50 to 75% of the cost of
production.

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.

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.

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. 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. 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. Scheduling determines the programmer
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’.

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 feed back 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 interchange ability 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 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.

THE SCOPE OF OPERATIONS MANAGEMENT

Operations management has been gaining increased recognition in recent years because
of the following reasons:

(i) The application of operations management concepts in service operations.

(ii) The growing importance of quality.

(iii) The introduction of operation management concepts to other areas such as marketing
and human resources and
(iv) The realization that the operations management function can add value to the end
product.

An overview of manufacturing process

Manufacturing process is basically a complex activity, concerned with people who've a

broad number of disciplines and expertise and a wide range of machinery, tools, and
equipment with numerous levels of automation, such as computers, robots, and other
equipment. Manufacturing pursuits must be receptive to several needs and developments.
Beside above, all the future technicians must understand the basic needs of workshop
routines in terms of man, equipment, material, methods, revenue and other infrastructure
conveniences needed to be placed properly for maximum shop or plant layouts and other
support solutions effectively regulated or positioned in the field or industry within a properly
planned manufacturing firm.
Meaning
The complete knowledge of fundamental workshop technology and manufacturing
processes is highly troublesome for anybody to claim competence over it. It deals with
numerous aspects of workshops procedures also for providing the basic working awareness
of the various engineering materials, tools, accessories, manufacturing processes, basic
concepts of machine instruments, production criteria’s, traits and uses of numerous testing
instruments and calibrating or inspecting units for checking materials or products designed
in various production shops in a commercial environment. It also explains and illustrates the
use of several hand tools (calibrating, marking, forming and supporting gear etc.), tools,
machinery and diverse methods of production that facilitate forming or shaping the existing
raw materials into appropriate usable forms. Below are some of the manufacturing
processes that are worth reading.
Types of Manufacturing Processes
Following are the 4 types of manufacturing processes
Machining
Tools used for machining are immobile power-driven units used to form or shape solid
materials, specifically metals. The forming is done by removing extra materials from a work-
piece. Machine tools make up the foundation of advanced industry and are utilized either
indirectly or directly in the manufacturing of tool parts.
They are categorized under three main categories:

1. Traditional Chip-making tools.

2. Presses.
3. Modern machine tools.

Traditional chip-making tools form the work-piece by trimming away the unwanted part
accessible as chips. Presses implement a several shaping processes, which includes
shearing, pressing, or elongating. Non-traditional machine tools implement light, electric
powered, chemical, and sonic power; superheated gas; and high-energy compound beams
to form the exotic supplies and materials that have been created to meet the requirements
of modern technology.
Joining
Every joining approach has particular design needs, while certain joint needs may propose
a particular joining approach. Design for assembly, and fastener selection apply their own
specifications.
Bolting is a standard fastening method, for instance, but welding may cut down the weight
of assemblies. Naturally, joints intended for the two approaches would differ tremendously.
However, all joint patterns must consider features such as load factors, assembly
effectiveness, operating surroundings, overhaul and upkeep, and the materials chosen.
Welding is generally a cost-effective approach to fabricate. It doesn't require overlapping
materials, and so it removes excess weight brought on by other fastening methods.
Fasteners don't have to be purchased and stored in stock. Welding also can minimize costs
related to extra parts, for example angles mounted between parts.
Forming
Metal forming is the approach of creating the metallic components by deforming the metal
but not by removing, cutting, shredding or breaking any part. Bending, spinning, drawing,
and stretching are a few important metal forming process in manufacturing. The metal press
such as die and punching tools are implemented for this manufacturing process.

Advantages: – Same equipment can be utilized for manufacturing various components by

simply changing the dies.
Disadvantages: – High apparatus and tooling expenses. – Heat treatment must be applied
afterwards.
Casting
Casting is a manufacturing process in which a solid is dissolved into a liquid, heated to
appropriate temperature (sometimes processed to change its chemical formula), and is then
added into a mold or cavity. Thus, in just one step, complex or simple shapes can be
crafted from any kind of metal that has the capability to be melted. The end product can
have practically any arrangement the designer wants.
Production Planning and Control: Meaning, Characteristics and Objectives!
Meaning:
Production planning and control is an important task of Production Manager. It has to see
that production process is properly decided in advance and it is carried out as per the plan.
Production is related to the conversion of raw materials into finished goods. This conversion
process involves a number of steps such as deciding what to produce, how to produce,
when to produce, etc. These decisions are a part, of production planning. Merely deciding
about the task is not sufficient.

The whole process should be carried out in a best possible way and at the lowest cost.
Production Manager will have to see that the things proceed as per the plans. This is a
control function and has to be carried as meticulously as planning. Both planning and
control of production are necessary to produce better quality goods at reasonable prices
and in a most systematic manner.

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Production planning is the function of looking ahead, anticipating difficulties to be faced and
the likely remedial steps to remove them. It may be said to be a technique of forecasting
ahead every step in the long process of production, taking them at a right time and in the
right degree and trying to complete the operations at maximum efficiency. Production
control, on the other hand, guides and directs flow of production so that products are
manufactured in a best way and conform to a planned schedule and are of the right quality.
Control facilitates the task of manufacturing and see that everything goes as per the plans.

Goldon B. Carson:
“Production planning and control involves generally the organization and planning of the
manufacturing process. Specifically, it consists of the planning of the routing, scheduling,
dispatching and inspection, co-ordination and the control of materials, methods, machines,
tooling and operating times. The ultimate objective is the organization of the supply and
movement of materials and labour, machine utilization and related activities, in order to
bring about the desired manufacturing results in terms of quantity, time and place.”
James L. Lundy:
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“Basically, the production control function involves the co-ordination and integration of the
factors of production for optimum efficiency. Overall sales orders or plans must be
translated into specific schedules and assigned so as to occupy all work centres but
overload none. The job can be done formally in which case elaborate charting and filing
techniques are used ; or it can be done informally, with individuals’ thoughts and retention
there of supplanting tangible aids.”

Charles A. Koepke:
“Production planning and control is the coordination of a series of functions according to a
plan which will economically utilize the plant facilities and regulate the orderly movement of
goods through the entire manufacturing cycle, from the procurement of all materials to the
shipping of finished goods at a predetermined rate.”

Characteristics of Production Planning and Control:

The forgoing discussion brings out the following traits of production planning and control:
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1. It is the planning and control of manufacturing process in an enterprise. The questions

like—What is to be manufactured? When it is to be manufactured? How to keep the
schedule of production etc.? —are decided and acted upon for getting good results.

2. All types of inputs like materials, men, machines are efficiently used for maintaining
efficiency of the manufacturing process.

3. Various factors of production are integrated to use them efficiently and economically.

4. The manufacturing process is organized in such a way that none of the work centres is
either overworked or under worked. The division of work is undertaken very carefully so that
every available element is properly utilized.

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5. The work is regulated from the first stage of procuring raw materials to the stage of
finished goods.

Objectives of Production Planning and Control:

Planning of production precedes control. Whatever is planned needs to be controlled. The
ultimate objective of both planning and control is to use various inputs in an efficient way
and to have a proper control over various targets and schedules fixed earlier.
The following details will bring out the objectives of production planning and production
control:
Production Planning:
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1. To determine the requirements for men, materials and equipment.

2. Production of various inputs at a right time and in right quantity.

3. Making most economical use of various inputs.

4. Arranging production schedules according to the needs of marketing department.

5. Providing for adequate stocks for meeting contingencies.

6. Keeping up-to-date information processes.

Production Control:
1. Making efforts to adhere to the production schedules.

2. Issuing necessary instructions to the staff for making the plans realistic.

3. To ensure that goods produced according to the prescribed standards and quality norms.

4. To ensure that various inputs are made available in right quantity and at proper time.

5. To ensure that work progresses according to the predecided plans.

The product life cycle is the process a product goes through from when it is first introduced
into the market until it declines or is removed from the market. The life cycle has four stages
- introduction, growth, maturity and decline. 

While some products may stay in a prolonged maturity state, all products eventually phase
out of the market due to several factors including saturation, increased competition,
decreased demand and dropping sales.

Additionally, companies use PLC analysis (examining their product's life cycle) to create
strategies to sustain their product's longevity or change it to meet with market demand or
developing technologies. 
4 Stages of the Product Life Cycle
Generally, there are four stages to the product life cycle, from the product's development to
its decline in value and eventual retirement from the market. 

Introduction

Once a product has been developed, the first stage is its introduction stage. In this stage,
the product is being released into the market. When a new product is released, it is often a
high-stakes time in the product's life cycle - although it does not necessarily make or break
the product's eventual success. 

During the introduction stage, marketing and promotion are at a high - and the company
often invests the most in promoting the product and getting it into the hands of consumers.
This is perhaps best showcased in Apple's (AAPL) - Get Report famous launch
presentations, which highlight the new features of their newly (or soon to be released)
products. 

It is in this stage that the company is first able to get a sense of how consumers respond to
the product, if they like it and how successful it may be. However, it is also often a heavy-
spending period for the company with no guarantee that the product will pay for itself
through sales. 

Costs are generally very high and there is typically little competition. The principle goals of
the introduction stage are to build demand for the product and get it into the hands of
consumers, hoping to later cash in on its growing popularity. 
2. Growth

By the growth stage, consumers are already taking to the product and increasingly buying it.
The product concept is proven and is becoming more popular - and sales are increasing. 

Other companies become aware of the product and its space in the market, which is
beginning to draw attention and increasingly pull in revenue. If competition for the product is
especially high, the company may still heavily invest in advertising and promotion of the
product to beat out competitors. As a result of the product growing, the market itself tends to
expand. The product in the growth stage is typically tweaked to improve functions and
features.

As the market expands, more competition often drives prices down to make the specific
products competitive. However, sales are usually increasing in volume and generating
revenue. Marketing in this stage is aimed at increasing the product's market share. 
3. Maturity

When a product reaches maturity, its sales tend to slow or even stop - signaling a largely
saturated market. At this point, sales can even start to drop. Pricing at this stage can tend to
get competitive, signaling margin shrinking as prices begin falling due to the weight of
outside pressures like competition or lower demand. Marketing at this point is targeted
at fending off competition, and companies will often develop new or altered products to
reach different market segments.

Given the highly saturated market, it is typically in the maturity stage of a product that less
successful competitors are pushed out of competition - often called the "shake-out point." 

In this stage, saturation is reached and sales volume is maxed out. Companies often begin
innovating to maintain or increase their market share, changing or developing their product
to meet with new demographics or developing technologies. 

The maturity stage may last a long time or a short time depending on the product. For some
brands, the maturity stage is very drawn out, like Coca-Cola (KO) - Get Report . 

4. Decline

Although companies will generally attempt to keep the product alive in the maturity stage as
long as possible, decline for every product is inevitable.

In the decline stage, product sales drop significantly and consumer behavior changes as
there is less demand for the product. The company's product loses more and more market
share, and competition tends to cause sales to deteriorate. 

Marketing in the decline stage is often minimal or targeted at already loyal customers, and
prices are reduced. 

Eventually, the product will be retired out of the market unless it is able to redesign itself to
remain relevant or in-demand. For example, products like typewriters, telegrams and
muskets are deep in their decline stages (and in fact are almost or completely retired from
the market). 
Examples of the Product Life Cycle
The life cycle of any product always carries it from its introduction to an inevitable decline,
but what does this cycle practically look like, and what are some examples? 

Typewriter

A classic example of the scope of the product life cycle is the typewriter.

When first introduced in the late 19th century, typewriters grew in popularity as a technology
that improved the ease and efficiency of writing. However, new electronic technology like
computers, laptops and even smartphones have quickly replaced typewriters - causing their
revenues and demand to drop off. 

Overtaken by the likes of companies like Microsoft (MSFT) - Get Report , typewriters could
be considered at the very tail end of their decline phase  - with minimal (if existent) sales
and drastically decreased demand. Now, the modern world almost exclusively uses desktop
computers, laptops or smartphones to type - which in turn are experiencing a growth or
maturity phase of the product life cycle. 

VCR

Many of us probably grew up watching or using VCRs (videocassette recorders for any Gen
Z readers), but you would likely be hard pressed to find one in anyone's home these days. 

With the rise of streaming services like Netflix (NFLX) - Get Report and Amazon (AMZN)
- Get Report (not to mention the interlude phase of DVDs), VCRs have been effectively
phased out and are deep in their decline stage.

Once groundbreaking technology, VCRs are now in very low demand (if any) and are
assuredly not bringing in the sales they once did. 

Uses of PLC Analysis 

Conducting PLC analysis can help companies determine if their products are servicing the
market they target efficiently, and when they might need to shift focus. 
By examining their product in relation to the market on the whole, their competitors, sales
and expenses, companies can better decide how to pivot and develop their product for
longevity in the marketplace. 

Examining their product's life cycle, specifically paying attention to where their products are
in the cycle, can help companies determine if they need to develop new products to
continue generating sales - especially if the majority of their products are in the maturity or
decline stages of the product life cycle.

Business Process Development

This is a crucial part of the business process life-cycle – where each step of the business
process is mapped to a technical service or implementation of the process. Business
Process models written in the BPEL format are meant to be executable, and assigning them
an executable service is what makes them executable.

Some BPM tools offer basic application hooks (such as adapters, listeners, etc), or codable
components (where small pieces of code can be written to implement some steps, connect
to databases, etc). However, these can soon become unmanageable, as they are not part
of a formal code-base that can be tracked, versioned, compliance-checked, or even
viewed/edited easily. Moreover, these are often not re-usable and can end up in a messy
spaghetti, rendering the BPM implementation devoid of the agility that it sought to achieve
in the first place.

Having a Services Enabled Infrastructure built on SOA principles, where business and
technical services are organized, catalogued, and available for use by processes is critical
in laying a good foundation for a scalable and agile BPM implementation.

 Business Process Execution

After the business process is designed and developed, it is now time to deploy it in a live
environment where it can be executed. This refers to the actual use of the process by users.
Deploying a process can require coordination, integration and change on some fronts – a
lot of it could be to do with the human beings involved in using this process. This is typical
cutover procedure, where users move over from an existing way of doing things to a new
way.

On the systems front, since the BPEL model is executable, it can be deployed on an
implementation platform that is capable of executing such a model (most BPM tools have a
Business Process Execution Engine – BPEE). While parsing the BPEL model, the BPEE,
will connect to and execute the underlying services or the human interaction tasks that
implement each step of the process. This necessitates that the implementation services
should have an interface that can be understood by the BPEE. This can be achieved
through having a standards-based interface (such as web-services) to the implementing
services that can be understood by any BPEE, or by having the implementation services as
part of the proprietary platform as the BPEE, in which case they can communicate using a
custom protocol. The first approach, being standards-based, offers the flexibility to choose
the best-of-breed BPM tool and a best-of-breed implementation platform, but requires some
managed coordination between the different pieces. The second approach, unless
standards-based, could potentially limit us to a single proprietary platform, without the
flexibility to change either the Business Process Execution Engine or the implementation
platform. There are plenty of successful implementations using both kinds of platforms – so
it is just a matter of choosing the best-suited for an organization, and making it work in the
right way.

 Business Process Monitoring and Optimization

A live process has a wealth of information about itself, such as its efficiency, errors, any
bottlenecks that might be reducing its throughput or the total time taken, the opportunities
for improving the efficiency of a step, a series of steps, and the whole process itself.
Monitoring the process to collect such measured/calculated KPIs of a process (defined in
the analysis & modeling stage), provide this information.

Most BPM tools have the capability for such monitoring of a business process to collect
KPIs and other process information, and also to analyze this information to determine the
above stated bottlenecks, etc, and also suggest potential areas that need attention or
optimization.

The optimization or improvement of the business process can be achieved in several ways
by taking such process analytics and reports into consideration. It could be re-designing the
process or modifying the business rules or conditions that cause bottlenecks, or it could
point towards changing the way in which the process is used – basically, this is where the
cycle repeats itself, and the process evolves. This is where the human intelligence uses the
business intelligence reports to create intelligent processes for the organization.

In my next post, I will talk about a BPM implementation from a project implementation point
of view, and how the phases of such an implementation relate to the phases of a Business
Process Life-cycle. Feel free to engage with us
on Facebook, LinkedIn, Twitter & Google+ to get updates about BPM and related
technologies.

Inter relationship between product life cycle and process

As you can see, a product life cycle goes from idea through product end-of-life. A process
cycle typically covers only one of these slices: a development process for the “Build It”
phase; a launch process for the “Nail it” phase. So you can think of the product life cycle as
being made up of multiple processes.

Project management

Project management is the practice of initiating, planning, executing, controlling, and closing
the work of a team to achieve specific goals and meet specific success criteria at the
specified time. The primary challenge of project management is to achieve all of
the project goals within the given constraints.

CLASSIFICATION OF PRODUCTION SYSTEMS

Production systems can be classified as Job-shop, Batch, Mass and Continuous production
systems.
Fig. 1 Classifications of production systems

2.1 Job-Shop Production

Job-shop production are characterized by manufacturing one or few quantity of products
designed and produced as per the specification of customers within prefixed time and cost.
The distinguishing feature of this is low volume and high variety of products.
A job-shop comprises of general-purpose machines arranged into different departments.
Each job demands unique technological requirements, demands processing on machines in
a certain sequence.
Job-shop Production is characterized by:
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product,
capacities for each work centre and order priorities.
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.
Limitations
Following are the limitations of Job-shop Production:
1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.
2.2 Batch Production
American Production and Inventory Control Society (APICS) defines Batch Production as a
form of manufacturing in which the job pass through the functional departments in lots or
batches and each lot may have a different routing. It is characterized by the manufacture of
limited number of products produced at regular intervals and stocked awaiting sales.
Batch Production is characterized by
1. Shorter production runs.
2. Plant and machinery are flexible.
3. Plant and machinery set up is used for the production of item in a batch and change of
set up is required for processing the next batch.
4. Manufacturing lead-time and cost are lower as compared to job order production.
Advantages
Following are the advantages of Batch Production:
1. Better utilization of plant and machinery.
2. Promotes functional specialization.
3. Cost per unit is lower as compared to job order production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of products.
6. Job satisfaction exists for operators.
Limitations
Following are the limitations of Batch Production:
1. Material handling is complex because of irregular and longer flows.
2. Production planning and control is complex.
3. Work in process inventory is higher compared to continuous production.
4. Higher set up costs due to frequent changes in set up.
2.3 Mass Production
Manufacture of discrete parts or assemblies using a continuous process are called Mass
Production.
This production system is justified by very large volume of production. The machines are
arranged in a line or product layout. Product and process standardization exists and all
outputs follow the same path.
Mass Production is characterized by
1. Standardization of product and process sequence.
2. Dedicated special purpose machines having higher production capacities and output
rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.
Advantages
Following are the advantages of Mass Production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilization due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.
Limitations
Following are the limitations of Mass Production:
1. Breakdown of one machine will stop an entire production line.
2. Line layout needs major change with the changes in the product design.
3. High investment in production facilities.
4. The cycle time is determined by the slowest operation.
2.4 Continuous Production
Production facilities are arranged as per the sequence of production operations from the
first operations to the finished product. The items are made to flow through the sequence of
operations through material handling devices such as conveyors, transfer devices, etc.
Continuous Production is characterized by
1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.
Advantages
Following are the advantages of Continuous Production:
1. Standardization of product and process sequence.
2. Higher rate of production with reduced cycle time.
3. Higher capacity utilization due to line balancing.
4. Manpower is not required for material handling as it is completely automatic.
5. Person with limited skills can be used on the production line.
6. Unit cost is lower due to high volume of production.
Limitations
Following are the limitations of Continuous Production:
1. Flexibility to accommodate and process number of products does not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.

UNIT 2: PLANT MANAGEMENT AND WORK STUDY

Capacity planning strategy

Capacity planning is defined as a method to gauge the production capacity needed to meet

the changing product demands of an organization. Two terms of design capacity and
effective capacity are used extensively in the context of capacity planning.

The first is the maximum work that is completed in a specific period by an organization, and
the latter is the maximum it is capable of completing in a specific period in spite of
limitations like material handling, delays, and problems.

Page Contents
Meaning of capacity planning

Capacity planning is described as a tool to minimize the discrepancy between the capacity
of a business entity and customer demands.

Demand for capacity is variable as it is based on changes in production output of an

existing product or in the production of a new product. Capacity can be maximized by
introducing new materials, machinery, techniques, and labor force.

Capacity planning is used for determining the kind of equipment capacities and labor
required and when they are needed. In simple terms, it is the ability to produce, store, and
achieve as it is referred to as the process to determine the best utilization of resources.

Besides other business entities, it is also used in information technology and business

computing. The capacity planning for IT includes estimating computer storage, software,
hardware, and connection infrastructure resources that are needed over a given time
period.

Capacity planning in IT industry is defined as a systematic approach that is taken for

making plans about future IT resources in terms of growth, demand, and current operations.

3Strategies of capacity planning

The primary strategies that an organization can use for capacity planning are as follows-

#1. Lead Strategy –

This is considered one of the most aggressive stances and strategies of capacity planning.
It is an approach where the company anticipates an increase in demand and thus increases
its production capacity beforehand.

The management uses lead strategy as an important tool to attract customers towards its
own products and away from those of rival companies, especially because of inventory
shortage during high demands. It also tries to minimize stockout costs.

There are several benefits of the Lead strategy, and this is why it is a favorite of entities.
One of the disadvantages of lead strategy is that if the demand does not rise than the
organization is stuck with the additional inventory.
#2. Lag Strategy –

This strategy is somewhat different from the previous one as the organization responds to
the cry of high demand by boosting its production capacity after the entity has started
running at full power.

It does not increase production on mere assumptions as it needs the fact and figures and
then only starts to act on it.

The benefits of Lag Strategy is that the company does not have any additional inventory
with it, there is a minimum risk of overproduction, and putting away large investments as
long as it is not necessary.

The disadvantage is that the company does not have any additional inventory with it in case
of sudden high demand. By the time the company doles out the extra inventory, either the
demand decreases or the customers have already become loyal to some other brand.

#3. Match Strategy –

This is considered a moderate strategy as it is an integration of both Lead and Lag

strategies. It does not assume and anticipate very high demand and start building
accordingly, nor does it sit idle until the so-called high demand is at your door.

Instead, the Match Strategy make small modifications, and this depends on the changing
market conditions. It is no doubt a bit hard to accomplish, but the risk is very less
comparatively.

#4. Adjustment strategy –

This strategy involves either reducing or adding to the capacity in small amounts depending
upon the prevalent consumer demand. The adjustment strategy can also take place
because of some important changes in the product.

Importance of capacity planning

The advantages of capacity planning are as follows

#1. Minimizing resource costs

It is the process of capacity planning that helps an organization to meet the future resource
needs effectively. It lets you see the workings of every individual so that the company can
make viable changes to future assignments based on the availability and skills of the team.

It is the capacity planning that helps a business entity to make choices about resource
management so that you can minimize resource costs.

#2. Information –

A capacity planning method helps to accumulate digital information on a regular basis that
will prove beneficial in the growth of the company.

#3. Monitoring costs –

An organization can easily monitor costs during recession and growths with the help of
capacity planning as it takes into account supplies and schedules of production, facilities,
and personnel.

The planning process allows the organization to make a viable budget and allocate financial
resources where they are needed, developing shipping schedules for the finished product
and delivery schedule for supplies.

#4. Ensures availability –

The capacity planning report shows you whether you have the scope to accept
new projects. Do you need to outsource or are your resources enough is an important
question that is easily answered via this method?

#5. Production cycles –

An organization uses the process of capacity planning to maintain the necessary production
cycle so that it does not have to stay behind during high demands.

There are certain products which have seasonal demand, for example, an umbrella or a
raincoat and if you are dealing in these products, you can take help of capacity planning to
work in accordance of the expected demands.

The capacity planning will even help in recognizing the downward slide so that you can halt
the process as you wish.
#6. Managing skills inventory

Capacity planning is linked with the skills inventory of a team, and it informs which member
has the necessary skills for a particular job. It becomes easy to allocate resources as per
needed.

#7. New locations

When a business entity starts on the path of growth and prosperity, it needs further space.
This is the time when capacity planning proves its worth and helps to develop an accurate
estimate in terms of expected production from the new location.

Procedure for capacity planning

The procedure for capacity planning includes

#1. Assessing existing capacity

The first step in the procedure of capacity planning includes measuring the unit capacity in
terms of input or output. Input measure is apt for the service industry, for instance,
restaurants, airline sector, hospitals, universities, and theatres.

Output measure is apt for manufacturing sectors like brewery, iron and steel, automotive,
power, and cannery.

#2. Forecasting capacity needs

Forecasting capacity needs for the short term is any day easy than for long-term
requirement. It is the capacity forecast that gives the organization a helping hand by
determining the gap between existing and estimated capacity.

This will help in making the necessary adjustments.

#3. Identifying alternatives

There is a need for expansion to meet the forecast capacity, and for this, a company might
have to start additional shifts. This will help to meet the forecast demand. It is vital to identify
and evaluate alternatives for both capacity increase and decrease from different viewpoints.
The organization can use Queuing theory and Cost-Benefit Analysis for getting an estimate
about alternatives.

Plant Location: 11 Factors that Influence the Selection of Plant Location

Location, localization and planned location of industries are often felt to be synonymous.
But, the distinction among these three terms is of immense importance. Entrepreneurs
locate their enterprises where the cost of production comes, the lowest at the time of
establishing industries. This is known as ‘location of industries’.

The concentration of a particular industry mainly in one area, as occurred with many
industries in India, for example, textile industry in Mumbai is known as ‘localisation of
industries’. ‘Planned location of industries’ is a term whereby the location of industries is
planned to give each industrial area a variety of industries so that large industries are
dispersed and not localised.

It was Alfred Weber (1929) to whom the credit of enunciating the theory of industrial location
went when his magnum opus “The Theory of the Location of Industry,” was published in
German in 1909 and English in 1929.

The early theories of industrial location carried out the analysis on a simple framework
where the locational and special diversification was simply determined by an adjustment
between location and weight distance characteristics of inputs and outputs.

The reason is that the then industrial structure was heavily dominated by the natural
resource-base and consumer-oriented industries. But, over the period the very
consideration for locating industries in a particular region has undergone a considerable
change so the early theories of industrial location have become improper to explain
location. Consideration of natural resources in the choice of industrial location has declined
and the industries are likely to be established even in those areas with poor natural
endowment.

This holds especially true in the case of industries which are not heavily biased in favour of
raw material source for their location. It is seen that such industries are gaining increasingly
greater importance in the industrial map of India during the recent decades. Concentration
of IT industries in Bangalore and Hyderabad are such examples.

Nonetheless, regardless of the type of business/enterprise, there are host of factors but not
confined to the following only that influence the selection of the location of an enterprise:
(i) Availability of Raw Materials

(ii) Proximity to Market

(iii) Infrastructural Facilities

(iv) Government Policy

(v) Availability of Manpower

(vi) Local Laws, Regulations and Taxation

(vii) Ecological and Environmental Factors

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(viii) Competition

(ix) Incentives, Land costs. Subsidies for Backward Areas

(x) Climatic Conditions

(xi) Political conditions.

Plant Layout: Concept, Objectives, Principles and Types

Concept of Plant Layout:
The concept of plant layout may be described as follows:
Plant layout is a plan for effective utilisation of facilities for the manufacture of products;
involving a most efficient and economical arrangement of machines, materials, personnel,
storage space and all supporting services, within available floor space.

More defines plant layout as follows:

“Plant layout is a plan of optimum arrangement of facilities including personnel,
equipment’s, storage space, material handling equipment and all other supporting services
along with the decision of best structure to contain all these facilities.”

Points of comment:
Certain useful observations on the concept of plant layout are as follows:

(i) Plant layout is very complex in nature; because it involves concepts relating to such fields
as engineering, architecture, economics and business management.

(ii) Most of managers now realize that after the site for plant location is selected; it is better
to develop the layout and build the building around it – rather than to construct the building
first and then try to fit the layout into it.
Objectives/Advantages of Plant Layout:
Following are the objectives/advantages of plant layout:
(i) Streamline flow of materials through the plant

(ii) Minimise material handling

(iii) Facilitate manufacturing progress by maintaining balance in the processes

(iv) Maintain flexibility of arrangements and of operation

(v) Maintaining high turnover of in-process inventory

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(vi) Effective utilisation of men, equipment and space

(vii) Increase employee morale

(viii) Minimise interference (i.e. interruption) from machines

(ix) Reduce hazards affecting employees

(x) Hold down investment (i.e. keep investment at a lower level) in equipment.

Principles of Plant Layout:

While designing the plant layout, the following principles must be kept in view:
(i) Principle of Minimum Movement:
Materials and labour should be moved over minimum distances; saving cost and time of
transportation and material handling.

(ii) Principle of Space Utilization:

All available cubic space should be effectively utilized – both horizontally and vertically.

(iii) Principle of Flexibility:

Layout should be flexible enough to be adaptable to changes required by expansion or
technological development.

(iv) Principle of Interdependence:

Interdependent operations and processes should be located in close proximity to each
other; to minimize product travel.

(v) Principle of Overall Integration:

All the plant facilities and services should be fully integrated into a single operating unit; to
minimize cost of production.

(vi) Principle of Safety:

There should be in-built provision in the design of layout, to provide for comfort and safety
of workers.

(vii) Principle of Smooth Flow:

The layout should be so designed as to reduce work bottlenecks and facilitate uninterrupted
flow of work throughout the plant.

(viii) Principle of Economy:

The layout should aim at effecting economy in terms of investment in fixed assets.

(ix) Principle of Supervision:

A good layout should facilitate effective supervision over workers.

(x) Principle of Satisfaction:

A good layout should boost up employee morale, by providing them with maximum work
satisfaction.

Types of Plant Layout:

Two basic plans of the arrangement of manufacturing facilities are – product layout and
process layout. The only other alternative is a combination of product and process layouts,
in the same plant.

Following is an account of the various types of plant layout:

(a) Product Layout (or Line Layout):
In this type of layout, all the machines are arranged in the sequence, as required to produce
a specific product. It is called line layout because machines are arrange in a straight line.
The raw materials are fed at one end and taken out as finished product to the other end.

Special purpose machines are used which perform the required jobs (i.e. functions) quickly
and reliably.
Product layout is depicted below:

Advantages:
1. Reduced material handling cost due to mechanized handling systems and straight flow

2. Perfect line balancing which eliminates bottlenecks and idle capacity.

3. Short manufacturing cycle due to uninterrupted flow of materials

4. Simplified production planning and control; and simple and effective inspection of work.

5. Small amount of work-in-progress inventory

6. Lesser wage cost, as unskilled workers can learn and manage production.

Disadvantages:
1. Lack of flexibility of operations, as layout cannot be adapted to the manufacture of any
other type of product.

2. Large capital investment, because of special purpose machines.

3. Dependence of whole activity on each part; any breakdown of one machine in the
sequence may result in stoppage of production.

4. Same machines duplicated for manufacture of different products; leading to high overall
operational costs.

5. Delicate special purpose machines require costly maintenance / repairs.

Suitability of product layout:

Product layout is suitable in the following cases:
1. Where one or few standardized products are manufactured.
2. Where a large volume of production of each item has to travel the production process,
over a considerable period of time.

3. Where time and motion studies can be done to determine the rate of work.

4. Where a possibility of a good balance of labour and equipment exists.

5. Where minimum of inspection is required, during sequence of operations.

6. Where materials and products permit bulk or continuous handling by mechanical parts.

7. Where minimum of set-ups are required.

(b) Process Layout (or Functional Layout):

In this type of layout, all machines performing similar type of operations are grouped at one
location i.e. all lathes, milling machines etc. are grouped in the shop and they will be
clustered in like groups.
A typical process layout is depicted below:

Advantages:
1. Greater flexibility with regard to work distribution to machinery and personnel. Adapted to
frequent changes in sequence of operations.

2. Lower investment due to general purpose machines; which usually are less costly than
special purpose machines.

3. Higher utilisation of production facilities; which can be adapted to a variety of products.

4. Variety of jobs makes the work challenging and interesting.

5. Breakdown of one machine does not result in complete stoppage of work.

Disadvantages:
1. Backtracking and long movements occur in handling of materials. As such, material
handling costs are higher.

2. Mechanisation of material handling is not possible.

3. Production planning and control is difficult

4. More space requirement; as work-in-progress inventory is high-requiring greater storage

space.

5. As the work has to pass through different departments; it is quite difficult to trace the
responsibility for the finished product.

Suitability of process layout:

Process layout is suitable in the following cases, where:
1. Non-standardised products are manufactured; as the emphasis is on special orders.

2. It is difficult to achieve good labour and equipment balance.

3. Production is not carried on a large scale.

4. It is difficult to undertake adequate time and motion studies.

5. It is frequently necessary to use the same machine or work station for two or more
difficult operations.

6. During the sequence of operations, many inspections are required.

7. Process may have to be brought to work, instead of “vice-versa”; because materials or

products are too large or heavy to permit bulk or continuous handling by mechanical
means.
(c) Combination Layout:
In practice, plants are rarely laid out either in product or process layout form. Generally a
combination of the two basic layouts is employed; to derive the advantages of both systems
of layout. For example, refrigerator manufacturing uses a combination layout.

Process layout is used to produce various operations like stamping, welding, heat treatment
being carried out in different work centres as per requirement. The final assembly of the
product is done in a product type layout.

(d) Fixed Position Layout:

It is also called stationary layout. In this type of layout men, materials and machines are
brought to a product that remains in one place owing to its size. Ship-building, air-craft
manufacturing, wagon building, heavy construction of dams, bridges, buildings etc. are
typical examples of such layout.

Sequencing of operations
The aim is to determine the best available possible sequences of jobs. A sequencing
problem is the determination of the best sequence among all possible sequences. Here
‘best’ may be defined with respect to set objectives or performance measure for the
concerned problem. Let us consider a common experience that most grown-up men face
everyday: whether to shave first and then take a bath, or to shave after taking bath. Clearly,
the problem is to decide on the sequence (or order) of the two tasks: shaving and bathing.
Now the choice lies between two alternative sequences, i.e., (1. Shaving, 2. Bathing) and
(1. Bathing, 2. Shaving). The first option ensures more cleanliness, whereas the second one
gives rise to ease in shaving. The solution to the problem depends on the objective or
performance measure, i.e., cleanliness or ease in shaving, of the concerned person. Once
the performance measure is specified, the solution is easy. The selection of the appropriate
order in which a number of jobs (customers) are to be performed (served) is called
sequencing. In sequencing problems, there are two or more customers (jobs) to be served
and one or more facilities (machines) available for this purpose. We wish to know when
each job is to begin and what its due date or time is. We also wish to know which facilities
are required to do each job, in which order these facilities are required and how long each
operation is to take. The following assumptions are usually made while dealing with
sequencing problems:
i) Only one operation is carried out on a machine at a time.
ii) Processing times are known and do not change.
iii) Processing times are independent of the order of processing the jobs.
iv) The time involved in moving jobs from one machine to another is negligible.
v) Each operation, once started, must be completed.
vi) An operation must be completed before its succeeding operation can start.
vii) Only one machine of each type is available.
viii) A job is processed as soon as possible, but only in the order specified.
ix) No passing rule is followed strictly, i.e., the same order of jobs is maintained over each
machine.

Sequencing problems have been most commonly encountered in production shops where
different products are to be processed over various combinations of machines. A general
sequencing problem may be defined as follows:

PROCESSING OF n JOBS THROUGH 2 MACHINES

The n-job, 2-machine sequencing problem is described as follows: Let there be n jobs
where each job is to be processed by two machines, say A and B. Each job is processed in
a pre-specified order AB, i.e., each job goes to machine A first and then to machine B. In
other words, passing is not allowed. The actual or expected processing times for the ith job
on machine A and machine B, respectively, are known where i= 1, 2, 3, …, n. The problem
is now to determine the sequence (order) of jobs which minimises the total elapsed time (T)
for processing all the jobs from the start of the first job to the completion of the last job. The
procedure suggested by S.M. Johnson and R. Bellman for finding such a sequence consists
of the following steps: Step 1: Select the minimum processing time among Ai and Bi (i = 1,
2, . . ., n) where Ai and Bi are the processing times of ith job on machines A and B,
respectively. If there are two or more minimum processing times, then select any one of
them arbitrarily. Step 2: a) If the minimum processing time is one of Ai, say Ar, then process
the job r first and place it at the beginning of the sequence. b) If the minimum processing
time is one of Bi, say Bs, then process the job s last and place it at the end of the sequence.
c) If in step 2(a) and 2(b) above, Ar = Bs, then process job r first and job s last. d) If there is
a tie for minimum among Ai (i = 1, 2, …, n), then process any one of these jobs first. e) If
there is a tie for a minimum among Bi (i = 1, 2, …, n), then process any one of these jobs
last. Step 3: Eliminate the job which has already been assigned from further consideration
and repeat Steps 1 and 2, placing the remaining jobs next to the first job or before the last
job as the case may be. Calculations of Various Times
1. The time at which the ith job in a sequence finishes on machine A

= Time at which the (i  1)th job in a sequence finishes on machine A + Processing time for
the ith job on machine A for i = 1, 2, . . ., n
2. The time when the ith job in a sequence starts on machine A

= Time when the (i  1)th job in a sequence finishes on machine A

3. The time the first job in a sequence starts on machine B

= Time when the first job in a sequence finishes on machine A

4. The time the ith job in a sequence finishes on machine B

= Time when the ith job in a sequence starts on machine B + Processing time of the ith job
on machine B for i = 1, 2, . . . , n
5. The time at which the (i + 1)th job in a sequence starts on machine B

= Max{Time when the (i+1)th job in a sequence finishes at machine A; time when the ith job
in a sequence finishes at machine B}
6. Total elapsed time
= Time when the nth job in a sequence finishes on machine B 7. Idle time for Machine A =
(Time when the nth job in a sequence finishes on machine B)  (Time when the nth job in a
sequence finishes on machine A) OR = (Total elapsed time)  (Time when the last job in the
sequence is out of machine A) 8. Idle time for Machine B =Time at which the first job in a
sequence finishes on machine A + [(Time when the ith job in a sequence starts on machine
B)  (Time when the (i  1)th job in a sequence finishes on machine B)] Let us consider an
example to explain this sequencing process. n i 2 = å

TYPES OF MAINTENANCE IN PRODUCTION MANAGEMENT - PRODUCTION AND

OPERATIONS MANAGEMENT
Equipments are an important resource which is constantly used for adding value to
products. So, it must be kept at the best operating condition. Otherwise, there will be
excessive downtime and also interruption of production if it is used in a mass production
line. Poor working of equipments will lead to quality related problems. Hence, it is an
absolute necessity to maintain the equipments in good operating conditions with
economical cost. Hence, we need an integrated approach to minimize the cost of
maintenance. In certain cases, the equipment will be obsolete over a period of time. If a firm
wants to be in the same business competitively, it has to take decision on whether to
replace the equipment or to retain the old equipment by taking the cost of maintenance and
operation into account.

The design life of most equipment requires periodic maintenance. Belts need adjustment,
alignment needs to be maintained, proper lubrication on rotating equipment is required, and
so on. In some cases, certain components need replacement, e.g., a wheel bearing on a
motor vehicle, to ensure the main piece of equipment (in this case a car) last for its design
life. Different approaches have been developed to know how maintenance can be
performed to ensure equipment reaches or exceeds its design life. In addition to waiting for
a piece of equipment to fail (reactive maintenance) the other approaches are preventive
maintenance, predictive maintenance, or reliability centered maintenance.

Types of Maintenance Management

The types of maintenance management are
Breakdown (Reactive) Maintenance
Breakdown maintenance is basically the ‘run it till it breaks’ maintenance mode. No actions
or efforts are taken to maintain the equipment as the designer originally intended to ensure
design life is reached. Studies as recent indicate that, this is still the predominant mode of
maintenance.
Advantages to breakdown maintenance can be viewed as a double-edged sword. If we are
dealing with new equipment, we can expect minimal incidents of failure. If our maintenance
 program is purely reactive, we will not expend manpower or incur capital cost until
something breaks. Since we do not see any associated maintenance cost, we could view
this period as saving money. In reality, during the time we believe we are saving
maintenance and capital cost, we are really spending more money than we would have
under a different maintenance approach. We are spending more money associated with
capital cost because, while waiting for the equipment to break, we are shortening the life of
the equipment resulting in more frequent replacement. We may incur cost upon failure of
the primary device associated with its failure causing the failure of a secondary device. This
is an increased cost we would not have experienced if our maintenance program was more
proactive.
Our labor cost associated with repair will probably be higher than normal because the
failure will most likely require more extensive repairs than would have been required if the
piece of equipment had not been run to failure. Chances are the piece of equipment will fail
during off hours or close to the end of the normal workday. If it is a critical piece of
equipment that needs to be back on-line quickly, we will have to pay maintenance overtime
cost. Since we expect to run equipment to failure, we will require a large material inventory
of repair parts. This is a cost we could minimize under a different maintenance strategy.
Advantages
1. Involves low cost investment for maintenance.
2. Less staff is required.
Disadvantages
1. Increased cost due to unplanned downtime of equipment.
2. Increased labor cost, especially if overtime is needed.
3. Cost involved with repair or replacement of equipment.
4. Possible secondary equipment or process damage from equipment failure.
5. Inefficient use of staff resources.
Preventive Maintenance
Preventive maintenance can be defined as, “Actions performed on a time or machine-run-
based schedule that detect, preclude, or mitigate degradation of a component or system
with the aim of sustaining or extending its useful life through controlling degradation to an
acceptable level.” Preventive maintenance is a means to increase the reliability of their
equipment. By simply expending the necessary resources to conduct maintenance activities
intended by the equipment designer, equipment life is extended and its reliability is
increased. In addition to an increase in reliability, lot of amount will be saved over that of a
program just using reactive maintenance. Studies indicate that this savings can amount to
as much as 12% to 18% on the average.
Advantages
1. Cost effective in many capital intensive processes.
2. Flexibility allows for the adjustment of maintenance periodicity.
3. Increased component life cycle.
4. Energy savings.
5. Reduced equipment or process failure.
6. Estimated 12% to 18% cost savings over reactive maintenance program.
Disadvantages
1. Catastrophic failures still likely to occur.
2. Labour intensive.
3. Includes performance of unneeded maintenance.
4. Potential for incidental damage to components in conducting unneeded maintenance.
Depending on the facilities current maintenance practices, present equipment reliability, and
facility downtime, there is little doubt that many facilities purely reliant on reactive
maintenance could save much more than 18% by instituting a proper preventive
maintenance program.
While preventive maintenance is not the optimum maintenance program, it does have
several advantages over that of a purely reactive program. By performing the preventive
maintenance as the equipment designer envisioned, we will extend the life of the equipment
closer to design. This translates into dollar savings. Preventive maintenance (lubrication,
filter change, etc.) will generally run the equipment more efficiently resulting in dollar
savings. While we will not prevent equipment catastrophic failures, we will decrease the
number of failures. Minimizing failures translate into maintenance and capital cost savings.
PredictiveMaintenance
Predictive maintenance can be defined as “Measurements that detect the onset of a
degradation mechanism, thereby allowing causal stressors to be eliminated or controlled
prior to any significant deterioration in the component physical state. Results indicate
current and future functional capability”.
Basically, predictive maintenance differs from preventive maintenance by basing
maintenance need on the actual condition of the machine rather than on some preset
schedule. Preventive maintenance is time-based. Activities such as changing lubricant are
based on time, like calendar time or equipment run time. For example, most people change
the oil in their vehicles every 3,000 to 5,000 miles travelled. This is effectively basing the oil
change needs on equipment run time. No concern is given to the actual condition and
performance capability of the oil. It is changed because it is time. This methodology would
be analogous to a preventive maintenance task. If, on the other hand, the operator of the
car discounted the vehicle run time and had the oil analyzed at some periodicity to
determine its actual condition and lubrication properties, he may be able to extend the oil
change until the vehicle had travelled 10,000 miles. This is the fundamental difference
between predictive maintenance and preventive maintenance, whereby predictive
maintenance is used to define needed maintenance task based on quantified
material/equipment condition.
 There are many advantages of predictive maintenance. A well-orchestrated predictive
maintenance program will eliminate catastrophic equipment failures. Schedule of
maintenance activities can be made to minimize or delete overtime cost. It is possible to
minimize inventory and order parts, as required, well ahead of time to support the
downstream maintenance needs and optimize the operation of the equipment, saving
energy cost and increasing plant reliability. Past studies have estimated that a properly
functioning predictive maintenance program can provide a savings of 8% to 12% over a
program utilizing preventive maintenance alone. Depending on a facility’s reliance on
reactive maintenance and material condition, it could easily recognize savings opportunities
exceeding 30% to 40%. Independent surveys indicate the following industrial average
savings resultant from initiation of a functional predictive maintenance program:
1. Return on investment—10 times
2. Reduction in maintenance costs—25% to 30%
3. Elimination of breakdowns—70% to 75%
4. Reduction in downtime—35% to 45%
5. Increase in production—20% to 25%.
Advantages
1. Increased component operational life/ availability.
2. Allows for pre-emptive corrective actions.
3. Decrease in equipment or process downtime.
4. Decrease in costs for parts and labor.
5. Better product quality.
6. Improved worker and environmental safety.
7. Improved worker moral.
8. Energy savings.
9. Estimated 8% to 12% cost savings over preventive maintenance program.
Disadvantages
1. Increased investment in diagnostic equipment.
2. Increased investment in staff training.
3. Savings potential not readily seen by management.
Concept of Reliability in Maintenance
Reliability is the probability of survival under a given operating environment. For example,
the time between consecutive failures of a refrigerator where continuous working is required
is a measure of its reliability. If this time is more, the product is said to have high reliability.
In a textile mill, generally the light is maintained at a minimum specified level. To achieve
this, let us assume that there are 100 bulbs in use and the guaranteed life time of these
bulbs is 5000 hours. If we collect statistics about the number of bulbs survived till 5000
hours, we can compute the reliability of the bulbs. In this case,
Reliability =
 Failurerate =
Number of bulbs survived till the specified time limit
Number of bulbs used
If the number of bulbs survived till 5000 hours is 80, then we can say that the reliability is
0.8 (i.e., 80/100) The reliability of railway signaling system, aircraft, and power plant are
some of the interesting examples for demonstrating the reliability concept. In these cases, a
failure will lead to heavy penalty.
The concept of reliability can be matched with systems concept. Generally,
products/equipments will have many components which may function with serial
relationship or parallel relationship. So, the individual component’s reliability affects the
reliability of the product. Hence, enough attention must be given at the design, stage such
that the product’s reliability is maximized. The cost of maintenance is also to be considered
along with the reliability while improving it.
The general failure pattern of any product is given in the following figure. This is called bath-
tub curve. In the figure, there will be large number of failures in the early period. This is
mainly due to non-alignment while shipping the product, or misfit while manufacturing
(assembling), or very high initial friction between moving parts, etc.
Product failure rate

Reliability Improvement
The reliability of a system/product depends on many factors. So, we should concentrate at
the grassroot level to improve product’s reliability. Some of the ways of improving systems
reliability are listed below:
 Improved design of components
 Simplification of product structure
 Usage of better production equipments
 Better quality standards
 Better testing standards
 Sufficient number of standby units
 Usage of preventive maintenance if necessary at appropriate time.

Work study in Production and Operation Management

“Work study is a generic term for those techniques, method study and work measurement
which are used in the examination of human work in all its contexts. And which lead
systematically to the investigation of all the factors which affect the efficiency and economy
of the situation being reviewed, in order to effect improvement.”
Framework of work study

Work Study in Management Science

Work study is a means of enhancing the production efficiency (productivity) of the firm by
elimination of waste and unnecessary operations. It is a technique to identify non-value
adding operations by investigation of all the factors affecting the job. It is the only accurate
and systematic procedure oriented technique to establish time standards. It is going to
contribute to the profit as the savings will start immediately and continue throughout the life
of the product. Method study and work measurement is part of work study. Part of method
study is motion study, work measurement is also called by the name ‘Time study’.
Advantages of Work Study
Following are the advantages of work study:
1. It helps to achieve the smooth production flow with minimum interruptions.
2. It helps to reduce the cost of the product by eliminating waste and unnecessary
operations.
3. Better worker-management relations.
4. Meets the delivery commitment.
5. Reduction in rejections and scrap and higher utilization of resources of the organization.
6. Helps to achieve better working conditions.
7. Better workplace layout.
8. Improves upon the existing process or methods and helps in standardization and
simplification.
9. Helps to establish the standard time for an operation or job which has got application in
manpower planning, production planning.

Method study in Production and Operation Management

Method study enables the industrial engineer to subject each operation to systematic
analysis. The main purpose of method study is to eliminate the unnecessary operations and
to achieve the best method of performing the operation. Method study is also
called methods engineering or work design.
Method engineering is used to describe collection of analysis techniques which focus on
improving the effectiveness of men and machines. According to British Standards Institution
(BS 3138): “Method study is the systematic recording and critical examination or existing
and proposed ways or doing work as a means or developing and applying easier and more
effective methods and reducing cost.”
Fundamentally method study involves the breakdown of an operation or procedure into its
component elements and their systematic analysis. In carrying out the method study, the
right attitude of mind is important. The method study man should have:
1. The desire and determination to produce results.
2. Ability to achieve results.
3. An understanding of the human factors involved.
Method study scope lies in improving work methods through process and operation
analysis, such as:
1. Manufacturing operations and their sequence.
2. Workmen.
3. Materials, tools and gauges.
4. Layout of physical facilities and work station design.
5. Movement of men and material handling.
6. Work environment.
Objectives of Method Study
Method study is essentially concerned with finding better ways of doing things. It adds value
and increases the efficiency by eliminating unnecessary operations, avoidable delays and
other forms of waste. The improvement in efficiency is achieved through:
1. Improved layout and design of workplace.
2. Improved and efficient work procedures.
3. Effective utilization of men, machines and materials.
4. Improved design or specification of the final product.
 The objectives of method study techniques are:
1. Present and analyze true facts concerning the situation.
2. To examine those facts critically.
3. To develop the best answer possible under given circumstances based on critical
examination of facts.
Scope of Method Study
The scope of method study is not restricted to only manufacturing industries. Method study
techniques can be applied effectively in service sector as well. It can be applied in offices,
hospitals, banks and other service organizations. The areas to which method study can be
applied successfully in manufacturing are:
1. To improve work methods and procedures.
2. To determine the best sequence of doing work.
3. To smoothen material flow with minimum of back tracking and to improve layout.
4. To improve the working conditions and hence to improve labor efficiency.
5. To reduce monotony in the work.
6. To improve plant utilization and material utilization.
7. Elimination of waste and unproductive operations.
8. To reduce the manufacturing costs through reducing cycle time of operations.
Steps or Procedure Involved in Methods Study
The basic approach to method study consists of the following eight steps. The detailed
procedure for conducting the method study is shown in the following figure.
1. SELECT the work to be studied and define its boundaries.
2. RECORD the relevant facts about the job by direct observation and collect such
additional data as may be needed from appropriate sources.
3. EXAMINE the way the job is being performed and challenge its purpose, place
sequence and method of performance.
4. DEVELOP the most practical, economic and effective method, drawing on the
contributions of those concerned.
5. EVALUATE different alternatives to developing a new improved method
comparing the cost- effectiveness of the selected new method with the current
method with the current method of performance.
6. DEFINE the new method, as a result, in a clear manner and present it to those
concerned, i.e., management, supervisors and workers.
7. INSTALL the new method as a standard practice and train the persons involved in
applying it.
8. MAINTAIN the new method and introduce control procedures to prevent a drifting
back to the previous method of work.
 Time study in Production and Operation Management
Time study is also called work measurement. It is essential for both planning and control of
operations. According to British Standard Institute time study has been defined as “The
application of techniques designed to establish the time for a qualified worker to carry out a
specified job at a defined level of performance.”

Steps in Making Time Study

Stop watch time is the basic technique for determining accurate time standards. They are
economical for repetitive type of work. Steps in taking the time study are:
1. Select the work to be studied.
2. Obtain and record all the information available about the job, the operator and the
working conditions likely to affect the time study work.
3. Breakdown the operation into elements. An element is a instinct part of a specified
activity composed of one or more fundamental motions selected for convenience of
observation and timing.
4. Measure the time by means of a stop watch taken by the operator to perform each
element of the operation. Either continuous method or snap back method of timing could
be used.
5. At the same time, assess the operators effective speed of work relative to the observer’s
concept of ‘normal’ speed. This is called performance rating
6. Adjust the observed time by rating factor to obtain normal time for each element
Normal =

Observed time Rating

100

7. Add the suitable allowances to compensate for fatigue, personal needs, contingencies
etc. to give standard time for each element.
8. Compute allowed time for the entire job by adding elemental standard times considering
frequency of occurrence of each element.
9. Make a detailed job description describing the method for which the standard time is
established.
10. Test and review standards wherever necessary. The basic steps in time study are
represented by a block diagram in the figure “Steps in time study”
Computation of Standard Time
Standard time is the time allowed to an operator to carry out the specified task under
specified conditions and defined level of performance. The various allowances are added to
the normal time as applicable to get the standard time “Components standard time”.
 Standard time Calculation time study
Standard time may be defined as the, amount of time required to complete a unit of work:
(a) under existing working conditions, ( b) using the specified method and machinery, ( c) by
an operator, able to the work in a proper manner, and ( d) at a standard pace.
Thus basic constituents of standard time are:
1. Elemental (observed time).
2. Performance rating to compensate for difference in pace of working.
3. Relaxation allowance.
4. Interference and contingency allowance.
5. Policy allowance.

Steps in time study

 UNIT 3: PURCHASE AND STORES MANAGEMENT

This article provides a broad overview on the purchasing function in materials management.
Purchasing Function:
The purchasing function used to be part of the production function and enjoyed very little
status in the organisation.

Over the past few decades, however, the purchasing activity has grown in stature through
recognition of the contribution it makes to the success of any enterprise and it is now
recognised as a separate function in its own right.

1. It is interesting to consider the enormous impact efficient purchasing (or procurement as

it is often called) has on the costs of an organisation. By rational buying the purchasing
department can generate profit immediately.

The huge responsibility falling on those concerned with purchasing, therefore, is clearly
visible. This has come about because of the increasing size of organisations, the increasing
complexity of materials and components and the extreme competition met in the modern
market.

2. The purchasing function differs from most others in that those carrying out this work are
to a large extent tied to their own industry. However, there are many activities within the
purchasing function that are common to many industries and other types of enterprise.

Common Purchasing Activities:

Activities common to most industries are:
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(a) All buyers will need to have a wide knowledge of the markets from which they have to
make their purchases, whether these are raw materials, manufactured components or as in
wholesale and retail trading finished goods. The knowledge will extend to how the suppliers
perform in regard to reliability and delivery performance.

(b) In most manufacturing industries buyers will have to interact closely with the production
department to ascertain their precise requirements. In retail selling the buyer has a key role
in the success of the enterprise in that he (or she) must closely watch consumer behaviour
and attitude their taste and demand.

(c) Though inventory control may or may not be the direct responsibility of the purchasing
officer, he is primarily responsible for ensuring that sufficient supplies of materials or
components are available to maintain continuity of production or sales. The buyer may do
this by contracts with suppliers for regular deliveries or by building up stocks to be used as
and when required.

The former keeps a minimum of capital tied up in store but there is always the risk of
suppliers not keeping to delivery undertakings. The suppliers in their turn try to ensure that
materials or components are readily available.

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(d) In most organisations the purchasing department is responsible for negotiating purchase
prices and terms of credit.

(e) Purchasing is also generally responsible for ensuring that the goods ordered and
invoiced are actually received and that the price charged are those quoted. To mimimise
risk, necessary checks are to be carried out by people not directly involved in placing the
orders.

(f) Purchasing will constantly monitor expected deliveries to ensure that suppliers fulfil their
commitments regarding quality and delivery dates.

(g) Purchasing will constantly investigate the market

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(i) To seek better products, prices, terms or deliveries;

(ii) To find out alternative suppliers to ensure continuity of deliveries in case the main source
suddenly fails for any reason.

Purchasing Relations with Other Functions:

1. The purchasing department probably has direct relations with more functional
departments throughout the organisation than any other single department.

2. Its primary relationship in manufacturing and similar industrial enterprises is with the
three aspects of production engineering, production planning and production control. It
serves production engineering by advising on the availability and costs of both equipment
and materials.

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The buying department, by its constant investigations into all the appropriate sources of
supply, has a wide knowledge and experience with which to advice on these important
matters. A similar service is provided for production planning where information concerning
availability and continuity of supplies is vital if production is to be planned effectively.

Equally, production control benefits from the activities of the purchasing department since
this department is concerned with monitoring delivery performance of suppliers and finding
out alternative sources of supply if delays or breakdowns in the main sources of supply
occur or are likely to occur in near future.

3. The purchasing department also has a direct relationship with the marketing function. It is
because customers’ remarks and complaints, especially in respect of material quality, have
a direct bearing on what is purchased and, sometimes, where.

4. Purchasing is also very much to do with finance: the buying department is a major
spender in any organisation. Its link with the accounts department is, therefore, obvious.
Credit terms in regard to payment times and cash discounts are as important as the actual
purchase prices.

Again, proper timing of purchases can have a positive effect on working capital. If, for
example, credit terms are for remittance at the end of the month following delivery, then
orders for delivery in the first week of a month allow for two months’ credit before payment
is due.

Many such devices are also used by the purchasing department to benefit the financial
aspect of the organisation, very often, for example the buyer may be able to strike a good
bargain for the organisation, and an efficient purchasing officer is one who is always alert
and is able to make use of such favourable offers.

On the other hand, prudence must always prevail in this connection as the costs of storage
can easily absorb may savings made by favourable prices.
6 Main Principles of Purchasing | Materials Management

This article throws light upon the six main principles of purchasing in materials
management. The principles are: 1. Right Quality 2. Right Quantity 3. Right Price 4. Right
Source 5. Right Time 6. Right Place.

Purchasing Principle # 1. Right Quality:

Quality has been defined as the capability of doing a certain thing or the power to satisfy a
particular need.

In other words quality means the useful value of a specific thing for a specific purpose to
fulfil.

The starting point for determining the quality of the materials needed in an organisation is
the end use, i.e., what is intended to be done or accomplished.

We then have to establish a specification and this is what quality is all about. A full and
complete quality specification is an essential part of a purchase contract.

The quality of a material has a direct relationship with its end use. In other words, an
inappropriate quality would mean that the end product is either too good or too bad for a
particular purpose. Both these have a direct effect on costs and competitiveness of the end
product. In one case, some extra cost has to make the quality more than is necessary and,
in other case, the quality of the incurred product would suffer.

We can express quality in various ways, i.e., dimensions, weights, and measures, chemical
properties, physical properties, strength, power, limit and tolerance, hardness, finish, colour,
capacity, durability, performance characteristics, appearance, design, etc.

The quality requirement should be determined first and then correctly specified. Ambiguity
in defining quality is one of the major problems in purchasing. This can be avoided by
ensuring that the supplier really understands exactly what is required by the purchaser. If
the supplier does not understand the quality requirements correctly, certain wrong types of
materials would be supplied.
This, in its turn, may lead to various problems like production stoppages, rejection of
finished product(s) by quality control people, and the emergence of a high quantity
(percentage) scrap, at the end of the production process. All these amount to waste.

Right quality means that the quality should be just right, neither too high nor too low. A
production process would always like to have the best quality available in order to make
sure that the end product is of best quality available in case of spares and components. It is
necessary to ensure that the machine does not go out of control due to poor quality of such
materials.

It is important for the purchaser to know the exact purpose for which the materials are
required and he must try to convince the production people to accept the materials which
would serve the purpose. At the same time he must not take any undue risk in buying
inferior materials which might be more expensive in the long run.

In case of doubt, he must discuss the matter with the production person and gather
knowledge from him regarding the usage. The purchaser should also have knowledge of
the materials of various brands as also qualities available in the market.

Purchasing Principle # 2. Right Quantity:

The purchaser must buy the materials in the right quantity to ensure that there is no
stoppage of production or no extra stock piling. Normally, the inventory control wing of
purchase (stores) department, fixes up the economic order quantity (EOQ), i.e., the quantity
which should be purchased at a time to get the maximum benefit at minimum total cost.

This requirement is mentioned in the purchase order and it is necessary to see that the
materials are delivered.

Purchasing Principle # 3. Right Price:

It is not easy to determine the right price of material. However, through cost and value
analyses one can guess what an item should cost. Thereafter, the purchaser’s negotiation
skill, his relations with the supplier and the nature of competition in the market will together
determine the actual purchase price.

This function is of prime importance because this is where the purchaser can be really of
much help to the company. But to perform this function properly, the purchaser must have a
thorough idea about the market prices, especially the current prices of raw materials, their
likely future trends, and environmental conditions which affect prices. The purchaser should
not be forced by the seller to accept any price quoted by the supplier. There are various
ways of determining the right price.

The supplier may be asked to give a break-up of prices showing the cost of raw materials,
overhead, profit, etc., and the buyer should check up the various cost items by comparing
them with the available data. He may also take the help of production department. In some
situations tendering to a large number of suppliers may also help in obtaining the correct
price.

However, the purchaser must use his own judgement because often the suppliers form a
cartel or an association (a ring) and they quote high prices. This would really pose a very
serious problem. The purchaser can either break the ring or call all the bidders to reduce
their prices on a rational basis. For purchasing of engineering items one should have the
basic technical knowledge to deal with the suppliers.

One should have an idea about the right price of the materials and current prices should be
compared with the past prices to find out how much the prices have gone up over a certain
period of time.

Purchasing Principle # 4. Right Source

Right source means the source which is reliable in all respect such as quality, delivery, after
sales service, etc. It is obvious that when all the other things have been done right (i.e.,
selection of right quality, quantity and prices), the source of supply from where the materials
have been obtained should be automatically right.

However, there are cases where anomaly occurs and it is, therefore, necessary to get the
materials from the right source.

A right supplier must fulfil the following basic conditions:

(a) He must be fully equipped to manufacture and supply the items ordered.

(b) He must look into the interest of the company and assist the buyer whenever there is
any scope of cost reduction by way of supplying alternative materials suited for the purpose.

(c) He must also assist the buyer in market research.

(d) He must be polite.

(e) He must be in a position to assist the buyer in improving on delivery negotiations

whenever necessary.
(f) He must be a man of integrity.

For source selection or to develop the right source of supply initial information about the
name and address of the suppliers can be had with the help of the following:
(1) Suppliers’ catalogue

(2) Trade requisition and directories

(3) Trade journals

(4) Yellow pages of telephone directory

(5) Vendors files

(6) Buyers’ guides

(7) Salespersons

(8) Trade exhibits — industrial trade fairs

(9) Company personnel

(10) Buyer-seller meet

(11) Purchasing departments of similar organisations.

There are various ways of ascertaining the right suppliers. Typical vendor regis tration forms
are given to the supplier by the purchase department. Such forms should give all the
necessary information as required by the buyer.

On receipt of the complete form, a representative of the buyer should call at the vendor’s
premises and submit his report (containing all his findings).

He should ascertain the following factors during his visit and inspection at the supplier’s
plant:
(i) Technical know-how of the supplier for manufacturing items.

(ii) Financial capability of the supplier to undertake the job.

(iii) Organisational set-up and manpower of the supplier.

(iv) Records of past performance of the supplier in delivering materials at the right time and
in right quality and quantity.

(v) Ability to deliver materials promptly and in required quantity.

(vi) Own manufacturing unit.

(vii) Quality control system of the firm.

(viii) Staff and line capability of the firm.

(ix) Service level.

(x) History of labour relations in the firm.

If this report meets the need of that particular company, the vendor may be registered on
the approved suppliers’ list and be given a trial order. Performances of the vendor should be
only judged after satisfactory and timely execution of orders.

A right supplier today might become a wrong supplier next year. As safeguard against this
possibility, the purchase department should also keep some record of the performance of
different suppliers. There are some typical ways of evaluating a supplier’s performance.
Moreover, various norms or criteria could be used to compare one supplier with another.

Purchasing Principle # 5. Right Time:

Just as one has to buy the materials in the right quantity, he must also obtain them exactly
when required. The delivery timings are again fixed by the indentor or the stock control
department. It is the primary duty of the purchase department to follow up the orders and to
ensure that the flow of materials remains unchanged.

It should also be seen that the materials are delivered exactly on time. This function is very
important in India as the suppliers often fail to maintain the delivery schedule.

Purchasing Principle # 6. Right Place (of Delivery):

The function of purchase department is not over until the materials are delivered at the right
place. Therefore, this also becomes a primary function of the purchase department.
Suppose the go down of the purchase department is in Calcutta’s Taratala area and the
material is booked to Howrah railway station. It must be ensured that the materials are
cleared from Howrah and delivered to the go down.

Vendor Selection
The vendor selection is a subsidiary process that allows clearly stating, defining and
approving those vendors which meet requirements of the procurement process.
Selecting a technology vendor is probably one of the most important tasks that an IT leader
will undertake. It can be a complicated and emotional process if the organization lacks the
right team of people who have the knowledge and expertise to undergo a successful
selection process.

Below are 7 steps to successful vendor selection:

Step 1: Define and analyze business requirements

What is the organization asking a third party to provide? A good start would be to assemble
an evaluation team that is knowledgeable in the vendor selection process and has a clear
understanding of what the business is all about. The evaluation team should be able to:
 Define the product, material or service that is needed;

 Define the Technical and Business Requirements;

 Define the Vendor Requirements (i.e. the features the organization is looking for in a
vendor), and
 Publish a Requirements Document.
The evaluation team should also try to collect as much information as possible, identify and
interview stakeholders and users, review existing internal materials such as reports, and
statistics as well as gather technical information including standards and descriptions of the
current technical environment.
Step 2: Identify third party vendor candidates

After the evaluation team has published a requirements document it must now compile a list
of possible vendors. The team should send each one a Request for Information (RFI) and
conduct a team evaluation process.  A short list of vendors is then created.
Step 3: Develop evaluation criteria (with weighting)

In this third step, the team would construct an evaluation model that weighs a requirement
against its value and priority. For example, if the vendor meets a requirement with a score
of 7 (on a scale of 1 to 10) and the priority of that requirement is 5 (on a scale of 1 to 5),
then the response can be scored by 35. This helps to amplify the differences among
vendors.
Step 4: Conduct vendor briefings
Once the team has developed evaluation criteria with weighting and further narrowed down
possible vendor candidates, it’s time to set up an initial meeting with each potential vendor
to discuss stated requirements and ensure a common understanding.
Step 5: Evaluate vendors and schedule demos

After completion of vendor briefings, the team should be better equipped to evaluate
potential vendors. Selected vendors should provide a solution overview to the
organization’s current business and technological requirements, fees, benefits derived from
using a particular vendor, etc.  In addition, vendors are requested to provide a “demo” to
showcase the capabilities of their solution. Demos are a valuable way to get more
information and also evaluate intangible aspects of a vendor. It is critical to check the
vendor’s references as a part of the evaluation process (site visits are also strongly
recommended).
Step 6: Complete vendor selection

Primary and Secondary Options:

At the conclusion of the evaluation process, the team will identify a primary option (the
winner) and a secondary alternative.
Step 7: Complete contracting with vendor

This step includes identifying a clear set of objectives, deliverables, timeframes, and
budgets for the project with the vendor. These should be clearly written in the terms of the
contract. One of the most important factors in the vendor selection process is to develop a
contract negotiation strategy. A successful contract negotiation simply means that both
parties will search for positives that will benefit the two parties in every aspect while they
achieve a fair and equitable deal.

It is important to be clear about all the important prerequisites, terms and conditions of the
contract and to provide precise information on what goods and/or services the vendor
should provide. Vendor’s compensation should be clearly stated; the total cost, the
schedule for payment and financing terms. There should also be acknowledgement of the
following: Effective dates/Renewal dates/Completion dates/Termination dates.

Introduction of Store Operations:

 Introduction; the Logistics Chain; Store Operations; Objectives of the Store Function;
Managing the Store Types of Retail Store and its Organization. Retail Store Organization;
Centralized and Decentralized Retail Stores; Types of Retail Stores; Location of Retail
Store; Site Selection of Retail Store; Merchandise Management in Retail Store;
Merchandise Handling in Retail Store.

>> Store Management and its Operations: Retail Store Operation and Human Resource
Management in Retail Store; Store Management Responsibilities; Recruitment Selection
and Motivating Retail Store Employees; Retail Store Operation and Financial Dimensions in
Retail Store; Asset Management; Resource Allocation; Retail Store Operation Management;
Store Format, Size and Space Organization; Retail Store Security; Retail Store Environment
and Brand Building

>> Selecting a Layout and Merchandise Management: Objective of Store Layout Design;

Selecting a Layout; Division of Merchandise by Department; Locating Departments Within
the Store; Merchandise Management and Principles of Merchandise Management. Space
Management

>> The Cost of Space: Drivers of the Size of the Store; The SMG Model; Impact on Space
of Future Changes ; Space Management Methods in Various Sectors; Promoting Space
Efficiency in Building Design; Space Utilization.

>> Store Layout and Design: Store Design with View to Retail Strategy; Constraints While
Designing a Retail Store; Layout; Layout Planning; Layout as an Indicator of
Competitiveness; Layout Types; Signage and Graphics.

>> Visual Merchandising: Meaning and Strategy Meaning of Visual Merchandising; Create

Your Retail Store for Target Customers; Retail Strategy for Visual Merchandise; Fixtures
and Presentation Techniques. Atmospherics Lighting; Address the Senses; Housekeeping
Standards; Store Windows; Creative Displays; Signage; Color; Music; Scent.

>> Scope and Challenges of Visual Merchandising: The Scope of Visual Merchandising;

Regional Supermarkets With a Difference; Visual Merchandising for Seasonal Sales;
Interactive Windows; Consumer Behavior and its Influence; Challenges for Organic
Retailers; Specific Shop Facings Attract Different Customer Segments.

Material Control: Meaning, Objectives, Necessity and Importance

Meaning:
Material control is the main component of the process of material management.

Control over materials is of utmost importance for smooth and uninterrupted functioning of
an organisation.
A few definition of the term are given as under:
“Material control is a systematic control over purchasing, storing and consumption of
materials, so as to maintain a regular and timely supply of materials, at the same time,
avoiding overstocking.”

“Material control refers to the management function concerned with acquisition, storage,
handling and use of materials so as to minimise wastage and losses, derive maximum
economy and establish responsibility for various operations through physical checks, record
keeping, accounting and other devices. ”

In simple words, material control refers to the various measures adopted to reduce the
amount of loss of materials at the time of receiving, storing and issuing the raw materials.
Material control in practice is exercised through periodical records and reports relating to
purchase, receipt, inspection, storage and issuing direct and indirect materials. Proper
control over material can contribute substantially to the efficiency of a business.

Objectives of Materials Control:

The following are the main objectives of materials control:
(a) To enable uninterrupted production:
The main object of material control is to ensure smooth and unrestricted production.
Production stoppages and production delays cause substantial loss to a concern.

(b) To ensure requisite quality of materials:

The quality of finished products depends mainly on the quality of raw materials used. If
quality of the raw materials is not up to desired standards, the end product will not be of
desired quality which affects the sale of the product in the market resulting in loss of profits
as well as goodwill of the concern. It is of vital importance to exercise strict control and
supervision over the purchases, storage and handling of materials.

(c) To minimise wastage:

The loss of material may occur on account of rust, dust, dirt or moisture, bad and careless
handling of materials, poor packing and many other reasons. The causes responsible for
such losses must be brought to light and utmost efforts should be made to minimise the
wastage of raw materials. This is possible only by introducing an efficient materials control
system.

(d) To fix responsibility:

A proper system of materials control also aims at fixing responsibility of operating units and
individuals connected with the purchase, storage and handling of materials.
(e) To provide information:
Another objective of materials control is to provide accurate information regarding material
cost and inventory whenever needed by management.

Necessity and importance of material control:

In a productive undertaking the need of materials control arises on account of the following
reasons:
1. For keeping the stock of raw mterials within limits in the stores i.e., to avoid overstocking
and understocking of raw materials, materials control is significant.

2. It ensures proper storage of materials. For the proper preservation and safety of
materials, adequate storage facilities are to be provided. With the help of proper storing of
materials, quantity of materials as and when required can be issued to various jobs.

3. For knowing proper cost of production, control over materials is indispensable.

4. Certain techniques and methods are developed under the system of materials control
thereby ensuring optimum utilisation of materials.

5. In order to undertake continuous checking of materials, the necessity of a proper system

of materials control cannot be ignored.

6. A well managed system of materials control ensures the availability of different kinds of
materials without delay.

As already pointed out while explaining the scope of material management that it includes
purchases of materials, storekeeping and inventory control etc.

Bin Card vs Stores Ledger

The key difference between Bin Card and Stores Ledger lies in the fact that bin card is used
in a company to record the transactions of the business which records material received,
issued and balance but store ledger is used to record the amount, quantity, type and rate of
the material.
Bin card is maintained by a storekeeper whereas store ledger is maintained by the cost
accountant.

In the events of accounting for daily business purposes, an idea of manufacturing

companies is that a “bin card” is like a rough book and “stores ledger” is like a book of
school.
Both “bin card” and “stores ledger” terms fall in the category of cost accountancy while both
of them are used to keep record the maintenance of goods that goes inside the company
and goods that go out from the company, yet they have their differences.
When it comes to the companies, “bin” is there but it crosses their limit and the reason
behind why the company maintains “bin card” that keep records the number of goods that
are received, issued, and balanced.

Main Differences Between Bin Card and Stores Ledger

1. A bin card is known to be made by the stores’ department. On the other hand, the
store ledger is made by the cost accounting department.
2. In business, a bin card is a document to keep a quantitative record of receipts,
issues, and closing balance of an item of material. While stores ledger tends to
keep records of every quantity received or issued or in stock and also the financial
expressions of the same things.
3. Bin card possesses the specifics of goods only in terms of keeping a score of the
quantity. On the other hand, stores ledger has particulars of materials in terms of
both quantity and value.
4. In the case of bin card, each and every entry is made on the basis of real quantities
received or issued. And in the case of store ledger, materials received note and
materials requisition note provide support to every entry.
5. In the case of bin card, usually, entries are made right after each transaction. And
in the case of stores’ ledger, entries are known to be made periodically.
6. To allow to label the stock, bin Card has to be attached to the bins inside the store.
And to do the same, stores ledger have to be attached outside the store.
7. When it comes to postings, in bin card they are made before a transaction
happens. In stores ledger, the posting is made after a transaction happens.
8. Bin Card is not capable of providing closing stock value for the preparation of
financial profit and loss statements. Diversely store ledger is capable of providing
closing stock value to prepare financial profit and loss account.

Inventory Management Techniques

Economic Order Quantity – EOQ Definition

Economic order quantity (EOQ) is the ideal order quantity a company should purchase to
minimize inventory costs such as holding costs, shortage costs, and order costs. This
production-scheduling model was developed in 1913 by Ford W. Harris and has been
refined over time. The formula assumes that demand, ordering, and holding costs all remain
constant.

The formula for EOQ is:

Q=√ 2 DS

where:Q=EOQ unitsD=Demand in units (typically on an annual basis)S=Order cost (per pur
chase order)H=Holding costs (per unit, per year)

The goal of the EOQ formula is to identify the optimal number of product units to order. If
achieved, a company can minimize its costs for buying, delivery, and storing units. The
EOQ formula can be modified to determine different production levels or order intervals, and
corporations with large supply chains and high variable costs use an algorithm in their
computer software to determine EOQ.

EOQ is an important cash flow tool. The formula can help a company control the amount of
cash tied up in the inventory balance. For many companies, inventory is its largest asset
other than its human resources, and these businesses must carry sufficient inventory to
meet the needs of customers. If EOQ can help minimize the level of inventory, the cash
savings can be used for some other business purpose or investment.

The EOQ formula determines a company's inventory reorder point. When inventory falls to
a certain level, the EOQ formula, if applied to business processes, triggers the need to
place an order for more units. By determining a reorder point, the business avoids running
out of inventory and can continue to fill customer orders. If the company runs out of
inventory, there is a shortage cost, which is the revenue lost because the company has
insufficient inventory to fill an order. An inventory shortage may also mean the company
loses the customer or the client will order less in the future.

Example of How to Use EOQ

EOQ takes into account the timing of reordering, the cost incurred to place an order, and
the cost to store merchandise. If a company is constantly placing small orders to maintain a
specific inventory level, the ordering costs are higher, and there is a need for additional
storage space.
Assume, for example, a retail clothing shop carries a line of men’s jeans, and the shop sells
1,000 pairs of jeans each year. It costs the company $5 per year to hold a pair of jeans in
inventory, and the fixed cost to place an order is $2.

The EOQ formula is the square root of (2 x 1,000 pairs x $2 order cost) / ($5 holding cost)
or 28.3 with rounding. The ideal order size to minimize costs and meet customer demand is
slightly more than 28 pairs of jeans. A more complex portion of the EOQ formula provides
the reorder point.

Limitations of Using EOQ

The EOQ formula assumes that consumer demand is constant. The calculation also
assumes that both ordering and holding costs remain constant. This fact makes it difficult or
impossible for the formula to account for business events such as changing consumer
demand, seasonal changes in inventory costs, lost sales revenue due to inventory
shortages, or purchase discounts a company might realize for buying inventory in larger
quantities.

2. Minimum order quantity.

On the supplier side, minimum order quantity (MOQ) is the smallest amount of set stock a
supplier is willing to sell. If retailers are unable to purchase the MOQ of a product, the
supplier won’t sell it to you.

For example, inventory items that cost more to produce typically have a smaller MOQ as
opposed to cheaper items that are easier and more cost effective to make.

3. ABC analysis.

This inventory categorization technique splits subjects into three categories to identify items
that have a heavy impact on overall inventory cost.

 Category A serves as your most valuable products that contribute the most to
overall profit.
 Category B is the products that fall somewhere in between the most and least
valuable.
 Category C is for the small transactions that are vital for overall profit but don’t
matter much individually to the company altogether.

4. Just-in-time inventory management.

Just-in-time (JIT) inventory management is a technique that arranges raw material orders
from suppliers in direct connection with production schedules.
JIT is a great way to reduce inventory costs. Companies receive inventory on an as-needed
basis instead of ordering too much and risking dead stock. Dead stock is inventory that was
never sold or used by customers before being removed from sale status.

5. Safety stock inventory.

Safety stock inventory management is extra inventory being ordered beyond expected
demand. This technique is used to prevent stockouts typically caused by incorrect
forecasting or unforeseen changes in customer demand.

7. FIFO and LIFO.

LIFO and FIFO are methods to determine the cost of inventory. FIFO, or First in, First out,
assumes the older inventory is sold first. FIFO is a great way to keep inventory fresh.

LIFO, or Last-in, First-out, assumes the newer inventory is typically sold first. LIFO helps
prevent inventory from going bad.

8. Reorder point formula.

The reorder point formula is an inventory management technique that’s based on a

business’s own purchase and sales cycles that varies on a per-product basis. A reorder
point is usually higher than a safety stock number to factor in lead time.

9. Batch tracking.

Batch tracking is a quality control inventory management technique wherein users can
group and monitor a set of stock with similar traits. This method helps to track the expiration
of inventory or trace defective items back to their original batch.

10. Consignment inventory.

If you’re thinking about your local consignment store here, you’re exactly right. Consignment
inventory is a business deal when a consigner (vendor or wholesaler) agrees to give a
consignee (retailer like your favorite consignment store) their goods without the consignee
paying for the inventory upfront. The consigner offering the inventory still owns the goods
and the consignee pays for them only when they sell.

11. Perpetual inventory management.

Perpetual inventory management is simply counting inventory as soon as it arrives. It’s the
most basic inventory management technique and can be recorded manually on pen and
paper or a spreadsheet.

12. Dropshipping.

Dropshipping is an inventory management fulfillment method in which a store doesn’t

actually keep the products it sells in stock. When a store makes a sale, instead of picking it
from their own inventory, they purchase the item from a third party and have it shipped to
the consumer. The seller never sees our touches the product itself.

13. Lean Manufacturing.

Lean is a broad set of management practices that can be applied to any business practice.
It’s goal is to improve efficiency by eliminating waste and any non value-adding activities
from daily business.

14. Six Sigma.

Six Sigma is a brand of teaching that gives companies tools to improve the performance of
their business (increase profits) and decrease the growth of excess inventory.

15. Lean Six Sigma.

Lean Six Sigma enhances the tools of Six Sigma, but instead focuses more on increasing
word standardization and the flow of business.

16. Demand forecasting.

Demand forecasting should become a familiar inventory management technique to retailers.

Demand forecasting is based on historical sales data to formulate an estimate of the
expected forecast of customer demand. Essentially, it’s an estimate of the goods and
services a company expects customers to purchase in the future.

17. Cross-docking.

Cross-docking is an inventory management technique whereby an incoming truck unloads

materials directly into outbound trucks to create a JIT shipping process. There is little or no
storage in between deliveries.

18. Bulk shipments.

Bulk shipments is a cost efficient method of shipping when you palletize inventory to ship
more at once.

UNIT 4: INTRODUCTION TO OR AND LPP

Introduction

The British/Europeans refer to "operational research", the Americans to "operations

research" - but both are often shortened to just "OR" - which is the term we will use.Another
term which is used for this field is "management science" ("MS"). The Americans
sometimes combine the terms OR and MS together and say "OR/MS" or "ORMS". Yet other
terms sometimes used are "industrial engineering" ("IE") and "decision science" ("DS"). In
recent years there
has been a move towards a standardization upon a single term for the field, namely the
term "OR". Operation Research is a relatively new discipline. The contents and the
boundaries of the OR are not yet fixed. Therefore, to give a formal definition of the term
Operations Research is a difficult task. The OR starts when mathematical and quantitative
techniques are used to substantiate the decision being taken. The main activity of a
manager is the decision making. In our daily life we make the decisions even without
noticing them. The decisions are taken simply by common sense, judgment and expertise
without using any mathematical or any other model in simple situations. But the decision we
are concerned here with are complex and heavily responsible. Examples are public
transportation network planning in a city having its own layout of factories, residential blocks
or finding the appropriate product mix when there exists a large number of products with
different profit contributions and production requirement etc.

Stages of Development of Operations Research

The stages of development of O.R. are also known as phases and process of O.R, which
has six
important steps. These six steps are arranged in the following order:
Step I: Observe the problem environment
Step II: Analyze and define the problem
Step III: Develop a model
Step IV: Select appropriate data input
Step V: Provide a solution and test its reasonableness
Step VI: Implement the solution
MBA-H2040 Quantitative Techniques for Managers

Step I: Observe the problem environment

The first step in the process of O.R. development is the problem environment observation.
This step includes different activities; they are conferences, site visit, research, observations
etc. These activities rovide sufficient information to the O.R. specialists to formulate the
problem.
Step II: Analyze and define the problem
This step is analyzing and defining the problem. In this step in addition to the problem
definition the objectives, uses and limitations of O.R. study of the problem also defined. The
outputs of this step are clear grasp of need for a solution and its nature understanding.
Step III: Develop a model
This step develops a model; a model is a representation of some abstract or real situation.
The models are basically mathematical models, which describes systems, processes in the
form of equations, formula/relationships. The different activities in this step are variables
definition, formulating equations etc. The model is tested in the field under different
environmental constraints and modified in order to
work. Some times the model is modified to satisfy the management with the results.
Step IV: Select appropriate data input
A model works appropriately when there is appropriate data input. Hence, selecting
appropriate input data is important step in the O.R. development stage or process. The
activities in this step include
internal/external data analysis, fact analysis, and collection of opinions and use of computer
data banks.
The objective of this step is to provide sufficient data input to operate and test the model
developed in
Step_III.
Step V: Provide a solution and test its reasonableness
This step is to get a solution with the help of model and input data. This solution is not
implemented immediately, instead the solution is used to test the model and to find there is
any limitations. Suppose if
the solution is not reasonable or the behaviour of the model is not proper, the model is
updated and modified at this stage. The output of this stage is the solution(s) that supports
the current organizational
objectives.
Step VI: Implement the solution
At this step the solution obtained from the previous step is implemented. The
implementation of the solution involves mo many behavioural issues. Therefore, before
implementation the implementation authority has to resolve the issues. A properly
implemented solution results in quality of work and gains the support from the management.

O.R. Tools and Techniques

Operations Research uses any suitable tools or techniques available. The common
frequently used tools/techniques are mathematical procedures, cost analysis, electronic
computation. However, operations researchers given special importance to the
development and the use of techniques like linear programming, game theory, decision
theory, queuing theory, inventory models and simulation. In addition to the above
techniques, some other common tools are non-linear programming, integer
programming, dynamic programming, sequencing theory, Markov process, network
scheduling (PERT/CPM), symbolic Model, information theory, and value theory. There is
many other Operations
Research tools/techniques also exists. The brief explanations of some of the above
techniques/tools are as follows:

Linear Programming:
This is a constrained optimization technique, which optimize some criterion within some
constraints. In Linear programming the objective function (profit, loss or return on
investment) and constraints are linear. There are different methods available to solve linear
programming.

Game Theory:
This is used for making decisions under conflicting situations where there are one or more
players/opponents. In this the motive of the players are dichotomized. The success of one
player tends to be at the cost of other players and hence they are in conflict.

Decision Theory:
Decision theory is concerned with making decisions under conditions of complete certainty
about the future outcomes and under conditions such that we can make some probability
about what will happen in future.

Queuing Theory:
Choose the solution to be used.‘Sell’ the decision to operating managers;
get their understanding and cooperation. This is used in situations where the queue is
formed (for example customers waiting for service, aircrafts
waiting for landing, jobs waiting for processing in the computer system, etc). The objective
here is minimizing the cost of waiting without increasing the cost of servicing.
Inventory Models:
Inventory model make a decisions that minimize total inventory cost. This model
successfully reduces the total cost of purchasing, carrying, and out of stock inventory.
Simulation:
Simulation is a procedure that studies a problem by creating a model of the process
involved in the problem and then through a series of organized trials and error solutions
attempt to determine the best
solution. Some times this is a difficult/time consuming procedure. Simulation is used when
actual experimentation is not feasible or solution of model is not possible.

Non-linear Programming:
This is used when the objective function and the constraints are not linear in nature. Linear
relationships may be applied to approximate non-linear constraints but limited to some
range, because approximation
becomes poorer as the range is extended. Thus, the non-linear programming is used to
determine the approximation in which a solution lies and then the solution is obtained using
linear methods.

Dynamic Programming:
Dynamic programming is a method of analyzing multistage decision processes. In this each
elementary decision depends on those preceding decisions and as well as external factors.

Integer Programming:
If one or more variables of the problem take integral values only then dynamic programming
method is used. For example number or motor in an organization, number of passenger in
an aircraft, number of
generators in a power generating plant, etc.

Markov Process:
Markov process permits to predict changes over time information about the behavior of a
system is known. This is used in decision making in situations where the various states are
defined. The probability from one state to another state is known and depends on the
current state and is independent of how we have arrived at that particular state.

Network Scheduling:
This technique is used extensively to plan, schedule, and monitor large projects (for
example computer system installation, R & D design, construction, maintenance, etc.). The
aim of this technique is
minimize trouble spots (such as delays, interruption, production bottlenecks, etc.) by
identifying the critical factors. The different activities and their relationships of the entire
project are represented
diagrammatically with the help of networks and arrows, which is used for identifying critical
activities and path. There are two main types of technique in network scheduling, they are:

Program Evaluation and Review Technique (PERT) – is used when activities time is not
known accurately/ only probabilistic estimate of time is available.
Critical Path Method (CPM) – is used when activities time is know accurately.

Information Theory:
This analytical process is transferred from the electrical communication field to O.R. field.
The objective of this theory is to evaluate the effectiveness of flow of information with a
given system. This
is used mainly in communication networks but also has indirect influence in simulating the
examination of business organizational structure with a view of enhancing flow of
information.

Applications of Operations Research

Today, almost all fields of business and government utilizing the benefits of Operations
Research. There are voluminous of applications of Operations Research. Although it is not
feasible to cover all
applications of O.R. in brief. The following are the abbreviated set of typical operations
research applications to show how widely these techniques are used today:

Accounting:
Assigning audit teams effectively Credit policy analysis Cash flow planning Developing
standard costs Establishing costs for byproducts
Planning of delinquent account strategy

Construction:
Project scheduling, monitoring and control Determination of proper work force Deployment
of work force Allocation of resources to projects

Facilities Planning:
Factory location and size decision Estimation of number of facilities required Hospital
planning
International logistic system design
Transportation loading and unloading
Warehouse location decision

Finance:
Building cash management models
Allocating capital among various alternatives
Building financial planning models
Investment analysis Portfolio analysis
Dividend policy making

Manufacturing:
Inventory control
Marketing balance projection
Production scheduling
Production smoothing

Marketing:
Advertising budget allocation
Product introduction timing
Selection of Product mix
Deciding most effective packaging alternative
Organizational Behavior / Human Resources:
Personnel planning
Recruitment of employees
Skill balancing
Training program scheduling
Designing organizational structure more effectively

Purchasing:
Optimal buying
Optimal reordering
Materials transfer

Research and Development:

R & D Projects control
R & D Budget allocation
Planning of Product introduction

Limitations of Operations Research

Operations Research has number of applications; similarly it also has certain limitations.
These limitations are mostly related to the model building and money and time factors
problems involved in its
application. Some of them are as given below:
i) Distance between O.R. specialist and Manager
Operations Researchers job needs a mathematician or statistician, who might not be aware
of the business problems. Similarly, a manager is unable to understand the complex nature
of Operations Research. Thus there is a big gap between the two personnel.
ii) Magnitude of Calculations
The aim of the O.R. is to find out optimal solution taking into consideration all the factors. In
this modern world these factors are enormous and expressing them in quantitative model
and
establishing relationships among these require voluminous calculations, which can be
handled only by machines.
iii) Money and Time Costs
The basic data are subjected to frequent changes, incorporating these changes into the
operations research models is very expensive. However, a fairly good solution at present
may be more desirable than a perfect operations research solution available in future or
after some
time.
iv) Non-quantifiable Factors
When all the factors related to a problem can be quantifiable only then operations research
provides solution otherwise not. The non-quantifiable factors are not incorporated in O.R.
models. Importantly O.R. models do not take into account emotional factors or qualitative
factors.
v) Implementation
Once the decision has been taken it should be implemented. The implementation of
decisions is a delicate task. This task must take into account the complexities of human
relations and behavior and in some times only the psychological factors.

Summary
Operations Research is relatively a new discipline, which originated in World War II, and
became very popular throughout the world. India is one of the few first countries in the world
who started using operations research. Operations Research is used successfully not only
in military/army operations but also in business, government and industry. Now a day’s
operations research is almost used in all the fields.
Proposing a definition to the operations research is a difficult one, because its boundary
and content are not fixed. The tools for operations search is provided from the subject’s viz.
economics, engineering, mathematics, statistics, psychology, etc., which helps to choose
possible alternative courses of action. The operations research tool/techniques include
linear programming, non-linear programming, dynamic programming, integer programming,
Markov process, queuing theory, etc.

Operations Research has a number of applications. Similarly it has a number of limitations,

which is basically related to the time, money, and the problem involves in the model
building. Day-by day operations research gaining acceptance because it improve decision
making effectiveness of the
managers. Almost all the areas of business use the operations research for decision
making.

Introduction to Linear Programming

Linear Programming is a special and versatile technique which can be applied to a variety
of management problems viz. Advertising, Distribution, Investment, Production, Refinery
Operations, and
Transportation analysis. The linear programming is useful not only in industry and business
but also in non-profit sectors such as Education, Government, Hospital, and Libraries. The
linear programming
method is applicable in problems characterized by the presence of decision variables. The
objective function and the constraints can be expressed as linear functions of the decision
variables. The
decision variables represent quantities that are, in some sense, controllable inputs to the
system being modeled. An objective function represents some principal objective criterion
or goal that measures the
effectiveness of the system such as maximizing profits or productivity, or minimizing cost or
consumption. There is always some practical limitation on the availability of resources viz.
man, material, machine, or time for the system. These constraints are expressed as linear
equations involving the decision variables. Solving a linear programming problem means
determining actual values of the decision variables that optimize the objective function
subject to the limitation imposed by the
constraints. The main important feature of linear programming model is the presence of
linearity in the problem. The use of linear programming model arises in a wide variety of
applications. Some model may not be strictly linear, but can be made linear by applying
appropriate mathematical transformations. Still some applications are not at all linear, but
can be effectively approximated by linear models. The
ease with which linear programming models can usually be solved makes an attractive
means of dealing with otherwise intractable nonlinear models.

A Brief Introduction to Linear Programming

Linear programming is not a programming language like C++, Java, or Visual Basic. Linear
programming can be defined as:
“A mathematical method to allocate scarce resources to competing activities in an optimal
manner when the problem can be expressed using a linear objective function and linear
inequality constraints.”
A linear program consists of a set of variables, a linear objective function indicating the
contribution of each variable to the desired outcome, and a set of linear constraints
describing the limits on the values of the variables. The “answer” to a linear program is a set
of values for the problem variables that results in the best — largest or smallest — value of
the objective function and yet is consistent with all the constraints. Formulation is the
process of translating a real-world problem into a linear program. Once a problem has been
formulated
as a linear program, a computer program can be used to solve the problem. In this regard,
solving a linear program is relatively easy. The hardest part about applying linear
programming is formulating the problem and interpreting the solution.

1. Understand the problem.

The goal of a linear programming problems is to find a way to get the most, or least,
of some quantity -- often profit or expenses. This quantity is called your objective.

The answer should depend on how much of some decision variables you choose.

Your options for how much will be limited by constraints stated in the problem.

2. Describe the objective.

What are you trying to optimize? Are you trying to minimize costs? Maximize
production quantities?

You may have constraints like "you can't spend more than $1000" or "you mus't
ship at least 50 tons of product C". These are limits but don't necessarily reflect
your employer's top priorities; don't mistake these for suggestions that you minimize
costs or maximize production.

4. Define the decision variables.

The answer to a linear programming problem is always "how much" of some things.
What are those things? Choose variables to represent how much of each of those
things. For example:
L = number of leadership training programs offered
P = number of problem solving programs offered.

5. Write the objective function.

Use the variables you just chose to write down an algebraic expression that
describes the amount you're trying to minimize. Do not use an = sign. Do not use <
or > signs.
 3. Describe the constraints.
What are the limits on "how much" your decision variables can be? Look for words
like "at least", "no more than", "two thirds of of", "we must fill orders for", etc.

6. Write the constraints in terms of the decision variables.

For each constraint such as "at least $500" or "no more than 29" write an inequality
using the decision variables. For example: 2.5 L > 500
P + L < 29
7. Add the nonnegativity constraints.
Don't forget to include non-negativity constraints like P >= 0. These are worth a
quick two points on the quiz.
8. Write it up pretty.
Your formulation should look something like:

Maximize: 4U + 3H
Subject to: U < 70
H < 60
2U - H < 100
U > 0
H > 0

Graphical Method Exercises Solved in Linear Programming

Exercise #1: A workshop has three (3) types of machines A, B and C; it can manufacture
two (2) products 1 and 2, and all products have to go to each machine and each one goes
in the same order; First to the machine A, then to B and then to C. The following table
shows:
 The hours needed at each machine, per product unit
 The total available hours for each machine, per week
 The profit of each product per unit sold

Formulate and solve using the graphical method a Linear Programming model for the
previous situation that allows the workshop to obtain maximum gains.

Decision Variables:
  : Product 1 Units to be produced weekly
  : Product 2 Units to be produced weekly
Objective Function:
Maximize 

Constraints:




The constraints represent the number of hours available weekly for machines A, B and C,
respectively, and also incorporate the non-negativity conditions.

For the graphical solution of this model we will use the Graphic Linear Optimizer
(GLP) software. The green colored area corresponds to the set of feasible solutions and the
level curve of the objective function that passes by the optimal vertex is shown with a red
dotted line.

The optimal solution is   and   with an optimal

value   that represents the workshop’s profit.

Exercise #2: A winemaking company has recently acquired a 110 hectares piece of land.
Due to the quality of the sun and the region’s excellent climate, the entire production of
Sauvignon Blanc and Chardonnay grapes can be sold. You want to know how to plant each
variety in the 110 hectares, given the costs, net profits and labor requirements according to
the data shown below:
 Suppose that you have a budget of US$10,000 and an availability of 1,200 man-days during
the planning horizon. Formulate and solve graphically a Linear Programming model for this
problem. Clearly outline the domain of feasible solutions and the process used to find the
optimal solution and the optimal value.

Decision Variables:
  : Hectares intended for growing Sauvignon Blanc
  : Hectares intended for growing Chardonnay
Objective Function:
Maximize 

Constraints:




Where the restrictions are associated with the maximum availability of hectares for planting,
available budget, man-hours in the planting period and non-negativity, respectively.

The following graph shows the representation of the winemaking company problem.
The shaded area corresponds with the domain of feasible solutions, where
the optimal basic feasible solution is reached at vertex C, where the budget and man-days
restraints are active. Thus solving said equation system the coordinate of the optimal
solution is found where   and   (hectares). The optimal value
is   (dollars).
 Exercise #3: A company produces two different products. One of them needs 1/4 of an hour
of assembly work per unit, 1/8 of an hour in quality control work and US$1.2 in raw
materials. The other product requires 1/3 of an hour of assembly work per unit, 1/3 of an
hour in quality control work and US$0.9 in raw materials. Given the current availability of
staff in the company, each day there is at most a total of 90 hours available for assembly
and 80 hours for quality control. The first product described has a market value (sale price)
of US$8.0 per unit. In addition, the maximum amount of daily sales for the first product is
estimated to be 200 units, without there being a maximum limit of daily sales for the second
product.
Formulate and solve graphically a Linear Programming model that will allow the company to
maximize profits.

Decision Variables:
  : Product 1 units to be produced daily
  : Product 2 units to be produced daily
Objective Function:
Maximize 

Constraints:




The first constraint represents the daily assembly time constraints. The second constraint is
the availability of time for quality control (also daily). The third constraint establishes an
upper bound for the manufacturing and daily sales of Product 1. In addition, the non-
negativity conditions for the decision variables are included.

The domain of feasible solutions has 5 vertexes that correspond with the problem’s optimal
candidates. In particular the optimal vertex is D such that the optimal solution is   
and   with an optimal value   that
corresponds with the maximum profit for the company.
UNIT 5: TRANSPORTATION, ASSIGNMENT AND QUEUING THEORY
Transportation problem was first studied by F.L. Hithcock[1]. In
transportation problem, different sources supply to different destinations of
demand in such a way that the transportation cost should be minimized. We
can obtain basic feasible solution by three methods. They are

1. North West Corner method

2. Least Cost method

3. Vogel’s Approximation method (VAM)

In these three methods, VAM method is best according to the literature. We

check the optimality of the transportation problem by MODI method.

The transportation problem is classified into two types. They are balanced
transportation problem and unbalanced transportation problem. If the
number of sources is equal to number of demands, then it is called balanced
transportation problem. If not, it is called unbalanced transportation
problem. If the source of item is greater than the demand, then we should
add dummy column to make the problem as balanced one. If the demand is
greater than the source, then we should add the dummy row to convert the
given unbalanced problem to balanced transportation problem.

In recent years, many methods are proposed to find the optimum solution
for the transportation problem. Pandian &Natarajan [2] gave a new
approach for solving transportation problem with mixed constraints.
Korukoglu & Balli [3] discussed an improved Vogel’s Approximation
method for the transportation problem. Quddos et al. [4]and Sudhakar et al.
[5]developed a new method for finding an optimal solution for
transportation problems. Reena et al. [6]gave the new global approach to
transportation problem. Later Reena et al. [7]extended their model and gave
an innovative approach to optimum solution of transportation problem.
Amaravathy et al. [8]developed MDMA Method to give an optimal solution
for transportation problem. Urashikumari et al. [9]investigated the new
transportation problem using stepping stone method and its application.
Abdul Kalam Azad et al. [10]gave an algorithmic approach to solve
transportation problem with the average total opportunity cost method.
Joshua et al. [11]developed a North- East Corner Method to give an initial
basic feasible solution for transportation problem.

It is difficult to give the new model which fit into the real-world problems.
In this paper, a new statistical method called harmonic mean is used to find
the optimum solution.This method gives the solution exactly like MODI-
Method and results very closer to VAM Method. We also gave the numerical
example for the new method and we compared our method with existing
methods such as North West Corner method, Least cost method, Vogel’s
Approximation method. We checked the optimality of the solution using
MODI Method. Here, we considered the balanced transportation problem
also.

Harmonic mean = total number of observations/sums of the reciprocal of

number.

Algorithm

1. Step 1: Check whether the given transportation problem is balanced or

not. If not, balance or by adding dummy row or column. Then go to the
next step.

2. Step 2: Find the harmonic mean for each row and each column. Then
find the maximum value among that.

3. Step 3: Allocate the minimum supply or demand at the place of

minimum value of the related row or column.
4. Step 4: Repeat the step 2 and 3 until all the demands are satisfied and
all the supplies are exhausted.

5. Step 5: Total minimum cost = sum of the product of the cost and its
corresponding allocated values of supply or demand.

Numerical Example

Table 1,2
The transportation cost is:

Table3&4

The transportation cost is:

Comparison of numerical results

The comparison between the existing method and proposed method results
are given below in Table5.
Conclusion

From the comparison table, we can observe that the optimum solution
obtained by the proposed method is less than that of other methods and
same that of MODI Method. But, the proposed method is very easy since we
have less computation works. So, we can conclude that if we use harmonic
mean approach to solve transportation problem, we can get global optimum
solution in a lesser step.

Unbalanced transportation problem in Operational Research

When the total supply of all the sources is not equal to the total demand of all
destinations, the problem is an unbalanced transportation problem.
Total supply ≠ Total demand

Demand Less than Supply

In real-life, supply and demand requirements will rarely be equal. This is
because of variation in production from the supplier end, and variations in
forecast from the customer end. Supply variations may be because of
shortage of raw materials, labour problems, Transportation Model improper
planning and scheduling. Demand variations may be because of change in
customer preference, change in prices and introduction of new products by
competitors.

These unbalanced problems can be easily solved by introducing dummy

sources and dummy destinations. If the total supply is greater than the total
demand, a dummy destination (dummy column) with demand equal to the
supply surplus is added. If the total demand is greater than the total supply, a
dummy source (dummy row) with supply equal to the demand surplus is
added. The unit transportation cost for the dummy column and dummy row
are assigned zero values, because no shipment is actually made in case of a
dummy source and dummy destination.
Example : Check whether the given transportation problem shown in Table is a
balanced one. If not, convert the unbalanced problem into a balanced
transportation problem.
Transportation Model with Supply Exceeding Demand

Solution: For the given problem, the total supply is not equal to the total
demand.
The given problem is an unbalanced transportation problem. To convert the
unbalanced transportation problem into a balanced problem, add a dummy
destination (dummy column). i.e., the demand of the dummy destination is
equal to,

Thus, a dummy destination is added to the table, with a demand of 100 units.
The modified table is shown in Table which has been converted into a
balanced transportation table. The unit costs of transportation of dummy
destinations are assigned as zero.

Dummy Destination Added

Similarly,
Demand Greater than Supply
Example : Convert the transportation problem shown in Table into a balanced
problem.
Demand Exceeding Supply

Solution: The given problem is,

The given problem is an unbalanced one. To convert it into a balanced

transportation problem, include a dummy source (dummy row) as shown in
Table

Balanced TP Model
The structure of assignment problem of assigning operators to jobs is shown
in Table.

Structure of Assignment Problem

Let n be the number of jobs and number of operators.

tij be the processing time of job i taken by operator j.

Mathematical model of Assignment problem

A few applications of mathematical model of assignment problem are:

 i. assignment of employees to machines.
ii. assignment of operators to jobs.
iii. effectiveness of teachers and subjects.
iv. allocation of machines for optimum utilization of space.
v. salesmen to different sales areas.
vi. clerks to various counters.

In all the cases, the objective is to minimize the total time and cost or
otherwise maximize the sales and returns.

Assignment algorithm (Hungarian Assignment method)

An assignment problem can be easily solved by applying Hungarian method

which consists of two phases. In the first phase, row reductions and column
reductions are carried out. In the second phase, the solution is optimized on
iterative basis.

Phase 1
Step 0: Consider the given matrix.
Step 1: In a given problem, if the number of rows is not equal to the number of
columns and vice versa, then add a dummy row or a dummy column. The
assignment costs for dummy cells are always assigned as zero.
Step 2: Reduce the matrix by selecting the smallest element in each row and
subtract with other elements in that row.
Phase 2:
Step 3: Reduce the new matrix column-wise using the same method as given
in step 2.
Step 4: Draw minimum number of lines to cover all zeros.
Step 5: If Number of lines drawn = order of matrix, then optimally is reached,
so proceed to step 7. If optimally is not reached, then go to step 6.
Step 6: Select the smallest element of the whole matrix, which is NOT
COVERED by lines. Subtract this smallest element with all other remaining
elements that are NOT COVERED by lines and add the element at the
intersection of lines. Leave the elements covered by single line as it is. Now go
to step 4.
Step 7: Take any row or column which has a single zero and assign by
squaring it. Strike off the remaining zeros, if any, in that row and column (X).
Repeat the process until all the assignments have been made.
Step 8: Write down the assignment results and find the minimum cost/time.
Note: While assigning, if there is no single zero exists in the row or column,
choose any one zero and assign it. Strike off the remaining zeros in that
column or row, and repeat the same for other assignments also. If there is no
single zero allocation, it means multiple numbers of solutions exist. But the
cost will remain the same for different sets of allocations.
Example : Assign the four tasks to four operators. The assigning costs are
given in Table.
Assignment Problem

Solution:
Step 1: The given matrix is a square matrix and it is not necessary to add a
dummy row/column
Step 2: Reduce the matrix by selecting the smallest value in each row and
subtracting from other values in that corresponding row. In row A, the smallest
value is 13, row B is 15, row C is 17 and row D is 12. The row wise reduced
matrix is shown in table below.
Row-wise Reduction

Step 3: Reduce the new matrix given in the following table by selecting the
smallest value in
each column and subtract from other values in that corresponding column. In
column 1, the smallest value is 0, column 2 is 4, column 3 is 3 and column 4 is
0. The column-wise reduction matrix is shown in the following table.
Column-wise Reduction Matrix
Step 4: Draw minimum number of lines possible to cover all the zeros in the
matrix given in Table
Matrix with all Zeros Covered

The first line is drawn crossing row C covering three zeros, second line is
drawn crossing column 4 covering two zeros and third line is drawn crossing
column 1 (or row B) covering a single zero.
Step 5: Check whether number of lines drawn is equal to the order of the
matrix, i.e., 3 ≠ 4. Therefore optimally is not reached. Go to step 6.
Step 6: Take the smallest element of the matrix that is not covered by single
line, which is 3. Subtract 3 from all other values that are not covered and add 3
at the intersection of lines. Leave the values which are covered by single line.
The following table shows the details.
Subtracted or Added to Uncovered Values and Intersection Lines Respectively
Step 7: Now, draw minimum number of lines to cover all the zeros and check
for optimality. Here in table minimum number of lines drawn is 4 which are
equal to the order of matrix. Hence optimality is reached.
Optimality Matrix

Step 8: Assign the tasks to the operators. Select a row that has a single zero
and assign by squaring it. Strike off remaining zeros if any in that row or
column. Repeat the assignment for other tasks. The final assignment is shown
in table below.
Final Assignment
Therefore, optimal assignment is:

Example : Solve the following assignment problem shown in Table using

Hungarian method. The matrix entries are processing time of each man in
hours.
Assignment Problem
Solution: The row-wise reductions are shown in Table
Row-wise Reduction Matrix

The column wise reductions are shown in Table.

Column-wise Reduction Matrix

Matrix with minimum number of lines drawn to cover all zeros is shown in
Table.

Matrix will all Zeros Covered

The number of lines drawn is 5, which is equal to the order of matrix. Hence
optimality is reached. The optimal assignments are shown in Table.

Optimal Assignment
Therefore, the optimal solution is:

Travelling Salesman Problem

The ‘Travelling salesman problem’ is very similar to the assignment problem

except that in the former, there are additional restrictions that a salesman
starts from his city, visits each city once and returns to his home city, so that
the total distance (cost or time) is minimum.
Procedure:
Step 1: Solve the problem as an assignment problem.
Step 2: Check for a complete cycle or alternative cycles. If the cycle is
complete, Go to Step 4. If not, go to the Step 3.
Step 3: To start with, assign the next least element other than zero, (only for
first allocation) and complete the assignment. Go to Step 2.
Step 4: Write the optimum assignment schedule and calculate the cost/time.
(Note: If there are two non-zero values in the matrix, it means that there are
two optimal
solutions. Calculate the cost for the two allocations and find the optimal
solution.)
Example: A Travelling salesman has to visit five cities. He wishes to start from
a particular city, visit each city once and then return to his starting point. The
travelling cost (in Rs.) of each city from a particular city is given below.
Travelling Salesman Problem
What should be the sequence of the salesman's visit, so that the cost is
minimum?
Solution: The problem is solved as an assignment problem using Hungarian
method; an optimal solution is reached as shown in Table.
Optimal Solution Reached Using Hungarian Method

In this assignment, it means that the travelling salesman will start from city A,
then go to city E and return to city A without visiting the other cities. The cycle
is not complete. To overcome this situation, the next highest element can be
assigned to start with. In this case it is 1, and there are three 1’s. Therefore,
consider all these 1’s one by one and find the route which completes the cycle.

Case 1: Make the assignment for the cell (A, B) which has the value 1. Now,
make the assignments for zeros in the usual manner. The resulting
assignments are shown in table.
Resulting Assignment
The assignment shown in Table 7.42 gives the route sequence
A → B, B → C, C → D, D →E and E → A.
The travelling cost to this solution is
= 2000 + 3000 + 4000 + 5000 + 1000
= Rs.15,000.00
Case 2: If the assignment is made for cell (D, C) instead of (D, E), the feasible
solution cannot be obtained. The route for the assignment will be A → B → C
→ D→ C. In this case, the salesman visits city C twice and cycle is not
complete.
Therefore the sequence feasible for this assignment is
A → B → C → D → E → A.
with the travelling cost of Rs.15,000.00

Queueing theory
Most capacity planning is based around queueing theory, which is the
mathematical study of waiting lines. Agner Krarup Erlang, a Danish engineer
working for the Copenhagen Telephone Exchange, published the first paper on
queueing theory in 1909. It explains (among other things) the powerful
 relationship between resource utilization and response time. Queueing theory
was used to develop modern packet-switching networks that became the
basis for developing the Internet. Important work was performed by Leonard
Kleinrock in the early 1960s.

Queueing means standing in line waiting for resources to become available.

Aside from being the British national pastime (David can say that, as he was
born one of Her Majesty’s loyal subjects, by “facts of birth” as the passport
says), it is the only word in the English language with five consecutive vowels
(in its British spelling queueingwhich we adopt here as this spelling was
adopted by the leading journal in the field, Queueing Systems). In the next few
paragraphs we explain everything you need to know about queueing but didn’t
know you needed to ask.

In designing a good queuing system, it is necessary to have good information

about the model. The characteristics listed below would provide sufficient
information.

1. The arrival pattern.

2. The service mechanism.
3. The queue discipline.
4. The number of customers allowed in the system.
5. The number of service channels.

The Arrival Pattern

 How customers arrive e.g. singly or in groups (batch or bulk arrivals)
 How the arrivals are distributed in time (e.g. what is the probability distribution
of time between successive arrivals (the inter-arrival time distribution))
 Whether there is a finite population of customers or (effectively) an infinite
number

The simplest arrival process is one where we have completely regular arrivals
(i.e. the same constant time interval between successive arrivals). A Poisson
stream of arrivals corresponds to arrivals at random. In a Poisson stream
successive customers arrive after intervals which independently are
exponentially distributed.
 The Poisson stream is important as it is a convenient mathematical model of
many real life queuing systems and is described by a single parameter - the
average arrival rate. Other important arrival processes are scheduled arrivals;
batch arrivals; and time dependent arrival rates (i.e. the arrival rate varies
according to the time of day).

Essential features of Queuing Management system

The essential features of queing management system in operations research

are

The Service Mechanism

 A description of the resources needed for service to begin
 How long the service will take (the service time distribution)
 The number of servers available
 Whether the servers are in series (each server has a separate queue) or in
parallel (one queue for all servers)
 Whether preemption is allowed (a server can stop processing a customer to
deal with another "emergency" customer)

Assuming that the service times for customers are independent and do not
depend upon the arrival process is common. Another common assumption
about service times is that they are exponentially distributed.

The Queue Discipline

In the queue structure, the important thing to know is the queue discipline. The
queue discipline is the order or manner in which customers from the queue are
selected for service.
There are a number of ways in which customers in the queue are served.
Some of these are:
(a) Static queue disciplines are based on the individual customer's status in
the queue. Few of such disciplines are:
i. If the customers are served in the order of their arrival, then this is known as
the first-come, first-served (FCFS) service discipline. Prepaid taxi queue at
 airports where a taxi is engaged on a first-come, first-served basis is an
example of this discipline.
ii. Last-come-first-served (LCFS)-- Sometimes, the customers are serviced in the
reverse order of their entry so that the ones who join the last are served first.
For example, assume that letters to be typed, or order forms to be processed
accumulate in a pile, each new addition being put on the top of them. The
typist or the clerk might process these letters or orders by taking each new
task from the top of the pile. Thus, a just arriving task would be the next to be
serviced provided that no fresh task arrives before it is picked up. Similarly, the
people who join an elevator last are the first ones to leave it.

(b) Dynamic queue disciplines are based on the individual customer attributes

in the queue. Few of such disciplines are:
i. Service in Random Order (SIRO)-- Under this rule customers are selected for
service at random, irrespective of their arrivals in the service system. In this
every customer in the queue is equally likely to be selected. The time of arrival
of the customers is, therefore, of no relevance in such a case.
ii. Priority Service-- Under this rule customers are grouped in priority classes on
the basis of some attributes such as service time or urgency or according to
some identifiable characteristic, and FCFS rule is used within each class to
provide service. Treatment of VIPs in preference to other patients in a hospital
is an example of priority service.

For the queuing models that we shall consider, the assumption would be that
the customers are serviced on the first-come-first-served basis.
The Number of Customers allowed in the System
In certain cases, a service system is unable to accommodate more than the
required number of customers at a time. No further customers are allowed to
enter until space becomes available to accommodate new customers. Such
type of situations are referred to as finite (or limited) source queue. Examples
of finite source queues are cinema halls, restaurants, etc.

On the other hand, if a service system is able to accommodate any number of

customers at a time, then it is referred to as infinite (or unlimited) source
queue. For example, in a sales department, here the customer orders are
received; there is no restriction on the number of orders that can come in, so
that a queue of any size can form.
The Number of Service Channels
The more the number of service channels in the service facility, the greater the
overall service rate of the facility. The combination of arrival rate and service
rate is critical for determining the number of service channels. When there are
a number of service channels available for service, then the arrangement of
service depends upon the design of the system's service mechanism.

Parallel channels means, a number of channels providing identical service

facilities so that several customers may be served simultaneously. Series
channel means a customer go through successive ordered channels before
service is completed. A queuing system is called a one-server model, i.e.,
when the system has only one server, and a multi-server model i.e., when the
system has a number of parallel channels, each with one server.
(a) Arrangement of service facilities in series

(1) Single Queue Single Server

(2) Single Queue, Multiple Server

(b) Arrangement of Service facilities in Parallel
(c) Arrangement of Mixed Service facilities

Arrangements of Service Facilities (a, b, c)

Attitude of Customers
Patient Customer: Customer arrives at the service system, stays in the queue
until served, no matter how much he has to wait for service.
Impatient Customer: Customer arrives at the service system, waits for a
certain time in the queue and leaves the system without getting service due to
some reasons like long queue before him.
Balking: Customer decides not to join the queue by seeing the number of
customers already in service system.
Reneging: Customer after joining the queue, waits for some time and leaves
the service system due to delay in service.
Jockeying: Customer moves from one queue to another thinking that he will
get served faster by doing so.
Quantitative Symbols and Notations

The quantitative symbols and notations used in queuing system are as

follows:

n = Number of customers in the system (both waiting and in service).

λ = Average number of customers arriving per unit of time.

μ = Average number of customers being served per unit of time.

λ / μ = P, traffic intensity.

C = Number of parallel service channels (i,e., servers).

Ls = Average or expected number of customers in the system (both waitingand

in service).
Lq = Average or expected number of customers in the queue.
Ws = Average waiting time in the system (both waiting and in service).
Wq = Average waiting time of a customer in the queue.
Pn = Time independent probability that there are n customers in the
system(both waiting and in service).
Pn (t) = Probability that there are n customers in the system at any time t(both
waiting and in service).

Exponential distribution and Poisson distribution in

Queuing Theory

Both the Poisson and Exponential distributions play a prominent role in

queuing theory. The Poisson distribution counts the number of discrete events
in a fixed time period; it is closely connected to the exponential distribution,
which (among other applications) measures the time between arrivals of the
events. The Poisson distribution is a discrete distribution; the random variable
 can only take nonnegative integer values. The exponential distribution can
take any (nonnegative) real value.

Considering a problem of determining the probability of n arrivals being

observed during a time interval of length t, where the following assumptions
are made.
i. Probability that an arrival is observed during a small time interval (say of length
v) is proportional to the length of interval. Let the proportionality constant be l,
so that the probability is lv.
ii. Probability of two or more arrivals in such a small interval is zero.
iii. Number of arrivals in any time interval is independent of the number in
nonoverlapping time interval.

These assumptions may be combined to yield what probability distributions

are likely to be, under Poisson distribution with exactly n customers in the
system.

Suppose function P is defined as follows:

P (n customers during period t) = the probability that n arrivals will be

observed in a time interval of length t

This is the Poisson probability distribution for the discrete random variable n,
the number of arrivals, where the length of time interval, t is assumed to be
given. This situation in queuing theory is called Poisson arrivals. Since the
arrivals alone are considered (not departures), it is called a pure birth process.
The time between successive arrivals is called inter-arrival time. In the case
where the number of arrivals in a given time interval has Poisson distribution,
inter-arrival times can be shown to have the exponential distribution. If the
inter-arrival times are independent random variables, they must follow an
exponential distribution with density f(t) where,
Poisson and Exponential distribution practice problems

The practice problems of poisson and exponential distributions are given

below

Example : In a factory, the machines break down and require service according
to a Poisson distribution at the average of four per day. What is the probability
that exactly six machines break down in two days?
Solving the Problem using Computer
Example 1 is solved using computer with TORA. Enter into TORA package and
select Queuing Analysis option. Press 'go to input screen' to enter the values.
The input screen is shown in Figure given below. The numbers scenarios is 1
and the value of Lambda is λt = 4 × 2 = 8.