Production and Operations Management

Module 4: Capacity Management

Method study

Job enlargement
Job design Job rotation
Job enrichment

Principles of
motion economy
Work design

Stop watch Time

study
Work measurement
Work Sampling

Work Design is the over all term used for Job design and Work measurement.

Job design aims to organize tasks, duties and responsibilities into a unit of work .
The objective may be:
• to increase Productivity
• to reduce costs.
• job satisfaction
• motivation

Poor job design may lead to

• Lower productivity
• High attrition rate
• Absenteeism
• Complaints
• Sabotage
Objectives of Job design
Technical feasibility – Jobs ( set of tasks) should be able to be performed by the person (s) with y
the equipments and systems available.
Economic feasibility – cost of performing the job should \be as low as possible
Behavioral feasibility- motivation and mental simulation are considered.

Techniques of Job design

Work simplification- Big job is broken down into small parts and assigned to one employee. Less
trained or less skilled persons can do the job. This may also result in
highly repetitive jobs and less job satisfaction.

Job rotation - Persons are assigned different jobs at different times . reduces boredom ,
monotony and exposes employees to different aspects of the process.

Job enlargement - Adding similar tasks to a job . to add variety and autonomy . to make
work more meaningful.
Job enrichment - tasks of planning, organizing and controlling are assigned along with
routine tasks. Objective is more involvement , motivation and satisfaction.

Ergonomics
Ergonomics is concerned with designing of work situations with human characteristics in mind.

1. Human and machine interfaces- some considerations are : location on tools , switches,
parts for assembly , controls, levers, push buttons, Working height, sitting height, left
hand and right hand operations, heights at which readings are taken, weights lifted, forces
applied , direction of force .

2. Environmental factors – which affect morale , productivity , quality and long term heath
problems. Ambient temperature ( 26-38 C) , Noise ( < 90 dB), Lighting( 100 ft-candles
Machines), vibrations, air circulation, comfortable furniture.

Work Study

Work study is concerned with the analysis of work methods and the equipment used in
performing the job, the design of optimum work method and the standardization of proposed
work methods.
Work study covers:
• Method study
• Work Measurement
Objective of work study:
Analysis of present method and to develop a new and better method
• To measure work content by measuring time and to establish standard time.
• To increase the productivity by ensuring best possible man- machine interface
• To reduce cost of production / increase efficiency

Benefits of work study

1. Increased productivity
2. Reduced production costs
3. Better layout
4. Better manpower planning
5. Reduced handling costs
6. Better Morale and satisfaction of employees
7. Standard performance measurement and basis for incentive schemes

Methods study
Method is a technique of observing, recording and examining the present method of performing
the work with a view to develop a cheaper and productive method. It covers work processes,
working conditions, equipments and tools used to carry out the job.

When method study is conducted:

1. High operating cost
2. Heavy rejections
3. Excessive movement of materials and men
4. Production bottle necks
5. Quality problems
6. Poor working conditions
7. Excessive overtime
8. Poor delivery performance

Objectives of Method study:

1. To study present method and propose new and improved method
2. Improvement in productivity and cost
3. Reduce material handling and operator fatigue
4. Elimination of wasteful motions
5. To standardize work methods

Advantages of Method study:

1. Work simplification
2. Improved method( cheaper and productive0
3. Better quality product
4. Improved layout
 5. Better material handling
6. Better work flow
7. Less fatigue to operator
8. Shorter production time
9. Job satisfaction

Method study procedure

1. Selection of work based on present problems and scope for improvement

2. Record relevant facts and information on existing method , use appropriate charts and
diagrams
3. Examining recorded facts ( use what, when , how, who, where, why type of
questioning on collected facts)
4. Developing improved method by
a. Eliminating wasteful tasks
b. Simplifying tasks
c. Combining tasks
d. Evaluating alternatives with respect to cost, savings, feasibility , reaction of
employees, short term and long term implications etc.

5. Installing improved method ( plan, schedule, coordinate, involve all concerned)

6. Maintaining the new method ( feed back on performance towards objectives)

Symbols used in process charts:

Operation Movement /‘
( conversion) Transportation

Inspection Delay / waiting

Storage Combined activity

Recording Charts and diagrams used in method study:

# Chart type Usage

1 Outline process chart Covers only main operations and Inspections
2 Operations process chart Includes operations, inspections and material
inputs
3 Flow process charts Includes sequence of operations, transportation,
inspections, delays and storages.
• For Material or product
• For Man
• For Machine
4 Two handed process charts Depicts the activities of both hands or limbs
5 Multiple activity chart For more than one worker/ machine or equipment

6 Man- machine chart • Worker and machine on common time scale

• Worker and two machines on common time
scale

7 Flow diagram Actual paths followed by materials. Diagram

drawn to scale

8 String diagram Sting used to trace the path of materials or

workmen in a scale plan or a Model. To measure
distances traveled.
9 SIMO chart Simultaneous motion cycle chart . used for cery
small cycle time operations .

Micro motion study is useful for analysis of very small cycle operations, rapid movements and
high production rates. Eg. Sewing, assembly of small parts.
Video pictures are take and analyzed to understand the minute tasks and to eliminate
unnecessary movements. Therbligs which indicate basic body motions of worker is used to
analyse the activities.

Some therbligs are:

Search , Select, Grasp ,Transport empty, Transport loaded, Hold, Release load, Position, Inspect,
Assemble, Disassemble

Principle of motion economy

Aims at minimizing the fatigue of workers due to repetitive motions of various parts of body
such as hands, feet, eyes etc.
Some principles:
• Two hands should begin and complete their motions at the same time
• Two hands should not be idle at the same time except during rest
• Curved motions are preferred to straight line motions
• Fixed place for tools and materials
• Materials to be fed to point of use by feeders
• Materials and tools to be located for best sequence of motions
• Height to be such that alternate suiting and standing is easily possible
• Materials to be prepositions
• Operations to be combined
• Levers, clamps to have greatest mechanical advantage
Work Measurement
Work measurement is concerned with techniques to establish work content of specified task by
measuring the time required to carry out the job at defined standard of performance by a
qualified worker.

Qualified worker ( ILO Definition)

A qualified worker is one who has the necessary physical attributes, intelligence, education and
skills and knowledge to carry out the work to satisfactory standards of safety, quality and
quantity

Objectives of Work Measurement

• Improved planning and control
• Basis for sound incentive schemes
• Better utilization of manpower
• Better labour productivity
• Better labour cost control

Work measurement procedure: ( arriving at standard time for the job)

1. Divide the job into elements
2. Record observed time for each element by
• Time study
• Synthesis
• Analytical estimation
• Predetermined motion time system ( PMTS) ( for basic body movements)
3. Establish elemental value by normalizing observed values
4. Add relaxation allowances ( personal, fatigue)
5. Add contingency allowances ( for non-repetitive elements)
6. Process allowance ( for forced idleness , wating for operation to complete)

Time study
Determination of amount of time required to perform a unit of work at defined level of
performance.
Objective of Time study
1. To set standards of performance
2. To determine labour costs
3. To balance the work of operators
4. To establish a incentive scheme

Conducting time study

1. Select job
2. Select worker to be studied
3. Plan and stopwatch study
 a. divide into elements. Elements may be repetitive, occasional, manual ,
machine foreign etc
b. Measure time with stop watch
c. Note rating factor ( normal pace of work is equivalent of walking 4 kmph )
4. Determine normal time for each element by:
Normal time = observed time x rating factor

Synthesis method

Synthesis method takes values of normal time foe reach element from the data base
developed and available . data base has elemental times for all similar job elements eg.`
loading, unloading, clamping, checking etc.
Advantages: less time to establish, reliable , good for estimation for new jobs

Analytical estimation
Takes data from elemental time data base as far as possible. Estimation of time is made for
remaining elements based on experience
Advantages : good for non-repetitive jobs and for estimation for new jobs

Predetermined motion time systems

Times for basic motions ( Therbligs ) are established in TMUs ( time measurement units) .
1 TMU =0.036 sec. Times for reach, move , grasp etc are available in TMUs.

Problem1:
Calculate standard production per shift of 8 hours with following data.
Observed time per unit= 5 mins
Rating factor =120%
Total allowance =33 1/3 % of Normal time

Ans: observed time X observed rating = Normal time x normal rating

5 x 120 =Normal time X 100 : normal tine = 5 x 120 / 100 = 6 min.
allowance = 33 1/3 percent = 1/3 of normal time = 6/3 =2 min.
Standard time =normal time + allowance = 6 +2 =8 min
Standard production / shift = time available / standard time per piece = (8 x 60)/ 8 =60 pcs.

Problem 2;
Time for making 4 pieces of an item with elements a, b, c, d is as follows .. Fatigue
allowance is 25% of normal time. find the standard time per piece

Element Cycle 1 Cycle 2 Cycle 3 Cycle 4 Rating

( min) ( min) ( min) ( min)
a 1.2 1.3 1.3 1.4 85
b 0.7 0.6 0.65 0.75 120
c 1.4 1.3 1.3 1.2 90
d 0.5 0.5 0.6 0.4 70

Ans
# average observed time Normal time
a 1.3 1.105
b 0.675 0.81
c 1.3 1.17
d 0.5 0.35

Total Normal time = 3.435

Allowance = 25/100 X 3.435 = 0.858 : Standard time = 3.435 + 0.858 =4.29 min.
Standard time per pc = 4.29 / 4 =1.073 min per pc

Work sampling

Work sampling is based statistical theory of random sampling and probability of Normal distribution.
Normally used for determining fraction of time the machines are idle or the operators are idle. More
the number of samples taken , less is the error.

No. of observations n= pqz2 / a2

p= percentage of observations where machine was idle

q= 100 -p ( percentage machine not idle)
z= desired confidence level ( z=1 for 68.3%, 2 for 95.4%, 3 for 99%)
a= desired accuracy or error ( in percentage)

Advantages
• Economical
• Not necessary to use trained work study experts
• No stop watch measurements

Limitations
• Little value to improve the operations
• If random sampling is not done results will be erroneous

Problem
Nine observations were made for machine busy or idle. If an accuracy of +- 15% is required
at a confidence level of 95.4%, determine the sample size necessary.

No. working

1 yes
 2 yes
3 yes
4 no
5 yes
6 no
7 no
8 yes
9 yes

Ans p= 3/9 X 100 = 33.33% ; q =66.67% ; z=2 ; a= 15%:

n= pqz2 / a2 : n= 33.33 x 66.67 x (2 x 2) / 15 x 15 = 39.50 = 40 observations

Productivity

Production – refers to total out put : 1000 pcs per month ; 100 tons of castings per month
Productivity = Out put / input = Quantity of goods and services / Amount of resources used

Productivity can be improved by:

• Increase production with same amount of resources
• Decrease resources while keeping the production same
• Add few resources and get higher production
• Allow slight production decrease while utilizing significantly less resources

Productivity can be applied to labour, space, money, materials energy used .

Ways of measuring labour productivity;

• Output per man –hour = Output / man hours used ( 50 pcs per man-hr)
• Labour hour per unit of out put = man-hours/ output ( 100man-hrs per part)
• Added value per unit of labour cost = added value for the product/ total wages ( eg. 8, 10 )

Some ways to increase productivity:

1. Reducing rejections and rework
2. Reducing cycle time
3. Reducing setup time
4. Reducing wasted time by method study
5. Good training
6. Automation
Learning curve
Workers take more time in the beginning when the task or product is new. As they gain
experience the performance improves. The reduction in time taken is drastic in the beginning ,
tapers off and finally the time taken is constant .

There are mathematical models to estimate the time taken such as :

• Arithmetic analysis
• Logarithmic analysis

Typical learning curve is as below

Time
taken

No. of components

Aggregate planning

Aggregate planning involves best quantities to be produced during the time period ( normally
6months to 18 months) at the lowest cost. It involves:
• Planning work force size
• Production rate
• Inventory levels

Aggregate production planning involves determining the output levels of product groups for the
planning period.
Aggregate planning or aggregate capacity planning consists of devising a plan to support the
production required.

Why aggregate planning is required?

1. It facilitates loading of facilities fully. Minimizes over loading and under loading
2. Provision of production capacity to meet aggregate demand
3. Helps in Systematic production in spite of peaks and valleys in customer demand.
4. Utilization of resources is enhanced

Steps in Aggregate capacity planning

1. Prepare sales forecast for each product over the planning period (normally 6-18 months)
2. Indicating quantities for weeks/ months .
3. Sum up individual product requirements into one arrogate demand for the factory.
4. Convert aggregate demand into labour, materials, machines and other elements of
production capacity
5. Identify alternate resources for supplying necessary production capacity , if required.
6. Develop alternatives and select one which meets the objectives of the organization.

Production capacity may have to be computed with respect to:

1. Size of work force
2. Use of over time or idle time
3. Inventories or back orders
4. Use of subcontractors

Costs associated with aggregate planning are:

Pay roll costs
Cost of overtime
Second shift/ third shift operation
Cost of hiring or laying off workers
Cost of inventories
Cost of backlogs ( liquidity damages – reduced price in case of delays as a part of contract)

Approaches to Aggregate planning

Topdown approach – consideration is given to product families , products and quantities. Does
not consider small capacity differences that may exist among specific products

Bottomup approach- each product with details at lower level ( say parts) are taken into
consideration while developing the plan. This the most popular method of arriving at aggregate
plan.

Capacity planning

Capacity indicates the ability of the firm to meet the market demand
Types of capacity planning
• Long range capacity planning
• Medium range capacity planning
• Short range capacity planning
Long range capacity planning
• Meets corporate / business objectives
• Normally for 3 or more years ahead
• Planning of land
• Planning of facilities
• Planning of technology and equipments
• Planning of human resources

Medium range capacity planning

• Making of aggregate plans
• Normally for 6 to 18 months or more years ahead
• Work force reallocation
• Inventory management
• Work force recruitment
• Second shift and third shift operation
• Subcontracting ( development and permanent loading)
• Make –buy decisions

Short tem capacity planning

• Normally for 3-6months
• Overtime management
• Control of inventories ( raw material, WIP and finished goods)
• Work force reallocation
• Subcontracting
• Alternate tooling

Capacity requirement planning (CRP)

Capacity requirement planning is concerned with determining the following requirement for a
Master production schedule.( MPS)
• What and when materials are required ( MRP – Material requirement planning)
• Machine hours required
• Labour hours and categories required

Major CRP inputs are:

• Planned orders and released orders
• Loading information from work centre file ( standard hours for jobs and hours available)
• Routing information and alternate routing , if any

Major CRP outputs are

• Load reports
• Revisions to MPS for rescheduling if any
• Verfication of materials planned as per MRP system

If the load reports indicate inadequacy of capacity, overtime or subcontracting to be resorted to

or changes to be made to MPS.

Strategies to meet non –uniform demand

Strategy 1: Absorbing demand fluctuations by varying inventory levels or allowing backlogs

Method1- Produce in earlier period and hold in inventory until the product is demanded
Cost- Inventory carrying cost

Method 2- deliver product when capacity is available

Result- lost revenue, lost customers, unhappy customers

Stategy2 : Change production according to demand

Method 1- Work additional hours with out changing work force size
Cost- overtime pay ( normally double)

Method 2- Add work force for higher production

Cost- excessive labour charges during period of slack demand

Method 3- Sub -contract

Cost- company overhead and sub-contact cost
Quality and production schedules may be affected

Strategy 3 : vary work force according to demand

Method1- Hire additional personnel when demand increases

Cost- cost of advertisement, interview, training
Skilled labour may not be available when needed

Method 2- lay-off when demand reduces

Cost- cost of lay off ( half pay during lay off)
Capital investments are idle

Problems;
Order position for a certain product is as below
Month Units Month Units
1 13, 000 7 11,000
2 12, 000 8 7, 000
3 10, 000 9 15, 000
4 9, 000 10 13, 000
5 11, 000 11 12,000
6 13, 000 12 10,000
Given:
Capacity of shop is10,000 per month on regular basis
Overtime capacity is 3000 per month
Sub-contract capacity is3000 per month with 3 months lead time
Initial inventory is 1000 units

Production cost is Rs 5 / unit on regular basis

Production cost is Rs 9 / unit on Overtime basis
Subcontract cost is Rs 7 / unit
Cost of carrying inventory is 1.00 per month per unit

No back log of orders is allowed. Work out the total production cost on:
• leveled production basis
• No inventory basis
and suggest which to be adopted

Ans :
Plan A : Level production basis

Month Units Regular Overtime Subcontract From Inventory

production production production Inventory carried
( stock) ( stock)
1 13, 000 10,000 2000 nil 1000
2 12, 000 10, 000 2000 nil
3 10, 000 10, 000
4 9, 000 10, 000 1000
5 11, 000 10, 000 1000
6 13, 000 10, 000 3000
7 11,000 10, 000 1000
8 7, 000 10, 000 3000
9 15, 000 10, 000 2000 3000
10 13, 000 10, 000 3000
11 12,000 10, 000 2000
12 10,000 10, 000
Total 1, 36, 000 1, 20, 000 4000 11,000 1000*
* from initial inventory

Cost of production;
1. Regular basis :1,20, 000 X Rs .5 = Rs. 6, 00, 000
2. Overtime basis: 4000 x Rs 9 = Rs 36, 000
 3. Subcontract basis 11, 000 X Rs 7 = Rs 77, 000
4. Inventory carrying cost : 1000 X 1 (month) X Rs 1 + 3000 x 1 x Rs 1 = Rs 4000
5. Total cost = Rs 7, 17, 000

Plan B : No Inventory basis

Month Units Regular Overtime Subcontract From
production production production Inventory
( stock)
1 13, 000 10,000 2000 nil 1000
2 12, 000 10, 000 2000 nil
3 10, 000 10, 000
4 9, 000 9, 000
5 11, 000 10, 000 1000
6 13, 000 10, 000 3000
7 11,000 10, 000 1000
8 7, 000 7, 000
9 15, 000 10, 000 2000 3000
10 13, 000 10, 000 3000
11 12,000 10, 000 2000
12 10,000 10, 000
Total 1, 36, 000 1, 16, 000 6000 13000 1000

Cost of production;
1. Regular basis :1,16, 000 X Rs .5 = Rs. 5, 80, 000
2. Overtime basis: 6000 x Rs 9 = Rs 54, 000
3. Subcontract basis 13, 000 X Rs 7 = Rs 91, 000
4. Inventory carrying cost : nil
5. Total cost = Rs 7, 25, 000

Plan A is to be adopted because of lower total production cost.