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PREFACE TO THE SECOND EDITION
The second edition of the book Production and Operations Management incorporates several
suggestions offered by our colleagues and students all over the country.
In this edition we have endeavored to strengthen the basic characteristics of the book. The subject
matter has been presented systematically in ten chapters, which can enable the reader to master the
topics covered without any additional guidance. In keeping with the basic objective of making the
learning of the ‘Concept and Principles in Production and Operations Management’, the following
chapters have been revised as per the suggestions.
Chapter 1 on Introduction to POM was revised with the addition of Managing Global
Operations with the concept of globalization. Chapter 2 on Plant Location and Layout was revised
with locational models and the design of product and process layout. Service layout was also included.
Chapter 4 on Materials Management was revised with the addition of special purchasing system.
Chapter 6 on Quality Control was revised with the addition of ISO 14000 series along with the
recognized bodies for ISO certification. Chapter 8 on Maintenance Management was revised with
the concept of Total Preventive Maintenance.
The revised edition also contains Caselets which provides additional input to understand the
subject with practical application of the techniques used in each chapter.
For the development of application skill of the theoretical knowledge of production and operation
management, it is necessary to arrange for a visit or conduct the project work either by individual or
group of students in a manufacturing or service organisation.
In this context the revised edition contains skill development/practicals in each chapter. For this
purpose the students are adviced to visit a Fast Food Restaurant like Pizza Hut or Pizza Corner for
getting the information for the questions given under skill development in each chapter.
In addition to the caselet, cases are given to understand the entire concept of production and
operations management at the end of the book.
Complete care has been taken to make the book error free. However, mistakes might have crept
inadvertently. Readers finding any error are requested to bring it to our notice, for enabling us to rectify
them in our future editions.
We are grateful to New Age International (P) Limited, Publishers, and the editorial department for
their untiring effort to publish the book within a short span of time with a nice get up.
Our acknowledgements are also due to Dr. Poornima Anil Kumar and Mrs. Bharathi Suresh,
without whose support and sacrifice this work would not have been completed by the deadline.
Finally, our acknowledgement is due to the Almighty who has blessed us with the knowledge,
required for writing this book.
AUTHORS
PREFACE TO THE FIRST EDITION
Production and Operations Management has been recognised as an important factor in a country’s
economic growth. The traditional view of manufacturing management is the concept of Production
Management with the focus on economic efficiency in manufacturing. Later the new name
Operations Management was identified, as service sector became more prominent. Rapid changes in
technology has posed numerous opportunities and challenges which have resulted in enhancement of
manufacturing capabilities through new materials, facilities, techniques and procedures. Hence,
managing a service/production system has become a major challenge in the global competitive
environment. Production and Operations Management leads the way for the organisations to achieve
its goals with minimum effort. Hence the study of the subject at undergraduate and postgraduate level
has more significance.
This book on ‘Production and Operations Management’ covers the complete syllabus of Bachelor
of Business Management of Bangalore University, however the coverage is wide enough to include the
requirements of the other Indian Universities and professional courses like MBA and Engineering.
Being student-friendly is the unique feature of this book. The subject matter has been presented
systematically in ten chapters, which can enable the reader master the topics covered without any
additional guidance.
Complete care has been taken to make the book error free. However, mistakes might have crept
inadvertently. Readers finding any error are requested to bring it to our notice, for enabling us to rectify
them in our future editions.
We are grateful to Mr. Saumya Gupta, Managing Director and Mr. Babu V.R. of New Age
International (P) Ltd., for providing us this opportunity to share our knowledge with you.
Our acknowledgements are also due to Dr. Poornima Anil Kumar and Mrs. Bharathi Suresh,
Mr. K. Raghavendra and M.N. Ramachandra without whose support and sacrifice this work would
not have been completed by the deadline.
Finally, our acknowledgement is due to the Almighty who has blessed us with the knowledge,
required for writing this book.
AUTHORS
CONTENTS
Preface to the Second Edition v
Preface to the First Edition vi
1 INTRODUCTION TO PRODUCTION AND OPERATION MANAGEMENT 1–21

1.1 Introduction 1
1.2 Historical Evolution of Production and Operations Management 1
1.3 Concept of Production 3
1.4 Production System 3
1.4.1 Classification of Production System 4
1.5 Production Management 7
1.5.1 Objectives of Production Management 7
1.6 Operating System 8
1.6.1 Concept of Operations 8
1.6.2 Distinction between Manufacturing Operations and Service Operations 8

1.7 Operations Management 9
1.7.1 A Framework for Managing Operations 9
1.7.2 Objectives of Operations Management 11
1.8 Managing Global Operations 12
1.9 Scope of Production and Operations Management 13
Exercises 17
Skill Development 18
Caselet 18
2 PLANT LOCATION AND LAYOUT 22–64

2.1 Introduction and Meaning 22
2.2 Need for Selecting a Suitable Location 22
2.3 Factors Influencing Plant Location/Facility Location 27
2.3.1 General Locational Factors 27
2.3.2 Specific Locational Factors for Manufacturing Organisation 31
2.3.3 Specific Locational Factors for Service Organisation 32
2.4 Location Theories 33
2.5 Location Models 34
2.5.1 Factor Rating Method 34
2.5.2 Weighted Factor Rating Method 35
2.5.3 Load-distance Method 36
2.5.4 Centre of Gravity 38
2.5.5 Break Even Analysis 39

2.6 Locational Economics 41
2.7 Plant Layout 42
2.7.1 Objectives of Plant Layout 42
2.7.2 Principles of Plant Layout 43
2.8 Classification of Layout 43
2.8.1 Process Layout 43
2.8.2 Product Layout 44
2.8.3 Combination Layout 45
2.8.4 Fixed Position Layout 46
2.8.5 Group Layout (or Cellular Layout) 46
2.9 Design of Product Layout 48
2.10 Design of Process Layout 52
2.11 Service Layout 55
2.12 Organisation of Physical Facilities 56
Exercises 63
3 MATERIAL HANDLING 65–74
3.2 Objectives of Material Handling 66
3.3 Principles of Material Handling 66
3.4 Selection of Material Handling Equipments 67
3.5 Evaluation of Material Handling System 68
3.6 Material Handing Equipments 69
3.7 Guidelines for Effective Utilisation of Material Handling Equipments 73
3.8 Relationship Between Plant Layout and Material Handling 73
Exercises 74
4 MATERIALS MANAGEMENT 75–106

4.2 Scope or Functions of Materials Management 75
4.3 Material Planning and Control 77
4.3.1 Techniques of Material Planning 78
4.4 Purchasing 78
4.4.1 Objectives of Purchasing 79
4.4.2 Parameters of Purchasing 79
4.4.3 Purchasing Procedure 82

4.4.4 Selection of Suppliers 84
4.4.5 Special Purchasing Systems 88
4.5 Stores Management 89
4.5.1 Codification 90
4.6 Inventory Control or Management 91
4.6.1 Meaning of Inventory 91
4.6.2 Reasons for Keeping Inventories 91

4.6.3 Meaning of Inventory Control 92
4.6.4 Objectives of Inventory Control 92
4.6.5 Benefits of Inventory Control 92
4.6.6 Techniques of Inventory Control 93
4.6.7 Inventory Model 94
4.7 Standardization 98
4.7.1 Advantages of Standardization 99
4.7.2 Disadvantages of Standardization 100
4.8 Simplification 100
4.8.1 Advantages of Simplification 100
4.9 Value Analysis 101
4.9.1 Value Analysis Framework 101
4.9.2 Steps in Value Analysis 101
4.10 Ergonomics (Human Engineering) 102
4.10.1 Objectives of Human Engineering 103
4.11 Just-In-Time (JIT) Manufacturing 103
4.11.1 Seven Wastes 103
4.11.2 Benefits of JIT 104
Exercises 105
Caselet 106
5 PRODUCTION PLANNING AND CONTROL 107–130
5.2 Need for Production Planning and Control 108
5.3 Objectives of Production Planning and Control 109
5.4 Phases of Production Planning and Control 109
5.4.1 Planning Phase 110
5.4.2 Action Phase 111
5.4.3 Control Phase 111
5.5 Functions of Production Planning and Control 112
5.5.1 Parameters for PPC 113
5.6 Operations Planning and Scheduling Systems 114
5.7 Aggregate Planning 118
5.8 Master Production Schedule (MPS) 119
5.9 Material Requirement Planning (MRP) 120
5.9.1 Objectives of MRP 120
5.9.2 MRP System 120
5.10 Capacity Planning 121
5.10.1 Measurement of Capacity Planning 122
5.10.2 Process of Capacity Planning 123
5.11 Routing 124
5.11.1 Techniques of Routing 125
5.12 Scheduling 125
5.12.1 Principles of Scheduling 126
5.12.2 Inputs to Scheduling 126
5.12.3 Scheduling Strategies 126
5.12.4 Types of Scheduling 127
5.13 Scheduling Methodology 127
Exercises 129
Caselet 130
6 QUALITY CONTROL 131–170
6.1 Introduction 131
6.2 Quality 132
6.2.1 Fundamental Factors Affecting Quality 132
6.3 Control 133
6.3.1 Need for Controlling Quality 133
6.4 Inspection 134
6.4.1 Objectives of Inspection 134
6.4.2 Purpose of Inspection 134
6.4.3 Types of Inspection 135
6.4.4 Methods of Inspection 137
6.4.5 Drawbacks of Inspection 137
6.5 Quality Control 137
6.5.1 Types of Quality Control 138
6.5.2 Steps in Quality Control 138
6.5.3 Objectives of Quality Control 139
6.5.4 Benefits of Quality Control 139
6.5.5 Seven Tools for Quality Control 139
6.5.6 Causes of Variation in Quality 143
6.6 Statistical Process Control 144
6.6.1 Control Charts 144
6.6.2 Acceptance Sampling 152
6.7 Quality Circles 154
6.7.1 Benefits of QC 154
6.8 Total Quality Management 155
6.8.1 Benefits of TQM 156
6.9 ISO 9000 Series 156
6.9.1 Objectives of ISO 9000 Series 156
6.9.2 Benefits of ISO 9000 Series 157
6.9.3 Steps in ISO 9000 Registration 157
6.10 Application ISO 9000: ISO 14000 Series 158
6.10.1 The Benefits of ISO 14000 Certification 159
Annexure–I 159
Annexure–II 162
Exercises 163
Caselet 165
7 WORK STUDY (TIME AND MOTION STUDY) 171–204
7.2 Productivity 172
7.2.1 Factors Influencing Productivity 172
7.2.2 Total Productivity Measure (TPM) 174
7.2.3 Partial Productivity Measures (PPM) 174
7.2.4 Productivity Improvement Techniques 175
7.3 Work Study 178
7.3.1 Advantages of Work Study 179
7.4 Method Study 179
7.4.1 Objectives of Method Study 180
7.4.2 Scope of Method Study 180
7.4.3 Steps or Procedure Involved in Methods Study 180
7.4.4 Selection of the Job for Method Study 182
7.4.5 Recording Techniques for Method Study 183
7.5 Motion Study 190
7.5.1 Principles of Motion Study 190
7.5.2 Recording Techniques of Motion Study 191
7.6 Work Measurement 192
7.6.1 Objectives of Work Measurement 192
7.6.2 Techniques of Work Measurement 192
7.7 Time Study 193
7.7.1 Steps in Making Time Study 194
7.7.2 Computation of Standard Time 194
Exercises 199
Caselet 200
8 MAINTENANCE MANAGEMENT 205–226
8.2 Objectives of Maintenance 205
8.3 Types of Maintenance 206
8.3.1 Breakdown (Reactive) Maintenance 206
8.3.2 Preventive Maintenance 207
8.3.3 Predictive Maintenance 208
8.4 Maintenance Planning 210
8.5 Maintenance Scheduling 211
8.6 Maintenance Schedule Techniques 212
8.6.1 Modern Scientific Maintenance Methods 212
8.6.2 Six Sigma Maintenance 214
8.6.3 Enterprise Asset Management (EAM) 215
8.6.4 Lean Maintenance 215
8.6.5 Computer Aided Maintenance 215
8.7 Total Productive Maintenance (TPM) 216
8.7.1 Similarities and Differences between TQM and TPM 217
8.7.2 Pillars of TPM 217
Exercises 226
9 WASTE MANAGEMENT 227–230
9.3 Identification and Control of Waste 228

9.4 Disposal of Scrap 229
Exercises 230
10 AUTOMATION 231–249
10.2 Types of Automation 231
10.3 Computer Integrated Manufacturing 233
10.4 Reasons for Automation 234
10.5 Advantages of Automation 235
10.6 Disadvantages of Automation 235
10.7 Automation Strategies 236
10.8 Automated Flow Lines 237
10.9 Automated Guided Vehicles Systems 238
10.9.1 Types of AGVS 239
10.9.2 Applications of Automated Guided Vehicle Systems 239
10.10 Automated Storage/Retrieval Systems 240
10.10.1 Types of AS/RS 241
10.10.2 Basic Components of an AS/RS 241
10.11 Carousel Storage Systems 242
10.12 Carousel Storage Applications 242
Exercises 243
Caselet 244
GLOSSARY 250–258
EXAMINATION QUESTION BANK 259–271
9.2 Reasons for Generation and Accumulation of Obsolete, Surplus and Scrap Items 227
1
INTRODUCTION TO PRODUCTION AND OPERATION
MANAGEMENT
C HA PTER O UTLINE
1.1 Introduction 1.7 Operations Management
1.2 Historical Evolution of Production and 1.8 Managing Global Operations
Operations Management 1.9 Scope of Production and Operations
1.3 Concept of Production Management
1.4 Production System •Exercises
1.5 Production Management •Skill Development
1.6 Operating System •Caselet
1.1 INTRO DUC TIO N

Production/operations management is the process, which combines and transforms various
resources used in the production/operations subsystem of the organization into value added
product/services in a controlled manner as per the policies of the organization. Therefore, it is that
part of an organization, which is concerned with the transformation of a range of inputs into the
required (products/services) having the requisite quality level.
The set of interrelated management activities, which are involved in manufacturing certain
products, is called as production management. If the same concept is extended to services
management, then the corresponding set of management activities is called as operations
management.
1.2 HISTORIC AL EVOLUTION OF PRODUC TION AND OPERATIONS MANAG EMENT
For over two centuries operations and production management has been recognised as an
important factor in a country’s economic growth.
1
The traditional view of manufacturing management began in eighteenth century when Adam
Smith recognised the economic benefits of specialisation of labour. He recommended breaking of
jobs down into subtasks and recognises workers to specialised tasks in which they would become
highly skilled and efficient. In the early twentieth century, F.W. Taylor implemented Smith’s
theories and developed scientific management. From then till 1930, many techniques were
developed prevailing the traditional view. Brief information about the contributions to
manufacturing management is shown in the Table 1.1.
TABLE 1.1 Historical summary of operations management
Date Contribution Contributor
1776 Specialization of labour in manufacturing Adam Smith
1799 Interchangeable parts, cost accounting Eli Whitney and others
1832 Division of labour by skill; assignment of jobs by skill;
basics of time study Charles Babbage
1900 Scientific management time study and work study
developed; dividing planning and doing of work Frederick W. Taylor
1900 Motion of study of jobs Frank B. Gilbreth
1901 Scheduling techniques for employees, machines jobs in
manufacturing Henry L. Gantt
1915 Economic lot sizes for inventory control F.W. Harris
1927 Human relations; the Hawthorne studies Elton Mayo
1931 Statistical inference applied to product quality: quality
control charts W.A. Shewart
1935 Statistical sampling applied to quality control: inspection H.F. Dodge & H.G.
sampling plans Roming
1940 Operations research applications in World War II P.M. Blacker and others.
1946 Digital computer John Mauchlly and
J.P. Eckert
1947 Linear programming G.B. Dantzig, Williams &
others
1950 Mathematical programming, on-linear and stochastic A. Charnes, W.W. Cooper
processes & others
1951 Commercial digital computer: large-scale computations

available. Sperry Univac
1960 Organizational behaviour: continued study of people at
work L. Cummings, L. Porter
1970 Integrating operations into overall strategy and policy, W. Skinner J. Orlicky and
Computer applications to manufacturing, Scheduling and G. Wright
control, Material requirement planning (MRP)
1980 Quality and productivity applications from Japan: W.E. Deming and
robotics, CAD-CAM J. Juran.
Production management becomes the acceptable term from 1930s to 1950s. As F.W.
Taylor’s works become more widely known, managers developed techniques that focussed on
economic efficiency in manufacturing. Workers were studied in great detail to eliminate wasteful
efforts and achieve greater efficiency. At the same time, psychologists, socialists and
other social scientists began to study people and human behaviour in the working environment. In
addition, economists, mathematicians, and computer socialists contributed newer, more
sophisticated analytical approaches.
With the 1970s emerges two distinct changes in our views. The most obvious of these,
reflected in the new name operations management was a shift in the service and manufacturing
sectors of the economy. As service sector became more prominent, the change from ‘production’
to ‘operations’ emphasized the broadening of our field to service organizations. The second, more
suitable change was the beginning of an emphasis on synthesis, rather than just analysis, in
management practices.
1.3 CONCEPT OF PRODUCTION
Production function is that part of an organization, which is concerned with the transformation of
a range of inputs into the required outputs (products) having the requisite quality level.
Production is defined as “the step-by-step conversion of one form of material into another
form through chemical or mechanical process to create or enhance the utility of the product to
the user.” Thus production is a value addition process. At each stage of processing, there will be
value addition.
Edwood Buffa defines production as ‘a process by which goods and services are created’.
Some examples of production are: manufacturing custom-made products like, boilers with a
specific capacity, constructing flats, some structural fabrication works for selected customers,
etc., and manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.
1.4 PRO DUC TIO N SYSTEM
The production system of an organization is that part, which produces products of an
organization. It is that activity whereby resources, flowing within a defined system, are combined
and transformed in a controlled manner to add value in accordance with the policies
communicated by management. A simplified production system is shown above.
The production system has the following characteristics:

1. Production is an organized activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and
improvesystem performance.
1.4.1 C la ssific a tion of Produc tion System

Production systems can be classified as Job Shop, Batch, Mass and Continuous Production
systems.
JOB SHOP PRODUCTION
Job shop production are characterised by manufacturing of 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.
Characteristics
The Job-shop production system is followed when there is:
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,
capacitiesfor 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
learningopportunities.
3. Full potential of operators can be utilised.
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.
BATCH PRODUCTION
Batch production is defined by American Production and Inventory Control Society (APICS) “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.” It is characterised by the manufacture of
limited number of products produced at regular intervals and stocked awaiting sales.
Characteristics
Batch production system is used under the following circumstances:
1. When there is shorter production runs.
2. When plant and machinery are flexible.
3. When plant and machinery set up is used for the production of item in a batch andchange
of set up is required for processing the next batch.
4. When manufacturing lead time and cost are lower as compared to job order production.
Advantages
Following are the advantages of batch production:
1. Better utilisation of plant and machinery.
2. Promotes functional specialisation.
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.
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 standardisation exists and all outputs
follow the same path.
Characteristics
Mass production is used under the following circumstances:
1. Standardisation 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 utilisation 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.
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.
Characteristics
Continuous production is used under the following circumstances:
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. Standardisation of product and process sequence.
2. Higher rate of production with reduced cycle time.
3. Higher capacity utilisation 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.
1.5 PRO DUC TIO N MA NA G EMENT
Production management is a process of planning, organizing, directing and controlling the
activities of the production function. It combines and transforms various resources used in the
production subsystem of the organization into value added product in a controlled manner as per
the policies of the organization.
E.S. Buffa defines production management as, “Production management deals with
decision making related to production processes so that the resulting goods or services are
produced according to specifications, in the amount and by the schedule demanded and out of
minimum cost.”
1.5.1Objectives of Production Management

The objective of the production management is ‘to produce goods services of right quality and
quantity at the right time and right manufacturing cost’.
1. RIGHT QUALITY
The quality of product is established based upon the customers needs. The right quality is not
necessarily best quality. It is determined by the cost of the product and the technical
characteristics as suited to the specific requirements.
2. RIGHT QUANTITY
The manufacturing organization should produce the products in right number. If they are
produced in excess of demand the capital will block up in the form of inventory and if the
quantity is produced in short of demand, leads to shortage of products.
3. RIGHT TIME
Timeliness of delivery is one of the important parameter to judge the effectiveness of production
department. So, the production department has to make the optimal utilization of input resources
to achieve its objective.
4. RIGHT MANUFACTURING COST
Manufacturing costs are established before the product is actually manufactured. Hence, all
attempts should be made to produce the products at pre-established cost, so as to reduce the
variation between actual and the standard (pre-established) cost.
1.6 O PERA TING SYSTEM
Operating system converts inputs in order to provide outputs which are required by a customer. It
converts physical resources into outputs, the function of which is to satisfy customer wants i.e., to
provide some utility for the customer. In some of the organization the product is a physical good
(hotels) while in others it is a service (hospitals). Bus and taxi services, tailors, hospital and
builders are the examples of an operating system.
Everett E. Adam & Ronald J. Ebert define operating system as, “An operating system (
function) of an organization is the part of an organization that produces the organization’s
physical goods and services.”
Ray Wild defines operating system as, “An operating system is a configuration of resources
combined for the provision of goods or services.”
1.6.1 Concept of Operations

An operation is defined in terms of the mission it serves for the organization, technology it
employs and the human and managerial processes it involves. Operations in an organization can
be categorised into manufacturing operations and service operations. Manufacturing operations is
a conversion process that includes manufacturing yields a tangible output: a product, whereas, a
conversion process that includes service yields an intangible output: a deed, a performance, an
effort.
1.6.2Distinc tion between Ma nufa c turing O pera tions a nd Servic e O pera tions
Following characteristics can be considered for distinguishing manufacturing operations with
service operations:
1. Tangible/Intangible nature of output
2. Consumption of output
3. Nature of work (job)
4. Degree of customer contact
5. Customer participation in conversion
6. Measurement of performance.
Manufacturing is characterised by tangible outputs (products), outputs that customers
consume overtime, jobs that use less labour and more equipment, little customer contact, no
customer participation in the conversion process (in production), and sophisticated methods for
measuring production activities and resource consumption as product are made.
Service is characterised by intangible outputs, outputs that customers consumes immediately,

jobs that use more labour and less equipment, direct consumer contact, frequent customer
participation in the conversion process, and elementary methods for measuring conversion
activities and resource consumption. Some services are equipment based namely rail-road
services, telephone services and some are people based namely tax consultant services, hair
styling.
1.7 O PERA TIO NS MA NA G EMENT
1.7.1 A Framework for Managing Operations

Managing operations can be enclosed in a frame of general management function as shown in
Fig. 1.3. Operation managers are concerned with planning, organizing, and controlling the
activities which affect human behaviour through models.
PLANNING
Activities that establishes a course of action and guide future decision-making is planning. The
operations manager defines the objectives for the operations subsystem of the organization, and
the policies, and procedures for achieving the objectives. This stage includes clarifying the role
and focus of operations in the organization’s overall strategy. It also involves product planning,
facility designing and using the conversion process.
ORGANIZING
Activities that establishes a structure of tasks and authority. Operation managers establish a
structure of roles and the flow of information within the operations subsystem. They determine
the activities required to achieve the goals and assign authority and responsibility for carrying
them out.
CONTROLLING
Activities that assure the actual performance in accordance with planned performance. To
ensure that the plans for the operations subsystems are accomplished, the operations manager
must exercise control by measuring actual outputs and comparing them to planned operations
management. Controlling costs, quality, and schedules are the important functions here.
BEHAVIOUR
Operation managers are concerned with how their efforts to plan, organize, and control affect
human behaviour. They also want to know how the behaviour of subordinates can affect
management’s planning, organizing, and controlling actions. Their interest lies in decision-
making behaviour.
MODELS
As operation managers plan, organise, and control the conversion process, they encounter many
problems and must make many decisions. They can simplify their difficulties using models like
aggregate planning models for examining how best to use existing capacity in short-term, break
even analysis to identify break even volumes, linear programming and computer simulation for
capacity utilisation, decision tree analysis for long-term capacity problem of facility expansion,
simple median model for determining best locations of facilities etc.
1.7.2 Objectives of Operations Management
Objectives of operations management can be categorised into customer service and resource
utilisation.
CUSTOMER SERVICE
The first objective of operating systems is the customer serivce to the satisfaction of customer
wants. Therefore, customer service is a key objective of operations management. The operating
system must provide something to a specification which can satisfy the customer in terms of cost
and timing. Thus, primary objective can be satisfied by providing the ‘right thing at a right price
at the right time’.
These aspects of customer service—specification, cost and timing—are described for four
functions in Table 1.2. They are the principal sources of customer satisfaction and must, therefore,
be the principal dimension of the customer service objective for operations managers.
TABLE 1.2 Aspects of customer service
Principal Principal customer wants
function Primary considerations Other considerations
Manufacture Goods of a given, requested or Cost, i.e., purchase price or cost of obtaining
goods.
acceptable specification Timing, i.e., delivery delay from order or request
to receipt of goods.
Transport Management of a given, requested Cost, i.e., cost of movements. Timing, i.e.,
or acceptable specification 1. Duration or time to move.
2. Wait or delay from requesting to its
commencement.
Supply Goods of a given, requested or Cost, i.e., purchase price or cost of obtaining
acceptable specification goods.
Timing, i.e., delivery delay from order or request
to receipt of goods.
Service Treatment of a given, requested or Cost, i.e., cost of movements.
acceptable specification Timing, i.e.,
1. Duration or time required for treatment.
2. Wait or delay from requesting treatment toits
commencement.
Generally an organization will aim reliably and consistently to achieve certain standards and
operations manager will be influential in attempting to achieve these standards. Hence, this
objective will influence the operations manager’s decisions to achieve the required customer
service.
RESOURCE UTILISATION
Another major objective of operating systems is to utilise resources for the satisfaction of
customer wants effectively, i.e., customer service must be provided with the achievement of
effective operations through efficient use of resources. Inefficient use of resources or inadequate
customer service leads to commercial failure of an operating system.
Operations management is concerned essentially with the utilisation of resources, i.e.,
obtaining maximum effect from resources or minimising their loss, under utilisation or waste. The
extent of the utilisation of the resources’ potential might be expressed in terms of the proportion
of available time used or occupied, space utilisation, levels of activity, etc. Each measure
indicates the extent to which the potential or capacity of such resources is utilised. This is referred
as the objective of resource utilisation.
Operations management is also concerned with the achievement of both satisfactory
customer service and resource utilisation. An improvement in one will often give rise to
deterioration in the other. Often both cannot be maximised, and hence a satisfactory performance
must be achieved on both objectives. All the activities of operations management must be tackled
with these two objectives in mind, and many of the problems will be faced by operations
managers because of this conflict. Hence, operations managers must attempt to balance these
basic objectives.
Table 1.3 summarises the twin objectives of operations management. The type of balance
established both between and within these basic objectives will be influenced by market
considerations, competitions, the strengths and weaknesses of the organization, etc. Hence, the
operations managers should make a contribution when these objectives are set.
TABLE 1.3 The twin objectives of operations management
The customer service objective. The resource utilisation objective. To achieve
To provide agreed/adequate levels of customer adequate levels of resource utilisation (or
service (and hence customer satisfaction) by productivity) e.g., to achieve agreed levels of
providing goods or services with the right utilisation of materials, machines and labour.
specification, at the right cost and at the right time.
1. MA NA G ING G LO BA L O PERA TIO NS

8
The term ‘globalization’ describes businesses’ deployment of facilities and operations around the
world. Globalization can be defined as a process in which geographic distance becomes a factor
of diminishing importance in the establishment and maintenance of cross border economic,
political and socio-cultural relations. It can also be defined as worldwide drive toward a
globalized economic system dominated by supranational corporate trade and banking institutions
that are not accountable to democratic processes or national governments.
There are four developments, which have spurred the trend toward globalization. These are:
1. Improved transportation and communication technologies;
2. Opened financial systems;
3. Increased demand for imports; and
4. Reduced import quotas and other trade barriers.
When a firm sets up facilities abroad it involve some added complexities in its operation.
Global markets impose new standards on quality and time. Managers should not think about
domestic markets first and then global markets later, rather it could be think globally and act
locally. Also, they must have a good understanding of their competitors. Some other important
challenges of managing multinational operations include other languages and customs, different
management style, unfamiliar laws and regulations, and different costs.
Managing global operations would focus on the following key issues:
To acquire and properly utilize the following concepts and those related to global
operations, supply chain, logistics, etc.
To associate global historical events to key drivers in global operations from different
perspectives.
To develop criteria for conceptualization and evaluation of different global operations.
To associate success and failure cases of global operations to political, social, economical
and technological environments.
To envision trends in global operations.
To develop an understanding of the world vision regardless of their country of origin,
residence or studies in a respectful way of perspectives of people from different races,
studies, preferences, religion, politic affiliation, place of origin, etc.
1.9 SC O PE O F PRO DUC TIO N A ND O PERA TIO NS MA NA G EMENT
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 adoptability. It distinguishes itself from
other functions such as personnel, marketing, finance, etc., by its primary concern for ‘conversion
by using physical resources.’ Following are the activities which are listed under production and
operations management functions:
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
Location of facilities for operations is a long-term capacity decision which involves a long term
commitment about the geographically static factors that affect a business organization. It is an
important strategic level decision-making for an organization. It deals with the questions such as
‘where our main operations should be based?’
The selection of location is a key-decision as large investment is made in building plant and
machinery. An improper location of plant may lead to waste of all the investments made in plant
and machinery equipments. Hence, location of plant should be based on the company’s expansion
plan and policy, diversification plan for the products, changing sources of raw materials and many
other factors. The purpose of the location study is to find the optimal location that will results in
the greatest advantage to the organization.
PLANT LAYOUT AND MATERIAL HANDLING

Plant layout refers to the physical arrangement of facilities. It is the configuration of departments,
work centres 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 equipments and all
other supporting services along with the design of best structure to contain all these facilities”.
‘Material Handling’ refers to the ‘moving of materials from the store room to the machine
and from one machine to the next during the process of manufacture’. It is also defined as the ‘art
and science of moving, packing and storing of products in any form’. It is a specialised activity
for a modern manufacturing concern, with 50 to 75% of the cost of production. This cost can be
reduced by proper section, operation and maintenance of material handling devices. Material
handling devices increases the output, improves quality, speeds up the deliveries and decreases
the cost of production. Hence, material handling is a prime consideration in the designing new
plant and several existing plants.
PRODUCT DESIGN
Product design deals with conversion of ideas into reality. Every business organization have to
design, develop and introduce new products as a survival and growth strategy. Developing the
new products and launching them in the market is the biggest challenge faced by the
organizations. The entire process of need identification to physical manufactures of product
involves three functions: marketing, product development, manufacturing. Product development
translates the needs of customers given by marketing into technical specifications and designing
the various features into the product to these specifications. Manufacturing has the responsibility
of selecting the processes by which the product can be manufactured. Product design and
development provides link between marketing, customer needs and expectations and the activities
required to manufacture the product.
PROCESS DESIGN
Process design is a macroscopic decision-making of an overall process route for converting the
raw material into finished goods. These decisions encompass the selection of a process, choice of
technology, process flow analysis and layout of the facilities. Hence, the important decisions in
process design are to analyse the workflow for converting raw material into finished product and
to select the workstation for each included in the workflow.
PRODUCTION PLANNING AND CONTROL
Production planning and control can be defined as the process of planning the production in
advance, setting the exact route of each item, fixing the starting and finishing dates for each item,
to give production orders to shops and to follow up the progress of products according to orders.
The principle of production planning and control lies in the statement ‘First Plan Your Work
and then Work on Your Plan’. Main functions of production planning and control includes
planning, routing, scheduling, dispatching and follow-up.
Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.
Planning bridges the gap from where we are, to where we want to go. It makes it possible for
things to occur which would not otherwise happen.
Routing may be defined as the selection of path which each part of the product will follow,
which being transformed from raw material to finished products. Routing determines the most
advantageous path to be followed from department to department and machine to machine till raw
material gets its final shape.
Scheduling determines the programme for the operations. Scheduling may be defined as ‘the
fixation of time and date for each operation’ as well as it determines the sequence of operations to
be followed.
Fig. 1.4 Scope of production and operations management

Dispatching is concerned with the starting the processes. It gives necessary authority so as
to start a particular work, which has already been planned under ‘Routing’ and ‘Scheduling’.
Therefore, dispatching is ‘release of orders and instruction for the starting of production for any
item in acceptance with the route sheet and schedule charts’.
The function of follow-up is to report daily the progress of work in each shop in a prescribed
proforma and to investigate the causes of deviations from the planned performance.
QUALITY CONTROL
Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of
quality in a product or service’. It is a systematic control of various factors that affect the quality
of the product. Quality control aims at prevention of defects at the source, relies on effective 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 interchangeability of manufacture in large scale production.
To produce optimal quality at reduced price.
To ensure satisfaction of customers with productions or services or high quality level, to
build customer goodwill, confidence and reputation of manufacturer.
To make inspection prompt to ensure quality control.
To check the variation during manufacturing.
MATERIALS MANAGEMENT
Materials management is that aspect of management function which is primarily concerned with
the acquisition, control and use of materials needed and flow of goods and services connected
with the production process having some predetermined objectives in view. The main objectives
of materials management are:
To minimise material cost.
To purchase, receive, transport and store materials efficiently and to reduce the related cost.
To cut down costs through simplification, standardisation, 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.
MAINTENANCE MANAGEMENT
In modern industry, equipment and machinery are a very important part of the total productive
effort. Therefore, their idleness or downtime becomes are very expensive. Hence, it is very
important that the plant machinery should be properly maintained. The main objectives of
maintenance management are:
1. To achieve minimum breakdown and to keep the plant in good working condition at
thelowest possible cost.
2. To keep the machines and other facilities in such a condition that permits them to be
usedat their optimal capacity without interruption.
3. To ensure the availability of the machines, buildings and services required by other
sectionsof the factory for the performance of their functions at optimal return on
investment.
EX ERC ISES
Section A
1. What do you mean by ‘Production’?
2. What do you mean by production system?
3. Mention the different types of production systems.
4. What is job shop production?
5. What is batch production?
6. What is mass production?
7. What is continuous production?
8. Mention any four advantages of job shop production.
9. Mention any four limitations of job shop production.
10. Mention any four advantages of batch production.
11. Mention any four limitations of batch production.
12. Mention any four advantages of mass production.
13. Mention any four limitations of mass production.
14. Mention any four advantages of continuous production.
15. Mention any four limitations of continuous production.
16. Define production management.
17. Mention any four objectives of production management.
18. Define operating system.
19. How do you manage operations?
20. What do you mean by operations?
21. What do you mean by manufacturing operations?
22. What do you mean by service operations?
23. What do you mean by ‘globalization’?
Section B
1. Briefly explain the production system and its characteristics.
2. What is job shop production? What are its characteristics, advantages and limitations?
3. What is batch production? What are its characteristics, advantages and limitations?
4. What is batch production? What are its characteristics, advantages and limitations?
5. What is mass production? What are its characteristics, advantages and limitations?
6. What is continuous production? What are its characteristics, advantages and limitations?
7. Explain in brief the objectives of production management.
8. Explain in brief the objectives of operations management.
9. Distinguish between manufacturing operations and service operations.
10. Explain the key issues to be considered for managing global operations.
Section C
1. Explain the different types of production systems.
2. Explain the framework of managing operations.
3. Explain the scope of production and operations management.
Skill Development
Visit a fast food restaurant like Pizza hut, Pizza corner to understand the concept of this
chapter by getting the information for the following questions.
1. Identify the type of production system followed.
2. Check how production system is managed.
3. Find out utilisation of the resources namely manpower, capacity and material.
4. How the customer services is rendered [feedback system exist or not]
C A SELET
SHEENA
Sheena had worked for the same Fortune 500 Company for most 15 years. Although the company
had gone through some tough times, things were starting to turn around. Customer orders were
up, and quality and productivity had improved dramatically from what they had been only a few
years earlier due company wide quality improvement program. So, it comes as a real shock to
Sheena and about 400 of her co-workers when they were suddenly terminated following the new
CEO’s decision to downsize the company.
After recovering from the initial shock, Sheena tried to find employment elsewhere. Despite
her efforts, after eight months of searching she was no closer to finding a job than the day she
started. Her funds were being depleted and she was getting more discouraged. There was one
bright spot, though: She was able to bring in a little money by mowing lawns for her neighbors.
She got involved quite by chance when she heard one neighbor remark that now that his children
were on their own, nobody was around to cut the grass. Almost jokingly, Sheena asked him how
much he’d be willing to pay. Soon Sheena was mowing the lawns of five neighbors. Other
neighbors wanted her to work on their lawns, but she didn’t feel that she could spare any more
time from her job search.
However, as the rejection letters began to pile up, Sheena knew she had to make an
important decision in her life. On a rainy Tuesday morning, she decided to go into business for
herself taking care of neighborhood lawns. She was relieved to give up the stress of job hunting,
and she was excited about the prospects of being her own boss. But she was also fearful of being
completely on her own. Nevertheless, Sheena was determined to make a go of it.
At first, business was a little slow, but once people realized Sheena was available, many
asked her to take care of their lawns. Some people were simply glad to turn - the work over to
her; others switched from professional lawn care services. By the end of her first year in business,
Sheena knew she could earn a living this way. She also performed other services such as
fertilizing lawns, weeding gardens, and trimming shrubbery. Business became so good that
Sheena hired two part-time workers to assist her and, even then, she believed she could expand
further if she wanted to.
Q ue stio ns
1. In what ways are Sheena’s customers most likely to judge the quality of her lawn care services?
2. Sheena is the operations manager of her business. Among her responsibilities are forecasting,
inventory management, scheduling, quality assurance, and maintenance.
(a) What kinds of things would likely require forecasts?

(b) What inventory items does Sheena probably have? Name one inventory decision she has to
make periodically.
(c) What scheduling must she do? What things might occur to disrupt schedules and cause
Sheena to reschedule?
(d) How important is quality assurance to Sheena’s business? Explain.
(e) What kinds of maintenance must be performed?
3. What are some of the trade-offs that Sheena probably considered relative to:
(a) Working for a company instead of for herself?
(b) Expanding the business?
4. The town is considering an ordinance that would prohibit putting grass clippings at the curb for
pickup because local landfills cannot handle the volume. What options might Sheena consider if
the ordinance is passed? Name two advantages and two drawbacks of each option.
[Source: Production/Operations Management by William J.Stevenson, Irwin/McGraw-Hill]
WEGMANS FOOD MARKETS

Wegmans Food Markets, Inc., is one of the premier grocery chains in the United States.
Headquartered in Rochester, NY, Wegmans operates over 70 stores. The company employs over
23,000 people, and has annual sales of over Rs. 2.0 billion.
Wegmans has a strong reputation for offering its customers high product quality and
excellent service. Through a combination of market research, trial and error, and listening to its
customers, Wegmans has evolved into a very successful organization. In fact, Wegmans is so
good at what it does that grocery chains all over the country send representatives to Wegmans for
a firsthand look at operations.
SUPERSTORES
Many of the company’s stores are giant 100,000 square foot superstores, double or triple the size
of average supermarkets. A superstore typically employs from 500 to 600 people.
Individual stores differ somewhat in terms of actual size and some special features. Aside
from the features normally found in supermarkets, they generally have a large bakery Section
(each store bakes its own bread, rolls, cakes, pies, and pastries), and extra large produce sections.
They also offer film processing a complete pharmacy, a card shop and video rentals. In-store
floral shops range in size up to 800 square feet of space, and offer a wide variety of fresh-cut
flowers, flower arrangements, varies and plants. In-store card shops covers over 1000 square feet
of floor of floor space. The bulk foods department provides customers with the opportunity to
select what quantities they desire from a vast array of foodstuffs and some nonfood items.
Each store is a little different. Among the special features in some stores are a dry cleaning
department, a wokery, and a salad bar. Some feature a Market Cafe that has different food
stations, each devoted to preparing and serving a certain type of food. For example, one station
has pizza and other Italian specialties, and another oriental food. There are also being a sandwich
bar, a salad bar and a dessert station. Customers often wander among stations as they decide
what to order. In several affluent locations, customers can stop in on their way home from work
and choose from a selection of freshly prepared dinner entrees. Some stores have a coffee shop
section with tables and chairs where shoppers can enjoy regular or specialty coffees and variety of
tempting pastries.
PRODUCE DEPARTMENT
The company prides itself on fresh produce. Produce is replenished as often as 12 times a day.
The larger stores have produce sections that are four to five times the size of a produce section of
an average supermarket. Wegmans offers locally grown produce a season. Wegmans uses a ’farm
to market’ system whereby some local growers deliver their produce directly to individual stores,
bypassing the main warehouse. That reduces the company’s inventory holding costs and gets the
produce into the stores as quickly as possible. Growers may use specially designed containers that
go right onto the store floor instead of large bins. This avoids the bruising that often occurs when
fruits and vegetables are transferred from bins to display shelves and the need to devote labor to
transfer the produce to shelves.
MEAT DEPARTMENT
In addition to large display cases of both fresh and frozen meat products, many stores have a full-
service butcher shop that offers a variety of fresh meat products and where butchers are available
to provide customized cuts of meat for customers.
ORDERING
Each department handles its own ordering. Although sales records are available from records of
items scanned at the checkouts, they are not used directly for replenishing stock. Other factors,
such as pricing, special promotions, local circumstances must all be taken into account. However,
for seasonal periods, such as holidays, managers often check scanner records to learn what past
demand was during a comparable period.
The superstores typically receive one truckload of goods per day from the main warehouse.
During peak periods, a store may receive two truckloads from the main warehouse. The short
lead-time greatly reduce the length of the time an item might be out of stock, unless the main
warehouse is also out of stock.
The company exercises strict control over suppliers, insisting on product quality and on-time
deliveries.
EMPLOYEES
The company recognises the value of good employees. It typically invests an average of Rs.7000
to train each new employee. In addition to learning about stores operations, new employees learn
the importance of good customer service and how to provide it. The employees are helpful,
cheerfully answering customer questions or handling complaints. Employees are motivated
through a combination of compensation, profit sharing, and benefits.
QUALITY
Quality and Customer satisfaction are utmost in the minds of Wegmans management and its
employees. Private label food items as well as name brands are regularly evaluated in test
kitchens, along with the potential new products. Managers are responsible for checking and
maintaining products and service quality in their departments. Moreover, employees are
encouraged to report problems to their managers.
If a customer is dissatisfied with an item and returns it, or even a portion of the item, the
customer is offered a choice of a replacement or a refund. If the item is a Wegmans brand food
item, it is then sent to the test kitchen to determine the cause of the problem. If the cause can be
determined, corrective action is taken.
Q ue stio ns
1. How do customers judge the quality of a supermarket?

2. Indicate how and why each of these factors is important to the successful operation of a
supermarket:
(a) Customer satisfaction.
(b) Forecasting.
(c) Capacity planning.
(d) Location
(e) Inventory management.
(f) Layout of the store.
(g) Scheduling.
[Source: Production/Operations Management by William J.Stevenson, Irwin/McGraw-Hill]
2
PLANT LOCATION AND LAYOUT
C HA PTER O UTLINE
2.1 Introduction and Meaning 2.8 Classification of Layout
2.2 Need for Selecting a Suitable Location 2.9 Design of Product Layout
2.3 Factors Influencing Plant/Facility Location 2.10 Design of Process Layout
2.4 Location Theories 2.11 Service Layout
2.5 Location Models 2.12 Organisation of Physical Facilities
2.6 Locational Economics •Exercises
2.7 PlantLayout •Skill Development
2.1 INTRO DUC TIO N A ND MEA NING

Plant location or the facilities location problem is an important strategic level decisionmaking
for an organisation. One of the key features of a conversion process (manufacturing system) is the
efficiency with which the products (services) are transferred to the customers. This fact will
include the determination of where to place the plant or facility.
The selection of location is a key-decision as large investment is made in building plant and
machinery. It is not advisable or not possible to change the location very often. So an improper
location of plant may lead to waste of all the investments made in building and machinery,
equipment.
Before a location for a plant is selected, long range forecasts should be made anticipating
future needs of the company. The plant location should be based on the company’s expansion plan
and policy, diversification plan for the products, changing market conditions, the changing
sources of raw materials and many other factors that influence the choice of the location decision.
The purpose of the location study is to find an optimum location one that will result in the
greatest advantage to the organization.
2.2 NEED FO R SELEC TING A SUITA BLE LO C A TIO N
The need for selecting a suitable location arises because of three situations.
I. When starting a new organisation, i.e., location choice for the first time.
II. In case of existing organisation.
III. In case of Global Location.
I. In Case of Location Choice for the First Time or New Organisations
Cost economies are always important while selecting a location for the first time, but should
keep in mind the cost of long-term business/organisational objectives. The following are the
factors to be considered while selecting the location for the new organisations:
1. Identification of region: The organisational objectives along with the various long-term
considerations about marketing, technology, internal organisational strengths and weaknesses,
regionspecific resources and business environment, legal-governmental environment, social
environment and geographical environment suggest a suitable region for locating the operations
facility.
2. Choice of a site within a region: Once the suitable region is identified, the next step is
choosing the best site from an available set. Choice of a site is less dependent on the organisation’s
long-term strategies. Evaluation of alternative sites for their tangible and intangible costs will
resolve facilities-location problem.
The problem of location of a site within the region can be approached with the following
cost-oriented non-interactive model, i.e., dimensional analysis.
3. Dimensional analysis: If all the costs were tangible and quantifiable, the comparison and
selection of a site is easy. The location with the least cost is selected. In most of the cases
intangible costs which are expressed in relative terms than in absolute terms. Their relative merits
and demerits of sites can also be compared easily. Since both tangible and intangible costs need to
be considered for a selection of a site, dimensional analysis is used.
Dimensional analysis consists in computing the relative merits (cost ratio) for each of the cost
items for two alternative sites. For each of the ratios an appropriate weightage by means of power
is given and multiplying these weighted ratios to come up with a comprehensive figure on the
relative merit of two alternative sites, i.e.,
C1M, C2M, …, CzM are the different costs associated with a site M on the ‘z’ different cost
items.
C1N, C2N, …, CzN are the different costs associated with a site N and W 1, W2, W3, …, Wz are
the weightage given to these cost items, then relative merit of the M and site N is given by:
( MN ) ( 1 MN
) ( 2 MN ) zW WW
C1 /C1 × C2 /C2 ,..., Cz /Cz

If this is > 1, site N is superior and vice-versa.
When starting a new factory, plant location decisions are very important because they have
direct bearing on factors like, financial, employment and distribution patterns. In the long run,
relocation of plant may even benefit the organization. But, the relocation of the plant involves
stoppage of production, and also cost for shifting the facilities to a new location. In addition to
these things, it will introduce some inconvenience in the normal functioning of the business.
Hence, at the time of starting any industry, one should generate several alternate sites for locating
the plant. After a critical analysis, the best site is to be selected for commissioning the plant.
Location of warehouses and other facilities are also having direct bearing on the operational
performance of organizations.
The existing firms will seek new locations in order to expand the capacity or to place the
existing facilities. When the demand for product increases, it will give rise to following decisions:
Whether to expand the existing capacity and facilities.
Whether to look for new locations for additional facilities.
Whether to close down existing facilities to take advantage of some new locations.
II. In Case of Location Choice for Existing Organisation
In this case a manufacturing plant has to fit into a multi-plant operations strategy. That is,
additional plant location in the same premesis and elsewere under following circumstances:
1. Plant manufacturing distinct products.
2. Manufacturing plant supplying to specific market area.
3. Plant divided on the basis of the process or stages in manufacturing.
4. Plants emphasizing flexibility.
The different operations strategies under the above circumstances could be:
1. Plants manufacturing distinct products: Each plant services the entire market area for
the organization. This strategy is necessary where the needs of technological and resource inputs
are specialized or distinctively different for the different product-lines.
For example, a high quality precision product-line should not be located along with other
product-line requiring little emphasis on precision. It may not be proper to have too many
contradictions such as sophisticated and old equipment, highly skilled and semi-skilled personnel,
delicates processes and those that could permit rough handlings, all under one roof and one set of
managers. Such a setting leads to much confusion regarding the required emphasis and the
management policies.
Product specialization may be necessary in a highly competitive market. It may be necessary
to exploit the special resources of a particular geographical area. The more decentralized these
pairs are in terms of the management and in terms of their physical location, the better would be
the planning and control and the utilization of the resources.
2. Manufacturing plants supplying to a specific market area: Here, each plant
manufactures almost all of the company’s products. This type of strategy is useful where market
proximity consideration dominates the resources and technology considerations. This strategy
requires great deal of coordination from the corporate office. An extreme example of this strategy
is that of soft drinks bottling plants.
3. Plants divided on the basis of the process or stages in manufacturing: Each production
process or stage of manufacturing may require distinctively different equipment capabilities,
labour skills, technologies, and managerial policies and emphasis. Since the products of one plant
feed into the other plant, this strategy requires much centralized coordination of the manufacturing
activities from the corporate office that are expected to understand the various technological
aspects of all the plants.
4. Plants emphasizing flexibility: This requires much coordination between plants to meet
the changing needs and at the same time ensure efficient use of the facilities and resources.
Frequent changes in the long-term strategy in order to improve be efficiently temporarily, are not
healthy for the organization. In any facility location problem the central question is: ‘Is this a
location at which the company can remain competitive for a long time?’
For an established organization in order to add on to the capacity, following are the ways:
(a) Expansion of the facilities at the existing site: This is acceptable when it does not violate
the basic business and managerial outlines, i.e., philosophies, purposes, strategies and capabilities.
For example, expansion should not compromise quality, delivery, or customer service.
(b) Relocation of the facilities (closing down the existing ones): This is a drastic step which
can be called as ‘Uprooting and Transplanting’. Unless there are very compelling reasons,
relocation is not done. The reasons will be either bringing radical changes in technology, resource
availability or other destabilization.
All these factors are applicable to service organizations, whose objectives, priorities and
strategies may differ from those of hardcore manufacturing organizations.
III. In Case of Global Location
Because of globalisation, multinational corporations are setting up their organizations in India
and Indian companies are extending their operations in other countries. In case of global locations
there is scope for virtual proximity and virtual factory.
VIRTUAL PROXIMITY
With the advance in telecommunications technology, a firm can be in virtual proximity to its
customers. For a software services firm much of its logistics is through the information/
communication pathway. Many firms use the communications highway for conducting a large
portion of their business transactions. Logistics is certainly an important factor in deciding on a
location—whether in the home country or abroad. Markets have to be reached. Customers have to
be contacted. Hence, a market presence in the country of the customers is quite necessary.
VIRTUAL FACTORY
Many firms based in USA and UK in the service sector and in the manufacturing sector often out
sources part of their business processes to foreign locations such as India. Thus, instead of one’s
own operations, a firm could use its business associates’ operations facilities. The Indian BPO firm
is a foreign-based company’s ‘virtual service factory’. So a location could be one’s own or one’s
business associates. The location decision need not always necessarily pertain to own operations.
REASONS FOR A GLOBAL/FOREIGN LOCATION

A. Tangible Reasons
The trangible reasons for setting up an operations facility abroad could be as follows:
Reaching the customer: One obvious reason for locating a facility abroad is that of
capturing a share of the market expanding worldwide. The phenomenal growth of the GDP of
India is a big reason for the multinationals to have their operations facilities in our country. An
important reason is that of providing service to the customer promptly and economically which is
logistics-dependent. Therefore, cost and case of logistics is a reason for setting up manufacturing
facilities abroad. By logistics set of activities closes the gap between production of goods/services
and reaching of these intended goods/services to the customer to his satisfaction. Reaching the
customer is thus the main objective. The tangible and intangible gains and costs depend upon the
company defining for itself as to what that ‘reaching’ means. The tangible costs could be the
logistics related costs; the intangible costs may be the risk of operating is a foreign country. The
tangible gains are the immediate gains; the intangible gains are an outcome of what the company
defines the concepts of reaching and customer for itself. The other tangible reasons could be as
follows:
(a) The host country may offer substantial tax advantages compared to the home country.
(b) The costs of manufacturing and running operations may be substantially less in that
foreign country. This may be due to lower labour costs, lower raw material cost, better
availability of the inputs like materials, energy, water, ores, metals, key personnel etc.
(c) The company may overcome the tariff barriers by setting up a manufacturing plant in a
foreign country rather than exporting the items to that country.
B. Intangible Reasons
The intangible reasons for considering setting up an operations facility abroad could be as
follows:
1. Customer-related Reasons
(a) With an operations facility in the foreign country, the firm’s customers may feel secure that
the firm is more accessible. Accessibility is an important ‘service quality’ determinant. (b) The
firm may be able to give a personal tough.
(c) The firm may interact more intimately with its customers and may thus understand their
requirements better.
(d) It may also discover other potential customers in the foreign location.
2. Organisational Learning-related Reasons
(a) The firm can learn advanced technology. For example, it is possible that cutting-edge
technologies can be learn by having operations in an technologically more advanced
country. The firm can learn from advanced research laboratories/universities in that
country. Such learning may help the entire product-line of the company.
(b) The firm can learn from its customers abroad. A physical location there may be essential
towards this goal.
(c) It can also learn from its competitors operating in that country. For this reason, it may
have to be physically present where the action is.
(d) The firm may also learn from its suppliers abroad. If the firm has a manufacturing plant
there, it will have intensive interaction with the suppliers in that country from whom there
may be much to learn in terms of modern and appropriate technology, modern
management methods, and new trends in business worldwide.
3. Other Strategic Reasons
(a) The firm by being physically present in the host country may gain some ‘local boy’ kind
of psychological advantage. The firm is no more a ‘foreign’ company just sending its
products across international borders. This may help the firm in lobbying with the
government of that country and with the business associations in that country.
(b) The firm may avoid ‘political risk’ by having operations in multiple countries.
(c) By being in the foreign country, the firm can build alternative sources of supply. The firm
could, thus, reduce its supply risks.
(d) The firm could hunt for human capital in different countries by having operations in those
countries. Thus, the firm can gather the best of people from across the globe.
(e) Foreign locations in addition to the domestic locations would lower the market risks for
the firm. If one market goes slow the other may be doing well, thus lowering the overall
risk.
2.3 FA C TO RS INFLUENC ING PLA NT LO C A TIO N/FA C ILITY LO C A TIO N
Facility location is the process of determining a geographic site for a firm’s operations. Managers
of both service and manufacturing organizations must weigh many factors when assessing the
desirability of a particular site, including proximity to customers and suppliers, labour costs, and
transportation costs.
Location conditions are complex and each comprises a different Characteristic of a tangible
(i.e. Freight rates, production costs) and non-tangible (i.e. reliability, Frequency security, quality)
nature.
Location conditions are hard to measure. Tangible cost based factors such as wages and
products costs can be quantified precisely into what makes locations better to compare. On the
other hand non-tangible features, which refer to such characteristics as reliability, availability and
security, can only be measured along an ordinal or even nominal scale. Other non-tangible features
like the percentage of employees that are unionized can be measured as well. To sum this up non-
tangible features are very important for business location decisions.
It is appropriate to divide the factors, which influence the plant location or facility location on
the basis of the nature of the organisation as
1. General locational factors, which include controllable and uncontrollable factors for all
type of organisations.
2. Specific locational factors specifically required for manufacturing and service
organisations.
Location factors can be further divided into two categories:
Dominant factors are those derived from competitive priorities (cost, quality, time, and
flexibility) and have a particularly strong impact on sales or costs. Secondary factors also are
important, but management may downplay or even ignore some of them if other factors are more
important.
2.3.1 General Locational Factors

Following are the general factors required for location of plant in case of all types of organisations.
CONTROLLABLE FACTORS
1. Proximity to markets
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
6. External economies
7. Capital
UNCONTROLLABLE FACTORS
8. Government policy
9. Climate conditions
10. Supporting industries and services
11. Community and labour attitudes
12. Community Infrastructure
CONTROLLABLE FACTORS
1. Proximity to markets: Every company is expected to serve its customers by providing
goods and services at the time needed and at reasonable price organizations may choose to locate
facilities close to the market or away from the market depending upon the product. When the
buyers for the product are concentrated, it is advisable to locate the facilities close to the market.
Locating nearer to the market is preferred if
• The products are delicate and susceptible to spoilage.
• After sales services are promptly required very often.
• Transportation cost is high and increase the cost significantly.
• Shelf life of the product is low.
Nearness to the market ensures a consistent supply of goods to customers and reduces the
cost of transportation.
2. Supply of raw material: It is essential for the organization to get raw material in right
qualities and time in order to have an uninterrupted production. This factor becomes very
important if the materials are perishable and cost of transportation is very high.
General guidelines suggested by Yaseen regarding effects of raw materials on plant location
are:
• When a single raw material is used without loss of weight, locate the plant at the raw
material source, at the market or at any point in between.
• When weight loosing raw material is demanded, locate the plant at the raw material
source.
• When raw material is universally available, locate close to the market area.
• If the raw materials are processed from variety of locations, the plant may be situated so
as to minimize total transportation costs.
Nearness to raw material is important in case of industries such as sugar, cement, jute and
cotton textiles.
3. Transportation facilities: Speedy transport facilities ensure timely supply of raw
materials to the company and finished goods to the customers. The transport facility is a
prerequisite for
the location of the plant. There are five basic modes of physical transportation, air, road, rail,
water and pipeline. Goods that are mainly intended for exports demand a location near to the port
or large airport. The choice of transport method and hence the location will depend on relative
costs, convenience, and suitability. Thus transportation cost to value added is one of the criteria
for plant location.
4. Infrastructure availability: The basic infrastructure facilities like power, water and
waste disposal, etc., become the prominent factors in deciding the location. Certain types of
industries are power hungry e.g., aluminum and steel and they should be located close to the
power station or location where uninterrupted power supply is assured throughout the year. The
non-availability of power may become a survival problem for such industries. Process industries
like paper, chemical, cement, etc., require continuous. Supply of water in large amount and good
quality, and mineral content of water becomes an important factor. A waste disposal facility for
process industries is an important factor, which influences the plant location.
5. Labour and wages: The problem of securing adequate number of labour and with skills
specific is a factor to be considered both at territorial as well as at community level during plant
location. Importing labour is usually costly and involve administrative problem. The history of
labour relations in a prospective community is to be studied. Prospective community is to be
studied. Productivity of labour is also an important factor to be considered. Prevailing wage
pattern, cost of living and industrial relation and bargaining power of the unions’ forms in
important considerations.
6. External economies of scale: External economies of scale can be described as
urbanization and locational economies of scale. It refers to advantages of a company by setting up
operations in a large city while the second one refers to the “settling down” among other
companies of related Industries. In the case of urbanization economies, firms derive from locating
in larger cities rather than in smaller ones in a search of having access to a large pool of labour,
transport facilities, and as well to increase their markets for selling their products and have access
to a much wider range of business services.
Location economies of scale in the manufacturing sector have evolved over time and have
mainly increased competition due to production facilities and lower production costs as a result of
lower transportation and logistical costs. This led to manufacturing districts where many
companies of related industries are located more or less in the same area. As large corporations
have realized that inventories and warehouses have become a major cost factor, they have tried
reducing inventory costs by launching “Just in Time” production system (the so called Kanban
System). This high efficient production system was one main factor in the Japanese car industry
for being so successful. Just in time ensures to get spare parts from suppliers within just a few
hours after ordering. To fulfill these criteria corporations have to be located in the same area
increasing their market and service for large corporations.
7. Capital: By looking at capital as a location condition, it is important to distinguish the
physiology of fixed capital in buildings and equipment from financial capital. Fixed capital costs
as building and construction costs vary from region to region. But on the other hand buildings can
also be rented and existing plants can be expanded. Financial capital is highly mobile and does
not very much influence decisions. For example, large Multinational Corporations such as Coca-
Cola operate in many different countries and can raise capital where interest rates are lowest and
conditions are most suitable.
Capital becomes a main factor when it comes to venture capital. In that case young, fast
growing (or not) high tech firms are concerned which usually have not many fixed assets. These
firms particularly need access to financial capital and also skilled educated employees.
UNCONTROLLABLE FACTORS
8. Government policy: The policies of the state governments and local bodies concerning
labour laws, building codes, safety, etc., are the factors that demand attention.
In order to have a balanced regional growth of industries, both central and state governments
in our country offer the package of incentives to entrepreneurs in particular locations. The
incentive package may be in the form of exemption from a safes tax and excise duties for a
specific period, soft loan from financial institutions, subsidy in electricity charges and investment
subsidy. Some of these incentives may tempt to locate the plant to avail these facilities offered.
9. Climatic conditions: The geology of the area needs to be considered together with
climatic conditions (humidity, temperature). Climates greatly influence human efficiency and
behaviour. Some industries require specific climatic conditions e.g., textile mill will require
humidity.
10.Supporting industries and services: Now a day the manufacturing organisation will not
make all the components and parts by itself and it subcontracts the work to vendors. So, the
source of supply of component parts will be the one of the factors that influences the location.
The various services like communications, banking services professional consultancy
services and other civil amenities services will play a vital role in selection of a location.
11.Community and labour attitudes: Community attitude towards their work and towards
the prospective industries can make or mar the industry. Community attitudes towards supporting
trade union activities are important criteria. Facility location in specific location is not desirable
even though all factors are favouring because of labour attitude towards management, which
brings very often the strikes and lockouts.
12.Community infrastructure and amenity: All manufacturing activities require access to
a community infrastructure, most notably economic overhead capital, such as roads, railways,
port facilities, power lines and service facilities and social overhead capital like schools,
universities and hospitals.
These factors are also needed to be considered by location decisions as infrastructure is
enormously expensive to build and for most manufacturing activities the existing stock of
infrastructure provides physical restrictions on location possibilities.
2.3.2 Specific Locational Factors for Manufacturing Organisation
DOMINANT FACTORS
Factors dominating location decisions for new manufacturing plants can be broadly classified in
six groups. They are listed in the order of their importance as follows.
1. Favourable labour climate

2. Proximity to markets
3. Quality of life
4. Proximity to suppliers and resources
5. Utilities, taxes, and real estate costs
1. Favorable labour climate: A favorable labour climate may be the most important factor
in location decisions for labour-intensive firms in industries such as textiles, furniture, and
consumer electronics. Labour climate includes wage rates, training requirements, attitudes toward
work, worker productivity, and union strength. Many executives consider weak unions or al low
probability of union organizing efforts as a distinct advantage.
2. Proximity to markets: After determining where the demand for goods and services is
greatest, management must select a location for the facility that will supply that demand.
Locating near markets is particularly important when the final goods are bulky or heavy and
outbound transportation rates are high. For example, manufacturers of products such as plastic
pipe and heavy metals all emphasize proximity to their markets.
3. Quality of life: Good schools, recreational facilities, cultural events, and an attractive
lifestyle contribute to quality of life. This factor is relatively unimportant on its own, but it can
make the difference in location decisions.
4. Proximity to suppliers and resources: In many companies, plants supply parts to other
facilities or rely on other facilities for management and staff support. These require frequent
coordination and communication, which can become more difficult as distance increases.
5. Utilities, taxes, and real estate costs: Other important factors that may emerge include
utility costs (telephone, energy, and water), local and state taxes, financing incentives offered by
local or state governments, relocation costs, and land costs.
SECONDARY FACTORS
There are some other factors needed to be considered, including room for expansion, construction
costs, accessibility to multiple modes of transportation, the cost of shuffling people and materials
between plants, competition from other firms for the workforce, community attitudes, and many
others. For global operations, firms are emphasizing local employee skills and education and the
local infrastructure.
2.3.3 Specific Locational Factors for Service Organisation
DOMINANT FACTORS
The factors considered for manufacturers are also applied to service providers, with one important
addition — the impact of location on sales and customer satisfaction. Customers usually look
about how close a service facility is, particularly if the process requires considerable customer
contact.
PROXIMITY TO CUSTOMERS
Location is a key factor in determining how conveniently customers can carry on business with a
firm. For example, few people would like to go to remotely located dry cleaner or supermarket if
another is more convenient. Thus the influence of location on revenues tends to be the dominant
factor.
TRANSPORTATION COSTS AND PROXIMITY TO MARKETS

For warehousing and distribution operations, transportation costs and proximity to markets are
extremely important. With a warehouse nearby, many firms can hold inventory closer to the
customer, thus reducing delivery time and promoting sales.
LOCATION OF COMPETITORS
One complication in estimating the sales potential at different location is the impact of
competitors. Management must not only consider the current location of competitors but also try
to anticipate their reaction to the firm’s new location. Avoiding areas where competitors are
already well established often pays. However, in some industries, such as new-car sales
showrooms and fastfood chains, locating near competitors is actually advantageous. The strategy
is to create a critical mass, whereby several competing firms clustered in one location attract more
customers than the total number who would shop at the same stores at scattered locations.
Recognizing this effect, some firms use a follow –the leader strategy when selecting new sites.
SECONDARY FACTORS
Retailers also must consider the level of retail activity, residential density, traffic flow, and site
visibility. Retail activity in the area is important, as shoppers often decide on impulse to go
shopping or to eat in a restaurant. Traffic flows and visibility are important because businesses’
customers arrive in cars. Visibility involves distance from the street and size of nearby buildings
and signs. High residential density ensures nighttime and weekend business when the population
in the area fits the firm’s competitive priorities and target market segment.
2.4 LO C A TIO N THEO RIES
ALFRED WEBER’S THEORY OF THE LOCATION OF INDUSTRIES

Alfred Weber (1868–1958), with the publication of Theory of the Location of Industries in 1909,
put forth the first developed general theory of industrial location. His model took into account
several spatial factors for finding the optimal location and minimal cost for manufacturing plants.
The point for locating an industry that minimizes costs of transportation and labour requires
analysis of three factors:
1. The point of optimal transportation based on the costs of distance to the ‘material
index’—the ratio of weight to intermediate products (raw materials) to finished product.
2. The labour distortion, in which more favourable sources of lower cost of labour
mayjustify greater transport distances.
3. Agglomeration and degglomerating.
Agglomeration or concentration of firms in a locale occurs when there is sufficient

demand for support services for the company and labour force, including new investments in
schools and hospitals. Also supporting companies, such as facilities that build and service
machines and financial services, prefer closer contact with their customers.
Degglommeration occurs when companies and services leave because of over concentration
of industries or of the wrong types of industries, or shortages of labour, capital, affordable land,
etc. Weber also examined factors leading to the diversification of an industry in the horizontal
relations between processes within the plant.
The issue of industry location is increasingly relevant to today’s global markets and
transnational corporations. Focusing only on the mechanics of the Weberian model could justify
greater transport distances for cheap labour and unexploited raw materials. When resources are
exhausted or workers revolt, industries move to different countries.
2.5 LO C A TIO N MO DELS
Various models are available which help to identify the ideal location. Some of the popular
models are:
1. Factor rating method
2. Weighted factor rating method
3. Load-distance method
4. Centre of gravity method
5. Break even analysis
2.5.1 Factor Rating Method

The process of selecting a new facility location involves a series of following steps:
1. Identify the important location factors.
2. Rate each factor according to its relative importance, i.e., higher the ratings is indicative
of prominent factor.
3. Assign each location according to the merits of the location for each factor.
4. Calculate the rating for each location by multiplying factor assigned to each location
withbasic factors considered.
5. Find the sum of product calculated for each factor and select best location having
highesttotal score.
ILLUSTRATION 1: Let us assume that a new medical facility, Health-care, is to be located
in Delhi. The location factors, factor rating and scores for two potential sites are shown in the
following table. Which is the best location based on factor rating method?
Sl. No. Location factor Rating

Factor
rating Location 1 Location 2
1. Facility utilization 8 3 5
2. Total patient per month 5 4 3
3. Average time per emergency trip 6 4 5
4. Land and construction costs 3 1 2
5. Employee preferences 5 5 3
SOLUTION:
Sl. No. Location Factor Location 1 Location 2
factor rating (Rating) Total= (Rating) Total
(1) (2) (1) . (2) (3) = (1) .
(3)
1. Facility utilization 8 3 24 5 40
2. Total patient per 5 4 20 3 15
month
3. Average time per 6 4 24 5 30
emergency trip
4. Land and 3 1 3 2 6
construction costs
5. Employee 5 5 25 3 15
preferences
Total 96 Total 106
The total score for location 2 is higher than that of location 1. Hence location 2, is the best
choice.
2.5.2Weighted Factor Rating Method

In this method to merge quantitative and qualitative factors, factors are assigned weights based on
relative importance and weightage score for each site using a preference matrix is calculated. The
site with the highest weighted score is selected as the best choice.
ILLUSTRATION 2: Let us assume that a new medical facility, Health-care, is to be located
in Delhi. The location factors, weights, and scores (1 = poor, 5 = excellent) for two potential sites
are shown in the following table. What is the weighted score for these sites? Which is the best
location?
Sl. No. Location factor Weight Scores
Location 1 Location 2
1. Facility utilization 25 3 5
2. Total patient km per month 25 4 3
3. Average time per emergency trip 25 3 3
4. Land and construction costs 15 1 2
5. Employee preferences 10 5 3
SOLUTION: The weighted score for this particular site is calculated by multiplying each
factor’s weight by its score and adding the results:
Weighed score location 1 = 25 × 3 + 25 × 4 + 25 × 3 + 15 × 1 + 10 × 5 = 75 +
100 + 75 + 15 + 50 = 315
Weighed score location 2 = 25 × 5 + 25 × 3 + 25 × 3 + 15 × 2 + 10 × 3
= 125 + 75 + 75 + 30 + 30 = 335 Location 2
is the best site based on total weighted scores.
2.5.3Load-distance Method
The load-distance method is a mathematical model used to evaluate locations based on proximity
factors. The objective is to select a location that minimizes the total weighted loads moving into
and out of the facility. The distance between two points is expressed by assigning the points to
grid coordinates on a map. An alternative approach is to use time rather than distance.
DISTANCE MEASURES
Suppose that a new warehouse is to be located to serve Delhi. It will receive inbound shipments
from several suppliers, including one in Ghaziabad. If the new warehouse were located at
Gurgaon, what would be the distance between the two facilities? If shipments travel by truck, the
distance depends on the highway system and the specific route taken. Computer software is
available for calculating the actual mileage between any two locations in the same county.
However, for load-distance method, a rough calculation that is either Euclidean or rectilinear
distance measure may be used. Euclidean distance is the straight-line distance, or shortest
possible path, between two points.
Fig. 2.2 Distance between point A and point B

The point A on the grid represents the supplier’s location in Ghaziabad, and the point B
represents the possible warehouse location at Gurgaon. The distance between points A and B is
the length of the hypotenuse of a right triangle, or
dAB = Sqrt ((XA – XB)2 + (YA – YB)2)
where dAB = distance between points A and B
XA = x-coordinate of point A
YA = y-coordinate of point A XB =
x-coordinate of point B
YB = y-coordinate of point B
Rectilinear distance measures distance between two points with a series of 90° turns as city
blocks. Essentially, this distance is the sum of the two dashed lines representing the base and side
of the triangle in figure. The distance travelled in the x-direction is the absolute value of the
difference in x-coordinates. Adding this result to the absolute value of the difference in the y-
coordinates gives
DAB = |XA – XB| + |YA – YB|
CALCULATING A LOAD-DISTANCE SCORE

Suppose that a firm planning a new location wants to select a site that minimizes the distances
that loads, particularly the larger ones, must travel to and from the site. Depending on the
industry, a load may be shipments from suppliers, between plants, or to customers, or it may be
customers or employees travelling to or from the facility. The firm seeks to minimize its
loaddistance, generally by choosing a location so that large loads go short distances.
To calculate a load-distance for any potential location, we use either of the distance measures
and simply multiply the loads flowing to and from the facility by the distances travelled. These
loads may be expressed as tones or number of trips per week.
This calls for a practical example to appreciate the relevance of the concept. Let us visit a
new Health-care facility, once again.
ILLUSTRATION 3: The new Health-care facility is targeted to serve seven census tracts in
Delhi. The table given below shows the coordinates for the centre of each census tract, along with
the projected populations, measured in thousands. Customers will travel from the seven census
tract centres to the new facility when they need health-care. Two locations being considered for
the new facility are at (5.5, 4.5) and (7, 2), which are the centres of census tracts C and F. Details
of seven census tract centres, co-ordinate distances along with the population for each centre are
given below. If we use the population as the loads and use rectilinear distance, which location is
better in terms of its total loaddistance score?
Sl. No. Census tract (x, y) Population (l)
1 A (2.5, 4.5) 2
2 B (2.5, 2.5) 5
3 C (5.5, 4.5) 10
4 D (5, 2) 7
5 E (8, 5) 10
6 F (7, 2) 20
7 G (9, 2.5) 14
SOLUTION: Calculate the load-distance score for each location. Using the coordinates
from the above table. Calculate the load-distance score for each tract.
Using the formula DAB = |XA – XB| + |YA – YB|
Census (x, y) Population Locate at (5.5, 4.5) Locate at (7, 2)

tract (l) Distance (d) Load- Distance (d) Load-
distance distance
A (2.5, 4.5) 2 3+0=3 6 4.5 + 2.5 = 7 14

B (2.5, 2.5) 5 3+2=5 25 4.5 + 0.5 = 5 25
C (5.5, 4.5) 10 0+0=0 0 1.5 + 2.5 = 4 40
D (5, 2) 7 0.5 + 2.5 = 3 21 2+0=2 14
E (8, 5) 10 2.5 + 0.5 = 3 30 1+3=4 40
F (7, 2) 20 1.5 + 2.5 = 4 80 0+0=0 0
G (9, 2.5) 14 3.5 + 2 = 5.5 77 2 + 0.5 = 2.5 35
Total 239 Total 168
Summing the scores for all tracts gives a total load-distance score of 239 when the facility is
located at (5.5, 4.5) versus a load-distance score of 168 at location (7, 2). Therefore, the location
in census tract F is a better location.
2.5.4 Centre of Gravity
Centre of gravity is based primarily on cost considerations. This method can be used to assist
managers in balancing cost and service objectives. The centre of gravity method takes into
account the locations of plants and markets, the volume of goods moved, and transportation costs
in arriving at the best location for a single intermediate warehouse.
The centre of gravity is defined to be the location that minimizes the weighted distance
between the warehouse and its supply and distribution points, where the distance is weighted by
the number of tones supplied or consumed. The first step in this procedure is to place the
locations on a coordinate system. The origin of the coordinate system and scale used are arbitrary,
just as long as the relative distances are correctly represented. This can be easily done by placing
a grid over an ordinary map. The centre of gravity is determined by the formula.
∑D .W ix i ∑D .W iy i
CX = C=
∑W i Y ∑W i
where Cx = x-coordinate of the centre of gravity

Cy = y-coordinate of the centre of gravity
Dix = x-coordinate of location i
Diy = y-coordinate of location i
ILLUSTRATION 4: The new Health-care facility is targeted to serve seven census tracts in
Delhi. The table given below shows the coordinates for the centre of each census tract, along with
the projected populations, measured in thousands. Customers will travel from the seven census
tract centres to the new facility when they need healthcare. Two locations being considered for
the new facility are at (5.5, 4.5) and (7, 2), which are the centres of census tracts C and F. Details
of seven census tract centres, coordinate distances along with the population for each centre are
given below. Find the target area’s centre of gravity for the Health-care medical facility.
Sl. No. Census tract (x, y) Population (l)
1 A (2.5, 4.5) 2
2 B (2.5, 2.5) 5
3 C (5.5, 4.5) 10
4 D (5, 2) 7
5 E (8, 5) 10
6 F (7, 2) 20
7 G (9, 2.5) 14
SOLUTION: To calculate the centre of gravity, start with the following information, where
population is given in thousands.
Sl. No. Census tract (x, y) Population (l) Lx Ly
1 A (2.5, 4.5) 2 5 9
2 B (2.5, 2.5) 5 12.5 12.5
3 C (5.5, 4.5) 10 55 45
4 D (5, 2) 7 35 14
5 E (8, 5) 10 80 50
6 F (7, 2) 20 140 40
7 G (9, 2.5) 14 126 35
Total 68 453.50 205.50
Next we find Cx and Cy.

Cx = 453.5/68 = 6.67
Cy = 205.5/68 = 3.02
The centre of gravity is (6.67, 3.02). Using the centre of gravity as starting point, managers
can now search in its vicinity for the optimal location.
2.5.5 Break Even Analysis
Break even analysis implies that at some point in the operations, total revenue equals total cost.
Break even analysis is concerned with finding the point at which revenues and costs agree
exactly. It is called ‘Break-even Point’. The Fig. 2.3 portrays the Break Even Chart:
Break even point is the volume of output at which neither a profit is made nor a loss is
incurred. The Break Even Point (BEP) in units can be calculated by using the relation:
Fixed Cost Fixed Cost F
BEP = units
Contribution per unit Selling Price Variable Cost per unit S V The Break
Even Point (BEP) in Rs. can be calulated by using the relation:
BEP = Fixed Cost Fixed Cost F Rs.

PV Ratio Sales – Variable Cost
Sales
Plotting the break even chart for each location can make economic comparisons of locations.
This will be helpful in identifying the range of production volume over which location can be
selected.
ILLUSTRATION 5: Potential locations X, Y and Z have the cost structures shown below.
The ABC company has a demand of 1,30,000 units of a new product. Three potential locations X,
Y and Z having following cost structures shown are available. Select which location is to be
selected and also identify the volume ranges where each location is suited?
Location X Location Y Location Z
Fixed Costs Rs. 150,000 Rs. 350,000 Rs. 950,000

Variable Costs Rs. 10 Rs. 8 Rs. 6
SOLUTION: Solve for the crossover between X and Y:

10X + 150,000 = 8X + 350,000 2X = 200,000 X = 100,000
units Solve for the crossover between Y and Z:
8X + 350,000 = 6X + 950,000 2X
= 600,000
X = 300,000 units
Therefore, at a volume of 1,30,000 units, Y is the appropriate strategy.
From the graph (Fig. 2.4) we can interpret that location X is suitable up to 100,000 units,
location Y is suitable up to between 100,000 to 300,000 units and location Z is suitable if the
demand is more than 300,000 units.
2.6 LO C A TIO NA L EC O NO MIC S
An ideal location is one which results in lowest production cost and least distribution cost per
unit. These costs are influenced by a number of factors as discussed earlier. The various costs
which decide locational economy are those of land, building, equipment, labour, material, etc.
Other factors like community attitude, community facilities and housing facilities will also
influence the selection of best location. Economic analysis is carried out to decide as to which
locate best location.
The following illustration will clarify the method of evaluation of best layout selection.
ILLUSTRATION 6: From the following data select the most advantageous location for
setting a plant for making transistor radios.
Site X Site Y Site Z
Rs. Rs. Rs.
(i) Total initial investment 2,00,000 2,00,000 2,00,000

(ii) Total expected sales 2,50,000 3,00,000 2,50,000
(iii) Distribution expenses 40,000 40,000 75,000
(iv) Raw material expenses 70,000 80,000 90,000
(v) Power and water supply expenses 40,000 30,000 20,000
(vi) Wages and salaries 20,000 25,000 20,000
(vii) Other expenses 25,000 40,000 30,000
(viii) Community attitude Indifferent Want Indifferent
business
(ix) Employee housing facilities Poor Excellent Good
SOLUTION:
Site X Site Y Site Z
Total expenses Rs. Rs. Rs.
[Add (iii) (iv) (v) (vi) and (vii)] 1,95,000 2,15,000 2,35,000
Total sales −Total expenses

Rate of return (RoR), % = ×100
Total investment
RoR for Site X = ×100

= 27.5%
RoR for Site Y = ×100

= 42.5%
RoR for Site Z = ×100

= 7.5%
Location Y can be selected because of higher rate of return.
2.7 PLA NT LA YO UT
Plant layout refers to the physical arrangement of production facilities. It is the configuration of
departments, work centres and equipment in the conversion process. It is a floor plan of the
physical facilities, which are used in production.
According to Moore “Plant layout is a plan of an optimum arrangement of facilities
including personnel, operating equipment, storage space, material handling equipment and all
other supporting services along with the design of best structure to contain all these facilities”.
2.7.1 Objectives of Plant Layout
The primary goal of the plant layout is to maximise the profit by arrangement of all the plant
facilities to the best advantage of total manufacturing of the product.
The objectives of plant layout are:
1. Streamline the flow of materials through the plant.
2. Facilitate the manufacturing process.
3. Maintain high turnover of in-process inventory.
4. Minimise materials handling and cost.
5. Effective utilisation of men, equipment and space.
6. Make effective utilisation of cubic space.
7. Flexibility of manufacturing operations and arrangements.
8. Provide for employee convenience, safety and comfort.
9. Minimize investment in equipment.
10. Minimize overall production time.
11. Maintain flexibility of arrangement and operation.
12. Facilitate the organizational structure.
2.7.2 Principles of Plant Layout

1. Principle of integration: A good layout is one that integrates men, materials, machines
and supporting services and others in order to get the optimum utilisation of resources and
maximum effectiveness.
2. Principle of minimum distance: This principle is concerned with the minimum travel
(or movement) of man and materials. The facilities should be arranged such that, the total
distance travelled by the men and materials should be minimum and as far as possible straight
line movement should be preferred.
3. Principle of cubic space utilisation: The good layout is one that utilise both horizontal
and vertical space. It is not only enough if only the floor space is utilised optimally but the third
dimension, i.e., the height is also to be utilised effectively.
4. Principle of flow: A good layout is one that makes the materials to move in forward
direction towards the completion stage, i.e., there should not be any backtracking.
5. Principle of maximum flexibility: The good layout is one that can be altered without
much cost and time, i.e., future requirements should be taken into account while designing the
present layout.
6. Principle of safety, security and satisfaction: A good layout is one that gives due
consideration to workers safety and satisfaction and safeguards the plant and machinery against
fire, theft, etc.
7. Principle of minimum handling: A good layout is one that reduces the material
handling to the minimum.
2.8 C LA SSIFIC A TIO N O F LA YO UT
Layouts can be classified into the following five categories:
1. Process layout
2. Product layout
3. Combination layout
4. Fixed position layout
5. Group layout
2.8.1 Process Layout
Process layout is recommended for batch production. All machines performing similar type of
operations are grouped at one location in the process layout e.g., all lathes, milling machines, etc.
are grouped in the shop will be clustered in like groups.
Thus, in process layout the arrangement of facilities are grouped together according to their
functions. A typical process layout is shown in Fig. 2.5. The flow paths of material through the
facilities from one functional area to another vary from product to product. Usually the paths are
long and there will be possibility of backtracking.
Process layout is normally used when the production volume is not sufficient to justify a
product layout. Typically, job shops employ process layouts due to the variety of products
manufactured and their low production volumes.
Advantages
1. In process layout machines are better utilized and fewer machines are required.
2. Flexibility of equipment and personnel is possible in process layout.
3. Lower investment on account of comparatively less number of machines and lower costof
general purpose machines.
4. Higher utilisation of production facilities.
5. A high degree of flexibility with regards to work distribution to machineries and workers.
6. The diversity of tasks and variety of job makes the job challenging and interesting.
7. Supervisors will become highly knowledgeable about the functions under their
department.
Limitations
1. Backtracking and long movements may occur in the handling of materials thus,
reducingmaterial handling efficiency.
2. Material handling cannot be mechanised which adds to cost.
3. Process time is prolonged which reduce the inventory turnover and increases the
inprocess inventory.
4. Lowered productivity due to number of set-ups.
5. Throughput (time gap between in and out in the process) time is longer.
6. Space and capital are tied up by work-in-process.
2.8.2 Product Layout
In this type of layout, machines and auxiliary services are located according to the processing
sequence of the product. If the volume of production of one or more products is large, the
facilities can be arranged to achieve efficient flow of materials and lower cost per unit. Special
purpose machines are used which perform the required function quickly and reliably.
The product layout is selected when the volume of production of a product is high such that a
separate production line to manufacture it can be justified. In a strict product layout, machines are
not shared by different products. Therefore, the production volume must be sufficient to achieve
satisfactory utilisation of the equipment. A typical product layout is shown in Fig. 2.6.
Fig. 2.6 Product layout
Advantages
1. The flow of product will be smooth and logical in flow lines.
2. In-process inventory is less.
3. Throughput time is less.
4. Minimum material handling cost.
5. Simplified production, planning and control systems are possible.
6. Less space is occupied by work transit and for temporary storage.
7. Reduced material handling cost due to mechanised handling systems and straight flow.
8. Perfect line balancing which eliminates bottlenecks and idle capacity.
9. Manufacturing cycle is short due to uninterrupted flow of materials.
10. Small amount of work-in-process inventory.
11. Unskilled workers can learn and manage the production.
Limitations
1. A breakdown of one machine in a product line may cause stoppages of machines in
thedownstream of the line.
2. A change in product design may require major alterations in the layout.
3. The line output is decided by the bottleneck machine.
4. Comparatively high investment in equipments is required.
5. Lack of flexibility. A change in product may require the facility modification.
2.8.3 Combination Layout
A combination of process and product layouts combines the advantages of both types of layouts.
A combination layout is possible where an item is being made in different types and sizes. Here
machinery is arranged in a process layout but the process grouping is then arranged in a sequence
to manufacture various types and sizes of products. It is to be noted that the sequence of
operations remains same with the variety of products and sizes. Figure 2.7 shows a combination
type of layout for manufacturing different sized gears.
Fig. 2.7 Combination layout for making different types and sizes of gears
2.8.4 Fixed Position Layout

This is also called the project type of layout. In this type of layout, the material, or major
components remain in a fixed location and tools, machinery, men and other materials are brought
to this location. This type of layout is suitable when one or a few pieces of identical heavy
products are to be manufactured and when the assembly consists of large number of heavy parts,
the cost of transportation of these parts is very high.
Fig. 2.8 Fixed position layout
Advantages
The major advantages of this type of layout are:
1. Helps in job enlargement and upgrades the skills of the operators.
2. The workers identify themselves with a product in which they take interest and pride
indoing the job.
3. Greater flexibility with this type of layout.
4. Layout capital investment is lower.
2.8.5 Group Layout (or Cellular Layout)
There is a trend now to bring an element of flexibility into manufacturing system as regards to
variation in batch sizes and sequence of operations. A grouping of equipment for performing a
sequence of operations on family of similar components or products has become all the
important.
Group technology (GT) is the analysis and comparisons of items to group them into families
with similar characteristics. GT can be used to develop a hybrid between pure process layout and
pure flow line (product) layout. This technique is very useful for companies that produce variety
of parts in small batches to enable them to take advantage and economics of flow line layout.
The application of group technology involves two basic steps; first step is to determine
component families or groups. The second step in applying group technology is to arrange the
plants equipment used to process a particular family of components. This represents small plants
within the plants. The group technology reduces production planning time for jobs. It reduces the
set-up time.
Thus group layout is a combination of the product layout and process layout. It combines
the advantages of both layout systems. If there are m-machines and n-components, in a group
layout (Group-Technology Layout), the m-machines and n-components will be divided into
distinct
number of machine-component cells (group) such that all the components assigned to a cell are
almost processed within that cell itself. Here, the objective is to minimize the intercell
movements.
The basic aim of a group technology layout is to identify families of components that require
similar of satisfying all the requirements of the machines are grouped into cells. Each cell is
capable of satisfying all the requirements of the component family assigned to it.
The layout design process considers mostly a single objective while designing layouts. In
process layout, the objective is to minimize the total cost of materials handling. Because of the
nature of the layout, the cost of equipments will be the minimum in this type of layout. In product
layout, the cost of materials handling will be at the absolute minimum. But the cost of equipments
would not be at the minimum if the equipments are not fully utilized.
In-group technology layout, the objective is to minimize the sum of the cost of transportation
and the cost of equipments. So, this is called as multi-objective layout. A typical process layout is
shown in Fig. 2.9.
Advantages of Group Technology Layout
Group Technology layout can increase—
1. Component standardization and rationalization.
2. Reliability of estimates.
3. Effective machine operation and productivity.
4. Customer service.
It can decrease the—
1. Paper work and overall production time.
2. Work-in-progress and work movement.
3. Overall cost.
Limitations of Group Technology Layout

This type of layout may not be feasible for all situations. If the product mix is completely
dissimilar, then we may not have meaningful cell formation.
2.9 DESIG N O F PRO DUC T LA YO UT
In product layout, equipment or departments are dedicated to a particular product line, duplicate
equipment is employed to avoid backtracking, and a straight-line flow of material movement is
achievable. Adopting a product layout makes sense when the batch size of a given product or part
is large relative to the number of different products or parts produced.
Assembly lines are a special case of product layout. In a general sense, the term assembly
line refers to progressive assembly linked by some material-handling device. The usual
assumption is that some form of pacing is present and the allowable processing time is equivalent
for all workstations. Within this broad definition, there are important differences among line
types. A few of these are material handling devices (belt or roller conveyor, overhead crane); line
configuration (U-shape, straight, branching); pacing (mechanical, human); product mix (one
product or multiple products); workstation characteristics (workers may sit, stand, walk with the
line, or ride the line); and length of the line (few or many workers). The range of products
partially or completely assembled on lines includes toys, appliances, autos, clothing and a wide
variety of electronic components. In fact, virtually any product that has multiple parts and is
produced in large volume uses assembly lines to some degree.
A more-challenging problem is the determination of the optimum configuration of operators
and buffers in a production flow process. A major design consideration in production lines is the
assignment of operation so that all stages are more or less equally loaded. Consider the case of
traditional assembly lines illustrated in Fig. 2.10.
In this example, parts move along a conveyor at a rate of one part per minute to three groups
of workstations. The first operation requires 3 minutes per unit; the second operation requires 1
minute per unit; and the third requires 2 minutes per unit. The first workstation consists of three
operators; the second, one operator; and the third, two operators. An operator removes a part from
the conveyor and performs some assembly task at his or her workstation. The completed part is
returned to the conveyor and transported to the next operation. The number of operators at each
workstation was chosen so that the line is balanced. Since three operators work simultaneously at
the first workstation, on the average one part will be completed each
minute. This is also true for other two stations. Since the parts arrive at a rate of one per minute,
parts are also completed at this rate.
Assembly-line systems work well when there is a low variance in the times required to
perform the individual subassemblies. If the tasks are somewhat complex, thus resulting in a
higher assembly-time variance, operators down the line may not be able to keep up with the flow
of parts from the preceding workstation or may experience excessive idle time. An alternative to a
conveyor-paced assembly-line is a sequence of workstations linked by gravity conveyors, which
act as buffers between successive operations.
LINE BALANCING
Assembly-line balancing often has implications for layout. This would occur when, for balance
purposes, workstation size or the number used would have to be physically modified.
The most common assembly-line is a moving conveyor that passes a series of workstations
in a uniform time interval called the workstation cycle time (which is also the time between
successive units coming off the end of the line). At each workstation, work is performed on a
product either by adding parts or by completing assembly operations. The work performed at each
station is made up of many bits of work, termed tasks, elements, and work units. Such tasks are
described by motion-time analysis. Generally, they are grouping that cannot be subdivided on the
assembly-line without paying a penalty in extra motions.
The total work to be performed at a workstation is equal to the sum of the tasks assigned to
that workstation. The line-balancing problem is one of assigning all tasks to a series of
workstations so that each workstation has no more than can be done in the workstation cycle time,
and so that the unassigned (idle) time across all workstations is minimized.
The problem is complicated by the relationships among tasks imposed by product design and
process technologies. This is called the precedence relationship, which specifies the order in
which tasks must be performed in the assembly process. The steps in balancing an assembly line
are:
1. Specify the sequential relationships among tasks using a precedence diagram. 2.
Determine the required workstation cycle time C, using the formula
Production time per day
C=
Required output per day (in units)
3. Determine the theoretical minimum number of workstations (N t) required to satisfy the
workstation cycle time constraint using the formula
Sum of task times (T)
Nt =
Cycle time (C)
4. Select a primary rule by which tasks are to be assigned to workstations, and a
secondaryrule to break ties.
5. Assign tasks, one at a time, to the first workstation until the sum of the task times is
equalto the workstation cycle time, or no other tasks are feasible because of time or
sequence restrictions. Repeat the process for workstation 2, workstation 3, and so on until
all tasks are assigned.
6. Evaluate the efficiency of the balance derived using the formula

Sum of task times (T)
Efficiency =
Actual number of workstations (N ) a × Workstations cycle time (C)
7. If efficiency is unsatisfactory, rebalance using a different decision rule.
ILLUSTRATION 7: The MS 800 car is to be assembled on a conveyor belt. Five hundred
cars are required per day. Production time per day is 420 minutes, and the assembly steps and
times for the wagon are given below. Find the balance that minimizes the number of workstations,
subject to cycle time and precedence constraints.
Task Task time Description Tasks that
(in seconds) must precede
A 45 Position rear axle support and -

hand fasten
B 11 Four screws to nuts A
C 9 Insert rear axle B
D 50 Tighten rear axle support screws -
to nuts
E 15 Position front axle assembly and hand D
F 12 Fasten with four screws to nuts C
G 12 Tighten front axle assembly screws C
H 12 Position rear wheel 1 and fasten hubcap E
I 12 Position rear wheel 2 and fasten hubcap E
J 8 Position front wheel 1 and fasten hubcap F, G, H, I
K 9 Position front wheel 2 and fasten hubcap J
SOLUTION: 1. Draw a precedence diagram as follows:
2. Determine workstation cycle time. Here we have to convert production time to

secondsbecause our task times are in seconds
Production time per day
C=
Required output per day (in units)
420 min × 60 sec 25200
= = = 50.4 secs
500 cars 500
3. Determine the theoretical minimum number of workstations required (the actual

numbermay be greater)
T 195 seconds
Nt = = = 3.87 = 4 (rounded up)
C 50.4 seconds
4. Select assignment rules.
(a)Prioritize tasks in order of the largest number of following tasks:
Task Number of following tasks
A 6
B or D 5
C or E 4
F, G, H, or I 2
J 1
K 0
Our secondary rule, to be invoked where ties exist from our primary rule, is (b) Prioritize
tasks in order of longest task time. Note that D should be assigned before B, and E
assigned before C due to this tie-breaking rule.
5. Make task assignments to form workstation 1, workstation 2, and so forth until all
tasksare assigned. It is important to meet precedence and cycle time requirements as the
assignments are made.
Station Task Task time Remaining Feasible Task with Task with
(in sec) unassigned remaining most longest ope-
time (in sec) tasks followers ration time
Station 1 A 45 5.4 Idle None

Station 2 D 50 0.4 Idle None
Station 3 B 11 39.4 C, E C, E E
E 15 24.4 C, H, I C
C 9 15.4 F, G, H, I F, G, H, I F, G, H, I
F 12 3.4 idle None
Station 4 G 12 38.4 H, I H, I H, I
H 12 26.4 I
I 12 14.4 J
J 8 6.4 idle None
Station 5 K 9 41.4 idle None
6. Calculate the efficiency.

T 195
Efficiency = .77 or 77%
N Ca 5 50.4
7. Evaluate the solution. An efficiency of 77 per cent indicates an imbalance or idle timeof
23 per cent (1.0 – .77) across the entire line.
In addition to balancing a line for a given cycle time, managers must also consider four other
options: pacing, behavioural factors, number of models produced, and cycle times.
Pacing is the movement of product from one station to the next after the cycle time has
elapsed. Paced lines have no buffer inventory. Unpaced lines require inventory storage areas to be
placed between stations.
BEHAVIOURAL FACTORS
The most controversial aspect of product layout is behavioural response. Studies have shown that
paced production and high specialization lower job satisfaction. One study has shown that
productivity increased on unpaced lines. Many companies are exploring job enlargement and
rotation to increase job variety and reduce excessive specialization. For example, New York Life
has redesigned the jobs of workers who process and evaluate claims applications. Instead of using
a production line approach with several workers doing specialized tasks, New York Life has made
each worker solely responsible for an entire application. This approach increased worker
responsibility and raised morale. In manufacturing, at its plant in Kohda, Japan, Sony Corporation
dismantled the conveyor belts on which as many as 50 people assembled camcorders. It set up
tables for workers to assemble an entire camera themselves, doing everything from soldering to
testing. Output per worker is up 10 per cent, because the approach frees efficient assemblers to
make more products instead of limiting them to conveyor belt’s speed. And if something goes
wrong, only a small section of the plant is affected. This approach also allows the line to match
actual demand better and avoid frequent shutdown because of inventory buildups.
NUMBER OF MODELS PRODUCED

A mixed-model line produces several items belonging to the same family. A single-model line
produces one model with no variations. Mixed model production enables a plant to achieve both
high-volume production and product variety. However, it complicates scheduling and increases
the need for good communication about the specific parts to be produced at each station.
CYCLE TIMES
A line’s cycle time depends on the desired output rate (or sometimes on the maximum number of
workstations allowed). In turn, the maximum line efficiency varies considerably with the cycle
time selected. Thus, exploring a range of cycle times makes sense. A manager might go with a
particularly efficient solution even if it does not match the output rate. The manager can
compensate for the mismatch by varying the number of hours the line operates through overtime,
extending shifts, or adding shifts. Multiple lines might even be the answer.
2.10 DESIG N O F PRO C ESS LA YO UT
The analysis involved in the design of production lines and assembly lines relates primarily to
timing, coordination, and balance among individual stages in the process.
For process layouts, the relative arrangement of departments and machines is the critical
factor because of the large amount of transportation and handling involved.
PROCEDURE FOR DESIGNING PROCESS LAYOUTS

Process layout design determines the best relative locations of functional work centres. Work
centres that interact frequently, with movement of material or people, should be located close
together, whereas those that have little interaction can be spatially separated. One approach of
designing an efficient functional layout is described below.
1. List and describe each functional work centre.
2. Obtain a drawing and description of the facility being designed.
3. Identify and estimate the amount of material and personnel flow among work centres
4. Use structured analytical methods to obtain a good general layout.
5. Evaluate and modify the layout, incorporating details such as machine orientation,
storagearea location, and equipment access.
The first step in the layout process is to identify and describe each work centre. The
description should include the primary function of the work centre; drilling, new accounts, or
cashier; its major components, including equipment and number of personnel; and the space
required. The description should also include any special access needs (such as access to running
water or an elevator) or restrictions (it must be in a clean area or away from heat).
For a new facility, the spatial configuration of the work centres and the size and shape of the
facility are determined simultaneously. Determining the locations of special structures and
fixtures such as elevators, loading docks, and bathrooms becomes part of the layout process.
However, in many cases the facility and its characteristics are a given. In these situations, it is
necessary to obtain a drawing of the facility being designed, including shape and dimensions,
locations of fixed structures, and restrictions on activities, such as weight limits on certain parts of
a floor or foundation.
To minimize transport times and material-handling costs, we would like to place close
together those work centres that have the greatest flow of materials and people between them.
To estimate the flows between work centres, it is helpful to begin by drawing relationship
diagram as shown in Fig. 2.11.
For manufacturing systems, material flows and transporting costs can be estimated
reasonably well using historical routings for products or through work sampling techniques
applied to workers or jobs. The flow of people, especially in a service system such as a business
office or a university administration building, may be difficult to estimate precisely, although
work sampling can be used to obtain rough estimates.
The amounts and/or costs of flows among work centres are usually presented using a flow
matrix, a flow-cost matrix, or a proximity chart.
1. Flow Matrix
A flow matrix is a matrix of the estimated amounts of flow between each pair of work
centres. The flow may be materials (expressed as the number of loads transported) or people who
move between centres. Each work centre corresponds to one row and one column, and the
element fij designates the amount of flow from work centre (row) I to work centre (column) j.
Normally, the direction of flow between work centres is not important, only the total amount, so
fij and fji can be combined and the flows represented using only the upper right half of a matrix.
Flow Ma trix Ta ble

Work centre
A B C D E F G H I
A - 25 32 0 80 0 30 5 15
B - - 20 10 30 75 0 7 10 Daily flows
C - - - 0 10 50 45 60 0 between
D - - - - 35 0 25 90 120 work
E - - - - - 20 80 0 70 centres
F - - - - - - 0 150 20
G - - - - - - - 50 45
H - - - - - - - - 80
I - - - - - - - - -
2. Flow-cost Matrix
A basic assumption of facility layout is that the cost of moving materials or people between
work centers is a function of distance travelled. Although more complicated cost functions can be
accommodated, often we assume that the per unit cost of material and personnel flows between
work centres is proportional to the distance between the centres. So for each type of flow between
each pair of departments, i and j, we estimate the cost per unit per unit distance, cij.
Flow-c ost Ma trix Ta ble

Work centre
A B C D E F G H I
A - 25 32 0 80 0 30 5 15
B - - 40 10 90 75 0 7 10 Daily cost
C - - - 0 10 50 45 60 0 for flows
D - - - - 35 0 50 90 240 between
E - - - - - 20 80 0 70 work centres
F - - - - - - 0 150 20 (Rs per day
G - - - - - - - 150 45 per 100 ft)
H - - - - - - - - 80
I - - - - - - - - -
3. Proximity Chart
Proximity charts (relationship charts) are distinguished from flow and flow-cost matrices by
the fact that they describe qualitatively the desirability or need for work centres to be close
together, rather than providing quantitative measures of flow and cost. These charts are used when
it is difficult to measure or estimate precise amounts or costs of flow among work centres. This is
common when the primary flows involve people and do not have a direct cost but rather an
indirect cost, such as when employees in a corporate headquarters move among departments
(payroll, printing, information systems) to carry out their work.
2.11 SERVIC E LA YO UT
The major factors considered for service providers, is an impact of location on sales and customer
satisfaction. Customers usually look about how close a service facility is, particularly if the
process requires considerable customer contact. Hence, service facility layouts should provide for
easy entrance to these facilities from the freeways. Well-organized packing areas, easily
accessible facilities, well designed walkways and parking areas are some of the requirements of
service facility layout.
Service facility layout will be designed based on degree of customer contact and the service
needed by a customer. These service layouts follow conventional layouts as required. For
example, for car service station, product layout is adopted, where the activities for servicing a car
follows a sequence of operation irrespective of the type of car. Hospital service is the best
example for adaptation of process layout. Here, the service required for a customer will follow an
independent path. The layout of car servicing and hospital is shown in Figs. 2.12 and 2.13.
2.12 O RG A NISA TIO N O F PHYSIC A L FA C ILITIES
The following are the most important physical facilities to be organised:
1. Factory building
2. Lighting
3. Claimatic conditions
4. Ventilation
5. Work-related welfare facilities
I. FACTORY BUILDING
Factory building is a factor which is the most important consideration for every industrial
enterprise. A modem factory building is required to provide protection for men, machines,
materials, products
or even the company’s secrets. It has to serve as a part of the production facilities and as a factor
to maximise economy and efficiency in plant operations. It should offer a pleasant and
comfortable working environment and project the management’s image and prestige. Factory
building is like skin and bones of a living body for an organisation. It is for these reasons that the
factory building acquires great importance.
Following factors are considered for an Industrial Building: A.
Design of the building.
B. Types of buildings.
A . Desig n of the Building
The building should designed so as to provide a number of facilities—such as lunch rooms,
cafeteria, locker rooms, crèches, libraries, first-aid and ambulance rooms, materials handling
facilities, heating, ventilation, air-conditioning, etc. Following factors are considerations in the
designing of a factory building:
1. Flexibility: Flexibility is one of the important considerations because the building is
likely to become obsolete and provides greater operating efficiency even when processes and
technology change. Flexibility is necessary because it is not always feasible and economical to
build a new plant, every time a new firm is organised or the layout is changed. With minor
alternations, the building should be able to accommodate different types of operations.
2. Product and equipment: The type of product that is to be manufactured, determines
column-spacing, type of floor, ceiling, heating and air-conditioning. A product of a temporary
nature may call for a less expensive building and that would be a product of a more permanent
nature. Similarly, a heavy product demands a far more different building than a product which is
light in weight.
3. Expansibility: Growth and expansion are natural to any manufacturing enterprises. They
are the indicators of the prosperity of a business. The following factors should be borne in mind if
the future expansion of the concern is to be provided for:
(i) The area of the land which is to be acquired should be large enough to provide for the
future expansion needs of the firm and accommodate current needs.
(ii) The design of the building should be in a rectangular shape. Rectangular shapes facilitate
expansion on any side.
(iii) If vertical expansion is expected, strong foundations, supporters and columns must be
provided.
(iv) If horizontal expansion is expected, the side walls must be made non-load-bearing to
provide for easy removal.
4. Employee facilities and service area: Employee facilities must find a proper place in the
building design because they profoundly affect the morale, comfort and productivity. The
building plan should include facilities for lunch rooms, cafeteria, water coolers, parking area and
the like. The provision of some of these facilities is a legal requirement. Others make good
working conditions possible. And a good working condition is good business.
Service areas, such as the tool room, the supervisor’s office, the maintenance room,
receiving and dispatching stations, the stock room and facilities for scrap disposal, should also be
included in the building design.
B. Types of Buildings
Industrial buildings may be grouped under three types:
1. Single-storey buildings,
2. Multi-storey buildings
The decision on choosing a suitable type for a particular firm depends on the manufacturing
process and the area of land and the cost of construction.
1. SINGLE-STOREY BUILDINGS
Most of the industrial buildings manufacturing which are now designed and constructed are single
storeyed, particularly where lands are available at reasonable rates. Single-storey buildings offer
several operating advantages. A single-storey construction is preferable when materials handling
is difficult because the product is big or heavy, natural lighting is desired, heavy floor loads are
required and frequent changes in layout are anticipated.
Advantages
Advantages of single-storey building are:
1. There is a greater flexibility in layout and production routing.
2. The maintenance cost resulting from the vibration of machinery is reduced
considerablybecause of the housing of the machinery on the ground.
3. Expansion is easily ensured by the removal of walls.
4. The cost of transportation of materials is reduced because of the absence of
materialshandling equipment between floors.
5. All the equipment is on the same level, making for an easier and more effective
layoutsupervision and control.
6. Greater floor load-bearing capacity for heavy equipment is ensured.
7. The danger of fire hazards is reduced because of the lateral spread of the building.
Limitations
Single-storey buildings suffer from some limitations. These are:
1. High cost of land, particularly in the city.
2. High cost of heating, ventilating and cleaning of windows.
3. High cost of transportation for moving men and materials to the factory which is
generallylocated far from the city.
2. MULTI-STOREY BUILDINGS
Schools, colleges, shopping complexes, and residences, and for service industries like Software,
BPO etc. multi-storey structures are generally popular, particularly in cities. Multi-storey
buildings are useful in manufacture of light products, when the acquisition of land becomes
difficult and expensive and when the floor load is less.
Advantages
When constructed for industrial use, multi-storey buildings offer the following advantages:
1. Maximum operating floor space (per sq. ft. of land). This is best suited in areas
whereland is very costly.
2. Lower cost of heating and ventilation.
3. Reduced cost of materials handling because the advantage of the use of gravity for
theflow of materials.
Limitations
Following are the disadvantages of multi-storey building:
1. Materials handling becomes very complicated. A lot of time is wasted in moving
thembetween floors.
2. A lot of floor space is wasted on elevators, stairways and fire escapes.
3. Floor load-bearing capacity is limited, unless special construction is used, which is
veryexpensive.
4. Natural lighting is poor in the centres of the shop, particularly when the width of
thebuilding is somewhat great.
5. Layout changes cannot be effected easily and quickly.
Generally speaking, textile mills, food industries, detergent plants, chemical industries and
software industry use these types of buildings.
II. LIGHTING
It is estimated that 80 per cent of the information required in doing job is perceived visually.
Good visibility of the equipment, the product and the data involved in the work process is an
essential factor in accelerating production, reducing the number of defective products, cutting
down waste and preventing visual fatigue and headaches among the workers. It may also be
added that both inadequate visibility and glare are frequently causes accidents.
In principle, lighting should be adapted to the type of work. However, the level of
illumination, measured in should be increased not only in relation to the degree of precision or
miniaturization of the work but also in relation to the worker’s age. The accumulation of dust and
the wear of the light sources cut down the level of illumination by 10–50 per cent of the original
level. This gradual drop in the level should therefore be compensated for when designing the
lighting system.
Regular cleaning of lighting fixture is obviously essential.
Excessive contrasts in lighting levels between the worker’s task and the general surroundings
should also be avoided. The use of natural light should be encouraged. This can be achieved by
installing windows that open, which are recommended to have an area equal to the time of day,
the distance of workstations from the windows and the presence or absence of blinds. For this
reason it is essential to have artificial lighting, will enable people to maintain proper vision and
will ensure that the lighting intensity ratios between the task, the surrounding objects and the
general environment are maintained.
CONTROL OF LIGHTING
In order to make the best use of lighting in the work place, the following points should be taken
into account:
1. For uniform light distribution, install an independent switch for the row of lighting
fixturesclosest to the windows. This allows the lights to be switched on and off depending
on whether or not natural light is sufficient.
2. To prevent glare, avoid using highly shiny, glossy work surfaces.
3. Use localized lighting in order to achieve the desired level for a particular fine job.
4. Clean light fixtures regularly and follow a maintenance schedule so as to prevent
flickeringof old bulbs and electrical hazards due to worn out cables.
5. Avoid direct eye contact with the light sources. This is usually achieved by
positioningthem property. The use of diffusers is also quite effective.
III. CLIMATIC CONDITIONS
Control of the climatic conditions at the workplace is paramount importance to the workers health
and comfort and to the maintenance of higher productivity. With excess heat or cold, workers may
feel very uncomfortable, and their efficiency drops. In addition, this can lead to accidents.
This human body functions in such a way as to keep the central nervous system and the
internal organs at a constant temperature. It maintains the necessary thermal balance by
continuous heat exchange with the environment. It is essential to avoid excessive hear or cold,
and wherever possible to keep the climatic conditions optimal so that the body can maintain a
thermal balance.
WORKING IN A HOT ENVIRONMENT

Hot working environments are found almost everywhere. Work premise in tropical countries may,
on account of general climatic conditions, be naturally hot. When source of heat such as furnaces,
kilns or hot processes are present, or when the physical workload is heavy, the human body may
also have to deal with excess heat. It should be noted that in such hot working environments
sweating is almost the only way in which the body can lose heat. As the sweat evaporates, the
body cools. There is a relationship between the amount and speed of evaporation and a feeling of
comfort. The more intense the evaporation, the quicker the body will cool and feel refreshed.
Evaporation increases with adequate ventilation.
WORKING IN A COLD ENVIRONMENT

Working in cold environments was once restricted to non-tropical or highly elevated regions.
Now as a result of modern refrigeration, various groups of workers, even in tropical countries, are
exposed to a cold environment.
Exposure to cold for short periods of time can produce serious effects, especially when
workers are exposed to temperatures below 10°C The loss of body heat is uncomfortable and
quickly affects work efficiency. Workers in cold climates and refrigerated premises should be well
protected against the cold by wearing suitable clothes, including footwear, gloves and, most
importantly, a hat. Normally, dressing in layers traps dead air and serves as an insulation layer,
thus keeping the worker warmer.
CONTROL OF THE THERMAL ENVIRONMENT

There are many ways of controlling the thermal environment. It is relatively easy to assess the
effects of thermal conditions, especially when excessive heat or cold is an obvious problem. To
solve the problem, however, consistent efforts using a variety of available measures are usually
necessary. This is because the problem is linked with the general climate, which greatly affects
the workplace climate, production technology, which is often the source of heat or cold and
varying conditions of the work premises as well as work methods and schedules. Personal factors
such as clothing, nutrition, personal habits, and age and individual differences in response to the
given thermal conditions also need to be taken into account in the attempt to attain the thermal
comfort of workers.
In controlling the thermal environment, one or more of the following principles may be
applied:
1. Regulating workroom temperature by preventing outside heat or cold from
entering(improved design of the roof, insulation material or installing an air-conditioned
workroom. Air-conditioning is costly, especially in factories. But it is sometimes a
worthwhile investment if an appropriate type is chosen);
2. provision of ventilation in hot workplaces by increasing natural ventilating through
openingsor installing ventilation devices;
3. separation of heat sources from the working area, insulation of hot surfaces and pipes,or
placement of barriers between the heat sources and the workers;
4. control of humidity with a view to keeping it at low levels, for example by preventing
theescape of steam from pipes and equipment;
5. Provision of adequate personal protective clothing and equipment for workers exposedto
excessive radiant heat or excessive cold (heat-protective clothing with high insulation
value may not be recommended for jobs with long exposure to moderate or heavy work
as it prevents evaporative heat loss);
6. Reduction of exposure time, for example, by mechanization, remote control or
alternatingwork schedules;
7. Insertion of rest pauses between work periods, with comfortable, if possible air-
conditioned,resting facilities;
8. Ensuring a supply of cold drinking-water for workers in a hot environment and of
hotdrinks for those exposed to a cold environment.
IV. VENTILATION
Ventilation is the dynamic parameter that complements the concept of air space. For a given
number of workers, the smaller the work premises the more should be the ventilation.
Ventilation differs from air circulation. Ventilation replaces contaminated air by fresh air,
whereas as the air-circulation merely moves the air without renewing it. Where the air
temperature and humidity are high, merely to circulate the air is not only ineffective but also
increases heat absorption. Ventilation disperses the heat generated by machines and people at
work. Adequate ventilation should be looked upon as an important factor in maintaining the
worker’s health and productivity.
Except for confined spaces, all working premises have some minimum ventilation. However,
to ensure the necessary air flow (which should not be lower than 50 cubic metres of air per hour
per worker), air usually needs to be changed between four to eight times per hour in offices or for
sedentary workers, between eight and 12 times per hour in workshops and as much as 15 to 30 or
more times per hour for public premises and where there are high levels of atmospheric pollution
or humidity. The air speed used for workplace ventilation should be adapted to the air temperature
and the energy expenditure: for sedentary work it should exceed 0.2 metre per second, but for a
hot environment the optimum speed is between 0.5 and 1 metre per second. For hazardous work it
may be even higher. Certain types of hot work can be made tolerable by directing a stream of cold
air at the workers.
Natural ventilation, obtained by opening windows or wall or roof airvents, may produce
significant air flows but can normally be used only in relatively mild climates. The effectiveness
of this type of ventilation depends largely on external conditions. Where natural ventilation is
inadequate, artificial ventilation should be used. A choice may be made between a blown-air
system, an exhaust air system or a combination of both (‘push-pull’ ventilation). Only ‘push-pull’
ventilation systems allow for better regulation of air movement.
V. WORK-RELATED WELFARE FACILITIES
Work-related welfare facilities offered at or through the workplace can be important factors.
Some facilities are very basic, but often ignored, such as drinking-water and toilets. Others may
seem less necessary, but usually have an importance to workers far greater than their cost to the
enterprise.
1. DRINKING WATER
Safe, cool drinking water is essential for all types of work, especially in a hot environment.
Without it fatigue increases rapidly and productivity falls. Adequate drinking water should be
provided and maintained at convenient points, and clearly marked as “Safe drinking water”.
Where possible it should be kept in suitable vessels, renewed at least daily, and all practical steps
taken to preserve the water and the vessels from contamination.
2. SANITARY FACILITIES
Hygienic sanitary facilities should exist in all workplaces. They are particularly important where
chemicals or other dangerous substances are used. Sufficient toilet facilities, with separate
facilities for men and women workers, should be installed and conveniently located.
Changingrooms and cloakrooms should be provided. Washing facilities, such as washbasins with
soap and towels, or showers, should be placed either within changing-rooms or close by.
3. FIRST-AID AND MEDICAL FACILITIES
Facilities for rendering first-aid and medical care at the workplace in case of accidents or
unforeseen sickness are directly related to the health and safety of the workers. First-aid boxes
should be clearly marked and conveniently located. They should contain only first-aid requisites
of a prescribed standard and should be in the charge of qualified person. Apart from first-aid
boxes, it is also desirable to have a stretcher and suitable means to transport injured persons to a
centre where medical care can be provided.
4. REST FACILITIES
Rest facilities can include seat, rest-rooms, waiting rooms and shelters. They help workers to
recover from fatigue and to get away from a noisy, polluted or isolated workstation. A sufficient
number of suitable chairs or benches with backrests should be provided and maintained, including
seats for occasional rest of workers who are obliged to work standing up. Rest-rooms enable
workers to recover during meal and rest breaks.
5. FEEDING FACILITIES
It is now well recognized that the health and work capacity of workers to have light refreshments
are needed. A full meal at the workplace in necessary when the workers live some distance away
and when the hours of work are so organized that the meal breaks are short. A snack bar, buffet or
mobile trolleys can provide tea, coffee and soft drinks, as well as light refreshments. Canteens or
a restaurant can allow workers to purchase a cheap, well-cooked and nutritious meal for a
reasonable price and eat in a clean, comfortable place, away from the workstation.
6. CHILD-CARE FACILITIES
Many employers find that working mothers are especially loyal and effective workers, but they
often face the special problems of carrying for children. It is for this reason that child-care
facilities, including crèches and day-care centres, should be provided. These should be in secure,
airy, clean and well lit premises. Children should be looked after property by qualified staff and
offered food, drink education and play at very low cost.
7. RECREATIONAL FACILITIES
Recreational facilities offer workers the opportunity to spend their leisure time in activities likely
to increase physical and mental well-being. They may also help to improve social relations within
the enterprise. Such facilities can include halls for recreation and for indoor and outdoor sports,
reading-rooms and libraries, clubs for hobbies, picnics and cinemas. Special educational and
vocational training courses can also be organized.
EX ERC ISES
Section A
1. What do you mean by plant location?
2. What is virtual proximity?
3. What is virtual factory?
4. What is agglomeration?
5. What is degglomeration?
6. What is plant layout?
7. Mention any four objectives of plant layout.
Section B
1. Explain different operations strategies in case of location choice for existing organisation.
2. Explain the factors to be considered while selecting the location for the new organisation.
3. Explain the reasons for global or foreign location.
4. Explain the Alfred Weber’s theory of the location of industries.

5. Explain the objectives of plant layout.
6. Explain the main principles of plant layout.
7. Explain the factors considered for an industrial building.
Section C
1. Explain the need for selecting a suitable location.
2. Explain the factors influencing plant location.
3. Explain the different types of layouts.
4. Explain the physical facilities required in an organisation/factory.
Skill Development
FAST FOOD RESTAURANT VISIT: Get the information for the following questions:
1. The locational factors considered for establishing the enterprise.
2. Strategy adopted for identifying the location [Ex: factor rating, load, distances method etc.]
3. Type of layout.
4. Physical facilities existing [line lighting ventilators, type of building etc.]
3
MATERIAL HANDLING
C HA PTER O UTLINE
3.1 Introduction and Meaning 3.7 Guidelines for Effective Utilisation of
3.2 Objectives of Material Handling Material Handling Equipments
3.3 Principles of Material Handling 3.8 Relationship Between Plant Layout and
3.4 Selection of Material Handling Material Handling
Equipments •Exercises
3.5 Evaluation of Material Handling System •Skill Development
3.6 Material Handing Equipments

Haynes defines “Material handling embraces the basic operations in connection with the
movement of bulk, packaged and individual products in a semi-solid or solid state by means of
gravity manually or power-actuated equipment and within the limits of individual producing,
fabricating, processing or service establishment”. Material handling does not add any value to the
product but adds to the cost of the product and hence it will cost the customer more. So the
handling should be kept at minimum. Material handling in Indian industries accounts for nearly
40% of the cost of production. Out of the total time spent for manufacturing a product, 20% of the
time is utilised for actual processing on them while the remaining 80% of the time is spent in
moving from one place to another, waiting for the processing. Poor material handling may result in
delays leading to idling of equipment.
Materials handling can be also defined as ‘the function dealing with the preparation, placing
and positioning of materials to facilitate their movement or storage’. Material handling is the art
and science involving the movement, handling and storage of materials during different stages of
manufacturing. Thus the function includes every consideration of the product except the actual
processing operation. In many cases, the handling is also included as an integral part of the
process. Through scientific material handling considerable reduction in the cost as well as in the
production cycle time can be achieved.
65
3.2 O BJ EC TIVES O F MA TERIA L HA NDLING

Following are the objectives of material handling:
1. Minimise cost of material handling.
2. Minimise delays and interruptions by making available the materials at the point of useat
right quantity and at right time.
3. Increase the productive capacity of the production facilities by effective utilisation
ofcapacity and enhancing productivity.
4. Safety in material handling through improvement in working condition.
5. Maximum utilisation of material handling equipment.
6. Prevention of damages to materials.
7. Lower investment in process inventory.
3.3 PRINC IPLES O F MA TERIA L HA NDLING
Following are the principles of material handling:
1. Planning principle: All handling activities should be planned.
2. Systems principle: Plan a system integrating as many handling activities as possible and
co-ordinating the full scope of operations (receiving, storage, production, inspection,
packing, warehousing, supply and transportation).
3. Space utilisation principle: Make optimum use of cubic space.
4. Unit load principle: Increase quantity, size, weight of load handled.
5. Gravity principle: Utilise gravity to move a material wherever practicable.
6. Material flow principle: Plan an operation sequence and equipment arrangement to
optimise material flow.
7. Simplification principle: Reduce combine or eliminate unnecessary movement and/or
equipment.
8. Safety principle: Provide for safe handling methods and equipment.
9. Mechanisation principle: Use mechanical or automated material handling equipment.
10. Standardisation principle: Standardise method, types, size of material handling
equipment.
11. Flexibility principle: Use methods and equipment that can perform a variety of task and
applications.
12. Equipment selection principle: Consider all aspect of material, move and method to be
utilised.
13. Dead weight principle: Reduce the ratio of dead weight to pay load in mobile equipment.
14. Motion principle: Equipment designed to transport material should be kept in motion.
15. Idle time principle: Reduce idle time/unproductive time of both MH equipment and man
power.
16. Maintenance principle: Plan for preventive maintenance or scheduled repair of all
handling equipment.
17. Obsolescence principle: Replace obsolete handling methods/equipment when more

efficient method/equipment will improve operation.
18. Capacity principle: Use handling equipment to help achieve its full capacity.
19. Control principle: Use material handling equipment to improve production control,
inventory control and other handling.
20. Performance principle: Determine efficiency of handling performance in terms of cost
per unit handled which is the primary criterion.
3.4 SELEC TIO N O F MA TERIA L HA NDLING EQ UIPMENTS
Selection of Material Handling equipment is an important decision as it affects both cost and
efficiency of handling system. The following factors are to be taken into account while selecting
material handling equipment.
1. PROPERTIES OF THE MATERIAL

Whether it is solid, liquid or gas, and in what size, shape and weight it is to be moved, are
important considerations and can already lead to a preliminary elimination from the range of
available equipment under review. Similarly, if a material is fragile, corrosive or toxic this will
imply that certain handling methods and containers will be preferable to others.
2. LAYOUT AND CHARACTERISTICS OF THE BUILDING

Another restricting factor is the availability of space for handling. Low-level ceiling may preclude
the use of hoists or cranes, and the presence of supporting columns in awkward places can limit
the size of the material-handling equipment. If the building is multi-storeyed, chutes or ramps for
industrial trucks may be used. Layout itself will indicate the type of production operation
(continuous, intermittent, fixed position or group) and can indicate some items of equipment that
will be more suitable than others. Floor capacity also helps in selecting the best material handling
equipment.
3. PRODUCTION FLOW
If the flow is fairly constant between two fixed positions that are not likely to change, fixed
equipment such as conveyors or chutes can be successfully used. If, on the other hand, the flow is
not constant and the direction changes occasionally from one point to another because several
products are being produced simultaneously, moving equipment such as trucks would be
preferable.
4. COST CONSIDERATIONS
This is one of the most important considerations. The above factors can help to narrow the range
of suitable equipment, while costing can help in taking a final decision. Several cost elements need
to be taken into consideration when comparisons are made between various items of equipment
that are all capable of handling the same load. Initial investment and operating and maintenance
costs are the major cost to be considered. By calculating and comparing the total cost for each of
the items of equipment under consideration, a more rational decision can be reached on the most
appropriate choice.
5. NATURE OF OPERATIONS
Selection of equipment also depends on nature of operations like whether handling is temporary or
permanent, whether the flow is continuous or intermittent and material flow pattern-vertical or
horizontal.
6. ENGINEERING FACTORS
Selection of equipment also depends on engineering factors like door and ceiling dimensions, floor
space, floor conditions and structural strength.
7. EQUIPMENT RELIABILITY
Reliability of the equipment and supplier reputation and the after sale service also plays an
important role in selecting material handling equipments.
3.5 EVA LUA TIO N O F MA TERIA L HA NDLING SYSTEM
The cost factors include investment cost, labour cost, and anticipated service hours per year,
utilization, and unit load carrying ability, loading and unloading characteristics, operating costs
and the size requirements are the factors for evolution of material handling equipment. Other
factors to be considered are source of power, conditions where the equipment has to operate and
such other technical aspects. Therefore, choices of equipments in organisation will improve the
material handling system through work study techniques. They usually result in improving the
ratio of operating time to loading time through palletizing, avoiding duplicative movements, etc.
Obsolete handling systems can be replaced with more efficient equipments.
The effectiveness of the material handling system can be measured in terms of the ratio of the
time spent in the handling to the total time spent in production. This will cover the time element.
The cost effectiveness can be measured by the expenses incurred per unit weight handled. It can be
safely said that very few organisations try to collate the expenses and time in this manner so as to
objectively view the performance and to take remedial measures. Some of the other indices which
can be used for evaluating the performance of handling systems are listed below:
EQUIPMENT UTILISATION RATIO

Equipment utilisation ratio is an important indicator for judging the materials handling system.
This ratio can be computed and compared with similar firms or in the same over a period of time.
In order to know the total effort needed for moving materials, it may be necessary to compute
Materials Handling Labour (MHL) ratio. This ratio is calculated as under:
Personnel assigned to materials handling
MHL =
Total operating work force
In order to ascertain whether is the handling system delivers materials work centres with
maximum efficiency, it is desirable to compute direct labour handling loss ratio. The ratio is:
Materials handling time lost of labour
DLHL =
Total direct labour time
The movement’s operations ratio which is calculated after dividing total number of moves by
total number of productive operations indicates whether the workers are going through too many
motions because of poor routing.
It should, however, be emphasized that the efficiency of materials handling mainly depends
on the following factors: (i) efficiency of handling methods employed for handling a unit weight
through a unit distance, (ii) efficiency of the layout which determines the distance through which
the materials have to be handled, (iii) utilisation of the handling facilities, and (iv) efficiency of
the speed of handling.
In conclusion, it can be said that an effective material handling system depends upon tailoring
the layout and equipments to suit specific requirements. When a large volume has to be moved
from a limited number of sources to a limited number of destinations the fixed path equipments
like rollers, belt conveyors, overhead conveyors and gauntry cranes are preferred. For increased
flexibility varied path equipments are preferred.
3.6 MA TERIA L HA NDING EQ UIPMENTS
Broadly material handling equipment’s can be classified into two categories, namely: ( a) Fixed
path equipments, and (b) Variable path equipments.
(a) Fixed path equipments which move in a fixed path. Conveyors, monorail devices, chutes
and pulley drive equipments belong to this category. A slight variation in this category is
provided by the overhead crane, which though restricted, can move materials in any
manner within a restricted area by virtue of its design. Overhead cranes have a very good
range in terms of hauling tonnage and are used for handling bulky raw materials, stacking
and at times palletizing.
(b) Variable path equipments have no restrictions in the direction of movement although their
size is a factor to be given due consideration trucks, forklifts mobile cranes and industrial
tractors belong to this category. Forklifts are available in many ranges, they are
manoeuvrable and various attachments are provided to increase their versatility.
Material Handing Equipments may be classified in five major categories.
1. CONVEYORS
Conveyors are useful for moving material between two fixed workstations, either continuously or
intermittently. They are mainly used for continuous or mass production operations—indeed, they
are suitable for most operations where the flow is more or less steady. Conveyors may be of
various types, with rollers, wheels or belts to help move the material along: these may be power-
driven or may roll freely. The decision to provide conveyors must be taken with care, since they
are usually costly to install; moreover, they are less flexible and, where two or more converge, it is
necessary to coordinate the speeds at which the two conveyors move.
2. INDUSTRIAL TRUCKS
Industrial trucks are more flexible in use than conveyors since they can move between various
points and are not permanently fixed in one place. They are, therefore, most suitable for
intermittent
production and for handling various sizes and shapes of material. There are many types of
truckpetrol-driven, electric, hand-powered, and so on. Their greatest advantage lies in the wide
range of attachments available; these increase the trucks ability to handle various types and shapes
of material.
3. CRANES AND HOISTS

The major advantage of cranes and hoists is that they can move heavy materials through overhead
space. However, they can usually serve only a limited area. Here again, there are several types of
crane and hoist, and within each type there are various loading capacities. Cranes and hoists may
be used both for intermittent and for continuous production.
4. CONTAINERS
These are either ‘dead’ containers (e.g. Cartons, barrels, skids, pallets) which hold the material to
be transported but do not move themselves, or ‘live’ containers (e.g. wagons, wheelbarrows or
computer self-driven containers). Handling equipments of this kind can both contain and move
the material, and is usually operated manually.
5. ROBOTS
Many types of robot exist. They vary in size, and in function and manoeuvrability. While many
robots are used for handling and transporting material, others are used to perform operations such
as welding or spray painting. An advantage of robots is that they can perform in a hostile
environment such as unhealthy conditions or carry on arduous tasks such as the repetitive
movement of heavy materials.
The choice of material-handling equipment among the various possibilities that exist is not
easy. In several cases the same material may be handled by various types of equipments, and the
great diversity of equipment and attachments available does not make the problem any easier. In
several cases, however, the nature of the material to be handled narrows the choice. Some of the
material handling equipment are shown in Figs. 3.1 to 3.11.
Fig. 3.1 Wheel conveyor Fig. 3.2 Secrew conveyor
Roller
Fig. 3.3 Belt conveyor Fig. 3.4 Roller conveyor
Fig. 3.5 Jib crane Fig. 3.6 Bridge crane
Fig. 3.7 Platform truck Fig. 3.8 Fork truck

Fig. 3.11 Spiral chute Fig. 3.12 Industrial tractor
Fig. 3.13 Electrical hoist
3.7 G UIDELINES FO R EFFEC TIVE UTILISA TIO N O F MA TERIA L HA NDLING

EQ UIPMENTS
The following guidelines are invaluable in the design and cost reduction of the materials handling
system:
1. As material handling adds no value but increases the production cycle time,
eliminatehandling wherever possible. Ideally there should not be any handling at all!
2. Sequence the operations in logical manner so that handling is unidirectional and smooth.
3. Use gravity wherever possible as it results in conservation of power and fuel.
4. Standardise the handling equipments to the extent possible as it means
interchangeableusage, better utilisation of handling equipments, and lesser spares
holding.
5. Install a regular preventive maintenance programme for material handling equipments
sothat downtime is minimum.
6. In selection of handling equipments, criteria of versatility and adaptability must be
thegoverning factor. This will ensure that investments in special purpose handling
equipments are kept at a minimum.
7. Weight of unit load must be maximum so that each ‘handling trip’ is productive.
8. Work study aspects, such a elimination of unnecessary movements and combination
ofprocesses should be considered while installing a material handling system.
9. Non-productive operations in handling, such as slinging, loading, etc., should be kept ata
minimum through appropriate design of handling equipment. Magnetic cranes for scrap
movement and loading in furnaces combination of excavators and tippers for ores
loading and unloading in mines are examples in this respect.
10. Location of stores should be as close as possible to the plant which uses the
materials.This avoids handling and minimizing investment in material handling system.
11. Application of OR techniques such as queueing can be very effective in optimal
utilisationof materials handling equipments.
12. A very important aspect in the design of a material handling system is the safety
aspect.The system designed should be simple and safe to operate.
13. Avoid any wasteful movements-method study can be conducted for this purpose.
14. Ensure proper coordination through judicious selection of equipments and training of
workmen.
3.8 RELA TIO NSHIP BETWEEN PLA NT LA YO UT A ND MA TERIA L HA NDLING
There is a close relationship between plant layout and material handling. A good layout ensures
minimum material handling and eliminates rehandling in the following ways:
1. Material movement does not add any value to the product so, the material handling
shouldbe kept at minimum though not avoid it. This is possible only through the
systematic plant layout. Thus a good layout minimises handling.
2. The productive time of workers will go without production if they are required to
travellong distance to get the material tools, etc. Thus a good layout ensures minimum
travel
for workman thus enhancing the production time and eliminating the hunting time and
travelling time.
3. Space is an important criterion. Plant layout integrates all the movements of men,
materialthrough a well designed layout with material handling system.
4. Good plant layout helps in building efficient material handling system. It helps to
keepmaterial handling shorter, faster and economical. A good layout reduces the material
backtracking, unnecessary workmen movement ensuring effectiveness in manufacturing.
Thus a good layout always ensures minimum material handling.
EX ERC ISES
Section A
1. Define material handling
2. Mention any four objectives of material handling.
3. Mention any four principles of material handling.
4. What do you mean by “Equipment Utilisation Ratio”?
5. Mention some of the fixed path equipments.
6. Mention some of the valuable path equipments.
Section B
1. Explain the objectives of material handling.
2. Explain the principles of material handling.
3. How do you evaluate the material handling system?
4. What are the relationship between plant layout and material handling?
Section C
1. Discuss the factors to be considered while selecting material handling equipment.
2. Discuss the different material handling equipments.
3. Discuss the guidelines for effective utilisation of material handling equipments.
Skill Development
1. Material handling in the restaurant for production and services.
2. Type of material handling equipment used for production and services.
3. Utilisation of material handling equipment.
4
MATERIALS MANAGEMENT
C HA PTER O UTLINE
4.1 Introduction and Meaning 4.8 Simplification
4.2 Scope or Functions of Materials 4.9 Value Analysis
Management
4.10 Ergonomics (Human Engineering)
4.3 Material Planning and Control
4.11 Just-in-Time (JIT) Manufacturing
4.4 Purchasing
•Exercises
4.5 Stores Management
•Skill Development
4.6 Inventory Control or Management
4.7 Standardization •Caselet

Materials management is a function, which aims for integrated approach towards the management
of materials in an industrial undertaking. Its main objective is cost reduction and efficient
handling of materials at all stages and in all sections of the undertaking. Its function includes
several important aspects connected with material, such as, purchasing, storage, inventory
control, material handling, standardisation etc.
4.2 SC O PE O R FUNC TIO NS O F MA TERIA LS MA NA G EMENT
Materials management is defined as “the function responsible for the coordination of planning,
sourcing, purchasing, moving, storing and controlling materials in an optimum manner so as to
provide a pre-decided service to the customer at a minimum cost”.
From the definition it is clear that the scope of materials management is vast. The functions
of materials management can be categorized in the following ways: (as shown in Fig. 4.1.) 1.
Material Planning and Control
75
2. Purchasing
3. Stores Management
4. Inventory Control or Management
5. Standardisation
6. Simplification
7. Value Analysis
8. Erogonomics
9. Just-in-Time (JIT)
All the above mentioned functions of materials management has been discussed in detail in
this chapter.
1. Materials planning and control: Based on the sales forecast and production plans, the
materials planning and control is done. This involves estimating the individual requirements of
parts, preparing materials budget, forecasting the levels of inventories, scheduling the orders and
monitoring the performance in relation to production and sales.
2. Purchasing: This includes selection of sources of supply finalization in terms of
purchase, placement of purchase orders, follow-up, maintenance of smooth relations with
suppliers, approval of payments to suppliers, evaluating and rating suppliers.
3. Stores management or management: This involves physical control of materials,
preservation of stores, minimization of obsolescence and damage through timely disposal and
efficient handling, maintenance of stores records, proper location and stocking. A store is also
responsible for the physical verification of stocks and reconciling them with book figures. A store
plays a vital role in the operations of a company.
4. Inventory control or management: Inventory generally refers to the materials in stock.
It is also called the idle resource of an enterprise. Inventories represent those items, which are
either stocked for sale or they are in the process of manufacturing or they are in the form of
materials, which are yet to be utilized. The interval between receiving the purchased parts and
transforming them into final products varies from industries to industries depending upon the
cycle time of manufacture. It is, therefore, necessary to hold inventories of various kinds to act as
a buffer between supply and demand for efficient operation of the system. Thus, an effective
control on inventory is a must for smooth and efficient running of the production cycle with least
interruptions.
5. Other related activities
(a) 3S
(i) Standardization: Standardization means producing maximum variety of products from
the minimum variety of materials, parts, tools and processes. It is the process of establishing
standards or units of measure by which extent, quality, quantity, value, performance etc. may be
compared and measured.
(ii)Simplification: The concept of simplification is closely related to standardization.
Simplification is the process of reducing the variety of products manufactured. Simplification is
concerned with the reduction of product range, assemblies, parts, materials and design.
(iii) Specifications: It refers to a precise statement that formulizes the requirements of
the customer. It may relate to a product, process or a service.
Example: Specifications of an axle block are Inside Dia. = 2 ± 0.1 cm, Outside Dia. = 4 ±
0.2 cm and Length = 10 ± 0.5 cm.
(b) Value analysis: Value analysis is concerned with the costs added due to inefficient or
unnecessary specifications and features. It makes its contribution in the last stage of product
cycle, namely, the maturity stage. At this stage research and development no longer make positive
contributions in terms of improving the efficiency of the functions of the product or adding new
functions to it.
(c) Ergonomics (Human Engineering): The human factors or human engineering is
concerned with man-machine system. Ergonomics is “the design of human tasks, man-machine
system, and effective accomplishment of the job, including displays for presenting information to
human sensors, controls for human operations and complex man-machine systems.” Each of the
above functions are dealt in detail.
4.3 MA TERIA L PLA NNING A ND C O NTRO L
Material planning is a scientific technique of determining in advance the requirements of raw
materials, ancillary parts and components, spares etc. as directed by the production programme. It
is a sub-system in the overall planning activity. There are many factors, which influence the
activity of material planning. These factors can be classified as macro and micro systems.
1. Macro factors: Some of the micro factors which affect material planning, are price trends,
business cycles Govt. import policy etc.
2. Micro factors: Some of the micro factors that affect material planning are plant capacity
utilization, rejection rates, lead times, inventory levels, working capital, delegation of
powers and communication.
4.3.1 Techniques of Material Planning

One of the techniques of material planning is bill of material explosion. Material planning
through bill of material explosion is shown below in Fig. 4.2.
The basis for material planning is the forecast demand for the end products. Forecasting
techniques such as weighted average method, exponential smoothening and time series models
are used for the same. Once the demand forecast is made, it is possible go through the excerse of
material planning. Bill of materials is a document which shows list of materials required, unit
consumption location code for a given product. An explosive chart is a series of bill of material
grouped in a matrix form so that combined requirements for different components can be done
requirements of various materials are arrives at from the demand forecast, using bill of materials,
through explosion charts. Thus material requirement plan will lead to be the development of
delivery schedule of the materials and purchasing of those material requirements.
4.4 PURC HA SING
Purchasing is an important function of materials management. In any industry purchase means
buying of equipments, materials, tools, parts etc. required for industry. The importance of the
purchase function varies with nature and size of industry. In small industry, this function is
performed by works manager and in large manufacturing concern; this function is done by a
separate department. The moment a buyer places an order he commits a substantial portion of the
finance of the corporation which affects the working capital and cash flow position. He is a highly
responsible person who meets various salesmen and thus can be considered to have been
contributing to the public relations efforts of the company. Thus, the buyer can make or mar the
company’s image by his excellent or poor relations with the vendors.
4.4.1 Objectives of Purchasing

The basic objective of the purchasing function is to ensure continuity of supply of raw materials,
sub-contracted items and spare parts and to reduce the ultimate cost of the finished goods. In
other words, the objective is not only to procure the raw materials at the lowest price but to
reduce the cost of the final product.
The objectives of the purchasing department can be outlined as under:
1. To avail the materials, suppliers and equipments at the minimum possible costs:
These are the inputs in the manufacturing operations. The minimization of the input cost
increases the productivity and resultantly the profitability of the operations.
2. To ensure the continuous flow of production through continuous supply of raw
materials, components, tools etc. with repair and maintenance service.
3. To increase the asset turnover: The investment in the inventories should be kept
minimum in relation to the volume of sales. This will increase the turnover of the assets
and thus the profitability of the company.
4. To develop an alternative source of supply: Exploration of alternative sources of
supply of materials increases the bargaining ability of the buyer, minimisation of cost of
materials and increases the ability to meet the emergencies.
5. To establish and maintain the good relations with the suppliers: Maintenance of good
relations with the supplier helps in evolving a favourable image in the business circles.
Such relations are beneficial to the buyer in terms of changing the reasonable price,
preferential allocation of material in case of material shortages, etc.
6. To achieve maximum integration with other department of the company: The
purchase function is related with production department for specifications and flow of
material, engineering department for the purchase of tools, equipments and machines,
marketing department for the forecasts of sales and its impact on procurement of
materials, financial department for the purpose of maintaining levels of materials and
estimating the working capital required, personnel department for the purpose of
manning and developing the personnel of purchase department and maintaining good
vendor relationship.
7. To train and develop the personnel: Purchasing department is manned with varied
types of personnel. The company should try to build the imaginative employee force
through training and development.
8. Efficient record keeping and management reporting: Paper processing is inherent in
the purchase function. Such paper processing should be standardised so that record
keeping can be facilitated. Periodic reporting to the management about the purchase
activities justifies the independent existence of the department.
4.4.2 Parameters of Purchasing
The success of any manufacturing activity is largely dependent on the procurement of raw
materials of right quality, in the right quantities, from right source, at the right time and at right
price popularly known as ten ‘R’s’ of the art of efficient purchasing. They are described as the
basic principles of purchasing. There are other well known parameters such as right contractual
terms, right material, right place, right mode of transportation and right attitude are also
considered for purchasing.
1. RIGHT PRICE
It is the primary concern of any manufacturing organization to get an item at the right price. But
right price need not be the lowest price. It is very difficult to determine the right price; general
guidance can be had from the cost structure of the product. The ‘tender system’ of buying is
normally used in public sector organizations but the objective should be to identify the lowest
‘responsible’ bidder and not the lowest bidder. The technique of ‘learning curve’ also helps the
purchase agent to determine the price of items with high labour content. The price can be kept
low by proper planning and not by rush buying. Price negotiation also helps to determine the right
prices.
2. RIGHT QUALITY
Right quality implies that quality should be available, measurable and understandable as far as
practicable. In order to determine the quality of a product sampling schemes will be useful. The
right quality is determined by the cost of materials and the technical characteristics as suited to
the specific requirements. The quality particulars are normally obtained from the indents. Since
the objective of purchasing is to ensure continuity of supply to the user departments, the time at
which the material is provided to the user department assumes great importance.
3. RIGHT TIME
For determining the right time, the purchase manager should have lead time information for all
products and analyse its components for reducing the same. Lead time is the total time elapsed
between the recognition of the need of an item till the item arrives and is provided for use. This
covers the entire duration of the materials cycle and consists of pre-contractual administrative
lead time, manufacturing and transporting lead time and inspection lead time. Since the inventory
increases with higher lead time, it is desirable to analyse each component of the lead time so as to
reduce the first and third components which are controllable. While determining the purchases,
the buyer has to consider emergency situations like floods, strikes, etc. He should have
‘contingency plans’ when force major clauses become operative, for instance, the material is not
available due to strike, lock-out, floods, and earthquakes.
4. RIGHT SOURCE
The source from which the material is procured should be dependable and capable of supplying
items of uniform quality. The buyer has to decide which item should be directly obtained from the
manufacturer. Source selection, source development and vendor rating play an important role in
buyer-seller relationships. In emergencies, open market purchases and bazaar purchases are
restored to.
5. RIGHT QUANTITY
The right quantity is the most important parameter in buying. Concepts, such as, economic order
quantity, economic purchase quantity, fixed period and fixed quantity systems, will serve as broad
guidelines. But the buyer has to use his knowledge, experience and common sense to determine
the quantity after considering factors such as price structure, discounts, availability of the item,
favourable reciprocal relations, and make or buy consideration.
6. RIGHT ATTITUDE
Developing the right attitude, too, is necessary as one often comes across such statement:
‘Purchasing knows the price of everything and value of nothing’; ‘We buy price and not cost’;
‘When will our order placers become purchase managers?’; ‘Purchasing acts like a post box’.
Therefore, purchasing should keep ‘progress’ as its key activity and should be future-oriented.
The purchase manager should be innovative and his long-term objective should be to minimise
the cost of the ultimate product. He will be able to achieve this if he aims himself with
techniques, such as, value analysis, materials intelligence, purchases research, SWOT analysis,
purchase budget lead time analysis, etc.
7. RIGHT CONTRACTS
The buyer has to adopt separate policies and procedures for capital and consumer items. He
should be able to distinguish between indigenous and international purchasing procedures. He
should be aware of the legal and contractual aspects in international practices.
8. RIGHT MATERIAL
Right type of material required for the production is an important parameter in purchasing.
Techniques, such as, value analysis will enable the buyer to locate the right material.
9. RIGHT TRANSPORTATION
Right mode of transportation have to be identified as this forms a critical segment in the cost
profile of an item. It is an established fact that the cost of the shipping of ore, gravel, sand, etc., is
normally more than the cost of the item itself.
10. RIGHT PLACE OF DELIVERY

Specifying the right place of delivery, like head office or works, would often minimize the
handling and transportation cost.
4.4.3 Purchasing Procedure
The procedure describes the sequence of steps leading to the completion of an identified specific
task. The purchasing procedure comprises the following steps as indicated in Fig. 4.4.
1. RECOGNITION OF THE NEED

The initiation of procedure starts with the recognition of the need by the needy section. The
demand is lodged with the purchase department in the prescribed Purchase Requisition Form
forwarded by the authorised person either directly or through the Stores Department. The
purchase requisition clearly specifies the details, such as, specification of materials, quality and
quantity, suggested supplier, etc. Generally, the low value sundries and items of common use are
purchased for stock while costlier and special items are purchased according the production
programmes. Generally, the corporate level executives are authorized signatories to such
demands. Such purchases are approved by the Board of Directors. The reference of the approval
is made on requisition and a copy of the requisition is sent to the secretary for the purpose of
overall planning and budgeting.
2. THE SELECTION OF THE SUPPLIER

The process of selection of supplier involves two basic aspects: searching for all possible sources
and short listing out of the identified sources. The complete information about the supplier is
available from various sources, such as, trade directories, advertisement in trade journals, direct
mailing by the suppliers, interview with suppliers, salesmen, suggestions from business
associates, visit to trade fair, participation in industries convention, etc. Identification of more and
more sources helps in selecting better and economical supplier. It should be noted that the low
bidder is not always the best bidder. When everything except price is equal, the low bidder will be
selected. The important considerations in the selection are the price, ability to supply the required
quantity, maintenance of quality standards, financial standing etc. It should be noted that it is not
necessary to go for this process for all types of purchases. For the repetitive orders and for the
purchases of low-value, small lot items, generally the previous suppliers with good records are
preferred.
3. PLACING THE ORDER

Once the supplier is selected the next step is to place the purchase order. Purchase order is a letter
sent to the supplier asking to supply the said material. At least six copies of purchase order
are prepared by the purchase section and each copy is separately signed by the purchase officer.
Out these copies, one copy each is sent to store-keeper, supplier, accounts section, inspection
department and to the department placing the requisition and one copy is retained by the purchase
department for record.
4. FOLLOW-UP OF THE ORDER

Follow-up procedure should be employed wherever the costs and risks resulting from the delayed
deliveries of materials are greater than the cost of follow-up procedure, the follow-up procedure
tries to see that the purchase order is confirmed by the supplier and the delivery is promised. It is
also necessary to review the outstanding orders at regular intervals and to communicate with the
supplier in case of need. Generally, a routine urge is made to the supplier by sending a printed
post card or a circular letter asking him to confirm that the delivery is on the way or will be made
as per agreement. In absence of any reply or unsatisfactory reply, the supplier may be contact
through personal letter, phone, telegram and/or even personal visit.
5. RECEIVING AND INSPECTION OF THE MATERIALS

The receiving department receives the materials supplied by the vendor. The quantity are verified
and tallied with the purchase order. The receipt of the materials is recorded on the specially
designed receiving slips or forms which also specify the name of the vendor and the purchase
order number. It also records any discrepancy, damaged condition of the consignment or
inferiority of the materials. The purchase department is informed immediately about the receipt of
the materials. Usually a copy of the receiving slip is sent to the purchase department.
6. PAYMENT OF THE INVOICE
When the goods are received in satisfactory condition, the invoice is checked before it is
approved for the payment. The invoice is checked to see that the goods were duly authorised to
purchase, they were properly ordered, they are priced as per the agreed terms, the quantity and
quality confirm to the order, the calculations are arithmetically correct etc.
7. MAINTENANCE OF THE RECORDS

Maintenance of the records is an important part and parcel of the efficient purchase function. In
the industrial firms, most of the purchases are repeat orders and hence the past records serve as a
good guide for the future action. They are very useful for deciding the timings of the purchases
and in selecting the best source of the supply.
8. MAINTENANCE OF VENDOR RELATIONS

The quantum and frequency of the transactions with the same key suppliers provide a platform for
the purchase department to establish and maintain good relations with them. Good relations
develop mutual trust and confidence in the course of the time which is beneficial to both the
parties. The efficiency of the purchase department can be measured by the amount of the goodwill
it has with its suppliers.
4.4.4 Selection of Suppliers

Selection of the right supplier is the responsibility of the purchase department. It can contribute
substantially to the fundamental objectives of the business enterprise. Different strategies are
required for acquiring different types of materials. The selection of supplier for standardised
products will differ from non-standardised products. Following factors are considered for the
selection of suppliers:
A. SOURCES OF SUPPLIER
The best buying is possible only when the decision maker is familiar with all possible sources of
supply and their respective terms and conditions. The purchase department should try to locate
the appropriate sources of the supplier of various types of materials. This is known as ‘survey
stage’. A survey of the following will help in developing the possible sources of supply:
1. Specialised trade directories.
2. Assistance of professional bodies or consultants.
3. The buyer’s guide or purchase handbook.
4. The manufacturer’s or distributor’s catalogue.
5. Advertisements in dailies.
6. Advertisement in specialised trade journals.
7. Trade fair exhibitions.
B. DEVELOPMENT OF APPROVED LIST OF SUPPLIERS

The survey stage highlights the existence of the source. A business inquiry is made with the
appropriate supplier. It is known as ‘Inquiry Stage’. Here a short listing is made out of the given
sources of suppliers in terms of production facilities and capacity, financial standing, product
quality, possibility of timely supply, technical competence, manufacturing efficiency, general
business policies followed, standing in the industry, competitive attitude, and interest in buying
orders etc.
C. EVALUATION AND SELECTION OF THE SUPPLIER

The purchase policy and procedure differ according to the type of items to be purchased. Hence,
evolution and selection of the supplier differ accordingly. In the ‘purchasing handbook’ edited by
Aljian, it has been described that the following variables to be considered while evaluating the
quotations of the suppliers:
1. Cost Factors
Price, transportation cost, installation cost if any, tooling and other operations cost, incidence of
sales tax and excise duty, terms of payment and cash discount are considered in cost factor.
2. Delivery
Routing and F.O.B. terms are important in determining the point at which the title to the goods
passes from vendor to the buyer and the responsibility for the payment of the payment charges.
3. Design and Specification Factors
Specification compliance, specification deviations, specification advantages, important
dimensions and weights are considered in line with the demonstration of sample, experience of
other users, after sale services etc.
4. Legal Factors
Legal factors include warranty, cancellation provision, patent protection, public liability, federal
laws and reputation compliance.
5. Vendor Rating
The evaluation of supplier or vendor rating provides valuable information which help in
improving the quality of the decision. In the vendor rating three basic aspects are considered
namely quality, service and price. How much weight should be given to each of these factors is a
matter of judgment and is decided according to the specific need of the organization. Quality
would be the main consideration in the manufacturing of the electrical equipments while price
would be the prime consideration in the product having a tense competitive market and for a
company procuring its requirements under the blanket contract with agreed price, the supplier
rating would be done on the basis of two variables namely quality and delivery.
The Development Project Committee of the National Association of Purchasing Agents
(U.S.A.) has suggested following methods for evaluating the performance of past suppliers.
1. The categorical plan: Under this method the members of the buying staff related with
the supplier like receiving section, quality control department, manufacturing department etc., are
required to assess the performance of each supplier. The rating sheets are provided with the
record of the supplier, their product and the list of factors for the evaluation purposes. The
members of the buying staff are required to assign the plus or minus notations against each factor.
The periodic meetings, usually at the interval of one month, are held by senior man of the buying
staff to consider the individual rating of each section. The consolidation of the individual rating is
done on the basis of the net plus value and accordingly, the suppliers are assigned the categories
such as ‘preferred’, ‘neutral’ or ‘unsatisfactory’. Such ratings are used for the future guidance.
This is a very simple and inexpensive method. However, it is not precise. Its quality heavily
depends on the experience and ability of the buyer to judge the situation. As compared to other
methods, the degree of subjective judgment is very high as rating is based on personal whim and
the vague impressions of the buyer. As the quantitative data supported by the profits do not exist,
it is not possible to institute any corrective action with the vendor. The rating is done on the basis
of memory, and thus it becomes only a routine exercise without any critical analysis.
2. The weighted-point method: The weighted-point method provides the quantitative data
for each factor of evaluation. The weights are assigned to each factor of evaluation according to
the need of the organization, e.g., a company decides the three factors to be considered— quality,
price and timely delivery. It assigns the relative weight to each of these factors as under:
Quality ……… 50
points
Price ……… 30
points
Timely delivery ……… 20
points
The evaluation of each supplier is made in accordance with the aforesaid factors and weights
and the composite weighted-points are ascertained for each suppliers—A, B and C— are rated
under this method. First of all the specific rating under each factor will be made and then the
consolidation of all the factors will be made for the purpose of judgment.
Quality rating: Percentage of quantity accepted among the total quantity is called quality
rating. In other words, the quality of the materials is judged on the basis of the degree of
acceptance and rejections. For the purpose of comparison, the percentage degree of acceptance
will be calculated in relation to the total lots received. Price rating is done on the basis of net
price charged by the supplier. Timely delivery rating will be done comparing with the average
delivery schedule of the supplier.
3. The cost-ratio plan: Under this method, the vendor rating is done on the basis of various
costs incurred for procuring the materials from various suppliers. The cost-ratios are ascertained
delivery etc. The cost-ratios are ascertained for the different rating variables such as quality, price,
timely delivery etc. The cost-ratio is calculated in percentage on the basis of total individual cost
and total value of purchases. At the end, all such cost-ratios will be adjusted with the quoted price
per unit. The plus cost-ratio will increase the unit price while the minus cost-ratio will decrease
the unit price. The net adjusted unit price will indicate the vendor rating. The vendor with the
lowest net adjusted unit price will be the best supplier and so on. Certain quality costs can be
inspection cost, cost of defectives, reworking costs and manufacturing losses on rejected items
etc. Certain delivery costs can be postage and telegrams, telephones and extra cost for quick
delivery etc.
VENDER RA TING ILLUSTRA TIO NS

ILLUSTRATION 1: The following information is available on 3 vendors: A, B and C.
Using the data below, determine the best source of supply under weighed-point method and
substantiate your solution.
Vendor A: Delivered ‘56’ lots, ‘3’ were rejected, ‘2’ were not according to the schedule.
Vendor B: Supplied ‘38’ lots, ‘2’ were rejected, ‘3’ were late.
Vendor C: Finished ‘42’ lots, ‘4’ were defective, ‘5’ were delayed deliveries.
Give 40 for quality and 30 weightage for service. SOLUTION:
Formula:
Quality accepted
Quality performance (weightage 40%) = × 40
Total quantity supplied
Delivery performance:
X Adherence to time schedule (weightage 30%)
No. of delivery made on the scheduled date
= × 30
Total no. of scheduled deliveries
Y Adherence to quantity schedule (weightage 30%)
No. of correct lot size deliveries
= × 30
Total no. of scheduled deliveries
Total vendor rating = X + Y
Vendor A = × 40+
× 30 = 66.78
Vendor B = × 40+
× 30 = 65.52
Vendor C = × 40+
× 30 = 62.62
Vendor ‘A’ is selected with the best rating.
ILLUSTRATION 2: The following information is available from the record of the incoming
material department of ABC Co. Ltd.
Vendor No. of No. of list Proportion Unit Fraction of
code lots submitted accepted defectives in price delivery
lots in Rs. commitment
A 15 12 0.08 15.00 0.94

B 10 9 0.12 19.00 0.98
C 1 1 – 21.00 0.90
The factor weightage for quality, delivery and price are 40%, 35% and 25% as per the
decision of the mar. Rank the performance of the vendors on the QDP basis interpret the result.
SOLUTION: Formula:
Total vendor rating = Quality performance + Delivery performance rating + Price rating
15
Vendor A = × 40 + 0 94. × 35+ × 25 = 89.90
15
15
Vendor B = × 40+ 0 98. × 35+ × 25 = 90.036
Vendor C = 1 × 40+ 0 90. × 35+ × 25 = 89.357
Formal mode:
No. of lots accepted
= weightage for quality×
No. of lots submitted
No. of accepted lots
+ × (weightage for delivery )
No. of lots submitted with time
Lowest price
+ × (weightage for price )
Price of lot
Vendor B is selected with higher rating.
4.4.5 Spec ia l Purc ha sing Systems

The following are some of the importnat purchasing systems:
1. FORWARD BUYING
Forward buying or committing an organization far into the future, usually for a year. Depending
upon the availability of the item, the financial policies, the economic order quantity, the
quantitative discounts, and the staggered delivery, the future commitment is decided. This type of
forward buying is different from speculative buying where the motive is to make capital out of
the price changes, by selling the purchased items. Manufacturing organizations normally do not
indulge in such buying. However, a few organizations do ‘Hedge’, particularly in the commodity
market by selling or buying contracts.
2. TENDER BUYING
In public, all semblance of favouritism, personal preferences should be avoided. As such, it is
common for government departments and public sector undertakings to purchase through tenders.
Private sector organizations adopt tender buying if the value of purchases is more than the
prescribed limits as Rs. 50000 or Rs. 100000. The steps involved are to establish a bidders’ list,
solicit bids by comparing quotations and place the order with the lowest bidder. However, care
has to be taken that the lowest bidder is responsible party and is capable of meeting the delivery
schedule and quality requirements. Open tender system or advertisement in newspapers is
common in public sector organizations. As advertising bids is costly and time consuming, most
private sector organizations solicit tenders only from the renowned suppliers capable of supplying
the materials.
3. BLANKET ORDER SYSTEM
This system minimizes the administrative expenses and is useful for ‘C’ type items. It is an
agreement to provide a required quantity of specified items, over a period of time, usually for one
year, at an agreed price. Deliveries are made depending upon the buyer’s needs. The system
relieves the buyers from routine work, giving him more time for focusing attention on high value
items. It requires fewer purchase orders and thus reduces clerical work. It often achieves lower
prices through quantity discounts by grouping the requirements. The supplier, under the system
maintains adequate inventory to meet the blanket orders.
4. ZERO STOCK
Some firms try to operate on the basis of zero stock and the supplier holds the stock for these
firms. Usually, the firms of the buyer and seller are close to each other so that the raw materials
of one is the finished products of another. Alternatively, the system could work well if the seller
holds the inventory and if the two parties work in close coordination. However, the price per item
in this system will be slightly higher as the supplier will include the inventory carrying cost in the
price. In this system, the buyer need not lock up the capital and so the purchasing routine is
reduced. This is also significantly reduces obsolescence of inventory, lead time and clerical
efforts in paper work. Thus, the seller can devote his marketing efforts to other customers and
production scheduling becomes easy.
5. RATE CONTRACT
The system of rate contract is prevalent in public sector organizations and government
departments. It is common for the suppliers to advertise that they are on ‘rate contract’ for the
specific period. After negotiations, the seller and the buyer agree to the rates of items. Application
of rate contract has helped many organizations to cut down the internal administrative lead time
as individual firms need to go through the central purchasing departments and can place orders
directly with the suppliers. However, suppliers always demand higher prices for prompt delivery,
as rate difficulty has been avoided by ensuring the delivery of a minimum quantity at the agreed
rates. This procedure of fixing a minimum quantity is called the running contract and is being
practised by the railways. The buyer also has an option of increasing the quantity by 25% more
than the agreed quantity under this procedure.
6. RECIPROCITY
Reciprocal buying means purchasing from one’s customers in preference to others. It is based on
the principle “if you kill my cat, I will kill your dog”, and “Do unto your customers as you would
have them do unto you”. Other things, like soundness from the ethics and economics point of
view being equal, the principles of reciprocity can be practiced. However, a purchasing executive
should not indulge in reciprocity on his initiative when the terms and conditions are not equal
with other suppliers. It is often sound that less efficient manufacturers and distributors gain by
reciprocity what they are unable to gain by price and quality. Since this tends to discourage
competition and might lead to higher process and fewer suppliers, reciprocity should be practised
on a selective basis.
7. SYSTEMS CONTRACT
This is a procedure intender to help the buyer and the sellers to reduce administrative expenses
and at the same time ensure suitable controls. In this system, the original indent, duly approved
by competent authorities, is shipped back with the items and avoids the usual documents like
purchase orders, materials requisitions, expediting letters and acknowledgements, delivery period
price and invoicing procedure, Carborandum company in the US claims drastic reduction in
inventory and elimination of 40000 purchase orders by adopting the system contracting
procedure. It is suitable for low unit price items with high consumption.
4.5 STO RES MA NA G EMENT
Stores play a vital role in the operations of company. It is in direct touch with the user
departments in its day-to-day activities. The most important purpose served by the stores is to
provide
uninterrupted service to the manufacturing divisions. Further, stores are often equated directly
with money, as money is locked up in the stores.
FUNCTIONS OF STORES
The functions of stores can be classified as follows:
1. To receive raw materials, components, tools, equipment’s and other items and account for
them.
2. To provide adequate and proper storage and preservation to the various items.
3. To meet the demands of the consuming departments by proper issues and account forthe
consumption.
4. To minimise obsolescence, surplus and scrap through proper codification,
preservationand handling.
5. To highlight stock accumulation, discrepancies and abnormal consumption and
effectcontrol measures.
6. To ensure good house keeping so that material handling, material preservation,
stocking,receipt and issue can be done adequately.
7. To assist in verification and provide supporting information for effective purchase action.
4.5.1 Codification
It is one of the functions of stores management. Codification is a process of representing each
item by a number, the digit of which indicates the group, the sub-group, the type and the
dimension of the item. Many organizations in the public and private sectors, railways have their
own system of codification, varying from eight to thirteen digits. The first two digits represents
the major groups, such as raw materials, spare parts, sub-contracted items, hardware items,
packing material, tools, oil, stationery etc. The next two digits indicate the sub-groups, such as,
ferrous, non-ferrous etc. Dimensional characteristics of length, width, head diameter etc.
constitute further three digits and the last digit is reserved for minor variations.
Whatever may be the basis, each code should uniquely represent one item. It should be
simple and capable of being understood by all. Codification should be compact, concise,
consistent and flexible enough to accommodate new items. The groupings should be logical,
holding similar parts near to one another. Each digit must be significant enough to represent some
characteristic of the item.
Objectives of Codification
The objectives of a rationalized material coding system are:
1. Bringing all items together.
2. To enable putting up of any future item in its proper place.
3. To classify an item according to its characteristics.
4. To give an unique code number to each item to avoid duplication and ambiguity.
5. To reveal excessive variety and promote standardization and variety reduction.
6. To establish a common language for the identification of an item.
7. To fix essential parameters for specifying an item.

8. To specify item as per national and international standards.
9. To enable data processing and analysis.
Advantages of Codification
As a result of rationalized codification, many firms have reduced the number of items. It enables
systematic grouping of similar items and avoids confusion caused by long description of items
since standardization of names is achieved through codification, it serves as the starting point of
simplification and standardization. It helps in avoiding duplication of items and results in the
minimisation of the number of items, leading to accurate record. Codification enables easy
recognition of an item in stores, thereby reducing clerical efforts to the minimum. If items are
coded according to the sources, it is possible to bulk the items while ordering. To maximise the
aforesaid advantages, it is necessary to develop the codes as concerned, namely, personnel from
design, production, engineering, inspection, maintenance and materials.
4.6 INVENTO RY C O NTRO L O R MA NA G EMENT
4.6.1 Meaning of Inventory

Inventory generally refers to the materials in stock. It is also called the idle resource of an
enterprise. Inventories represent those items which are either stocked for sale or they are in the
process of manufacturing or they are in the form of materials, which are yet to be utilised. The
interval between receiving the purchased parts and transforming them into final products varies
from industries to industries depending upon the cycle time of manufacture. It is, therefore,
necessary to hold inventories of various kinds to act as a buffer between supply and demand for
efficient operation of the system. Thus, an effective control on inventory is a must for smooth and
efficient running of the production cycle with least interruptions.
4.6.2 Reasons for Keeping Inventories
1. To stabilise production: The demand for an item fluctuates because of the number of
factors, e.g., seasonality, production schedule etc. The inventories (raw materials and
components) should be made available to the production as per the demand failing which results
in stock out and the production stoppage takes place for want of materials. Hence, the inventory
is kept to take care of this fluctuation so that the production is smooth.
2. To take advantage of price discounts: Usually the manufacturers offer discount for bulk
buying and to gain this price advantage the materials are bought in bulk even though it is not
required immediately. Thus, inventory is maintained to gain economy in purchasing.
3. To meet the demand during the replenishment period: The lead time for procurement
of materials depends upon many factors like location of the source, demand supply condition, etc.
So inventory is maintained to meet the demand during the procurement (replenishment) period.
4. To prevent loss of orders (sales): In this competitive scenario, one has to meet the
delivery schedules at 100 per cent service level, means they cannot afford to miss the delivery
schedule which may result in loss of sales. To avoid the organizations have to maintain inventory.
5. To keep pace with changing market conditions: The organizations have to anticipate
the changing market sentiments and they have to stock materials in anticipation of non-
availability of materials or sudden increase in prices.
6. Sometimes the organizations have to stock materials due to other reasons like
suppliersminimum quantity condition, seasonal availability of materials or sudden increase in
prices.
4.6.3 Meaning of Inventory Control
Inventory control is a planned approach of determining what to order, when to order and how
much to order and how much to stock so that costs associated with buying and storing are optimal
without interrupting production and sales. Inventory control basically deals with two problems:
(i) When should an order be placed? (Order level), and (ii) How much should be ordered? (Order
quantity).
These questions are answered by the use of inventory models. The scientific inventory
control system strikes the balance between the loss due to non-availability of an item and cost of
carrying the stock of an item. Scientific inventory control aims at maintaining optimum level of
stock of goods required by the company at minimum cost to the company.
4.6.4 Objectives of Inventory Control
1. To ensure adequate supply of products to customer and avoid shortages as far as possible.
2. To make sure that the financial investment in inventories is minimum (i.e., to see that the
working capital is blocked to the minimum possible extent).
3. Efficient purchasing, storing, consumption and accounting for materials is an
importantobjective.
4. To maintain timely record of inventories of all the items and to maintain the stock
withinthe desired limits.
5. To ensure timely action for replenishment.
6. To provide a reserve stock for variations in lead times of delivery of materials.
7. To provide a scientific base for both short-term and long-term planning of materials.
4.6.5 Benefits of Inventory Control
It is an established fact that through the practice of scientific inventory control, following are the
benefits of inventory control:
1. Improvement in customer’s relationship because of the timely delivery of goods and
service.
2. Smooth and uninterrupted production and, hence, no stock out.
3. Efficient utilisation of working capital. Helps in minimising loss due to
deterioration,obsolescence damage and pilferage.
4. Economy in purchasing.
5. Eliminates the possibility of duplicate ordering.
4.6.6 Tec hniques of Inventory C ontrol
In any organization, depending on the type of business, inventory is maintained. When the
number of items in inventory is large and then large amount of money is needed to create such
inventory, it becomes the concern of the management to have a proper control over its ordering,
procurement, maintenance and consumption. The control can be for order quality and order
frequency.
The different techniques of inventory control are: (1) ABC analysis, (2) HML analysis, (3)
VED analysis, (4) FSN analysis, (5) SDE analysis, (6) GOLF analysis and (7) SOS analysis. The
most widely used method of inventory control is known as ABC analysis. In this technique, the
total inventory is categorised into three sub-heads and then proper exercise is exercised for each
sub-heads.
1. ABC analysis: In this analysis, the classification of existing inventory is based on annual
consumption and the annual value of the items. Hence we obtain the quantity of inventory item
consumed during the year and multiply it by unit cost to obtain annual usage cost. The items are
then arranged in the descending order of such annual usage cost. The analysis is carried out by
drawing a graph based on the cumulative number of items and cumulative usage of consumption
cost. Classification is done as follows:
Table 4.1
Category Percentage of items Percentage of annual
consumption value
A 10–20 70–80
B 20–30 10–25
C 60–70 5–15
The classification of ABC analysis is shown by the graph given as follows (Fig. 4.5).
Fig. 4.5 ABC classification
Once ABC classification has been achieved, the policy control can be formulated as follows:
A-Item: Very tight control, the items being of high value. The control need be exercised at
higher level of authority.
B-Item: Moderate control, the items being of moderate value. The control need be exercised
at middle level of authority.
C-Item: The items being of low value, the control can be exercised at gross root level of
authority, i.e., by respective user department managers.
2. HML analysis: In this analysis, the classification of existing inventory is based on unit
price of the items. They are classified as high price, medium price and low cost items.
3. VED analysis: In this analysis, the classification of existing inventory is based on
criticality of the items. They are classified as vital, essential and desirable items. It is mainly used
in spare parts inventory.
4. FSN analysis: In this analysis, the classification of existing inventory is based
consumption of the items. They are classified as fast moving, slow moving and non-moving
items.
5. SDE analysis: In this analysis, the classification of existing inventory is based on the
items.
6. GOLF analysis: In this analysis, the classification of existing inventory is based sources
of the items. They are classified as Government supply, ordinarily available, local availability and
foreign source of supply items.
7. SOS analysis: In this analysis, the classification of existing inventory is based nature of
supply of items. They are classified as seasonal and off-seasonal items.
For effective inventory control, combination of the techniques of ABC with VED or ABC
with HML or VED with HML analysis is practically used.
4.6.7 Inventory Model
ECONOMIC ORDER QUANTITY (EOQ)

Inventory models deal with idle resources like men, machines, money and materials. These
models are concerned with two decisions: how much to order (purchase or produce) and when to
order so as to minimize the total cost.
For the first decision—how much to order, there are two basic costs are considered namely,
inventory carrying costs and the ordering or acquisition costs. As the quantity ordered is
increased, the inventory carrying cost increases while the ordering cost decreases. The ‘order
quantity’ means the quantity produced or procured during one production cycle. Economic order
quantity is calculated by balancing the two costs. Economic Order Quantity (EOQ) is that size of
order which minimizes total costs of carrying and cost of ordering.
i.e., Minimum Total Cost occurs when Inventory Carrying Cost = Ordering Cost Economic
order quantity can be determined by two methods:
1. Tabulation method.
2. Algebraic method.
1. Determination of EOQ by Tabulation (Trial & Error) Method
This method involves the following steps:
1. Select the number of possible lot sizes to purchase.
2. Determine average inventory carrying cost for the lot purchased.
3. Determine the total ordering cost for the orders placed.
4. Determine the total cost for each lot size chosen which is the summation of
inventorycarrying cost and ordering cost.
5. Select the ordering quantity, which minimizes the total cost.
The data calculated in a tabular column can plotted showing the nature of total cost,
inventory cost and ordering cost curve against the quantity ordered as in Fig. 4.6.
ILLUSTRATION 3: The XYZ Ltd. carries a wide assortment of items for its customers. One
of its popular items has annual demand of 8000 units. Ordering cost per order is found to be Rs.
12.5. The carrying cost of average inventory is 20% per year and the cost per unit is Re. 1.00.
Determine the optimal economic quantity and make your recommendations.
SOLUTION:
No. of Lot size Average Carrying Ordering Total cost/
orders/ (2) inventory (3) cost (4) cost (5) year
year (1) (6) =(4) + (5)
1 8000 4000 800.00 12.5 812.50

2 4000 2000 400.00 25 425.00
4 2000 1000 200.00 50 250.00
8 1000 500 100.00 100 200.00
12 666.667 333.333 66.67 150 216.67
16 500 250 50.00 200 250.00
The table and the graph indicates that an order size of 1000 units will gives the lowest total
cost among the different alternatives. It also shows that minimum total cost occurs when carrying
cost is equal to ordering cost.
2. Determination of EOQ by Analytical Method

In order to derive an economic lot size formula following assumptions are made:
1. Demand is known and uniform.
2. Let D denotes the total number of units purchase/produced and Q denotes the lot sizein
each production run.
3. Shortages are not permitted, i.e., as soon as the level of the inventory reaches zero, the
inventory is replenished.
4. Production or supply of commodity is instantaneous.
5. Lead-time is zero.
6. Set-up cost per production run or procurement cost is C3.
7. Inventory carrying cost is C1 = CI, where C is the unit cost and I is called inventory
carrying cost expressed as a percentage of the value of the average inventory.
This fundamental situation can be shown on an inventory-time diagram, (Fig. 4.7) with Q on
the vertical axis and the time on the horizontal axis. The total time period (one year) is divided
into n parts.
Fig. 4.7
The most economic point in terms of total inventory cost exists where,
Inventory carrying cost = Annual ordering cost (set-up cost)
Average inventory = 1/2 (maximum level + minimum level)
= (Q + 0)/2 = Q/2
Total inventory carrying cost = Average inventory × Inventory carrying cost per unit
i.e., Total inventory carrying cost = Q/2 × C1 = QC1/2 …(1)
Total annual ordering costs = Number of orders per year × Ordering cost per order
i.e., Total annual ordering costs = (D/Q) × C3 = (D/Q)C3 …(2)
Now, summing up the total inventory cost and the total ordering cost, we get the total
inventory cost C(Q).
i.e., Total cost of production run = Total inventory carrying cost
+ Total annual ordering costs
C(Q) = QC1/2 + (D/Q)C3 (cost equation) …(3)
But, the total cost is minimum when the inventory carrying costs becomes equal to the total
annual ordering costs. Therefore,
QC1/2 = (D/Q)C3
or QC1 = (2D/Q)C3 or Q2 = 2C3D/C1
2CD
3
or Q= C1
2CD
3
i.e., C1 Optimal quantity (EOQ), Q0 =...(4)
Optimum number of orders, (N0) = Q0 ...(5)

365 1 Q0
Optimum order interval, (t0) = in days = N0 in years or (t0) = D ...(6) N0

Average yearly cost (TC) = 2C DC31 …(7)
ILLUSTRATION 4: An oil engine manufacturer purchases lubricants at the rate of Rs. 42
per piece from a vendor. The requirements of these lubricants are 1800 per year. What should be
the ordering quantity per order, if the cost per placement of an order is Rs. 16 and inventory
carrying charges per rupee per year is 20 paise. SOLUTION: Given data are:
Number of lubricants to be purchased, D = 1800 per year
Procurement cost, C3 = Rs. 16 per order
Inventory carrying cost, CI = C1 = Rs. 42 × Re. 0.20 = Rs. 8.40 per year
2CD3
Then, optimal quantity (EOQ), Q0 = C1
2 × 16 × 1800
Q0 =
8.4 = 82.8 or 83 lubricants (approx).
ILLUSTRATION 5: A manufacturing company purchase 9000 parts of a machine for its
annual requirements ordering for month usage at a time, each part costs Rs. 20. The ordering
cost per order is Rs. 15 and carrying charges are 15% of the average inventory per year. You
have been assigned to suggest a more economical purchase policy for the company. What advice
you offer and how much would it save the company per year?
SOLUTION: Given data are:
Number of lubricants to be purchased, D = 9000 parts per year
Cost of part, Cs = Rs. 20
Procurement cost, C3 = Rs. 15 per order
Inventory carrying cost, CI = C1 = 15% of average inventory per year
= Rs. 20 × 0.15 = Rs. 3 per each part per year
2CD
Then, optimal quantity (EOQ), Q0 = 3
C1
2 ××
15 9000
Q0 = = 300 units
3
Q0 300 1
in years = = years
and Optimum order interval, (t0) =
D 9000 30
= ×365 days = 122 Days
Minimum average cost = 2C DC31 = 2 × × ×3 15 9000 = Rs. 900

If the company follows the policy of ordering every month, then the annual ordering cost
is
= Rs 12 × 15 = Rs. 180
Lot size of inventory each month = 9000/12 = 750
Q
Average inventory at any time = = 750/2 = 375
2
Therefore,storage cost at any time = 375 × C1 = 375 × 3 = Rs. 1125
Total annual cost = 1125 + 180 = Rs. 1305
Hence, the company should purchase 300 parts at time interval of 1/30 year instead of
ordering 750 parts each month. The net saving of the company will be
= Rs. 1305 – Rs. 900 = Rs. 405 per year.
4.7 STA NDA RDIZA TIO N
Standardization means producing maximum variety of products from the minimum variety of
materials, parts, tools and processes. It is the process of establishing standards or units of measure
by which extent, quality, quantity, value, performance etc., may be compared and measured.
4.7.1 Advantages of Standardization

All the sections of company will be benefited from standardization as mentioned below. Benefits
to Design Department
1. Fewer specifications, drawings and part list have to prepared and issued.
2. More time is available to develop new design or to improve established design.
3. Better resource allocation.
4. Less qualified personnel can handle routine design work.
Benefits to Manufacturing Department
1. Lower unit cost.
2. Better quality products.
3. Better methods and tooling.
4. Increased interchangeability of parts.
5. Better utilization of manpower and equipment.
6. Accurate delivery dates.
7. Better services of production control, stock control, purchasing, etc.
8. More effective training.
Benefits to Marketing Department
1. Better quality products of proven design at reasonable cost leads to greater sales volume.
2. Increased margin of profit.
3. Better product delivery.
4. Easy availability of sales part.
5. Less sales pressure of after-sales services.
Benefits to Production Planning Department
1. Scope for improved methods, processes and layouts.
2. Opportunities for more efficient tool design.
3. Better resource allocation.
4. Reduction in pre-production activities.
Benefits to Production Control Department
1. Well proven design and methods improve planning and control.
2. Accurate delivery promises.
3. Fewer delays arise from waiting for materials, tools, etc.
4. Follow-up of small batches consumes less time.
Benefits to Purchase and Stock Control Department
1. Holding of stock of standard items leads to less paper work and fewer requisitions
andorders.
2. Storage and part location can be improved.
3. Newer techniques can be used for better control of stocks.
4. Because of large purchase quantities involved, favourable purchase contracts can be
made.
Benefits to Quality Control Department
1. Better inspection and quality control is possible.
2. Quality standards can be defined more clearly.
3. Operators become familiar with the work and produce jobs of consistent quality.
Other Benefits
1. Work study section is benefited with efficient break down of operations and
effectivework measurement.
2. Costing can obtain better control by installing standard costing.
3. More time is available to the supervisors to make useful records and preserve statistics.
4. Reduced reductions and scrap.
5. Helps supervisors to run his department efficiently and effectively.
4.7.2 Disadvantages of Standardization
Following are the disadvantages of standardization:
1. Reduction in choice because of reduced variety and consequently loss of business
orcustomer.
2. Standard once set, resist change and thus standardization may become an obstacle
toprogress.
3. It tends to favour only large companies.
4. It becomes very difficult to introduce new models because of less flexible
productionfacilities and due to high cost of specialised production equipment.
4.8 SIMPLIFIC A TIO N
The concept of simplification is closely related to standardization. Simplification is the process of
reducing the variety of products manufactured. Simplification is concerned with the reduction of
product range, assemblies, parts, materials and design.
4.8.1 Advantages of Simplification
Following are the advantages of simplification:
1. Simplification involves fewer, parts, varieties and changes in products; this
reducesmanufacturing operations and risk of obsolescence.
2. Simplification reduces variety, volume of remaining products may be increased.
3. Simplification provides quick delivery and better after-sales services.
4. Simplification reduces inventory and thus results in better inventory control.
5. Simplification lowers the production costs.

6. Simplification reduces price of a product.
7. Simplification improves product quality.
4.9 VA LUE A NA LYSIS
Value engineering or value analysis had its birth during the World War II Lawrence D. Miles was
responsible for developing the technique and naming it. Value analysis is defined as “an
organized creative approach which has its objective, the efficient identification of unnecessary
cost-cost which provides neither quality nor use nor life nor appearance nor customer features.”
Value analysis focuses engineering, manufacturing and purchasing attention to one
objectiveequivalent performance at a lower cost.
Value analysis is concerned with the costs added due to inefficient or unnecessary
specifications and features. It makes its contribution in the last stage of product cycle, namely, the
maturity stage. At this stage, research and development no longer make positive contributions in
terms of improving the efficiency of the functions of the product or adding new functions to it.
Value is not inherent in a product, it is a relative term, and value can change with time and
place. It can be measured only by comparison with other products which perform the same
function. Value is the relationship between what someone wants and what he is willing to pay for
it. In fact, the heart of value analysis technique is the functional approach. It relates to cost of
function whereas others relate cost to product. It is denoted by the ratio between function and
cost. Function
Value =
Cost
4.9.1 Value Analysis Framework
The basic framework for value analysis approach is formed by the following questions, as given
by Lawrence D. Miles:
1. What is the item?
2. What does it do?
3. What does it cost?
4. What else would do the job?
5. What would the alternative cost be?
Value analysis requires these questions to be answered for the successful implementation of
the technique.
4.9.2 Steps in Value Analysis
In order to answer the above questions, three basic steps are necessary:
1. Identifying the function: Any useful product has some primary function which must be
identified—a bulb to give light, a refrigerator to preserve food, etc. In addition it may have
secondary functions such as withstanding shock, etc. These two must be identified.
2. Evaluation of the function by comparison: Value being a relative term, the comparison
approach must be used to evaluate functions. The basic question is, ‘Does the function
accomplish reliability at the best cost’ and can be answered only comparison.
3. Develop alternatives: Realistic situations must be faced, objections should overcome
and effective engineering manufacturing and other alternatives must be developed. In order to
develop effective alternatives and identify unnecessary cost the following thirteen value analysis
principles must be used:
1. Avoid generalities.
2. Get all available costs.
3. Use information only from the best source.
4. Brain-storming sessions.
5. Blast, create and refine: In the blast stage, alternative productive products,
materials,processes or ideas are generated. In the ‘create’ stage the ideas generated in the
blast stage are used to generate alternatives which accomplish the function almost totally.
In the refining stage the alternatives generated are sifted and refined so as to arrive at the
final alternative to be implemented.
6. Identify and overcome road blocks.
7. Use industry specialists to extend specialised knowledge.
8. Key tolerance not to be too light.
9. Utilise the pay for vendors’ skills techniques. 10. Utilise vendors’ available functional
products.
11. Utilise speciality processes.
12. Utilise applicable standards.
13. Use the criterion ‘Would I spend my money this way?’
4.10 ERG O NO MIC S (HUMA N ENG INEERING )
The word ‘Ergonomics’ has its origin in two Greek words Ergon meaning laws. So it is the study
of the man in relation to his work. In USA and other countries it is called by the name ‘human
engineering or human factors engineering”. ILO defines human engineering as, “The application
of human biological sciences along with engineering sciences to achieve optimum mutual
adjustment of men and his work, the benefits being measured in terms of human efficiency and
well-being.”
The human factors or human engineering is concerned with man-machine system. Thus
another definition which highlights the man-machine system is: “The design of human tasks,
man-machine system, and effective accomplishment of the job, including displays for presenting
information to human sensors, controls for human operations and complex man-machine
systems.”
Human engineering focuses on human beings and their interaction with products, equipment
facilities and environments used in the work. Human engineering seeks to change the things
people use and the environment in which they use the things to match in a better way the
capabilities, limitations and needs of people.
4.10.1 Objectives of Human Engineering

Human engineering (ergonomics) has two broader objectives:
1. To enhance the efficiency and effectiveness with which the activities (work) is carriedout
so as to increase the convenience of use, reduced errors and increase in productivity.
2. To enhance certain desirable human values including safety reduced stress and fatigueand
improved quality of life.
Thus, in general the scope and objective of ergonomics is “designing for human use and
optimising working and living conditions”. Thus human factors (ergonomics) discover and apply
information about human behaviour. Abilities and limitations and other characteristics to the
design of tools, machines, systems, tasks, jobs and environment for productive, safe, comfortable
and effective human use. Ergonomics aims at providing comfort and improved working
conditions so as to channelise the energy, skills of the workers into constructive productive work.
This accounts for increased productivity, safety and reduces the fatigue. This helps to increase the
plant utilisation.
4.11 JUST-IN-TIME (JIT) MANUFACTURING
Introd uc tion
Just-In-Time (JIT) Manufacturing is a philosophy rather than a technique. By eliminating all
waste and seeking continuous improvement, it aims at creating manufacturing system that is
response to the market needs.
The phase just in time is used to because this system operates with low WIP (Work-
InProcess) inventory and often with very low finished goods inventory. Products are assembled
just before they are sold, subassemblies are made just before they are assembled and components
are made and fabricated just before subassemblies are made. This leads to lower WIP and reduced
lead times. To achieve this organizations have to be excellent in other areas e.g. quality.
According to Voss, JIT is viewed as a “Production methodology which aims to improve
overall productivity through elimination of waste and which leads to improved quality”. JIT
provides an efficient production in an organization and delivery of only the necessary parts in the
right quantity, at the right time and place while using the minimum facilities”.
4.11.1 Seven Wastes
Shiego Shingo, a Japanese JIT authority and engineer at the Toyota Motor Company identifies
seven wastes as being the targets of continuous improvement in production process. By attending
to these wastes, the improvement is achieved.
1. Waste of over production eliminate by reducing set-up times, synchronizing quantities
andtiming between processes, layout problems. Make only what is needed now.
2. Waste of waiting eliminate bottlenecks and balance uneven loads by flexible work
forceand equipment.
3. Waste of transportation establish layouts and locations to make handling and

transportunnecessary if possible. Minimise transportation and handling if not possible to
eliminate.
4. Waste of processing itself question regarding the reasons for existence of the productand
then why each process is necessary.
5. Waste of stocks reducing all other wastes reduces stocks.
6. Waste of motion study for economy and consistency. Economy improves productivity
andconsistency improves quality. First improve the motions, then mechanise or automate
otherwise. There is danger of automating the waste.
7. Waste of making defective products develop the production process to prevent
defectsfrom being produced, so as to eliminate inspection. At each process, do not accept
defects and makes no defects. Make the process fail-safe. A quantify process always yield
quality product.
4.11.2 Benefits of JIT
The most significant benefit is to improve the responsiveness of the firm to the changes in the
market place thus providing an advantage in competition. Following are the benefits of JIT:
1. Product cost—is greatly reduced due to reduction of manufacturing cycle time, reduction
of waste and inventories and elimination of non-value added operation.
2. Quality—is improved because of continuous quality improvement programmes.
3. Design—Due to fast response to engineering change, alternative designs can be quickly
brought on the shop floor.
4. Productivity improvement.
5. Higher production system flexibility.
6. Administrative and ease and simplicity.
EX ERC ISES
Section A
1. What do you mean by materials management?
2. What is material planning and budgeting?
3. What do you mean by purchasing?
4. What do you mean by ‘Inventory Management’?
5. What do you mean by ‘Inventory Control’?
6. What is codification?
7. What do you mean by ‘Standardisation’?
8. What do you mean by ‘Simplification’?
9. What is ‘Value Analysis’?
10. What do you mean by ‘Ergonomics’?
11. What is EOQ?
Section B
1. Explain the objectives of materials management.
2. What are the functions of stores?
3. Explain the reasons for keeping inventories.
4. What are the objectives of inventory control?
5. What are the benefits of inventory control?
6. What are the objectives of codification?
7. What are the advantages of simplification?
8. Explain the basic steps in value analysis.
9. Explain the objective of ‘Ergonomics’.
Section C
1. Discuss the scope of materials management.
2. Discuss the parameters of purchasing.
3. Discuss the ten ‘R’ ’s of purchasing.
4. Discuss the purchasing procedure.
5. Discuss the selection of suppliers.
6. Discuss the benefits of standardisation.
Skill Development
1. Material Requirement Plan for procurements of Raw material.
2. Purchase procedures adopted.
3. Preparation of Bill of Material.
4. The supplier or vendors selection.
5. In process, spares and etc.
6. Adaptation of Just In Time Manufacturing Technique.
C A SELET
THE MIXING AND BAGGING COMPANY

The Mixing and Bagging Company produces a line of commercial animal feeds in 10 mixes.
The production process itself is simple. A variety of basic grain and filler ingredients is mixed in
batches. The mixture is then fed to an intermediate storage hoper, from which it is conveyed to a
bagging operation. The bags of feed are then loaded on pallets and moved to the nearby
warehouse for storage.
A foreman supervises the operations. A full-time worker who operates the mixing and
blending equipment, plus four full-time and 10 part-time workers provide direct labor. The
foreman is paid Rs.15, 000 per year; the mixer-operator, Rs. 5 per hour; the other full-time
workers, Rs. 4 per hour; and the 10 part-time workers, Rs. 3 per hour.
The usual routine for a production run is as follows: The foreman receives job tickets from
the office indicating the quantities to be run and the formula. The job tickers are placed in the
order in which they are to be processed. At the end of a run, the foreman purges the mixing
system and ducts of the previous product. This takes 20 minutes.
Meanwhile, the foreman has directed the mixer-operator and the four full-time employees
to obtain the required ingredients for the next product from the storeroom. When the mixing
equipment has been purged, the mixer and gets it started. This takes about 10 minutes. The total
time spent by the mixer-operates in obtaining materials and loading the mixer is 30 minutes. The
four full-time employees devote 30 minutes to obtaining materials.
While the previous activities are being performed the foreman turns his attention to the
bagger line, which requires minor change over for bag size and the product identifying lable that
is sewed to the top of bag as it is sewed closed.
While the foreman is purging the system, the 10 part-time employees transfer what is left of
the last run to the warehouse, which requires about 15 minutes. They then idle until the finished
goods warehouse is valued according to the sale price of each item, which is about Rs. 5 per 100
kg. The cost of placing items in the warehouse has been calculated as approximately Re. 0.20 per
100 kg, based on the time required for one of the part-time workers to truck it to the warehouse
and place it in the proper location. The front office has calculated that the storage space in the
owned warehouse is worth about Rs. 10 per square foot per year, but because the bags are
palletized and stacked 12 feet high, this cost has been reduced to only Re. 0.20 per 100 kg per
year. The product mixes are stable, and there is very little risk of obsolescence. There is some loss
because uninvited guests (rats, etc.) come in to dine. The total storage and obsolescence costs ate
estimated as 5 per cent of inventory value.
The Mixing and Bagging Company has a factory overhead rate that it applied to materials
and direct labor. This overhead rate is currently 100 percent and is applied to the average material
cost of Rs. 1.87 per 10 kg plus direct labor costs of Re. 0.13 per 10 kg. The company earns 8 per
cent after taxes and can borrow at the local bank at an interest rate of 9 per cent.
The factory manager is currently reviewing the bases for deciding the length of production
runs for products. He figures that operations are currently at about 85 per cent of capacity. He has
heard of EOQ as a basis for setting the length of production runs. What values should he assign to
cp and cH for his operations?
[Source: Modern Production/Operations Management by Elwood S.Buffa & Rakesh K.Sarin]
5
PRODUCTION PLANNING AND CONTROL
C HA PTER O UTLINE
5.1 Introduction and Meaning 5.8 Master Production Schedule
5.2 Need for Production Planning and 5.9 Material Requirement Planning
Control 5.10 Capacity Planning
5.3 Objectives of PP & C 5.11 Routing
5.4 Phases of PP & C 5.12 Scheduling
5.5 Functions of PP & C 5.13 Scheduling Methodology
5.6 Operations Planning and Scheduling •Exercises
Systems •Skill Development
5.7 Aggregate Planning •Caselet

Production planning and control is a tool available to the management to achieve the stated
objectives. Thus, a production system is encompassed by the four factors. i.e., quantity, quality,
cost and time. Production planning starts with the analysis of the given data, i.e., demand for
products, delivery schedule etc., and on the basis of the information available, a scheme of
utilisation of firms resources like machines, materials and men are worked out to obtain the target
in the most economical way.
Once the plan is prepared, then execution of plan is performed in line with the details given
in the plan. Production control comes into action if there is any deviation between the actual and
planned. The corrective action is taken so as to achieve the targets set as per plan by using control
techniques.
Thus production planning and control can be defined as the “direction and coordination of
firms’ resources towards attaining the prefixed goals.” Production planning and control helps to
achieve uninterrupted flow of materials through production line by making available the materials
at right time and required quantity.
107
5.2 NEED FO R PRO DUC TIO N PLA NNING A ND C O NTRO L

The present techno-economic scenario of India emphasize on competitiveness in manufacturing.
Indian industries have to streamline the production activities and attain the maximum utilisation
of firms’ resources to enhance the productivity. Production planning and control serves as a useful
tool to coordinate the activities of the production system by proper planning and control system.
Production system can be compared to the nervous system with PPC as a brain. Production
planning and control is needed to achieve:
1. Effective utilisation of firms’ resources.
2. To achieve the production objectives with respect to quality, quantity, cost and
timelinessof delivery.
3. To obtain the uninterrupted production flow in order to meet customers varied
demandwith respect to quality and committed delivery schedule.
4. To help the company to supply good quality products to the customer on the
continuousbasis at competitive rates.
Production planning is a pre-production activity. It is the pre-determination of manufacturing
requirements such as manpower, materials, machines and manufacturing process.
Ray wild defines “Production planning is the determination, acquisition and arrangement of
all facilities necessary for future production of products.” It represents the design of production
system. Apart from planning the resources, it is going to organize the production.
Based on the estimated demand for company’s products, it is going to establish the
production programme to meet the targets set using the various resources.
Produc tion C ontrol
Inspite of planning to the minute details, most of the time it is not possible to achieve production
100 per cent as per the plan. There may be innumerable factors which affect the production
system and because of which there is a deviation from the actual plan. Some of the factors that
affect are:
1. Non-availability of materials (due to shortage, etc.);
2. Plant, equipment and machine breakdown;
3. Changes in demand and rush orders;
4. Absenteeism of workers; and
5. Lack of coordination and communication between various functional areas of business.
Thus, if there is a deviation between actual production and planned production, the control
function comes into action. Production control through control mechanism tries to take corrective
action to match the planned and actual production. Thus, production control reviews the progress
of the work, and takes corrective steps in order to ensure that programmed production takes place.
The essential steps in control activity are:
1. Initiating the production,
2. Progressing, and
3. Corrective action based upon the feedback and reporting back to the production planning.
5.3 O BJ EC TIVES O F PRO DUC TIO N PLA NNING A ND C O NTRO L

Following are the objectives of production planning and control:
1. Systematic planning of production activities to achieve the highest efficiency in
productionof goods/services.
2. To organize the production facilities like machines, men, etc., to achieve stated
productionobjectives with respect to quantity and quality time and cost.
3. Optimum scheduling of resources.
4. Coordinate with other departments relating to production to achieve regular balanced
anduninterrupted production flow.
5. To conform to delivery commitments.
6. Materials planning and control.
7. To be able to make adjustments due to changes in demand and rush orders.
5.4 PHA SES O F PRO DUC TIO N PLA NNING A ND C O NTRO L
Production planning and control has three phases namely:
A. Planning Phase
Fig. 5.1 Phases of production planning and control
5.4.1 Planning Phase

Planning is an exercise of intelligent anticipation in order to establish how an objective can
be achieved or a need fulfilled in circumstances, which are invariably restrictive. Production
planning determines the optimal schedule and sequence of operations economic batch quantity,
machine assignment and dispatching priorities for sequencing. It has two categories of planning
namely
1. Prior planning
2. Active planning.
PRIOR PLANNING
Prior planning means pre-production planning. This includes all the planning efforts, which are
taking place prior to the active planning.
Modules of pre-planning
The modules of prior planning are as follows:
1. Product development and design is the process of developing a new product with all
the features, which are essential for effective use in the field, and designing it
accordingly. At the design stage, one has to take several aspects of design like, design for
selling, design for manufacturing and design for usage.
2. Forecasting is an estimate of demand, which will happen in future. Since, it is only an
estimate based on the past demand, proper care must be taken while estimating it. Given
the sales forecast, the factory capacity, the aggregate inventory levels and size of the
work force, the manager must decide at what rate of production to operate the plant over
an intermediate planning horizon.
3. Aggregate planning aims to find out a product wise planning over the intermediate
planning horizon.
4. Material requirement planning is a technique for determining the quantity and timing
for the acquisition of dependent items needed to satisfy the master production schedule.
ACTIVE PLANNING
The modules of active planning are: Process planning and routing, Materials planning. Tools
planning, Loading, Scheduling etc.
1. Process planning and routing is a complete determination of the specific technological
process steps and their sequence to produce products at the desired quality, quantity and
cost. It determines the method of manufacturing a product selects the tools and
equipments, analyses how the manufacturing of the product will fit into the facilities.
Routing in particular prescribes the flow of work in the plant and it is related to the
considerations of layout, temporary locations for raw materials and components and
materials handling systems.
2. A material planning is a process which determines the requirements of various raw
materials/subassemblies by considering the trade-off between various cost components
like, carrying cost, ordering cost, shortage cost, and so forth.
3. Tools’ planning determines the requirements of various tools by taking process

specification (surface finish, length of the job, overall depth of cut etc.), material
specifications (type of material used, hardness of the material, shape and size of the
material etc.) and equipment specifications (speed range, feed range, depth of cut range
etc.).
4. Loading is the process of assigning jobs to several machines such that there is a load
balance among the machines. This is relatively a complex task, which can be managed
with the help of efficient heuristic procedures.
5. Scheduling is the time phase of loading and determines when and in what sequence the
work will be carried out. This fixes the starting as well as the finishing time for each job.
5.4.2 Action Phase
Action phase has the major step of dispatching. Dispatching is the transition from planning phase
to action phase. In this phase, the worker is ordered to start manufacturing the product. The tasks
which are included in dispatching are job order, store issue order, tool order, time ticket,
inspection order, move order etc.
The job order number is the key item which is to be mentioned in all other reports/orders.
Stores issue order gives instruction to stores to issue materials for manufacturing the product as
per product specifications. As per tooling requirements for manufacturing the product, the tool
order instruct the tool room to issue necessary tools. Time ticket is nothing but a card which is
designed to note down the actual time taken at various processes. This information is used for
deciding the costs for future jobs of similar nature and also for performing variance analysis,
which helps to exercise control.
Job order is the official authorization to the shop floor to start manufacturing the product.
Generally, the process sequence will contain some testing and inspection. So, these are to be
instructed to inspection wing in the form of inspection order for timely testing and inspection so
that the amount of rework is minimized. The manufacture of product involves moving raw
materials/subassemblies to the main line. This is done by a well-designed materials handling
system. So, proper instruction is given to the materials handling facilities for major movements of
materials/subassemblies in the form of a move order. Movements which involve less distance and
fewer loads are managed at the shop floor level based on requests from operators.
5.4.3 Control Phase

The control phase has the following two major modules:
1. Progress reporting, and
2. Corrective action.
1. PROGRESS REPORTING
In progress reporting, the data regarding what is happening with the job is collected. Also, it helps
to make comparison with the present level of performance. The various data pertaining to
materials rejection, process variations, equipment failures, operator efficiency, operator
absenteeism, tool life, etc., are collected and analyzed for the purpose of progress reporting.
These data are
used for performing variance analysis, which would help us to identify critical areas that deserve
immediate attention for corrective actions.
2. CORRECTIVE ACTION
The tasks under corrective action primarily make provisions for an unexpected event. Some
examples of corrective actions are creating schedule flexibility, schedule modifications, capacity
modifications, make or buy decisions, expediting the work, pre-planning, and so on. Due to
unforeseen reasons such as, machine breakdown, labour absenteeism, too much rejection due to
poor material quality etc., it may not be possible to realize the schedule as per the plan. Under
such condition, it is better to reschedule the whole product mix so that we get a clear picture of
the situation to progress further. Under such situation, it is to be re-examined for selecting
appropriate course of action. Expediting means taking action if the progress reporting indicates
deviations from the originally set targets. Pre-planning of the whole affair becomes essential in
case the expediting fails to bring the deviated plan to its right path.
5.5 FUNC TIO NS O F PRO DUC TIO N PLA NNING A ND C O NTRO L
Functions of production planning and controlling is classified into:
1. Pre-planning fuction
2. Planning function
3. Control function
The functions of production planning and controlling are depicted in the Fig. 5.2.
1. PRE-PLANNING FUNCTION
Pre-planning is a macro level planning and deals with analysis of data and is an outline of the
planning policy based upon the forecasted demand, market analysis and product design and
Fig. 5.2 Functions of production planning and control
development. This stage is concerned with process design (new processes and developments,
equipment policy and replacement and work flow (Plant layout). The pre-planning function of
PPC is concerned with decision-making with respect to methods, machines and work flow with
respect to availability, scope and capacity.
2. PLANNING FUNCTION
The planning function starts once the task to be accomplished is specified, with the analysis of
four M’s, i.e., Machines, Methods, Materials and Manpower. This is followed by process
planning (routing). Both short-term (near future) and long-term planning are considered.
Standardisation, simplification of products and processes are given due consideration.
3. CONTROL FUNCTION
Control phase is effected by dispatching, inspection and expediting materials control, analysis of
work-in-process. Finally, evaluation makes the PPC cycle complete and corrective actions are
taken through a feedback from analysis. A good communication, and feedback system is essential
to enhance and ensure effectiveness of PPC.
5.5.1 Parameters for PPC

The functions of PPC can be explained with the following parameters:
1. Materials: Raw materials, finished parts and bought out components should be made
available in required quantities and at required time to ensure the correct start and end for each
operation resulting in uninterrupted production. The function includes the specification of
materials (quality and quantity) delivery dates, variety reduction (standardisation) procurement
and make or buy decisions.
2. Machines and equipment: This function is related with the detailed analysis of available
production facilities, equipment down time, maintenance policy procedure and schedules.
Concerned with economy of jigs and fixtures, equipment availability. Thus, the duties include the
analysis of facilities and making their availability with minimum down time because of
breakdowns.
3. Methods: This function is concerned with the analysis of alternatives and selection of the
best method with due consideration to constraints imposed. Developing specifications for
processes is an important aspect of PPC and determination of sequence of operations.
4. Process planning (Routing): It is concerned with selection of path or route which the
raw material should follow to get transformed into finished product. The duties include:
(a) Fixation of path of travel giving due consideration to layout.
(b) Breaking down of operations to define each operation in detail.
(c) Deciding the set up time and process time for each operation.
5. Estimating: Once the overall method and sequence of operations is fixed and process
sheet for each operation is available, then the operations times are estimated. This function is
carried out using extensive analysis of operations along with methods and routing and a standard
time for operation are established using work measurement techniques.
6. Loading and scheduling: Scheduling is concerned with preparation of machine loads
and fixation of starting and completion dates for each of the operations. Machines have to be
loaded according to their capability of performing the given task and according to their capacity.
Thus the duties include:
(a) Loading, the machines as per their capability and capacity.
(b) Determining the start and completion times for each operation.
(c) To coordinate with sales department regarding delivery schedules.
7. Dispatching: This is the execution phase of planning. It is the process of setting
production activities in motion through release of orders and instructions. It authorises the start of
production activities by releasing materials, components, tools, fixtures and instruction sheets to
the operator. The activities involved are:
(a) To assign definite work to definite machines, work centres and men.
(b) To issue required materials from stores.
(c) To issue jigs, fixtures and make them available at correct point of use.
(d) Release necessary work orders, time tickets, etc., to authorise timely start of operations.
(e) To record start and finish time of each job on each machine or by each man.
8. Expediting: This is the control tool that keeps a close observation on the progress of the
work. It is logical step after dispatching which is called ‘follow-up’. It coordinates extensively to
execute the production plan. Progressing function can be divided into three parts, i.e., follow up
of materials, follow up of work-in-process and follow up of assembly. The duties include:
(a) Identification of bottlenecks and delays and interruptions because of which the
production schedule may be disrupted.
(b) To devise action plans (remedies) for correcting the errors.
(c) To see that production rate is in line with schedule.
9. Inspection: It is a major control tool. Though the aspects of quality control are the
separate function, this is of very much important to PPC both for the execution of the current
plans and its scope for future planning. This forms the basis for knowing the limitations with
respects to methods, processes, etc., which is very much useful for evaluation phase.
10.Evaluation: This stage though neglected is a crucial to the improvement of productive
efficiency. A thorough analysis of all the factors influencing the production planning and control
helps to identify the weak spots and the corrective action with respect to pre-planning and
planning will be effected by a feedback. The success of this step depends on the communication,
data and information gathering and analysis.
5.6 O PERA TIO NS PLA NNING A ND SC HEDULING SYSTEMS
Operations planning and scheduling systems concern with the volume and timing of outputs, the
utilisation of operations capacity at desired levels for competitive effectiveness. These systems
must fit together activities at various levels, form top to bottom, in support of one another, as
shown in Fig. 5.3. Note that the time orientation ranges from long to short as we progress from
top to bottom in the hierarchy. Also, the level of detail in the planning process ranges from broad
at the top to detail at the bottom.
C omponents of O pera tions Pla nning a nd Sc heduling System

1. THE BUSINESS PLAN
The business plan is a statement of the organization’s overall level of business activity for the
coming six to eighteen months, usually expressed in terms of outputs (in volume of sales) for its
various product groups, a set of individual products that share or consume common blocks of
capacity in the manufacturing process. It also specifies the overall inventory and backlog levels
that will be maintained during the planning period. The business plan is an agreement between all
functional areas—finance, production, marketing, engineering, R & D—about the level of
activity and the products they are committed to support. The business plan is not concerned with
all the details and specific timing of the actions for executing the plan. Instead, it determines a
feasible general posture for competing to achieve its major goals. The resulting plan guides the
lower-level, more details decisions.
2. AGGREGATE PRODUCTION (OUTPUT) PLANNING

The process of determining output levels of product groups over the coming six to eighteen
months on a weekly or monthly basis. It identifies the overall level of outputs in support of the
business plan. The plan recognizes the division’s existing fixed capacity and the company’s
overall policies for maintaining inventories and backlogs, employment stability and
subcontracting.
3. AGGREGATE CAPACITY PLANNING

It is the process of testing the feasibility of aggregate output plans and evaluating overall capacity
utilisation. A statement of desired output is useful only if it is feasible. Thus, it addresses the
supply side of the firm’s ability to meet the demand. As for aggregate output plans, each plant,
facility, or division requires its own aggregate capacity plan. Capacity and output must be in
balance, as indicated by the arrow between them in Fig. 5.3. A capacity plan translates an output
plan into input terms, approximating how much of the division’s capacity will be consumed.
Although these basic capacities are fixed, management can manipulate the short-term capacities
by the ways they deploy their work force, by subcontracting, or by using multiple work shifts to
adjust the timing of overall outputs. As a result, the aggregate planning process balances output
levels, capacity constraints, and temporary capacity adjustments to meet demand and utilise
capacity at desired levels during the coming months. The resulting plan sets limits on the master
production schedule.
4. MASTER PRODUCTION SCHEDULING (MPS)
MPS is a schedule showing week by week how many of each product must be produced
according to customer orders and demand forecasts. Its purpose is to meet the demand for
individual products in the product group. This more detailed level of planning disaggregates the
product groups into individual products and indicates when they will be produced. The MPS is an
important link between marketing and production. It shows when incoming sales orders can be
scheduled into production, and when each shipment can be scheduled for delivery. It also takes
into account current backlogs so that production and delivery schedules are realistic.
Fig. 5.3 Operations planning and scheduling system
5. RESOURCE REQUIREMENT PLANNING

Resource requirement planning (rough-cut capacity planning) is the process of testing the
feasibility of master production schedule in terms of capacity. This step ensures that a proposed
MPS does not inadvertently overload any key department, work centre, or machine, making the
MPS unworkable.
6. MATERIAL REQUIREMENT PLANNING

Material requirement planning (MRP) is a system of planning and scheduling the time phased
material requirements for releasing materials and receiving materials that enable the master
production schedule to be implemented. Thus, the master production schedule is the driving force
for material requirements planning. MRP provides information such as due dates for components
that are subsequently used for shop floor control. Once this information is available, it enables
managers to estimate the detailed requirements for each work centres.
7. CAPACITY REQUIREMENT PLANNING

Capacity requirement planning (CRP) is an iterative process of modifying the MPS or planned
resources to make capacity consistent with the production schedule. CRP is a companion process
used with MRP to identify in detail the capacity required to execute the material requirement
planning. At this level, more accurate comparisons of available and needed capacity for scheduled
workloads are possible.
8. SHOP FLOOR CONTROL
Shop floor control involves the activities that execute and control shop operations namely
loading, sequencing, detailed scheduling and expediting jobs in production. It coordinates the
weekly and daily activities that get jobs done. Individual jobs are assigned to machines and work
centres (loading), the sequence of processing the jobs for priority control is determined, start
times and job assignments for each stage of processing are decided (detailed scheduling ) and
materials and work flows from station to station are monitored and adjusted (expediting).
9. LOADING
Each job (customer order) may have its unique product specification and, hence, it is unique
through various work centres in the facility. As new job orders are released, they are assigned or
allocated among the work centres, thus establishing how much of a load each work centre must
carry during the coming planning period. This assignment is known as loading (sometimes called
shop loading as machine loading).
10. SEQUENCING
This stage establishes the priorities for jobs in the queues (waiting lines) at the work centres.
Priority sequencing specifies the order in which the waiting jobs are processed; it requires the
adoption of a priority sequencing rule.
11. DETAILED SCHEDULING
Detailed scheduling determines start times, finish times and work assignments for all jobs at each
work centre. Calendar times are specified when job orders, employees, and materials (inputs), as
well as job completion (outputs), should occur at each work centre. By estimating how long each
job will take to complete and when it is due, schedulers can establish start and finish dates and
develop the detailed schedule.
12. EXPEDITING
Expediting is a process of tracking a job’s progress and taking special actions to move it through
the facility. In tracking a job’s progress, special action may be needed to keep the job moving
through the facility on time. Manufacturing or service operations disruptions-equipments
breakdowns, unavailable materials, last-minute priority changes, require managers to deviate
from plans and schedules and expedite an important job on a special handling basis.
13. INPUT/OUTPUT CONTROL
Input/output control related to the activities to monitor actual versus planned utilisation of a work
centre’s capacity. Output plans and schedules call for certain levels of capacity at a work centre,
but actual utilisation may differ from what was planned. Actual versus planned utilisation of the
work centre’s capacity can be monitored by using input-output reports and, when discrepancies
exist, adjustments can be made. The important components of operations planning and scheduling
system has been explained in detail in the following paragraphs.
5.7 A G G REG A TE PLA NNING
Aggregate planning is an intermediate term planning decision. It is the process of planning the
quantity and timing of output over the intermediate time horizon (3 months to one year). Within
this range, the physical facilities are assumed to –10 be fixed for the planning period. Therefore,
fluctuations in demand must be met by varying labour and inventory schedule. Aggregate
planning seeks the best combination to minimise costs.
A g g reg a te Pla nning Stra teg ies
The variables of the production system are labour, materials and capital. More labour effort is
required to generate higher volume of output. Hence, the employment and use of overtime (OT)
are the two relevant variables. Materials help to regulate output. The alternatives available to the
company are inventories, back ordering or subcontracting of items.
These controllable variables constitute pure strategies by which fluctuations in demand and
uncertainties in production activities can be accommodated by using the following steps:
1. Vary the size or the workforce: Output is controlled by hiring or laying off workers in
proportion to changes in demand.
2. Vary the hours worked: Maintain the stable workforce, but permit idle time when there is
a slack and permit overtime (OT) when demand is peak.
3. Vary inventory levels: Demand fluctuations can be met by large amount of inventory.
4. Subcontract: Upward shift in demand from low level. Constant production rates can be
met by using subcontractors to provide extra capacity.
A g g reg a te Pla nning G uidelines
The following are the guidelines for aggregate planning:
1. Determine corporate policy regarding controllable variables.
2. Use a good forecast as a basis for planning.
3. Plan in proper units of capacity.
4. Maintain the stable workforce.
5. Maintain needed control over inventories.
6. Maintain flexibility to change.
7. Respond to demand in a controlled manner.
8. Evaluate planning on a regular base.
5.8 MA STER PRO DUC TIO N SC HEDULE (MPS)

Master scheduling follows aggregate planning. It expresses the overall plans in terms of specific
end items or models that can be assigned priorities. It is useful to plan for the material and
capacity requirements.
Flowchart of aggregate plan and master production schedule is shown in Fig. 5.4
Time interval used in master scheduling depends upon the type, volume, and component lead
times of the products being produced. Normally weekly time intervals are used. The time horizon
covered by the master schedule also depends upon product characteristics and lead times. Some
master schedules cover a period as short as few weeks and for some products it is more than a
year.
Func tions of MPS
Master Production Schedule (MPS) gives a formal details of the production plan and converts this
plan into specific material and capacity requirements. The requirements with respect to labour,
material and equipment is then assessed. The main functions of MPS are:
1. To translate aggregate plans into specific end items: Aggregate plan determines level of
operations that tentatively balances the market demands with the material, labour and
equipment capabilities of the company. A master schedule translates this plan into
specific number of end items to be produced in specific time period.
Fig. 5.4 Flowchart of aggregate plan and master schedule
2. Evaluate alternative schedules: Master schedule is prepared by trial and error. Many
computer simulation models are available to evaluate the alternate schedules.
3. Generate material requirement: It forms the basic input for material requirement
planning (MRP).
4. Generate capacity requirements: Capacity requirements are directly derived from MPS.
Master scheduling is thus a prerequisite for capacity planning.
5. Facilitate information processing: By controlling the load on the plant. Master schedule
determines when the delivery should be made. It coordinates with other management
information systems such as, marketing, finance and personnel.
6. Effective utilization of capacity: By specifying end item requirements schedule
establishes the load and utilization requirements for machines and equipment.
5.9 MA TERIA L REQ UIREMENT PLA NNING (MRP)
MRP refers to the basic calculations used to determine components required from end item
requirements. It also refers to a broader information system that uses the dependence relationship
to plan and control manufacturing operations.
“Materials Requirement Planning (MRP) is a technique for determining the quantity and
timing for the acquisition of dependent demand items needed to satisfy master production
schedule requirements.”
5.9.1 Objectives of MRP

1. Inventory reduction: MRP determines how many components are required when they
are required in order to meet the master schedule. It helps to procure the materials/ components as
and when needed and thus avoid excessive build up of inventory.
2. Reduction in the manufacturing and delivery lead times: MRP identifies materials
and component quantities, timings when they are needed, availabilities and procurements and
actions required to meet delivery deadlines. MRP helps to avoid delays in production and
priorities production activities by putting due dates on customer job order.
3. Realistic delivery commitments: By using MRP, production can give marketing timely
information about likely delivery times to prospective customers.
4. Increased efficiency: MRP provides a close coordination among various work centres
and hence help to achieve uninterrupted flow of materials through the production line. This
increases the efficiency of production system.
5.9.2 MRP System
The inputs to the MRP system are: (1) A master production schedule, (2) An inventory status file
and (3) Bill of materials (BOM).
Using these three information sources, the MRP processing logic (computer programme)
provides three kinds of information (output) for each product component: order release
requirements, order rescheduling and planned orders.
1. MASTER PRODUCTION SCHEDULE (MPS)
MPS is a series of time phased quantities for each item that a company produces, indicating how
many are to be produced and when. MPS is initially developed from firm customer orders or from
forecasts of demand before MRP system begins to operate. The MRP system whatever the master
schedule demands and translates MPS end items into specific component requirements. Many
systems make a simulated trial run to determine whether the proposed master can be satisfied.
2. INVENTORY STATUS FILE

Every inventory item being planned must have an inventory status file which gives complete and
up to date information on the on-hand quantities, gross requirements, scheduled receipts and
planned order releases for an item. It also includes planning information such as lot sizes, lead
times, safety stock levels and scrap allowances.
3. BILL OF MATERIALS (BOM)
BOM identifies how each end product is manufactured, specifying all subcomponents items, their
sequence of build up, their quantity in each finished unit and the work centres performing the
build up sequence. This information is obtained from product design documents, workflow
analysis and other standard manufacturing information.
5.10 C A PA C ITY PLA NNING
Design of the production system involves planning for the inputs, conversion process and outputs
of production operation. The effective management of capacity is the most important
responsibility of production management. The objective of capacity management (i.e., planning
and control of capacity) is to match the level of operations to the level of demand.
Capacity planning is to be carried out keeping in mind future growth and expansion plans,
market trends, sales forecasting, etc. It is a simple task to plan the capacity in case of stable
demand. But in practice the demand will be seldom stable. The fluctuation of demand creates
problems regarding the procurement of resources to meet the customer demand. Capacity
decisions
are strategic in nature. Capacity is the rate of productive capability of a facility. Capacity is
usually expressed as volume of output per period of time.
Production managers are more concerned about the capacity for the following reasons:
Sufficient capacity is required to meet the customers demand in time.
Capacity affects the cost efficiency of operations.
Capacity affects the scheduling system.
Capacity creation requires an investment.
Capacity planning is the first step when an organization decides to produce more or new
products.
5.10.1 Measurement of Capacity Planning
The capacity of the manufacturing unit can be expressed in number of units of output per period.
In some situations measuring capacity is more complicated when they manufacture multiple
products. In such situations, the capacity is expressed as man-hours or machine hours. The
relationship between capacity and output is shown in Fig. 5.6.
1. Design capacity: Designed capacity of a facility is the planned or engineered rate of
output of goods or services under normal or full scale operating conditions.
For example, the designed capacity of the cement plant is 100 TPD (Tonnes per day).
Capacity of the sugar factory is 150 tonnes of sugarcane crushing per day.
2. System capacity: System capacity is the maximum output of the specific product or
product mix the system of workers and machines is capable of producing as an integrated whole.
System capacity is less than design capacity or at the most equal, because of the limitation of
product mix, quality specification, breakdowns. The actual is even less because of many factors
affecting the output such as actual demand, downtime due to machine/equipment failure,
unauthorised absenteeism.
Fig. 5.6 Capacity and output relationship
The system capacity is less than design capacity because of long range uncontrollable
factors. The actual output is still reduced because of short-term effects such as, breakdown of
equipment, inefficiency of labour. The system efficiency is expressed as ratio of actual measured
output to the system capacity.
Actual output
System Efficiency (SE) =
System capacity
3. Licensed capacity: Capacity licensed by the various regulatory agencies or government
authorities. This is the limitation on the output exercised by the government.
4. Installed capacity: The capacity provided at the time of installation of the plant is called
installed capacity.
5. Rated capacity: Capacity based on the highest production rate established by actual
trials is referred to as rated capacity.
5.10.2 Process of Capacity Planning
Capacity planning is concerned with defining the long-term and the short-term capacity needs of
an organization and determining how those needs will be satisfied. Capacity planning decisions
are taken based upon the consumer demand and this is merged with the human, material and
financial resources of the organization.
Capacity requirements can be evaluated from two perspectives—long-term capacity
strategies and short-term capacity strategies.
1. LONG-TERM CAPACITY STRATEGIES

Long-term capacity requirements are more difficult to determine because the future demand and
technology are uncertain. Forecasting for five or ten years into the future is more risky and
difficult. Even sometimes company’s today’s products may not be existing in the future. Long
range capacity requirements are dependent on marketing plans, product development and
lifecycle of the product. Long-term capacity planning is concerned with accommodating major
changes that affect overall level of the output in long-term. Marketing environmental assessment
and implementing the long-term capacity plans in a systematic manner are the major
responsibilities of management. Following parameters will affect long range capacity decisions.
1. Multiple products: Company’s produce more than one product using the same facilities
in order to increase the profit. The manufacturing of multiple products will reduce the risk of
failure. Having more than one product helps the capacity planners to do a better job. Because
products are in different stages of their life-cycles, it is easy to schedule them to get maximum
capacity utilisation.
2. Phasing in capacity: In high technology industries, and in industries where technology
developments are very fast, the rate of obsolescence is high. The products should be brought into
the market quickly. The time to construct the facilities will be long and there is no much time as
the products should be introduced into the market quickly. Here the solution is phase in capacity
on modular basis. Some commitment is made for building funds and men towards facilities over a
period of 3–5 years. This is an effective way of capitalising on technological breakthrough.
3. Phasing out capacity: The outdated manufacturing facilities cause excessive plant
closures and down time. The impact of closures is not limited to only fixed costs of plant and
machinery. Thus, the phasing out here is done with humanistic way without affecting the
community. The phasing out options makes alternative arrangements for men like shifting them to
other jobs or to other locations, compensating the employees, etc.
2. SHORT-TERM CAPACITY STRATEGIES

Managers often use forecasts of product demand to estimate the short-term workload the facility
must handle. Managers looking ahead up to 12 months, anticipate output requirements for
different products, and services. Managers then compare requirements with existing capacity and
then take decisions as to when the capacity adjustments are needed.
For short-term periods of up to one year, fundamental capacity is fixed. Major facilities will
not be changed. Many short-term adjustments for increasing or decreasing capacity are possible.
The adjustments to be required depend upon the conversion process like whether it is capital
intensive or labour intensive or whether product can be stored as inventory.
Capital intensive processes depend on physical facilities, plant and equipment. Short-term
capacity can be modified by operating these facilities more or less intensively than normal. In
labour intensive processes short-term capacity can be changed by laying off or hiring people or by
giving overtime to workers. The strategies for changing capacity also depend upon how long the
product can be stored as inventory.
The short-term capacity strategies are:
1. Inventories: Stock of finished goods during slack periods to meet the demand during
peak period.
2. Backlog: During peak periods, the willing customers are requested to wait and their
orders are fulfilled after a peak demand period.
3. Employment level (hiring or firing): Hire additional employees during peak demand
period and layoff employees as demand decreases.
4. Employee training: Develop multi-skilled employees through training so that they can
be rotated among different jobs. The multi-skilling helps as an alternative to hiring employees.
5. Subcontracting: During peak periods, hire the capacity of other firms temporarily to
make the component parts or products.
6. Process design: Change job contents by redesigning the job.
5.11 RO UTING
Routing may be defined as the selection of path which each part of the product will follow while
being transformed from raw materials to finished products. Path of the product will also give
sequence of operation to be adopted while being manufactured.
In other way, routing means determination of most advantageous path to be followed from
department to department and machine to machine till raw material gets its final shape, which
involves the following steps:
(a) Type of work to be done on product or its parts.
(b) Operation required to do the work.
(c) Sequence of operation required.
(d) Where the work will be done.

(e) A proper classification about the personnel required and the machine for doing the
work.
For effective production control of a well-managed industry with standard conditions, the
routing plays an important role, i.e., to have the best results obtained from available plant
capacity. Thus routing provides the basis for scheduling, dispatching and follow-up.
5.11.1 Techniques of Routing
While converting raw material into required goods different operations are to be performed and
the selection of a particular path of operations for each piece is termed as ‘Routing’. This
selection of a particular path, i.e. sequence of operations must be the best and cheapest to have the
lowest cost of the final product. The various routing techniques are:
1. Route card: This card always accompanies with the job throughout all
operations. This indicates the material used during manufacturing and their progress from one
operation to another. In addition to this the details of scrap and good work produced are also
recorded.
2. Work sheet: It contains
(a) Specifications to be followed while manufacturing.
(b) Instructions regarding routing of every part with identification number of machines and
work place of operation.
This sheet is made for manufacturing as well as for maintenance.
3. Route sheet: It deals with specific production order. Generally made from operation
sheets. One sheet is required for each part or component of the order. These includes the
following:
(a) Number and other identification of order.
(b) Symbol and identification of part.
(c) Number of pieces to be made.
(d) Number of pieces in each lot—if put through in lots.
(e) Operation data which includes:
(i) List of operation on the part.
(ii) Department in which operations are to be performed.
(iii) Machine to be used for each operation.
(iv) Fixed sequence of operation, if any.
(f) Rate at which job must be completed, determined from the operation sheet.
4. Move order: Though this is document needed for production control, it is never used for
routing system. Move order is prepared for each operation as per operation sheet. On this the
quantity passed forward, scrapped and to be rectified are recorded. It is returned to planning
office when the operation is completed.
5.12SC HEDULING
Scheduling can be defined as “prescribing of when and where each operation necessary to
manufacture the product is to be performed.”
It is also defined as “establishing of times at which to begin and complete each event or
operation comprising a procedure”. The principle aim of scheduling is to plan the sequence of
work so that production can be systematically arranged towards the end of completion of all
products by due date.
5.12.1 Principles of Scheduling
1. The principle of optimum task size: Scheduling tends to achieve maximum efficiency
when the task sizes are small, and all tasks of same order of magnitude.
2. Principle of optimum production plan: The planning should be such that it imposes an
equal load on all plants.
3. Principle of optimum sequence: Scheduling tends to achieve the maximum efficiency
when the work is planned so that work hours are normally used in the same sequence.
5.12.2 Inputs to Scheduling
1. Performance standards: The information regarding the performance standards (standard
times for operations) helps to know the capacity in order to assign required machine
hours to the facility.
2. Units in which loading and scheduling is to be expressed.
3. Effective capacity of the work centre.
4. Demand pattern and extent of flexibility to be provided for rush orders.
5. Overlapping of operations.
6. Individual job schedules.
5.12.3 Scheduling Strategies
Scheduling strategies vary widely among firms and range from ‘no scheduling’ to very
sophisticated approaches.
These strategies are grouped into four classes:
1. Detailed scheduling: Detailed scheduling for specific jobs that are arrived from
customers is impracticable in actual manufacturing situation. Changes in orders, equipment
breakdown, and unforeseen events deviate the plans.
2. Cumulative scheduling: Cumulative scheduling of total work load is useful especially
for long range planning of capacity needs. This may load the current period excessively and under
load future periods. It has some means to control the jobs.
3. Cumulative detailed: Cumulative detailed combination is both feasible and practical
approach. If master schedule has fixed and flexible portions.
4. Priority decision rules: Priority decision rules are scheduling guides that are used
independently and in conjunction with one of the above strategies, i.e., first come first serve.
These are useful in reducing Work-In-Process (WIP) inventory.
5.12.4 Types of Scheduling

Types of scheduling can be categorized as forward scheduling and backward scheduling.
1. Forward scheduling is commonly used in job shops where customers place their orders
on “needed as soon as possible” basis. Forward scheduling determines start and finish times of
next priority job by assigning it the earliest available time slot and from that time, determines
when the job will be finished in that work centre. Since the job and its components start as early
as possible, they will typically be completed before they are due at the subsequent work centres in
the routing. The forward method generates in the process inventory that are needed at subsequent
work centres and higher inventory cost. Forward scheduling is simple to use and it gets jobs done
in shorter lead times, compared to backward scheduling.
2. Backward scheduling is often used in assembly type industries and commit in advance
to specific delivery dates. Backward scheduling determines the start and finish times for waiting
jobs by assigning them to the latest available time slot that will enable each job to be completed
just when it is due, but done before. By assigning jobs as late as possible, backward scheduling
minimizes inventories since a job is not completed until it must go directly to the next work
centre on its routing. Forward and backward scheduling methods are shown in Fig. 5.7.
5.13 SC HEDULING METHO DO LO G Y

The scheduling methodology depends upon the type of industry, organization, product, and level
of sophistication required. They are:
1. Charts and boards,
2. Priority decision rules, and

3. Mathematical programming methods.
1. G a ntt C ha rts a nd Boa rds
Gantt charts and associated scheduling boards have been extensively used scheduling devices in
the past, although many of the charts are now drawn by computer. Gantt charts are extremely easy
to understand and can quickly reveal the current or planned situation to all concerned. They are
used in several forms, namely,
(a) Scheduling or progress charts, which depicts the sequential schedule;
(b) Load charts, which show the work assigned to a group of workers or machines; and
(c) Record a chart, which are used to record the actual operating times and delays of workers
and machines.
2. Priority Dec ision Rules
Priority decision rules are simplified guidelines for determining the sequence in which jobs will
be done. In some firms these rules take the place of priority planning systems such as MRP
systems. Following are some of the priority rules followed.
date
Symbol Priority rule

FCFS First come, first served
EDO Earliest due date
LS Least slack (that is, time due less processing time)
SPT Shortest processing time
LPT Longest processing time
PCO Preferred customer order
RS Random selection
3. Ma thema tic a l Prog ra mming Methods
Scheduling is a complex resource allocation problem. Firms process capacity, labour skills,
materials and they seek to allocate their use so as to maximize a profit or service objective, or
perhaps meet a demand while minimizing costs.
The following are some of the models used in scheduling and production control.
(a) Linear programming model: Here all the constraints and objective functions are
formulated as a linear equation and then problem is solved for optimality. Simplex method,
transportation methods and assignment method are major methods used here.
(b) PERT/CPM network model: PERT/CPM network is the network showing the sequence
of operations for a project and the precedence relation between the activities to be completed.
Note: Scheduling is done in all the activities of an organisation i.e., production, maintenance etc. Therefore, all
the methods and techniques of scheduling is used for maintenance management (Ref. Chapter 8).
EX ERC ISES
Section A
1. What do you mean by production planning and control?
2. What do you mean by aggregate planning?
3. What is master production schedule?
4. What is material requirement planning?
5. What is capacity planning?
6. What is routing?
7. What is scheduling?
8. Mention the types of scheduling.
Section B
1. Why do you need production planning and control?
2. What are the objective of production planning and control?
3. What are the guidelines for aggregate planning?
4. Explain the functions of master production schedule.
5. Explain the objective of MRP.
6. How do you measure capacity?
7. Explain the techniques of routing.
8. What are the inputs to scheduling?
9. Explain the scheduling strategies.
Section C
1. Discuss the phases of production planning and control.
2. Discuss the functions of PP & C.
3. Discuss the operations planning and scheduling systems.
4. Discuss the aggregate plan and master schedule.
5. Discuss the MRP system.
6. Discuss the process of capacity planning.
7. Discuss the scheduling methods.
Skill Development
1. Phase of production planning and production control.
2. Planning for the demand fluctuation.
3. Items are prepared to order or with forecast.
4. Procedures to manufacture pizza.
5. Scheduling the orders (i.e. first come first schedule or largest proceeding time and shortest
proceeding time etc.)
C A SELET
ESCOM-COPING WITH RUNWAY CAPACITY NEEDS
ESCOM is a producer of electronic home appliances, including VHS (Video Home System)
television recorders, located in northern California. The packaged product weighs about 75 kg.
ESCOM was not the innovator of the system. Rather, its managers sat back and let RCA and
others develop the market, and ESCOM is currently producing under license agreements.
ESCOM has a conscious strategy of being a follower with new product innovations. It does not
have the financial resources to be a leader in research and development.
ESCOM’s present opportunity is indicated by the fact that industry sales of VHS recorders
have increased 30 per cent per year for the past two years, and forecasts for the next year and the
two following are even more enticing. ESCOM has established a 10 per cent market share
position and feels that it can at least maintain this position if it has the needed capacity; it could
possibly improve its market share if competitors fail to provide capacity at the time it is needed.
Year
0 1 2 3 4 5
Forecast, 1000 Units 100 140 195 270 350 450
Capacity (gap), or slack 5 (35) (90) (165) (245) (345)
1000 units
The forecasts and capacity gaps are indicated in Table. ESCOM regards the first year
forecast as being quite solid, based on its present market share and a compilation of several
industry forecasts from different sources. It is less sure about the forecasts for future years, but it
is basing these forecasts on patterns for both black and white and color TV sales during their
product life cycles.
ESCOM’s VHS model has a factory price of Rs 600. Variable costs are 70 percent of the
price. Inventory carrying costs are 20 per cent of inventory value, 15 percentage points of which
represents the cost of capital. ESCOM’s facility planners estimate that a 40,000 unit plant can be
built for Rs. 5 million and a 200,00 unit plant, for Rs. 10 million. Land and labour are available in
the area, and either size plant can be built within a year.
(a) What capacity plans do you think ESCOM should make for next year? Why?
(b) What longer-term capacity plans should ESCOM make? Why?
(c) What are the implications of these plans for marketing, distribution, and production?
[Source: Modern Production/Operations Management by Elwood S.Buffa & Rakesh K.Sarin]
6
QUALITY CONTROL
C HA PTER O UTLINE
6.1 Introduction 6.7 Quality Circles
6.2 Quality 6.8 Total Quality Management (TQM)
6.3 Control 6.9 ISO 9000 Series
6.4 Inspection 6.10 Appliation ISO 9000: ISO 14000 Series
6.5 Quality Control •Exercises
6.6 Statistical Process Control •Skill Development
•Caselet
6.1 INTRO DUC TIO

N
In any business organization, profit is the ultimate goal. To achieve this, there are several
approaches. Profit may be maximized by cutting costs for the same selling price per unit. If it is a
monopolistic business, without giving much of importance to the cost reduction programs, the
price may be fixed suitably to earn sufficient profit. But, to survive in a competitive business
environment, goods and services produced by a firm should have the minimum required quality.
Extra quality means extra cost. So, the level of quality should be decided in relation to other
factors such that the product is well absorbed in the market. In all these cases, to have repeated
sales and thereby increased sales revenue, basic quality is considered to be one of the supportive
factors. Quality is a measure of how closely a good or service conforms to specified standard.
Quality standards may be any one or a combination of attributes and variables of the product
being manufactured. The attributes will include performance, reliability, appearance, commitment
to delivery time, etc., variables may be some measurement variables like, length, width, height,
diameter, surface finish, etc.
131
Most of the above characteristics are related to products. Similarly, some of the quality
characteristics of services are meeting promised due dates, safety, comfort, security, less waiting
time and so forth. So, the various dimensions of quality are performance, features, reliability,
conformance, durability, serviceability, aesthetics, perceived quality, safety, comfort, security,
commitment to due dates, less waiting time, etc.
6.2 Q UA
LITY
Different meaning could be attached to the word quality under different circumstances. The word
quality does not mean the quality of manufactured product only. It may refer to the quality of the
process (i.e., men, material, and machines) and even that of management. Where the quality
manufactured product referred as or defined as “Quality of product as the degree in which it
fulfills the requirement of the customer. It is not absolute but it judged or realized by comparing it
with some standards”.
Quality begins with the design of a product in accordance with the customer specification
further it involved the established measurement standards, the use of proper material, selection of
suitable manufacturing process etc., quality is a relative term and it is generally used with
reference to the end use of the product.
Crosby defined as “Quality is conformance to requirement or specifications”.
Juran defined as “Quality is fitness for use”. “The Quality of a product or service is the fitness
of that product or service for meeting or exceeding its intended use as required by the customer.”
6.2.1 Fundamental Factors Affecting Quality
The nine fundamental factors (9 M’s), which are affecting the quality of products and services,
are: markets, money, management, men, motivation, materials, machines and mechanization.
Modern information methods and mounting product requirements.
1. Market: Because of technology advancement, we could see many new products to satisfy
customer wants. At the same time, the customer wants are also changing dynamically. So, it is the
role of companies to identify needs and then meet it with existing technologies or by developing
new technologies.
2. Money: The increased global competition necessitates huge outlays for new equipments
and process. This should be rewarded by improved productivity. This is possible by minimizing
quality costs associated with the maintenance and improvements of quality level.
3. Management: Because of the increased complex structure of business organization, the
quality related responsibilities lie with persons at different levels in the organization.
4. Men: The rapid growth in technical knowledge leads to development of human resource
with different specialization. This necessitates some groups like, system engineering group to
integrate the idea of full specialization.
5. Motivation: If we fix the responsibility of achieving quality with each individual in the
organization with proper motivation techniques, there will not be any problem in producing the
designed quality products.
6. Materials: Selection of proper materials to meet the desired tolerance limit is also an
important consideration. Quality attributes like, surface finish, strength, diameter etc., can be
obtained by proper selection of material.
7. Machines and mechanization: In order to have quality products which will lead to
higher productivity of any organization, we need to use advanced machines and mechanize
various operations.
8. Modern information methods: The modern information methods help in storing and
retrieving needed data for manufacturing, marketing and servicing.
9. Mounting product requirements: Product diversification to meet customers taste leads
to intricacy in design, manufacturing and quality standards. Hence, companies should plan
adequate system to tackle all these requirements.
6.3 C O NTRO
L
The process through which the standards are established and met with standards is called control.
This process consists of observing our activity performance, comparing the performance with
some standard and then taking action if the observed performance is significantly too different
from the standards.
The control process involves a universal sequence of steps as follows:
1. Choose the control object
2. Choose a unit of measure
3. Set the standard value
4. Choose a sensing device which can measure
5. Measure actual performance
6. Interpret the difference between actual and standard
7. Taking action.
6.3.1 Need for Controlling Quality

In the absence of quality, the following will result:
1. No yardstick for comparing the quality of goods/services.
2. Difficulty in maintaining consistency in quality.
3. Dissatisfied customers due to increased maintenance and operating costs of
products/services.
4. Increased rework cost while manufacturing products/providing services.
5. Reduced life time of the products/services.
6. Reduced flexibility with respect to usage of standard spare parts.
7. Hence, controlling quality is an essential activity.
6.4 INSPEC TIO N

Inspection is an important tool to achieve quality concept. It is necessary to assure confidence to
manufacturer and aims satisfaction to customer. Inspection is an indispensable tool of modern
manufacturing process. It helps to control quality, reduces manufacturing costs, eliminate scrap
losses and assignable causes of defective work.
The inspection and test unit is responsible for appraising the quality of incoming raw
materials and components as well as the quality of the manufactured product or service. It checks
the components at various stages with reference to certain predetermined factors and detecting and
sorting out the faulty or defective items. It also specified the types of inspection devices to use and
the procedures to follow to measure the quality characteristics.
Inspection only measures the degree of conformance to a standard in the case of variables. In
the case of attributes inspection merely separates the nonconforming from the conforming.
Inspection does not show why the nonconforming units are being produced.
Inspection is the most common method of attaining standardization, uniformity and quality of
workmanship. It is the cost art of controlling the production quality after comparison with the
established standards and specifications. It is the function of quality control. If the said item does
not fall within the zone of acceptability it will be rejected and corrective measure will be applied
to see that the items in future conform to specified standards.
6.4.1 Objectives of Inspection
1. To detect and remove the faulty raw materials before it undergoes production.
2. To detect the faulty products in production whenever it is detected.
3. To bring facts to the notice of managers before they become serous to enable
themdiscover weaknesses and over the problem.
4. To prevent the substandard reaching the customer and reducing complaints.
5. To promote reputation for quality and reliability of product.
6.4.2 Purpose of Inspection
1. To distinguish good lots from bad lots.
2. To distinguish good pieces from bad pieces.
3. To determine if the process is changing.
4. To determine if the process is approaching the specification limits.
5. To rate quality of product.
6. To rate accuracy of inspectors.
7. To measure the precision of the measuring instrument.
8. To secure products-design information.
9. To measure process capability.
6.4.3 Types of
Inspection
Types of
inspection are:
1. Floor2.
inspection inspection
3. Combined
4.
5. First6.piece
7. Final inspection
1. FLOOR INSPECTION
In this system, the inspection is performed at the place of production. It suggests the checking of
materials in process at the machine or in the production time by patrolling inspectors. These
inspectors move from machine to machine and from one to the other work centres. Inspectors have
to be highly skilled. This method of inspection minimize the material handling, does not disrupt
the line layout of machinery and quickly locate the defect and readily offers field and correction.
Advantages
1. Detection of errors of the source reduces scrap and rework.
2. Correction is done before it affects further production, resulting in saving cost
ofunnecessary work on defective parts.
3. Material handling time is reduced.
4. Job satisfaction to worker as he can’t be held responsible for bad work at a later date.
5. Greater number of pieces can be checked than a sample size.
6. Does not delay in production.
Disadvantages
1. Delicate instruments can be employed.
2. Measuring or inspection equipment have to be recalibrated often as they are subjectedto
wear or dust.
3. High cost of inspection because of numerous sets of inspections and skilled inspectors.
4. Supervision of inspectors is difficult due to vibration.
5. Pressure on inspector.
6. Possibility of biased inspection because of worker.
Suitability
1. Heavy products are produced.
2. Different work centres are integrated in continuous line layout.
2. CENTRALISED INSPECTION
Inspection is carried in a central place with all testing equipment, sensitive equipment is housed in
air-conditioned area. Samples are brought to the inspection floor for checking. Centralised
inspection may locate in one or more places in the manufacturing industry.
Advantages
1. Greater degree of inspection due to sensitive equipment.
2. Less number of inspectors and tools.
3. Equipment needs less frequency of recalibration.
4. Cost of inspection is reduced.
5. Unbiased inspection.
6. Supervision of inspectors made possible.
7. No distraction to the inspector.
Disadvantages
1. Defects of job are not revealed quickly for prevention.
2. Greater material handling.
3. High cost as products are subjected to production before they are prevented.
4. Greater delay in production.
5. Inspection of heavy work not possible.
6. Production control work is more complicated.
7. Greater scrap.
3. COMBINED INSPECTION
Combination of two methods whatever may be the method of inspection, whether floor or central.
The main objective is to locate and prevent defect which may not repeat itself in subsequent
operation to see whether any corrective measure is required and finally to maintain quality
economically.
4. FUNCTIONAL INSPECTION
This system only checks for the main function, the product is expected to perform. Thus an
electrical motor can be checked for the specified speed and load characteristics. It does not reveal
the variation of individual parts but can assure combined satisfactory performance of all parts put
together. Both manufacturers and purchasers can do this, if large number of articles are needed at
regular intervals. This is also called assembly inspection.
5. FIRST PIECE OR FIRST-OFF INSPECTIONS

First piece of the shift or lot is inspected. This is particularly used where automatic machines are
employed. Any discrepancy from the operator as machine tool can be checked to see that the
product is within in control limits. Excepting for need for precautions for tool we are check and
disturbance in machine set up, this yields good result if the operator is careful.
6. PILOT PIECE INSPECTION

This is done immediately after new design or product is developed. Manufacturer of product is
done either on regular shop floor if production is not disturbed. If production is affected to a large
extent, the product is manufactured in a pilot plant. This is suitable for mass production and
products involving large number of components such as automobiles aeroplanes etc., and
modification are design or manufacturing process is done until satisfactory performance is assured
or established.
7. FINAL INSPECTION
This is also similar to functional or assembly inspection. This inspection is done only after
completion of work. This is widely employed in process industries where there is not possible
such as, electroplating or anodizing products. This is done in conjunction with incoming material
inspection.
6.4.4 Methods of Inspection
There are two methods of inspection. They are: 100% inspection and sampling inspection.
1. 100% INSPECTION
This type will involve careful inspection in detail of quality at each strategic point or stage of
manufacture where the test is involved is non-destructive and every piece is separately inspected.
It requires more number of inspectors and hence it is a costly method. There is no sampling error.
This is subjected to inspection error arising out of fatigue, negligence, difficulty of supervision etc.
Hence, completer accuracy of influence is seldom attained. It is suitable only when a small
number of pieces are there or a very high degree of quality is required. Example: Jet engines,
aircraft, medical and scientific equipment.
2. SAMPLING INSPECTION
In this method randomly selected samples are inspected. Samples taken from different patches of
products are representatives. If the sample proves defective, the entire concerned is to be rejected
or recovered. Sampling inspection is cheaper and quicker. It requires less number of Inspectors. It
is subjected to sampling errors but the magnitude of sampling error can be estimated. In the case
of destructive test, random or sampling inspection is desirable. This type of inspection governs
wide currency due to the introduction of automatic machines or equipments which are less
susceptible to chance variable and hence require less inspection, suitable for inspection of products
which have less precision importance and are less costly. Example: Electrical bulbs, radio bulbs,
washing machine etc.
6.4.5 Drawbacks of Inspection

Following are the disadvantages of inspection:
1. Inspection adds to the cost of the product but not for its value.
2. It is partially subjective, often the inspector has to judge whether a products passes ornot.
3. Fatigue and Monotony may affect any inspection judgment.
4. Inspection merely separates good and bad items. It is no way to prevent the productionof
bad items.
6.5 Q UA LITY C O NTRO L
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. It depends on materials, tools, machines, type of labour, working conditions etc.
QC is a broad term, it involves inspection at particular stage but mere inspection does not mean
QC. As opposed to inspection, in quality control activity emphasis is placed on the quality future
production. Quality control aims at prevention of defects at the source, relies on effective feedback
system and corrective action procedure. Quality control uses inspection as a valuable tool.
According to Juran “Quality control is the regulatory process through which we measure
actual quality performance, compare it with standards, and act on the difference”. Another
definition of quality control is from ANSI/ASQC standard (1978) quality control is defined as
“The operational techniques and the activities which sustain a quality of product or service that
will satisfy given needs; also the use of such techniques and activities”.
Alford and Beatty define QC as “In the broad sense, quality control is the mechanism by
which products are made to measure up to specifications determined from customers, demands
and transformed into sales engineering and manufacturing requirements, it is concerned with
making things right rather than discovering and rejecting those made wrong”.
6.5.1 Types of Quality Control

QC is not a function of any single department or a person. It is the primary responsibility of any
supervisor to turn out work of acceptable quality. Quality control can be divided into three main
sub-areas, those are:
1. Off-line quality control, 2. Statistical process control, and 3. Acceptance sampling plans.
1. Off-line quality control: Its procedure deal with measures to select and choose
controllable product and process parameters in such a way that the deviation between the product
or process output and the standard will be minimized. Much of this task is accomplished through
product and process design.
Example: Taguchi method, principles of experimental design etc.
2. Statistical process control: SPC involves comparing the output of a process or a service
with a standard and taking remedial actions in case of a discrepancy between the two. It also
involves determining whether a process can produce a product that meets desired specification or
requirements. On-line SPC means that information is gathered about the product, process, or
service while it is functional. The corrective action is taken in that operational phase. This is real-
time basis.
3. Acceptance sampling plans: A plan that determines the number of items to sample and
the acceptance criteria of the lot, based on meeting certain stipulated conditions (such as the risk
of rejecting a good lot or accepting a bad lot) is known as an acceptance sampling plan.
6.5.2 Steps in Quality Control

Following are the steps in quality control process:
1. Formulate quality policy.
2. Set the standards or specifications on the basis of customer’s preference, cost and profit.
3. Select inspection plan and set up procedure for checking.
4. Detect deviations from set standards of specifications.
5. Take corrective actions or necessary changes to achieve standards.
6. Decide on salvage method i.e., to decide how the defective parts are disposed of, entire
scrap or rework.
7. Coordination of quality problems.
8. Developing quality consciousness both within and outside the organization.
9. Developing procedures for good vendor-vendee relations.
6.5.3 Objectives of Quality Control
Following are the objectives of quality control:
1. To improve the companies income by making the production more acceptable to
thecustomers, i.e., by providing long life, greater usefulness, maintainability etc.
2. To reduce companies cost through reduction of losses due to defects.
3. To achieve interchangeability of manufacture in large scale production.
4. To produce optimal quality at reduced price.
5. To ensure satisfaction of customers with productions or services or high quality level,
tobuild customer goodwill, confidence and reputation of manufacturer.
6. To make inspection prompt to ensure quality control.
7. To check the variation during manufacturing.
The broad areas of application of quality control are incoming material control, process
control and product control.
6.5.4 Benefits of Quality Control
Improving the quality of products and services.
Increasing the productivity of manufacturing processes, commercial business, corporations.
Reducing manufacturing and corporate costs.
Determining and improving the marketability of products and services.
Reducing consumer prices of products and services.
Improving and/or assuring on time deliveries and availability.
Assisting in the management of an enterprise.
6.5.5 Seven Tools for Quality Control

To make rational decisions using data obtained on the product, or process, or from the consumer,
organizations use certain graphical tools. These methods help us learn about the characteristics of
a process, its operating state of affairs and the kind of output we may expect from it. Graphical
methods are easy to understand and provide comprehensive information; they are a viable tool for
the analysis of product and process data. These tools are effect on quality improvement. The seven
quality control tools are:
1. Pareto charts 2. Check sheets 3. Cause and effect diagram
4. Scatter diagrams 5. Histogram 6. Graphs or flow charts
7. Control charts
1. PARETO CHARTS
Pareto charts help prioritize by arranging them in decreasing order of importantce. In an
environment of limited resources these diagrams help companies to decide on the order in which
they should address problems. The Pareto analysis can be used to identify the problem in a number
of forms.
(a) Analysis of losses by material (number or past number).
(b) Analysis of losses by process i.e., classification of defects or lot rejections in terms of the
process.
(c) Analysis of losses by product family.
(d) Analysis by supplier across the entire spectrum of purchases.
(e) Analysis by cost of the parts.
(f) Analysis by failure mode.
Example: The Fig. 6.1 shows a Pareto chart of reasons for poor quality. Poor design will be
the major reason, as indicated by 64%. Thus, this is the problem that the manufacturing unit
should address first.
A — Poor Design B — Defective Parts
C — Operator Error D — Wrong Dimensions
E — Surface Abrasion F — Machine Calibrations
G — Defective Material
2. CHECK SHEETS
Check sheets facilitate systematic record keeping or data collection observations are recorded as
they happen which reveals patterns or trends. Data collection through the use of a checklist is
often the first step in analysis of quality problem. A checklist is a form used to record the
frequency of occurrence of certain product or service characteristics related to quality. The
characteristics may be measurable on a continuous scale such as weight, diameter, time or length.
Fig. 6.1 Pareto chart
Example: The table is a check sheet for an organization’s computer related problems.
3. CAUSE AND EFFECT DIAGRAM
It is sometimes called as Fish-bone diagram. It is first developed by Kaorv Ishikawa in 1943 and is
sometimes called as Ishikawa diagram. The diameter helps the management trace customer
complaints directly to the operations involved. The main quality problem is referred to Fish-head;
the major categories of potential cause structural bones and the likely specific causes to ribs. It
explores possible causes of problems, with the intention being to discover the root causes. This
diagram helps identify possible reasons for a process to go out of control as well as possible
effects on the process.
4. SCATTER DIAGRAM (SCATTER PLOTS)

It often indicates the relationship between two variables. They are often used as follow-ups to a
cause and effect analysis to determine whether a stated cause truly does impact the quality
characteristics.
Fig. 6.4 Scatter diagram
Example: The above figure plots advertising expenditure against company sales and indicates
a strong positive relationship between the two variables. As the level of advertising expenditure
increases sales tend to increase.
5. HISTOGRAM (OR) BAR CHARTS

It displays the large amounts of data that are difficult to interpret in their raw form. A histogram
summarizes data measured on a continuous scale showing the frequency distribution of some
quality characteristics (in statistical terms the central tendency and the dispersion of the data).
Often the mean of the data is indicated on the histogram. A bar chart is a series of bare
representing the frequency of occurrence of data characteristics, the bar height indicates the
number of times a particular quality characteristic was observed.
6. FLOW CHARTS (OR) GRAPHS
It shows the sequence of events in a process. They are used for manufacturing and service
operations. Flow charts are often used to diagram operational procedures to simplify the system.
They can identify bottlenecks, redundant steps and non-value added activities. A realistic flow
chart can be constructed by using the knowledge of the person who are directly involved in the
particular process. The flow chart can be identifies where delays can occur.
Fig. 6.6 Flowchart

7. CONTROL CHARTS
It distinguish special causes of variations from common causes of variation. They are used to
monitor and control process on an ongoing basis. A typical control chart plots a selected quality
characteristic found from sub-group of observations as a function of sample number.
Characteristics such as sample average, sample range and sample proportion of non-conforming
units are plotted. The centre line on a control chart represents the average value of characteristics
being plotted. Two limits know as the upper control limit (UCL) and lower control limit (LCL) are
also shown on control charts. These limits are constructed so that if the process is operating under
a stable system of chance causes, the problem of an observation falling outside these limits is quite
small. Figure 6.7 shows a generalized representation of a control chart.
Control chart shows the performance of a process from two points of view. First, they show a
snapshot of the process at the moment the data are collected. Second, they show the process trend
as time progresses. Process trends are important because they help in identifying the outof-control
status if it actually exists. Also, they help to detect variations outside the normal operational limits,
and to identify the cause of variations. Fig. 6.7 shows a generalised representation of a control
chart.
Fig. 6.7 Control charts
6.5.6 Causes of Variation in Quality

The variation in the quality of product in any manufacturing process is broadly classified as:
(a) Chance causes
(b) Assignable causes.
(A) CHANCE CAUSES

The chance causes are those causes which are inherit in manufacturing process by virtue of
operational and constructional features of the equipments involved in a manufacturing process.
This is because of— 1.
Machine vibrations
2. Voltage variations
3. Composition variation of material, etc.
They are difficult to trace and difficult to control, even under best condition of production.
Even though, it is possible to trace out, it is not economical to eliminate. The chance causes results
in only a minute amount of variation in process. Variation in chance causes is due to internal
factors only the general pattern of variation under chance causes will follow a stable statistical
distribution (normal distribution). Variation within the control limits means only random causes
are present.
(B) ASSIGNABLE CAUSES

These are the causes which creates ordinary variation in the production quality.
Assignable cause’s variation can always be traced to a specific quality. They occur due to—
1. Lack of skill in operation
2. Wrong maintenance practice
3. New vendors
4. Error in setting jigs and fixtures
5. Raw material defects
Variation due to these causes can be controlled before the defective items are produced. Any
one assignable cause can result in a large amount of variation in process. If the assignable causes
are present, the system will not follow a stable statistical distribution. When the actual variation
exceeds the control limits, it is a signal that assignable causes extend the process and process
should be investigated.
6.6 STA TISTIC A L PRO C ESS C O NTRO L
Statistical process control (SPC) is the application of statistical techniques to determine whether
the output of a process conforms to the product or service design. It aims at achieving good quality
during manufacture or service through prevention rather than detection. It is concerned with
controlling the process that makes the product because if the process is good then the product will
automatically be good.
6.6.1 C ontrol C ha rts

SPC is implemented through control charts that are used to monitor the output of the process and
indicate the presence of problems requiring further action. Control charts can be used to monitor
processes where output is measured as either variables or attributes. There are two types of
control charts: Variable control chart and attribute control chart.
1. Variable control charts: It is one by which it is possible to measures the quality
characteristics of a product. The variable control charts are X-BAR chart, R-BAR chart, SIGMA
chart.
2. Attribute control chart: It is one in which it is not possible to measures the quality
characteristics of a product, i.e., it is based on visual inspection only like good or bad, success or
failure, accepted or rejected. The attribute control charts are p-charts, np-charts, c-charts, u-
charts. It requires only a count of observations on characteristics e.g., the number of
nonconforming items in a sample.
CHARACTERISTICS OF CONTROL CHARTS
A control chart is a time-ordered diagram to monitor a quality characteristic, consisting of:
1. A nominal value, or centre line, the average of several past samples.
2. Two control limits used to judge whether action is required, an upper control limit (UCL)
and a lower control limit (LCL).
3. Data points, each consisting of the average measurement calculated from a sample
takenfrom the process, ordered overtime. By the Central Limit Theorem, regardless of the
distribution of the underlying individual measurements, the distribution of the sample
means will follow a normal distribution. The control limits are set based on the sampling
distribution of the quality measurement.
BENEFITS OF USING CONTROL CHARTS

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

Following are the objectives of control charts:
1. To secure information to be used in establishing or changing specifications or in
determiningwhether the process can meet specifications or not.
2. To secure information to be used on establishing or changing production procedures.
3. To secure information to be used on establishing or changing inspection procedures
oracceptance procedures or both.
4. To provide a basis for current decision during production.
5. To provide a basis for current decisions on acceptance for rejection of manufacturing

orpurchased product.
6. To familiarize personnel with the use of control chart.
CONTROL CHARTS FOR VARIABLES

As the name indicates, these charts will use variable data of a process. X chart given an idea of the
central tendency of the observations. These charts will reveal the variations between sample
observations. R chart gives an idea about the spread (dispersion) of the observations. This chart
shows the variations within the samples.
X-Chart and R-Chart: The formulas used to establish various control limits are as follows:
(a) Standard Deviation of the Process, σ, Unknown

R-Chart: To calculate the range of the data, subtract the smallest from the largest
measurement in the sample.
The control limits are: UCLR D R and LCL4 R D R3

where = average of several past R values and is the central line of the
R control chart, and
D3, D4 = constants that provide three standard deviation (three-sigma)
limits for a given sample size
X -Chart: The control limits are:
X = X+ 2
UCL A R and LCLX = −X A R2
where X = central line of the chart and the average of past sample mean’s, and A 2 =
constant to provide three-sigma limits for the process mean.
(b) Standard Deviation of the Process, σ, Known

Control charts for variables (with the standard deviation of the process, σ, known) monitor
the mean, X , of the process distribution.

The control limits are:
UCL = X + σ2 X and
LCL = X − σ2 X
where X = centre line of the chart and the average of several past sample means, Z is
the standard normal deviate (number of standard deviations from the
average),
σX = σ/ n and is the standard deviation of the distribution of sample means,
and n is the sample size Procedures
to construct X-chart and R-chart
1. Identify the process to be controlled.
2. Select the variable of interest.

3. Decide a suitable sample size (n) and number of samples to be collected (k).
4. Collect the specified number of samples over a given time interval.
5. Find the measurement of interest for each piece within the sample.
6. Obtain mean (X) of each sample.
7. Establish control limits for X and R-charts.
CONTROL CHARTS FOR ATTRIBUTES

P-charts and C-charts are charts will used for attributes. This chart shows the quality
characteristics rather than measurements.
P-CHART
A p-chart is a commonly used control chart for attributes, whereby the quality characteristic is
counted, rather than measured, and the entire item or service can be declared good or defective.
The standard deviation of the proportion defective, p, is:
σp = p1−p n/ , where n = sample size, and p = average of several past p values and
central line on the chart.
Using the normal approximation to the binomial distribution, which is the actual distribution
of p,
UCLp = p+ σZ p
and LCLp = p− σZ p where z is the normal deviate (number of standard

deviations from the average).
ILLUSTRA TIO NS O N X BA R C HA RT A ND R BA R C HA RT
(i) Standard Deviation of the Process, Σ, Unknown

ILLUSTRATION 1: Several samples of size n = 8 have been taken from today’s production
of fence posts. The average post was 3 yards in length and the average sample range was 0.015
yard. Find the 99.73% upper and lower control limits.
SOLUTION: X = 3 yds
R = 0.015 yds A2 = 0.37 from
Statistical Table
UCL = X + A R2 = +3 0.37(0.015) = 3.006 yds
LCL = X − A R2 = −3 0.37(0.015) = 2.996 yds

ILLUSTRATION 2 (Problem on X and R Chart): The results of inspection of 10 samples
with its average and range are tabulated in the following table. Compute the
control limit for the X and R-chart and draw the control chart for the data.
Sample No. (Sample R (Range)

Size 5) X (Mean)
1 7.0 2
2 7.5 3
3 8.0 2
4 10.0 2
5 9.5 3
6 11.0 4
7 11.5 3
8 4.0 2
9 3.5 3
10 4.0 2
Σ X = 76 ΣR = 26
SOLUTION: X = Σ X /No. of samples

R = ΣR/No. of samples
Therefore, X= = 7.6
R= = 2.6
For X chart
Upper Control Limit (UCL) = X + A2 R

Lower Control Limit (LCL) = X – A2 R
For R chart
Upper Control Limit (UCL) = D4 R
Lower Control Limit (LCL) = D3 R

The values of various factors (like A 2, D4 and D3) based on normal distribution can be found
from the following table:
A2 = 0.58, D3 = 0 and D4 = 2.11
Thus, for X chart

UCL = 7.6 + (0.58 × 2.6)
= 7.6 + 1.51 = 9.11

LCL = 7.6 – (0.58 × 2.6) = 6.09
For R chart UCL = 2.11 × 2.6 = 5.48
LCL = D3 × R = 0 × R = 0
These control limits are marked on the graph paper on either side of the mean value (line).
X and R values are plotted on the graph and jointed, thus resulting the control chart.
From the X chart, it appears that the process became completely out of control for 4th sample
over labels.
(ii) Standard Deviation of the Process, σ, known

ILLUSTRATION 3: Twenty-five engine mounts are sampled each day and found to have an
average width of 2 inches, with a standard deviation of 0.1 inche. What are the control limits that
include 99.73% of the sample means (z = 3)?
= X +Zσ X =+
( )
X 2
SOLUTION: UCL3 0.1 25 = +20.06 = 2.06 inches
=
LCLX X − ZσX = −23 0.1 ( )
25 = −2 0.06 =1.94 inches
ILLUSTRATION 4 (Problem on p-Chart): The following are the inspection results of 10
lots, each lot being 300 items. Number defectives in each lot is 25, 30, 35, 40, 45, 35, 40, 30, 20
and 50. Calculate the average fraction defective and three sigma limit for P-chart and state
whether the process is in control.
SOLUTION:
Date Number of Number of Fraction
pieces defective pieces defective % Defective
inspected found p = (b)/(a) loop
(a) (b)
November 4 300 25 0.0834 8.34
November 5 300 30 0.1000 10.00
November 6 300 35 0.1167 11.67
November 7 300 40 0.1333 13.33
November 8 300 45 0.1500 15.00
November 10 300 35 0.1167 11.67
November 11 300 40 0.1333 13.33
November 12 300 30 0.1000 10.00
November 13 300 20 0.0666 6.66
November 14 300 50 0.1666 16.66
Total Number = 10 3000 350

P 1 −P
Upper Control Limit, UCL = p n +3
P 1 −P
Lower Control Limit, LCL= p −3
n
Total number of defective pieces found

where p
Total number of pieces inspected
p= = 0.1167
and n = number of pieces inspected every day
= 300
p 1 −p 0 1167.× 1− 0 1167.
Therefore,=
n 300
0 1167.× 0 8333.
= = 0.01852
300
p 1−p
and
3. = 0.01852 × 3 = 0.05556 n
Thus, UCL = 0.1167 + 0.05556 = 0.17226 = 0.1723 (Approx.) LCL = 0.1167 – 0.05566 =
0.06114 = 0.0611 (Approx.)
Conclusion: All the samples are within the control limit and we can say process is under
control.
TYPES OF SAMPLING ERRORS

There are two types of errors. They are type-I and type-II that can occur when making inferences
from control chart.
Type-I: Error or α-error or Level of Significance Reject the

hypothesis when it is true.
This results from inferring that a process is out of control when it is actually in control. The
probability of type-I error is denoted by α, suppose a process is in control. If a point on the control
chart falls outside the control limits, we assume that, the process is out of control. However, since
the control limits are a finite distance (3σ) from the mean. There is a small chance about 0.0026 of
a sample falling outside the control limits. In such instances, inferring the process is out of control
is wrong conclusion.
The control limits could be placed sufficiently far apart say 4 or 5σ stand deviations on each
side of the central lines to reduce the probability of type-I error.
Type-II: Error or β-error

Accept the hypothesis when it is false.
This results from inferring that a process is in control when it is really out of control. If no
observations for outside the control limits we conclude that the process is in control while in
reality it is out control. For example, the process mean has changed.
The process could out of control because process variability has changed (due to presence of
new operator). As the control limits are placed further apart the probability of type-II error
increases. To reduce the probability of type-II error it tends to have the control limits placed closer
to each other. This increases the probability of type-I error. Thus, the two types of errors are
inversely related to each other as the control limits change. Increasing the sample size can reduce
both α and β.
6.6.2 Acceptance Sampling
The objective of acceptance sampling is to take decision whether to accept or reject a lot based on
sample’s characteristics. The lot may be incoming raw materials or finished parts.
An accurate method to check the quality of lots is to do 100% inspection. But, 100%
inspection will have the following limitations:
The cost of inspection is high.
Destructive methods of testing will result in 100% spoilage of the parts.
Time taken for inspection will be too long.
When the population is large or infinite, it would be impossible or impracticable to inspect
each unit.
Hence, acceptance-sampling procedure has lot of scope in practical application. Acceptance
sampling can be used for attributes as well as variables.
Acceptance sampling deals with accept or reject situation of the incoming raw materials and
finished goods. Let the size of the incoming lot be N and the size of the sample drawn be n. The
probability of getting a given number of defective goods parts out a sample consisting of n pieces
will follow binomial distribution. If the lot size is infinite or very large, such that when a sample is
drawn from it and not replaced, then the usage of binomial distribution is justified. Otherwise, we
will have to use hyper-geometric distribution.
Specifications of a single sampling plan will contain a sample size (n) and an acceptance
number C. As an example, if we assume the sample size as 50 and the acceptance number as 3, the
interpretation of the plan is explained as follows: Select a sample of size 50 from a lot and obtain
the number of defective pieces in the sample. If the number of defective pieces is less than or
equal to 3, then accept the whole lot from which the sample is drawn. Otherwise, reject the whole
lot. This is called single sampling plan. There are several variations of this plan.
In this process, one will commit two types of errors, viz., type-I error and type-II error. If the
lot is really good, but based on the sample information, it is rejected, then the supplier/ producer
will be penalized. This is called producer’s risk or type-I error. The notation for this error is α. On
the other hand, if the lot is really bad, but it is accepted based on the sample information, then the
customer will be at loss. This is called consumer’s risk or type-II error. The notation for this error
is β. So, both parties should jointly decide about the levels of producer’s risk (α) and consumer’s
risk (β) based on mutual agreement.
OPERATING CHARACTERISTIC CURVE (O.C. CURVE)
The concepts of the two types of risk are well explained using an operating characteristic curve.
This curve will provide a basis for selecting alternate sample plans. For a given value of sample
size (n), acceptance number (C), the O.C. curve is shown in Fig. 6.8.
In Fig. 6.9, per cent defective is shown on x-axis. The probability of accepting the lot for
given per cent defective is shown on y-axis. The value for per cent defective indicates the quality
level of the lot inspected. AQL means acceptable quality level and LTPD indicates lot tolerance
per cent defectives. These represent quality levels of the lot submitted for inspection. If the quality
level of the lot inspected is at AQL or less than AQL, then the customers are satisfied with the
quality of the lot. The corresponding probability of acceptance is called 1 – α. On the other hand,
if the quality level is more than or equal to LTPD, the quality of the lot is considered to be inferior
from consumer’s viewpoint. The corresponding probability of acceptance of the lot is called β. The
quality levelling between AQL and LTPD is called indifferent zone.
So, we require α, β, AQL and LTPD to design a sample plan. Based on these, one can
determine n and C for the implementation purpose of the plan.
Fig. 6.10 shows a various O.C. curves for different combinations of n and C.
Fig. 6.10 Operation characteristic curve for different samples.
SINGLE SAMPLING PLAN

The design of single sampling plan with a specified producer’s risk and consumer’s risk is
demonstrated in this section. The required data for designing such plan are as follows:
(a) Producer’s Risk (α)
(b) Consumer’s Risk (b)
(c) Acceptable Quality Level (AQL)
(d) Lot Tolerance Per cent Defectives (LPTD)
The objective of this design is to find out the values for the sample size (n) and acceptance
number (C). The values for n and C are to be selected such that the O.C. curve passes through the
following two coordinates:
Coordinate with respect to the given α and AQL.
Coordinate with respect to the given β and LTPD.
But, the values of n and C should be integers. So, it will be very difficult to find n and C
exactly for the given parameters of the design. Hence, we will have to look for approximate
integer values for n and C such that the O.C. curve more or less passes through the above two
coordinates.
6.7 Q UA LITY C IRC LES
The quality circles begun in Japan in 1960s. The concept of quality circles is based on the
participating style of management. It assumes that productivity will improve through an uplift of
morale and motivations which are in turn achieved through consultation and discussion in
informal groups. One organizational mechanism for worker participation in quality is the quality
circle. It is typically an informal group of people that consists of operators, supervisors, managers
and so on who get together to improve ways to make the product or deliver the service.
According to Juran, quality circle defined as “a group of work force level people, usually
from within one department, who volunteer to meet weekly (on company time) to address quality
problems that occur within their department.”
Quality circle members select the problems and are given training is problem-solving
techniques. A quality circle can be an effective productivity improvement tool because it generates
new ideas and implements them. Where the introduction of quality circle is capably planned and
where the company environment is supporting they are highly successful.
The benefits fall into two categories: those are measurable saving and improvement in the
attitudes and behaviour of people. Quality circles pursue two types of problems, those concerned
with the personal well being of the worker and those concerned with the well being of company.
6.7.1 Benefits of QC
The most important benefit of quality circles is their effect on people’s attitudes fall into three
categories:
1. Quality Circles Effect on Individual Characteristics

(a) Quality circles enable the individual to improve personal capabilities—group
participation and learning specific problem-solving tools.
(b) Quality circles increase the individual’s self-respect.
(c) Quality circles help worker change certain personality characteristics—shy person
become as active.
2. Quality Circles Effect on Individuals Relations with Other
(a) Quality circles increase the respect of the supervisor for the worker.
(b) Quality circles increase workers understanding of the difficulties faced by supervisors—
problem selection, solving and implementations.
(c) Quality circle increase management’s respect for worker.
3. Quality Circles Effect on Workers and Their Attributes
(a) Quality circles change some workers negative attitudes.
(b) Quality circle reduces conflict stemming from the working environment.
(c) Quality circles help workers to understand better the reasons while many problems
solved quickly.
Quality circles, as a management tool, are based on the following basic principles of people:
(a) People want to do a good job.
(b) People want to be recognized as intelligent, interested employees and to participate in
decisions affecting their work.
(c) People want information to better understand goals and problems of their organization
and make informed decisions.
(d) Employees want recognition and responsibility and a feeling of self-esteem.
Motivational methods are not enough for successful quality circle programs. Management
support, technical knowledge, and statistical procedures are essential.
6.8 TO TA L Q UA LITY MA NA G EMENT
Now-a-days, customers demand products/services with greater durability and reliability at the
most economic price. This forces producers to strictly follow quality procedures right from design
till shipment and installation of the products. So that goal of any competitive industry is to provide
a product or service at the most economical costs, ensuring full customer satisfaction. This can be
achieved through Total Quality Management (TQM), because, quality is not a technical function,
but a systemic process extending throughout all phases of the business, e.g., marketing, design,
development, engineering, purchasing, production/operations.
As per Feigebaum, “Total Quality Management is an effective system of integrating the
quality development, quality maintenance and quality improvement efforts of various groups in an
organization so as to enable marketing, engineering, production and service at the most
economical levels which allow for full customer satisfaction”.
6.8.1 Benefits of TQM

The benefits of TQM can be classified into the following two categories:
1. Customer satisfaction oriented benefits.
2. Economic improvements oriented benefits.
1. Customer satisfaction oriented benefits: The benefits under this category are listed
below:
(a) Improvement in product quality.
(b) Improvement in product design.
(c) Improvement in production flow.
(d) Improvement in employee morale and quality consciousness.
(e) Improvement of product service.
(f) Improvement in market place acceptance.
2. Economic improvements oriented benefits: The benefits under this category are as
follows:
(a) Reductions in operating costs.
(b) Reductions in operating losses.
(c) Reductions in field service costs.
(d) Reductions in liability exposure.
6.9 ISO 9000 SERIES
ISO stands for International Organization for Standardization. It is an international body, which
consists of representatives from more than 90 countries. The national standard bodies of these
countries are the members of this organization. Bureau of Indian Standards (BIS) are the Indian
representative to ISO, ISO and International Electro Technical Commission (IEC)) operate jointly
as a single system. These are non-governmental organizations, which exist to provide common
standards on international trade of goods and services.
ISO 9000 standards expect firms to have a quality manual that meets ISO guidelines,
documents, quality procedures and job instructions, and verification of compliance by third-party
auditors. ISO 9000 series has five international standards on quality managements. They are:
1. ISO 9000 — Quality management and Quality assurance standards
2. ISO 9001 — Quality systems: Quality in design
3. ISO 9002 — Quality systems: Production and Installation
4. ISO 9003 — Quality systems: Final inspection and test
5. ISO 9004 — Quality management and systems
6.9.1 Objectives of ISO 9000 Series

The objectives of ISO 9000 series is listed in Table 6.1.
TABLE 6.1: ISO 9000 series

Standard Objectives/Tasks
ISO 9000 This provides guidelines on selection and use of quality management and quality assurance
standards.
ISO 9001 It has 20 elements covering design, development, production, installation and servicing.
ISO 9002 It has 18 elements covering production and installation. It is same as ISO 9001 without the
first two tasks, viz., design and development. This is applicable for the units excluding R &
D functions.
ISO 9003 It has 12 elements covering final inspection and testing for laboratories and warehouses etc.
ISO 9004 This provides guidelines to interpret the quality management and quality assurance. This also
has suggestions which are not mandatory.
6.9.2 Benefits of ISO 9000 Series
ISO 9000 series provides several tangible and intangible benefits which are listed below:
1. This gives competitive advantage in the global market.
2. Consistency in quality, since ISO helps in detecting non-conformity early which makesit
possible to take corrective action.
3. Documentation of quality procedures adds clarity to quality system.
4. ISO 9000 ensures adequate and regular quality training for all members of the
organization.
5. ISO helps the customers to have cost effective purchase procedure.
6. The customers while making purchases from companies with ISO certificate need
notspend much on inspection and testing. This will reduce the quality cost and lead-time.
7. This will help in increasing productivity.
8. This will aid to improved morale and involvement of workers.
9. The level of job satisfaction would be more.
6.9.3 Steps in ISO 9000 Registration
1. Selection of appropriate standard from ISO 9001, ISO 9002 and ISO 9003 using
theguidelines given in ISO 9000.
2. Preparation of quality manual to cover all the elements in the selected model.
3. Preparation of procedures and shop floor instructions which are used at the time
ofimplementing the system. Also document these items.
4. Self-auditing to check compliance of the selected model.
5. Selection of a registrar and making application to obtain certificate for the selected model.
A registrar is an independent body with knowledge and experience to evaluate any one of the
three models of the company’s quality system (ISO 9002). Registrars are approved and certified by
acridities.
The registrar, on successful verification and assessment will register the company. Before
selecting a registrar, one should know the following:
1. Accreditors of the registrar.
2. Background and credibility of the registrar.
3. Cost of registration through the proposed registrar.
4. Expected harmony between the company and the potential registrar while working
towardsimplementing ISO model in the company.
6.10 A PPLIC A TIO N ISO 9000: ISO 14000 SERIES
OVERVIEW
The ISO 14000 series of environmental management standards are intended to assist organizations
manage the environmental effect of their business practices. The ISO 14000 series is similar to the
ISO 9000 series published in 1987. The purpose of the ISO 9000 series is to encourage
organizations to institute quality assurance management programs. Although ISO 9000 deals with
the overall management of an organization and ISO 14000 deals with the management of the
environmental effects of an organization, both standards are concerned with processes, and there is
talk of combining the two series into one.
Both series of standards were published by ISO, the International Organization for
Standardization. The purpose of ISO is to facilitate international trade and cooperation in
commercial, intellectual, scientific and economic endeavors by developing international standards.
ISO originally focused on industrial and mechanical engineering standards. Now, it has ventured
into setting standards for an organization’s processes, policies, and practices.
The environmental standards of ISO 14000 deal with how a company manages the
environment inside its facilities and the immediate outside environment. However, the standards
also call for analysis of the entire life cycle of a product, from raw material to eventual disposal.
These standards do not mandate a particular level of pollution or performance, but focus on
awareness of the processes and procedures that can effect the environment. It should be noted that
adherence to the ISO 14000 standards does not in anyway release a company from any national or
local regulations regarding specific performance issues regarding the environment.
Some of the standards in the ISO 14000 series are:
ISO 14001—Specification of Environmental Management Systems
ISO 14004—Guideline Standard
ISO 14010 through ISO 14015—Environmental Auditing and Related Activities
ISO 14020 through ISO 14024—Environmental Labelling
ISO 14031 through ISO 14032—Environmental Performance Evaluation
ISO 14040 through ISO 14043—Life Cycle Assessment
ISO 14050—Terms and Definitions
Although the ISO 14000 standards are similar to the ISO 9000 standards, the nature of the
environmental standards creates a need for people who are technical environment professionals in
addition to those required to maintain the documentation necessary for certification.
6.10.1 The Benefits of ISO 14000 Certification
The benefits of acquiring ISO certification go beyond the satisfaction of doing a good deed.
Adhering to the standard may result in better conformance to environmental regulations, greater
marketability, better use of resources, higher quality goods and services, increased levels of safety,
improved image and increased profits.
The environmental awareness and the documentation that are required by the ISO 14000
standards assist a company in conforming to environmental regulations. This means that a
company, by diligently adhering to the standard, is less likely to violate environmental
regulations and is always ready for inspection by a regulatory agency. In addition, the
certification and documentation may aid a company in acquiring capital, in defending
itself during environmental litigation and in receiving insurance or permits.
A wider market for a company’s goods and services may result from certification. Many
corporations and governments will be looking for suppliers that are ISO 14000 certified in
order to maintain their own certification and environment-friendly image.
Producers of consumer goods may find that many consumers not only try to purchase goods
from environment-friendly companies, but will spend a little more if they feel they are
helping the environment. In order to reap this benefit, a company must make their
environmental efforts known through advertising and labelling.
The process analyses that go along with ISO 14000 certification may result in streamlining
processes and more efficient use of resources and raw materials and subsequently reduce a
company’s costs.
Reducing the amount of potentially dangerous substances in an end product may result in
less use of dangerous chemicals in a plant. This leads to a safer internal environment for
employees and the possibility of reduced insurance premiums. Improved employee morale
may result when employees feel that the workplace is safer and they are contributing to
the environmental effort.
A NNEX URE–I
List of C ertifying Bodies

The list of certification bodies with Quality Management System and Environmental
Management System for 9000 series is listed in the following tables:
List of Certification Bodies for Quality Management Systems:

Accrn. Name Address Website &
No. Phone
QM001 Det Norske Veritas AS 203, Savitri Sadan 1, www.dnv.com

(Certification Services, India) 11, Preet Vihar Community Tel +91 11 2202 3242
Centre, New Delhi-110 092 India Fax +91 11 2202 3244
QM002 TUV India Pvt. Ltd. 801, Raheja Plaza - I, L.B.S www.tuvindia.co.in
Marg, Ghatkopar Tel + 91 22 6647 7000
(West), Mumbai - 400 086 Fax + 91 22 6647 7009
QM003 Bureau Veritas Certification Marwah Centre, 6th Floor, www.certification.bureauv

(India) Pvt. Ltd. Opposite Ansa Industrial eritas.co.in
Estate, Kishanlal Marwah Tel +91 22 6695 6330
Marg, Off Sakivihar Road, Fax +91 22 6695 6302

Andheri, East, Mumbai–400 072
QM004 Intal Quality Certification Platinum City, G / 13 / 03, www.i-quality.net
Pvt. Ltd. Site No. 02, Next to CMTI, Tel +91 80 4117 2752
HMT Road, Yeshwantpur Fax +91 80 4128 0347

Post Bangalore - 560 022
QM006 Indian Register Quality 161 A, Maker Towers www.irclass.org
Systems (IRQS) 'E' (16th Floor), Cuffe Parade, Tel +91 22 2215 3871 /
Dept. of Indian Register of Mumbai - 400 005 2215 4162 / 2215 4164
Shipping Fax +91 22 2215 4250
QM007 ICRS Management Systems 808, Suneja Tower - II, www.icrsms.com

Private Ltd. District Centre, Janakpuri, Tel +91 11 3290 6779
New Delhi 110058 Fax +91 11 2554 2745
QM008 British Standards Institution The Mira Corporate Suites www.bsi-global.com

(BSI Management (A-2), Plot 1&2, Ishwar Nagar, Tel +91 11 2692 9000
Systems India Pvt. Ltd.) Mathura Road, (eight lines)
New Delhi - 110 065 Fax +91 11 2692 9001
QM010 TUV Rheinland (India) 504-506, Prestige Centre Point www.ind.tuv.com

Private Limited Cunningham Road +91 80 22282489 / 90
Bangalore - 560 002
QM011 TUV South Asia Private 321, Solitaire Corporate Park, www.tuv-sud.in
Limited Chakala, Andheri (East) www.tuvsouthasia.com
Mumbai - 400 093 Tel +91 22 6692 3415

Fax +91 22 6692 3418
QM012 NVT Quality Certification CAP-1, EOIZ, Export Promotion www.nvtqualitygroup.org
Pvt. Ltd. Industrial Park, Tel +91-80-5534 3536/ 37
Near ITPL, Whitefield, Fax +91-80-2841 6767

Bangalore - 560 066, India
QM014 American Quality Assessors "Victory Vihar", 4th Floor, www.aqa.in
(India) Private Limited Himayatnagar, Tel +91 040 2322
2894/895,
Hyderabad - 500 029 (India) 2322 1228
Fax +91 040 2322 3023
QM015 Bureau of Indian Standards Bureau of Indian Standards www.bis.org.in

9, Bahadur Shah Zafar Marg Telefax: +91 11 2323 1842
New Delhi - 110 002 (India)
QM016 URS Certification Ltd. B-8, Dayanand Colony, www.ursindia.com
Lajpat Nagar - IV Tel + 91 11 2622 3444
New Delhi - 110 024 Fax + 91 11 2622 6974
QM018 Transpacific Certifications 59/10, www.tclcertifications.com
Ltd. Old Rajinder Nagar, Tel / Fax +91 11 235 25107/ New Delhi
110060 08/12
QM019 Knowledge Partner QR Address B-1, Nutech Narayana www.kpqr.com
Pvt. Ltd. 48, Tirumalai Road, Tel + 91 44 4202 4230
T. Nagar Chennai 600017 India Fax + 91 44 2834 2041
QM020 QMS Certification Services 207, Durga Towers, RDC, www.qmscertification.com
Pvt. Ltd. Raj Nagar Ghaziabad Tel +91 120 282 4369, 652 (U.P.) 210002 6369, 647 1796
Fax +91 120 282 4369
QM021 Lloyd's Register Quality Solitaire Corporate Park, Tel + 91 22 2825 8601/ 02
Assurance Ltd. (India Building No. 1, 5th Floor, Fax + 91 22 2825 8618
Branch) 151 M. Vasanji Road Chakala,
Andheri East, Mumbai 400 093
QM022 Vexil Business Process 208A/4 Savitri Nagar, New www.vexilbps.com
Services Pvt. Ltd. Delhi 110017, India Tel + 91 11 3245 3661
Fax + 91 11 2601 8001
QM023 NQA Certification Pvt. Ltd. # 15/1, 9th Main, www.nqaindia.com
Hampi Nagar (RPC Layout), Tel + 91 80 3272 2698, 2314
Near Govt. Central Library, 2208, 2314 2407 Vijayanagar II
Stage, Fax + 91 80 4117 8952.
Bangalore - 560 040. India
QM024 QSS, Quality Management 'Sai Shraddha', 'C' Wing, Tel + 91 22 2574 9499/3501
Services Station Road, Mobile 0 98210 56619
Vikhroli (East), Fax + 91 22 2574 6200
Mumbai 400083, India
QM025 QSI (India) Certifications 557, Sector - 1, www.qsi-india.com
Pvt. Ltd. Vidyadhar Nagar, Tel +91 0141 2236 895
Jaipur - 302 023 (India) Fax +91 0141 2236 133
Mobile +91 98290 17133
QM026 RINA India Pvt. Ltd. B Wing 607/608, Everest www.rina.org
Chambers, Marol Naka, Tel +91 022 2851 5862/63
Andheri-Kurla Road, Andheri Fax +91 022 2852 5139
(E), Mumbai-400 059, India
QM027 SGS India Pvt. Ltd. SGS House, 9-1-127/2, 43, www.sgs.com
Sarojini Devi Road, Mobile 0 98488 14239
Secunderabad - 500 003, India
QM028 Global Certification Services"Sathya Manor", W- 27/3, www.global-certification.com
1st Street, Anna Nagar, Tel 044 2621 3360
Chennai 600 040, India Fax 044 2622 4657
QM029 NQAQSR Certification 107/55, Madhuban Building, www.nqacertification.com
Pvt. Ltd. Nehru Place, New Delhi-110019 Tel 011 - 4654 2669 - 76
Fax +9111 4163 6292/2921
7475
QM030 BSC International Office No. 124, Dwarka Complex,
www.bsc-icc.com
Certifications Co. SCO 102-103, Sector 16, Telefax: +91 129 3290068 /
Faridabad Pin 121002, 98108 82505/ 93134 82505
Haryana, India
QM031 Swiso (India) Pvt. Ltd. 507 Pragati Tower, www.swisoindia.com
26 Rajendra Place Tel +91 11 41539720
New Delhi 110008 Fax +91 11 41539721
QM032 KBS Certification Services 343, Om Shubham Tower Tel +91 129 4034513,
Pvt. Ltd. Neelam - Bata Road 4054513
N.I.T. Faridabad - 121 001 Fax +91 0129 4034513
(Haryana) Mobile +91 98107 12926
QM033 Intertek Systems Certification501 Everest House, Tel +91 22 6703 8686
(a division of Intertek 4th Floor 6 Suren Road Fax +91 22 6703 8688
Testing Services India Andheri (East)
Pvt. Ltd.) Mumbai - 400093
QM034 STQC Certification ServicesMinistry of Communication & Tel +91 11 2436 3107/2430
IT STQC Directorate, 1817
Electronic Niketan 6, Fax +91 11 2436 3083
CGO Complex, Lodhi Road
New Delhi 110003
A NNEX URE–II
List of Certification Bodies for Environmental Management Systems for 14000 Series:
Accrn. Name Address Website &
No. Phone
EM001 Det Norske Veritas AS 203, Savitri Sadan 1, www.dnv.com

(Certification Services, India) 11, Preet Vihar Community Tel +91 11 2202 3242
Centre, New Delhi–110 092 India Fax +91 11 2202 3244
EM002 TUV India Pvt. Ltd. 801, Raheja Plaza–I, L.B.S Marg, www.tuvindia.co.in
Ghatkopar (West), Tel + 91 22 6647 7000
Mumbai–400 086 Fax + 91 22 6647 7009
EM003 International Certification 22/23, Goodwill Premises, www.icsasian.com

Services Pvt. Ltd. Swastik Estate, 178, CST Road, Tel + 91 22 2650 7777-82
Kalina, Santacruz (East) Fax + 91 22 2650 7777-82
Mumbai–400 098 (Maharashtra) extension–333
EM004 Bureau Veritas Certification Marwah Centre, 6th Floor, www.certification.bureauv

(India) Pvt. Ltd. Opposite Ansa Industrial eritas.co.in
Estate, Kishanlal Marwah Marg, Tel +91 22 6695 6330
Off Sakivihar Road, Andheri Fax +91 22 6695 6302

East, Mumbai - 400 072
EM005 Indian Register Quality 161 A, Maker Towers ‘E’ www.irclass.org
Systems (IRQS) (16th Floor), Cuffe Parade, Tel +91 22 2215 3871/
Dept. of Indian Register of Mumbai - 400 005 2215 4162 / 2215 4164
Shipping Fax +91 22 2215 4250
EM006 NVT Quality Certification CAP-1, EOIZ, Export Promotion www.nvtqualitygroup.org

Pvt. Ltd. Industrial Park, Tel +91-80-5534 3536/ 37
Near ITPL, Whitefield, Fax +91-80-2841 6767

Bangalore–560 066, India
EM007 Lloyd’s Register Quality Solitaire Corporate Park, Tel + 91 22 2825 8601/ 02
Assurance Ltd. Building No. 1, 5th Floor, Fax + 91 22 2825 8618
(India Branch) 151 M. Vasanji Road Chakala,

Andheri East, Mumbai 400 093
EM008 Vexil Business Process 208A/4 Savitri Nagar, New www.vexilbps.com
Services Pvt. Ltd. Delhi 110017, India Tel + 91 11 3245 3661
Fax + 91 11 2601 8001
EM009 TUV South Asia Private 321, Solitaire Corporate Park, www.tuv-sud.in
Limited Chakala, Andheri (East) www.tuvsouthasia.com
Mumbai - 400 093 Tel +91 22 6692 3415

Fax +91 22 6692 3418
EM010 AQSR India Private Limited 3rd Floor, 7 Community Center www.aqsr.com
East of Kailash Tel +91 11 4160 1242,
3294
New Delhi–110 065 (India) 2268 Fax +91 11 4160
1243
EM011 NQAQSR Certification 107/55, Madhuban Building, www.nqacertification.com
Pvt. Ltd. Nehru Place, Tel 011 - 4654 2669–76
New Delhi-110019 Fax +91 11 4163
6292/2921
7475
EX ERC ISES
Section A
1. Define quality.
2. What do you mean by inspection?
3. Mention the objectives of inspection.
4. Mention any four drawbacks of inspection.
5. What do you mean by ‘control’?
6. Mention the control process.
7. Define ‘quality control’.
8. Mention different types of quality control.

9. What is statistical process control?
10. What is QC?
11. Mention two types of control charts.
12. Mention the characteristics of control charts.
13. What is P-chart?
14. What do you mean by ‘quality circles’?
15. What do you mean by TQM?
16. Mention the five international standards of ISO 9000 series.
17. What is ISO?
Section B
1. What is inspection? Explain the purpose of inspection.
2. Explain the different methods of inspection.
3. Explain the steps in quality control process.
4. Explain the objectives of quality control. 5. Explain the cause of variation in quality.
6. What are the benefits of using control charts.
7. Explain the objectives of control charts.
8. Explain the benefits of TQM.
9. What are the benefits of ISO 9000 series?
10. What are the steps in ISO 9000 registration?
Section C
1. Discuss the different types of inspection.
2. Discuss the seven tools for quality control.
3. Discuss the fundamental factors affecting quality.
4. Discuss the ‘9 M’ ’s of quality of product or service.
Skill Development
1. Quality control technique adopted for raw material.

2. Maintenance of quality in the process of manufacture.
3. Method of quality control technique (i.e. inspection or sampling technique).
4. Quality control tools used (i.e. Pareto chart, Scatter diagram etc.)
5. Application of control charts (i.e. control charts for variable i.e. thickness and size ofpizza,
and for attributes i.e. number of defects in process of manufacturing)
6. Types of errors in accepting or rejecting samples (i.e. accepting bad one and rejectinggood
one or vice versa).
7. Total quality Management approach for continual improvement of quality.

8. Quality standard certification obtained if any.
C A SELET
The Roots of Quality Control in Japan: An Interview with W. Edwards Deming Dr.
Deming, you said it will take about thirty years for the United States to catch up with Japan.
This is a somewhat pessimistic view of the United States. Would you elaborate on this point?
I don’t really know how long it will take. I think it will take thirty years; it should take all of
thirty years. I don’t think America will catch up with Japan because, so far as I can see, the
Japanese system has the advantage over the American system. For example, consider the principle
of constancy of purpose, which is absolutely vital and is number one in my Fourteen Points. It
refers to planning for the future with constancy of purpose.
Now in America some companies certainly do have constancy of purpose, but most do not.
Most have a president who was brought in to improve the quarterly dividend. That’s his job; you
can’t blame him for doing it. He’ll be there a while, and then go on to some other place to raise the
quarterly dividend there. For instance, someone told me that there were five candidates for
president of one of the biggest and most famous of America’s companies. When one of them was
selected, the other four resigned from the company. Such a thing could not happen in Japan. So
you see, the American system is so set up that it cannot use the talents of its people. That’s very
serious.
People cannot work for the company. They only get out their quota. You can’t blame a person
for doing the job that is cut out for him since he has to pay his rent and take care of his family. You
can’t blame him, but you can blame management for a situation in which people cannot work for
the company. An employee cannot remain on the job to find out for sure what the job is. The
foreman does not have time to help him. As a matter of fact, the foreman may decide a particular
person cannot do the job at all and perhaps should be let go. People report equipment out of order
and nothing happens. If someone reports equipment out of order more than three or four times,
that person is considered a troublemaker. If he tries to find out more about the job from the-
foreman, he is considered a troublemaker. People find out that it is impossible to do what is best
for the company or do their best work for the company. They just have to carryon as best they can,
given the handicaps.
In addition, people have to use materials that are not suited to the job, and this creates a sense
of desperation. There isn’t much they can do about it-if they report, or try to do something, they
are labeled troublemakers. This situation does not exist in Japan. There, everyone is willing to help
everyone else.
Dr. Deming, as you’ve mentioned, one of the Fourteen Points emphasizes constancy of
purpose. Personally, I learned a great deal from that. Could you elaborate a little more on that
point?
A good way to assess a company’s constancy of purpose is to evaluate the source of ultimate
authority in that company. To whom does the president of the company answer? Does anybody
own the company? Do the owners answer to the stockholders? The stockholders, thousands of
them, who want dividends-to whom do they answer? Do they answer to their
consciences? Do they answer to a built-in institution? Do they answer to a constitution of the

company? Is there a constitution for the company?
Some companies have a constitution. In medical service, for example, you have some
constancy of purpose. Not all, but some nursing homes or other medical institutions are under the
governance of a religious board, and they’re very exact about service. The head of the organization
answers to constancy of purpose. There is a constitution with an aim of going beyond the making
of dividends.
You have to pay to keep such institutions going, but their job is service. The reason why the
public school systems fail in America is because the schools don’t answer to anybody. There is no
constitution. What is their aim? Is it to teach, or to produce? Is it to help youngsters that have
ability to develop that ability, or is it something else? I don’t know. The aim is not stated, so the
schools are failing.
We hear that American companies are now changing and adopting such things as quality
control. Do you think American companies are heeding your message?
Many companies are forming QC circles in America without understanding what they’re
doing. QC circles cannot be effective in the absence of quality control, which means management
actively adopting my Fourteen Points. Many companies are forming QC circles because
management wants a lazy way to avoid the job of improving quality and productivity. These
circles will make a worthwhile contribution if they are given a chance, but QC circles alone are
not quality control. Once it becomes obvious that management is working on the Fourteen Points
and is trying to do something to make people more effective in their work, then the workers will
be creative.
Can you imagine people in a QC circle being effective when half of them will be turned out
on the streets when business slacks off? Can you imagine an effective QC circle when half or even
fewer of the people involved were rehired after being laid off during a slump? People have to feel
secure. That means, according to the word’s derivation, “without concern,” from the Latin se for
“without” and cure meaning “care” or “concern.” Security means being able to speak, ask each
other questions, and, help one another. There is nothing to hide and no one to please. Most people
who work are only trying to please somebody because otherwise they might not have a job.
The lack of constancy of purpose in America is very serious. For example, I received a letter
from a man who asked what he could do that would have a lasting benefit for his company. The
problem is, the man will probably be where he is for only two more years. At the end of two years,
he will either be promoted or he will look for a job with another company. He asked what fire he
could start that would continue to burn after he leaves his job, whether he is promoted at the same
company or goes elsewhere. It’s a very serious question. I don’t know if there is an answer.
There is another serious matter in this country: the supposition that quality control consists of
a bag of techniques. Quality control is more than just a set of techniques. But you cannot have
quality control without physical techniques. One of my Fourteen Points is to remove fear within a
company, to make people secure. I don’t know of any physical techniques to bring this about. But
it is through physical techniques that I discovered the existence of fear. Fear is costing
companies a great deal of money and causing a lot of waste in out-of-order machines and rework.
Fear causes wasted human effort and wasted materials. It arises because people do not understand
their jobs, and have no place to go for help. I don’t know of any statistical technique by which to
establish constancy of purpose and eliminate fear.
Statistical techniques are certainly necessary for purchasing and selling materials, since
without them you cannot measure or understand the quality of what you are buying. American
industry and American government, especially the military, are being rooked by the practice of
purchasing from the lowest bidder. They are forcing everyone to conform to the lowest price. That
is wrong because there is no such thing as price without a measure of quality. Purchasing
departments are not prepared to measure quality; they only know arithmetic. They understand that
thirteen cents less per thousand pieces translates into so many thousands of dollars per year. But
they don’t understand that the quality of these pieces may be so bad that it will cause a great deal
of trouble.
You already referred to American management’s lack of understanding of quality control
for production processes. Could we go back to that?
Most American managers ‘have no idea how deep the trouble is, and those who do have no
idea of what can be done. There is no way for them to learn what to do that I know of.
In the United States, I have been intrigued by the notion of the trade-off between quality
and price and the trade-off between productivity and quality. Here these are seen as different
things, and yet your message, which you say the Japanese have accepted, is not to treat quality
and price, and productivity and quality, as trade-off. Why has this been so difficult for
Americans to understand?
Americans simply have no idea of what quality is. Ask almost any plant manager in this
country and he’ll say it is a trade-off, that you have one or the other. He does not know that you
can have both, and that once you have quality, then you can have productivity, lower costs, and a
better market position. Here, people don’t know this, but they know it in Japan. In 1950 in Japan, 1
was able to get top management together for conferences to explain what they had to do. No such
gathering has ever been held in America and I don’t know if anybody has any way of organizing
one. In Japan, Mr. Ishikawa of JUSE organized conferences with top management in July 1950,
again in August, then six months later, and so on. Top management understood from the beginning
what they must do, and that as they improved quality, productivity would increase. They had some
examples within six months, and more within a year. News of these examples spread throughout
the country, and everyone learned about them because Japanese management was careful to
disseminate the information.
The supposition of so many Americans that better quality means more gold plating or
polishing, more time spent to do better work, is just not true. Quality improvement means
improving the process so it produces quality without rework, quickly and directly. In other words,
quality means making it right the first time so you don’t have to rework it. By improving the
process, you decrease wasted human effort, wasted machine time and materials, and you get a
better product. If you decrease rework by six percent, you increase the productivity of a production
line by six percent; and increase its capacity by the same amount. Therefore, in many cases,
increased capacity could be achieved in this country simply by reducing wasted human
effort, machine time, and materials. In this country, better use of existing machinery-not new
machinery or automation-is the answer.
How do you respond to American management’s idea that mechanization and automation
are cost-saving devices rather than quality-improvement devices? In Japan mechanization and
automation are seen as quality improvement, obviously with cost-saving benefits on the side.
But in Japan they’re working toward mechanization, automation, and the use of robots as
quality-improvement devices.
New machinery and automation very often bring higher costs, not lower ones. They also
bring headaches and troubles, which a company is unprepared to handle. The result is that they
decrease production, increase costs, lower quality, and create problems the company never had
before. The best thing to do is learn to use what you have efficiently. Once you learn that, then
there’s a possibility you may learn to use more sophisticated equipment. I’m afraid that time is a
long way off for this country.
In Japan, now that they’re using present equipment successfully and efficiently and cannot
extract any more capacity, the only way to increase production is with new automated machinery,
because there are no more people to employ. There are no employment agencies in Japan where
you can find people to work in plants. In the United States, on the other hand, there are seven
million unemployed, maybe half of whom are actually able and willing to work, and are good
workers.
Back in the 1950s, you made a prophetic statement when you told the Japanese that if they
pursued this quality-first approach, Japan would dominate the world market and everyone,
including the United States, would demand protection from Japanese imports. Did you make
that prediction because you were convinced that American industries were not pursuing the
proper course of action in this field?
No, I saw, through the conferences with the top management in Japan, that Japan could do a
better job with quality control than America had ever done. Americans had not done well with
quality control because they thought of it as a bag of techniques. As a group, management in
America never knew anything about quality control. What you had in America, from the intensive
statistical courses I started at Stanford University, were brilliant fires and applications all over the
country. But when a person changed jobs, the fire burned out and there was nobody in
management to keep it going.
We held the first course at Stanford in July 1942, and seventeen people came. Two months
later, Stanford University gave another course, and later other universities gave courses. I taught
twenty-three of them myself. By that time, they would be attended by fifty or sixty or seventy
people. The War Department also gave courses at defense suppliers’ factories. Quality control
became a big fire. As a matter of fact, courses were given to a total of ten thousand people from
eight hundred companies, but nothing happened.
Brilliant applications burned, sputtered, fizzled, and died out. What people did was solve
individual problems; they did not create a structure at the management level to carry out their
obligations. There was not sufficient appreciation at the management level to spread the methods
to other parts of the company.
The man who saw these things first was Dr. Holbrook working at Stanford. He knew the job
that management must carry out. He saw it first. We tried, but our efforts were feeble, and
the results were zero. We did not know how to do it. In our eight-day courses, we would ask
companies to send their top people, but top people did not come. Some came for one afternoon.
You don’t learn this in one afternoon. So quality control died out in America.
Let me put it this way: more and more, quality control in America became merely statistical
methods-the more applications, the better. Instead of finding many problems, we need to find the
big problem. Where are the problems? Let’s find the big problems first. What methods will help?
Maybe no methods will help. Let’s be careful-so many things that happen are just carelessness. We
don’t need control charts for them. We just need some action from management to cut that
carelessness. Wrong design? That’s management’s fault. Recall of automobiles? Management’s
fault, not the workers’ fault.
People started control charts everywhere. The Ford Company had charts all over their
assembly plants across the country, one chart on top of another. Quality control “experts” sat and
made more and more charts. One man told me his job was to count the number of points out of
control every day. But what happened was nothing. Quality control drifted into so-called quality
control departments that made charts. They would look at the charts and perhaps tell somebody if
something was out of control. The only people who could do anything never saw the charts and
never learned anything. That included everybody. Top management never heard or learned
anything; people on the production lines did not learn anything. That was totally wrong, because
the first step is for management to take on my Fourteen Points, namely, to gain purpose. The
Japanese had already accomplished this task. The Japanese were all ready to work on training.
JUSE was ready. But in 1950, quality control had practically died out in America. When I went to
Japan in 1950, I said to myself, “Why repeat in Japan the mistakes that were made in America? I
must get hold of top management and explain to them what their job is, because unless they do
their part, these wonderful engineers will accomplish nothing. They will make business
applications and then the fire will burn out.”
It was at that time I was fortunate enough to meet Mr. Ichiro Ishikawa, who, after three
conferences, sent telegrams to forty-five men in top management telling them to come and hear
me. Well, I did a very poor job, but I explained what management must do, what quality control is
from a management standpoint. For example, I told them to improve incoming materials, which
means working with vendors as if they were members of your family, and teaching them. I told
them they must learn statistical control of quality. It’s a big job.
Incoming materials were wretched, deplorable, and nobody seemed to care. They just thought
that industry consisted of taking what you got and doing the best you could. But I explained that
that won’t do because now you must compete. The consumer you never thought of-to whom you
must now export-is in America, Canada, and Europe. Improve agriculture, yes, but the better way-
the quicker way, the most effective way-is to export quality. They thought it could not be done.
They said they had never done it, that they had a bad reputation. I told them, you can do it-you
have to do it, you must. You must learn statistical methods. These methods of quality control must
be a part of everybody’s job.
At that time, consumer research was unknown in Japan, but the aim of making products was
to help somebody. I think they had never thought of the consumer as the most important end of the
production line. I told them they must study the needs of the consumer. They must look ahead
one year, three years, eight years, to be ahead in new services and new products. As they learned,
they must teach everyone else. Well, that was the natural Japanese way. I did not know how much,
but I gave them that advice.
How did you develop your own views, not only of statistical control methods, but also your
central message that quality determines productivity?
By simple arithmetic, if you have material coming in that is difficult to use -and there was
plenty of it coming to Japan in 1950-you will produce a lot of wasted human effort, machine time,
and materials. There will be a lot of rework, with people occupying time trying to overcome the
deficiencies of defective incoming material. So if you have better material coming in, you
eliminate waste; production, quality, and productivity go up; costs go down; and your market
position is improved.
Well I think that I have put some principles on paper that everybody knew but that, in a sense,
nobody knew. They had never been put down on paper. I stated those principles in Japan in the
summer of 1950, some for the first time. They’re obvious, perhaps, as Newton’s laws of motion
are obvious. But like Newton’s laws, they’re not obvious to everyone.
Is there a company in the United States that has heeded your message? Are there some
isolated cases?
The Nashua Corporation in Nashua, New Hampshire, under the direction of its former
president, William E. Conway, was off to a good start. Mr. Conway himself was doing a great deal,
not only for his corporation, but for American industry. Almost every day, visiting teams of ten to
fifteen people from other companies came to Mr. Conway’s offices and plants to hear about what
he was doing. He was getting a very good start. The entire company was meant for quality.
Why is he so different from other American managers?
I don’t know. There are other good companies. Some of them have started lately and they are
pushing along one of the great problems is finding competent statistical consultants. There are
very few that can give competent training. One company I work with must train fifty thousand
people to discover problems how long do you think it will take the purchasing department to learn
to take quality into consideration along with price? It will take five years or more, and at the end
of five years a lot of people will be gone. They will have other jobs. It’s going to take a long time.
There is no quick road.
Disc ussion Q uestions
(a) Dr. Deming seems to put more emphasis on corporate culture than on quality control
methodology. What is necessary to change a corporate culture to be as quality conscious
as Deming feels is necessary to compete in global markets?
(b) What are the relationships between quality and productivity?
(c) If automation continues to be installed in both Japanese and U.S. industry, will the quality
problem be solved by technology?
(d) What are the prospects for making the quality of U.S. manufactured products companies?
How can such a goal be achieved, given the current Japanese lead?
[Source: These edited interviews were given by Dr. Deming to the Pacific Basin Center Foundation on
September 8, 1981, and July 28,1984]
7
WORK STUDY (TIME AND MOTION STUDY)
C HA PTER O UTLINE
7.1 Introduction 7.6 Work Measurement
7.2 Productivity 7.7 Time Study
7.3 Work Study •Exercises
7.4 Method Study •Skill Development
7.5 Motion Study •Caselet
7.1 INTRO DUC TIO N

Productivity has now become an everyday watch word. It is crucial to the welfare of industrial firm
as well as for the economic progress of the country. High productivity refers to doing the work in a
shortest possible time with least expenditure on inputs without sacrificing quality and with minimum
wastage of resources.
Work-study forms the basis for work system design. The purpose of work design is to identify
the most effective means of achieving necessary functions. This work-study aims at improving the
existing and proposed ways of doing work and establishing standard times for work performance.
Work-study is encompassed by two techniques, i.e., method study and work measurement.
“Method study is the systematic recording and critical examination of existing and proposed
ways of doing work, as a means of developing and applying easier and more effective methods and
reducing costs.”
“Work measurement is the application or techniques designed to establish the time for a
qualified worker to carry out a specified job at a defined level or performance.”
171
There is a close link between method study and work measurement. Method study is concerned
with the reduction of the work content and establishing the one best way of doing the job whereas
work measurement is concerned with investigation and reduction of any ineffective time associated
with the job and establishing time standards for an operation carried out as per the standard method.
7.2 PRO DUC TIVITY
Productivity is the quantitative relation between what we produce and we use as a resource to
produce them, i.e., arithmetic ratio of amount produced (output) to the amount of resources (input).
Productivity can be expressed as:
Output Productivity
=
Input
Productivity refers to the efficiency of the production system. It is the concept that guides the
management of production system. It is an indicator to how well the factors of production (land,
capital, labour and energy) are utilised.
European Productivity Agency (EPA) has defined productivity as,
“Productivity is an attitude of mind. It is the mentality of progress, of the constant
improvements of that which exists. It is the certainty of being able to do better today than yesterday
and continuously. It is the constant adaptation of economic and social life to changing conditions. It
is the continual effort to apply new techniques and methods. It is the faith in progress.”
A major problem with productivity is that it means many things to many people. Economists
determine it from Gross National Product (GNP), managers view it as cost cutting and speed up,
engineers think of it in terms of more output per hour. But generally accepted meaning is that it is
the relationship between goods and services produced and the resources employed in their
production.
7.2.1 Factors Influencing Productivity
Factors influencing productivity can be classified broadly into two categories: (A) controllable (or
internal) factors and (B) un-controllable (or external) factors.
(A) CONTROLLABLE (OR INTERNAL) FACTORS

1. Product factor: In terms of productivity means the extent to which the product meets
output requirements product is judged by its usefulness. The cost benefit factor of a product can be
enhanced by increasing the benefit at the same cost or by reducing cost for the same benefit.
2. Plant and equipment: These play a prominent role in enhancing the productivity. The
increased availability of the plant through proper maintenance and reduction of idle time increases
the productivity. Productivity can be increased by paying proper attention to utilisation, age,
modernisation, cost, investments etc.
3. Technology: Innovative and latest technology improves productivity to a greater extent.
Automation and information technology helps to achieve improvements in material handling,
storage, communication system and quality control. The various aspects of technology factors to be
considered are:
(i) Size and capacity of the plant,
(ii) Timely supply and quality of inputs,
(iii) Production planning and control,
(iv) Repairs and maintenance,
(v) Waste reduction, and
(vi) Efficient material handling system.
4. Material and energy: Efforts to reduce materials and energy consumption brings about
considerable improvement in productivity.
1. Selection of quality material and right material.
2. Control of wastage and scrap.
3. Effective stock control.
4. Development of sources of supply.
5. Optimum energy utilisation and energy savings.
5. Human factors: Productivity is basically dependent upon human competence and skill.
Ability to work effectively is governed by various factors such as education, training, experience
aptitude etc., of the employees. Motivation of employees will influence productivity.
6. Work methods: Improving the ways in which the work is done (methods) improves
productivity, work study and industrial engineering techniques and training are the areas which
improve the work methods, which in term enhances the productivity.
7. Management style: This influence the organizational design, communication in
organization, policy and procedures. A flexible and dynamic management style is a better approach
to achieve higher productivity.
(B) UN-CONTROLLABLE (OR EXTERNAL) FACTORS

1. Structural adjustments: Structural adjustments include both economic and social changes.
Economic changes that influence significantly are:
(a) Shift in employment from agriculture to manufacturing industry,
(b) Import of technology, and
(c) Industrial competitiveness.
Social changes such as women’s participation in the labour force, education, cultural values,
attitudes are some of the factors that play a significant role in the improvement of productivity.
2. Natural resources: Manpower, land and raw materials are vital to the productivity
improvement.
3. Government and infrastructure: Government policies and programmes are significant to
productivity practices of government agencies, transport and communication power, fiscal policies
(interest rates, taxes) influence productivity to the greater extent.
7.2.2 Total Productivity Measure (TPM)
It is based on all the inputs. The model can be applied to any manufacturing organization or service
company.
Total tangible output Total
productivity =
Total trangible input
Total tangible output = Value of finished goods produced + Value of partial
units produced + Dividents from securities + Interest
+ Other income
Total tangible input = Value of (human + material + capital + energy + other
inputs) used. The word tangible here refers to
measurable.
The output of the firm as well as the inputs must be expressed in a common measurement unit.
The best way is to express them in rupee value.
7.2.3 Partial Productivity Measures (PPM)
Depending upon the individual input partial productivity measures are expressed as:
Total output
Partial productivity =
Individual input
Total output
1. Labour productivity =
Labour input Labour
input is measured in terms of man-hours
Total output
2. Capital productivity =
Capital input
3. Material productivity = Total output
Material input
Total output
4. Energy productivity =
Energy input
One of the major disadvantage of partial productivity measures is that there is an over emphasis
on one input factor to the extent that other input are underestimated or even ignored.
7.2.4 Productivity Improvement Techniques
(A) TECHNOLOGY BASED
1. Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), and
Computer Integrated Manufacturing Systems (CIMS): CAD refers to design of products,
processes or systems with the help of computers. The impact of CAD on human productivity is
significant for the advantages of CAD are:
(a) Speed of evaluation of alternative designs,
(b) Minimisation of risk of functioning, and
CAM is very much useful to design and control the manufacturing. It helps to achieve the
effectiveness in production system by line balancing.
(a) Production Planning and Control
(b) Capacity Requirements Planning (CRP), Manufacturing Resources Planning (MRP II) and
Materials Requirement Planning (MRP)
(c) Automated Inspection.
2. Computer integrated manufacturing: Computer integrated manufacturing is characterised
by automatic line balancing, machine loading (scheduling and sequencing), automatic inventory
control and inspection.
1. Robotics
2. Laser technology
3. Modern maintenance techniques
4. Energy technology
5. Flexible Manufacturing System (FMS)
(B) EMPLOYEE BASED
1. Financial and non-financial incentives at individual and group level.
2. Employee promotion.
3. Job design, job enlargement, job enrichment and job rotation.
4. Worker participation in decision-making

5. Quality Circles (QC), Small Group Activities (SGA)
6. Personal development.
(C) MATERAL BASED
1. Material planning and control
2. Purchasing, logistics
3. Material storage and retrieval
4. Source selection and procurement of quality material
5. Waste elimination.
(D) PROCESS BASED
1. Methods engineering and work simplification
2. Job design evaluation, job safety
3. Human factors engineering.
(E) PRODUCT BASED
1. Value analysis and value enginering
2. Product diversification
3. Standardisation and simplification
4. Reliability engineering
5. Product mix and promotion.
(F) TASK BASED
1. Management style
2. Communication in the organisation
3. Work culture
4. Motivation
5. Promotion group activity.
ILLUSTRATION 1: A company produces 160 kg of plastic moulded parts of acceptable
quality by consuming 200 kg of raw materials for a particular period. For the next period, the
output is doubled (320 kg) by consuming 420 kg of raw material and for a third period, the output is
increased to 400 kg by consuming 400 kg of raw materal. SOLUTION: During the first year,
production is 160 kg
Output 160
Productivity = = = 0.8 or 80%
Input 200
For the second year, production is increased by 100%
Output 320
Productivity = = = 0.76 or 76% ↓
Input 420
For the third period, production is increased by 150%
Output 400
Productivity = = = 1.0, i.e., 100% ↑
Input 400
From the above illustration it is clear that, for second period, though production has doubled,
productivity has decreased from 80% to 76% for period third, production is increased by 150% and
correspondingly productivity increased from 80% to 100%.
ILLUSTRATION 2 : The following information regarding the output produced and inputs
consumed for a particular time period for a particular company is given below:
Output – Rs. 10,000
Human input – Rs. 3,000
Material input – Rs. 2,000
Capital input – Rs. 3,000
Energy input – Rs. 1,000
Other misc. input – Rs. 500
The values are in terms of base year rupee value. Compute various productivity indices.
SOLUTION:
Partial productivity
Output 10,000
1. Labour productivity = = = 3.33
Human input 3,000
Output 10,000
2. Capital productivity = = = 3.33 Capital input 3,000
Output 10,000
3. Material productivity = = = 5.00
Material input 2,000
Output 10,000
1,000
4. Energy productivity = = = 10.00 Energy input
Output 10,000
5. Other misc. expenses = = = 20.00
Other misc. input 500
Total output
6. Total productivity =
Total input
Total output
=
(Human + Material + Capital + Energy + Other misc. input)
= = 1.053
Net output
7. Total factor productivity (TFP) =
(Labour +Capital) Input
Total output −Material and services purchased

=
(Labour +Capital) Input
Assume that the company purchases all its material and services including energy, misc. and
equipment (leasing). Then,
10,000−2 000, + 3 000,+1 000,+500

Total factor productivity =
3 000,+ 3 000,
= = 0.583
7.3 WO RK STUDY
“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.”
Fig. 7.2 Framework of work study
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’.
7.3.1 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 utilisation 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 standardisation
andsimplification.
9. Helps to establish the standard time for an operation or job which has got application
inmanpower planning, production planning.
7.4 METHO D STUDY
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.
7.4.1 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 utilisation of men, machines and materials.
4. Improved design or specification of the final product.
The objectives of method study techniques are:
1. Present and analyse true facts concerning the situation.
2. To examine those facts critically.
3. To develop the best answer possible under given circumstances based on criticalexamination
of facts.
7.4.2 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 labour efficiency.
5. To reduce monotony in the work.
6. To improve plant utilisation and material utilisation.
7. Elimination of waste and unproductive operations.
8. To reduce the manufacturing costs through reducing cycle time of operations.
7.4.3 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 Fig. 7.3.
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.
Fig. 7.3. Method study procedure
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.
Note: Only the first two steps have been dealt in detail.
7.4.4 Selection of the Job for Method Study

Cost is the main criteria for selection of a job, process and department for methods analysis. To carry
out the method study, a job is selected such that the proposed method achieves one or more of the
following results:
(a) Improvement in quality with lesser scrap.
(b) Increased production through better utilisation of resources.
(c) Elimination of unnecessary operations and movements.
(d) Improved layout leading to smooth flow of material and a balanced production line.
(e) Improved working conditions.
CONSIDERATIONS FOR SELECTION OF METHOD STUDY

The job should be selected for the method study based upon the following considerations:
1. Economic aspect 2. Technical aspect, and 3. Human aspect.
A. Economic Aspects
The method study involves cost and time. If sufficient returns are not attained, the whole exercise
will go waste. Thus, the money spent should be justified by the savings from it. The following
guidelines can be used for selecting a job:
(a) Bottleneck operations which are holding up other production operations.
(b) Operations involving excessive labour.
(c) Operations producing lot of scrap or defectives.
(d) Operations having poor utilisation of resources.
(e) Backtracking of materials and excessive movement of materials.
B. Technical Aspects
The method study man should be careful enough to select a job in which he has the technical
knowledge and expertise. A person selecting a job in his area of expertise is going to do full justice.
Other factors which favour selection in technical aspect are:

1. Job having in consistent quality.
2. Operations generating lot of scraps.
3. Frequent complaints from workers regarding the job.
C. Human Considerations
Method study means a change as it is going to affect the way in which the job is done presently
and is not fully accepted by workman and the union. Human considerations play a vital role in
method study. These are some of the situations where human aspect should be given due
importance:
1. Workers complaining about unnecessary and tiring work.
2. More frequency of accidents.
3. Inconsistent earning.
7.4.5 Recording Techniques for Method Study

The next step in basic procedure, after selecting the work to be studied is to record all facts
relating to the existing method. In order that the activities selected for investigation may be
visualised in their entirety and in order to improve them through subsequent critical examination, it
is essential to have some means of placing on record all the necessary facts about the existing
method. Records are very much useful to make before and after comparison to assess the
effectiveness of the proposed improved method.
The recording techniques are designed to simplify and standardise the recording work. For this
purpose charts and diagrams are used.
CHARTS USED IN METHODS STUDY

This is the most popular method of recording the facts. The activities comprising the jobs are
recorded using method study symbols. A great care is to be taken in preparing the charts so that
the information it shows is easily understood and recognized. The following information should be
given in the chart. These charts are used to measure the movement of operator or work (i.e., in
motion study).
(a) Adequate description of the activities.
(b) Whether the charting is for present or proposed method.
(c) Specific reference to when the activities will begin and end.
(d) Time and distance scales used wherever necessary.
(e) The date of charting and the name of the person who does charting.
Types of C ha rts
It can be broadly divided into (A) Macro motion charts and (B) Micro motion charts.
Macro motion charts are used for macro motion study and micro motion charts are used for
micro motion study.
Macro motion study is one which can be measured through ‘stop watch’ and micro motion
study is one which cannot be measured through stop watch.
(A) MACRO MOTION CHARTS
Following four charts are used under this type:
1. Operation Process Chart
It is also called outline process chart. An operation process chart gives the bird’s eye view of the
whole process by recording only the major activities and inspections involved in the process.
Operation process chart uses only two symbols, i.e., operation and inspection. Operation, process
chart is helpful to:
(a) Visualise the complete sequence of the operations and inspections in the process. (b) Know
where the operation selected for detailed study fits into the entire process.
(c) In operation process chart, the graphic representation of the points at which materials are
introduced into the process and what operations and inspections are carried on them are
shown.
2. Flow Process Chart
Flow process chart gives the sequence of flow of work of a product or any part of it through the
work centre or the department recording the events using appropriate symbols. It is the amplification
of the operation process chart in which operations; inspection, storage, delay and transportation are
represented. However, process charts are of three types:
(a) Material type—Which shows the events that occur to the materials.
(b) Man type—Activities performed by the man.
(c) Equipment type—How equipment is used.
The flow process chart is useful:
(a) to reduce the distance travelled by men (or materials).
(b) to avoid waiting time and unnecessary delays.
(c) to reduce the cycle time by combining or eliminating operations.
(d) to fix up the sequence of operations.
(e) to relocate the inspection stages.
Like operation process chart, flow process chart is constructed by placing symbols one below
another as per the occurrence of the activities and are joined by a vertical line. A brief description of
the activity is written on the right hand side of the activity symbol and time or distance is given on
the left hand side.
3. Two Handed Process Chart
A two handed (operator process chart) is the most detailed type of flow chart in which the
activities of the workers hands are recorded in relation to one another. The two handed process chart
is normally confined to work carried out at a single workplace. This also gives synchronised and
graphical representation of the sequence of manual activities of the worker. The application of this
charts are:
To visualise the complete sequence of activities in a repetitive task.
To study the work station layout.
4. Multiple Activity Chart
It is a chart where activities of more than subject (worker or equipment) are each recorded on a
common time scale to show their inter-relationship. Multiple activity chart is made:
to study idle time of the man and machines,
to determine number of machines handled by one operator, and
to determine number of operators required in teamwork to perform the given job.
Dia g ra ms Used in Method Study

The flow process chart shows the sequence and nature of movement but it does not clearly show the
path of movements. In the paths of movements, there are often undesirable features such as
congestion, back tracking and unnecessary long movements. To record these unnecessary features,
representation of the working area in the form of flow diagrams, string diagrams can be made:
1. To study the different layout plans and thereby; select the most optimal layout.
2. To study traffic and frequency over different routes of the plant.
3. Identification of back tracking and obstacles during movements. Diagrams are of twotypes:
1. Flow diagram and 2. String diagram.
1. FLOW DIAGRAM
Flow diagram is a drawing, of the working area, showing the location of the various activities
identified by their numbered symbols and are associated with particular flow process chart either
man type or machine type.
The routes followed in transport are shown by joining the symbols in sequence by a line which
represents as nearly as possible the path or movement of the subject concerned. Following are the
procedures to make the flow diagram:
1. The layout of the workplace is drawn to scale.
2. Relative positions of the machine tools, work benches, storage, and inspection benchesare
marked on the scale.
3. Path followed by the subject under study is tracked by drawing lines.
4. Each movement is serially numbered and indicated by arrow for direction.
5. Different colours are used to denote different types of movements.
2. STRING DIAGRAM
The string diagram is a scale layout drawing on which, length of a string is used to record the extent
as well as the pattern of movement of a worker working within a limited area during a certain period
of time. The primary function of a string diagram is to produce a record of a existing set of
conditions so that the job of seeing what is actually taking place is made as simple as possible.
One of the most valuable features of the string diagram is the actual distance travelled during
the period of study to be calculated by relating the length of the thread used to the scale of drawing.
Thus, it helps to make a very effective comparison between different layouts or methods of doing
job in terms of the travelling involved.
The main advantages of string diagram compared to flow diagram is that respective movements
between work stations which are difficult to be traced on the flow diagram can be conveniently
shown on string diagram.
Folloging are the procedures to draw string diagram:
1. A layout of the work place of factory is drawn to scale on the soft board.
2. Pins are fixed into boards to mark the locations of work stations, pins are also driven atthe
turning points of the routes.
3. A measured length of the thread is taken to trace the movements (path).
4. The distance covered by the object is obtained by measuring the remaining part of thethread
and subtracting it from original length.
Symbols Used in Method Study

Graphical method of recording was originated by Gilberth, in order to make the presentation of the
facts clearly without any ambiguity and to enable to grasp them quickly and clearly. It is useful to
use symbols instead of written description.
(A) METHOD STUDY SYMBOLS
Ο OPERATION
INSPECTION
→ TRANSPORTATION
D DELAY
∇ STORAGE
Operation O
An operation occurs when an object is intentionally changed in one or more of its
characteristics (physical or chemical). This indicates the main steps in a process, method or
procedure.
An operation always takes the object one stage ahead towards completion.
Examples of operation are:
Turning, drilling, milling, etc.
A chemical reaction.
Welding, brazing and riveting.
Lifting, loading, unloading.
Getting instructions from supervisor.
Taking dictation.
Inspection
An inspection occurs when an object is examined and compared with standard for quality and
quantity. The inspection examples are:
Visual observations for finish.
Count of quantity of incoming material.
Checking the dimensions.
Transportation →
A transport indicates the movement of workers, materials or equipment from one place to
another.
Example: Movement of materials from one work station to another.
Workers travelling to bring tools.
Delay D: Delay (Temporary Storage)
A delay occurs when the immediate performance of the next planned thing does not take place.
Example: Work waiting between consecutive operations.
Workers waiting at tool cribs.
Operators waiting for instructions from supervisor.
Storage ∇
Storage occurs when the object is kept in an authorised custody and is protected against
unauthorised removal. For example, materials kept in stores to be distributed to various work.
ILLUSTRATION 1. Develop a Process Chart for making a cheese sandwich.
SOLUTION. The following chart is one possible solution. The level of detail in process charts
depends upon the requirements of the job. Time is often included to aid analysis of value added.
Process Chart
Distance in Symbol Process description
metre
10 Move to cabinet
- Get loaf of bread
- Remove two slices of bread
- Lay slices on counter-top
- Close loaf of bread
Replace loaf of bread on shelf
- Open butter
- Spread butter on top slice of bread
- Inspect sandwich
10 Move to serving area
- Serve sandwich
ILLUSTRATION 2. Develop a Multiple Activity Chart for doing three loads of laundry,
assume you will have access to one washing machine and one dryer.
SOLUTION: The followingchart is one possible solution. The level of detail in process charts
depends upon the requirements of the job. Time is often included to aid analysis of value added.
Multiple Activity Chart
Time Operator Machine 1 Washer Machine 2 Dryer
Load clothes and detergent in to Being loaded Idle

Machine 1
Idle Run Idle
Remove clothes from Machine 1 Being unloaded Idle
Repeat Load clothes into Machine 2 Idle Being loaded
Cycle Load clothes and detergent into Being loaded Run
Machine 1
Idle Run Run
Remove clothes from Machine 2 Idle Being unloaded
Hang clothes Idle Idle
(B) MICRO-MOTION STUDY CHART
Micro-motion study provides a technique for recording and timing an activity. It is a set of
techniques intended to divide the human activities in a groups of movements or micro-motions
(called Therbligs) and the study of such movements helps to find for an operator one best pattern of
movements that consumes less time and requires less effort to accomplish the task. Therbligs were
suggested by Frank O. Gilbreth, the founder of motion study. Micro-motion study was mainly
employed for the job analysis. Its other applications includes:
1. As an aid in studying the activities of two or more persons on a group work?
2. As an aid in studying the relationship of the activities of the operator and the machineas a
means of timing operations.
3. As an aid in obtaining motion time data for time standards.
4. Acts as permanent record of the method and time of activities of the operator and
themachine.
TABLE 7.1 SIMO chart symbols
Sl. No. Code Name Description Colour
1. SH SEARCH Locate and article Black
2. F FIND Mental reaction at end of Gray
search
3. ST SELECT Selection from a member Light Gray
4. G GRASP Taking Hold Red
5. H HOLD Prolonged group Gold Ochre
6. TL TRANSPORTED Moving an article Green
LOADED
7. P POSITION Placing in a definite Blue
location
8. A ASSEMBLE Putting parts together Violet
9. U USE Causing a device to Purple
perform its function
10. DA DISASSEMBLE Separating parts Light Violet
11. I INSPECT Examine or test Burnt Ochre
12. PP PREPOSITION Placing an article Pale Blue
ready for use
13. RL RELEASE Release an article Carmine red
LOAD
14. TE TRANSPORT Movement of a body Olive Green
EMPTY member
15. R REST Pause to overcome Orange

fatigue
16. JD UNAVOIDABLE Idle-outside persons Yellow
DELAY control
17. PN PLAN Mental plan for future —

action
The micro-motion group of techniques is based on the idea of dividing human activities into
division of movements or groups of movements (Therbligs) according to purpose for which they are
made. Gilbreth differentiated 17 fundamental hand or hand and eye motions. Each Therbligs
has a specific colour, symbol and letter for recording purposes. The Therbligs are micro-motion
study involves the following steps:
1. Filming the operation to be studied.
2. Analysis of the data from the film.
The recording of the data through SIMO chart is done as micro motion chart.
SIMO Chart
Simultaneous motion cycle chart (SIMO chart) is a recording technique for micro-motion study.
A SIMO chart is a chart based on the film analysis, used to record simultaneously on a common time
scale the Therbligs or a group of Therbligs performed by different parts of the body of one or more
operators.
It is the micro-motion form of the man type flow process chart. To prepare SIMO chart, an
elaborate procedure and use of expensive equipment are required and this study is justified when the
saving resulting from study will be very high.
7.5 MO TIO N STUDY
Motion study is part of method study where analysis of the motion of an operator or work will be
studied by following the prescribed methods.
7.5.1 Principles of Motion study
There are a number of principles concerning the economy of movements which have been
developed as a result of experience and which forms the basis for the development of improved
methods at the workplace. These are first used by Frank Gilbreth, the founder of motion study and
further rearranged and amplified by Barnes, Maynard and others. The principles are grouped into
three headings:
(a) Use of the human body.
(b) Arrangement of workplace.
(c) Design of tools and equipment.
(A) USES OF HUMAN BODY When

possible:
1. The two hands should begin and complete their movements at the same time.
2. The two hands should not be idle at the same time except during periods of rest.
3. Motions of the arms should be made simultaneously.
4. Hand and body motions should be made at the lowest classification at which it is possibleto
do the work satisfactorily.
5. Momentum should be employed to help the worker, but should be reduced to a
minimumwhenever it has to be overcome by muscular effort.
6. Continuous curved movements are to be preferred to straight line motions involvingsudden
and changes in directions.
7. ‘Ballistic’ (i.e., free swinging) movements are faster, easier and more accurate than
restricted or controlled movements.
8. Rhythm is essential to the smooth and automatic performance of a repetitive operation.The

work should be arranged to permit easy and natural rhythm wherever possible.
9. Work should be arranged so that eye movements are confined to a comfortable area,without
the need for frequent changes of focus.
(B) ARRANGEMENT OF THE WORKPLACE

1. Definite and fixed stations should be provided for all tools and materials to permit
habitformation.
2. Tools and materials should be pre-positioned to reduce searching.
3. Gravity fed, bins and containers should be used to deliver the materials as close to thepoint
of use as possible.
4. Tools, materials and controls should be located within a maximum working area and asnear
to the worker as possible.
5. Materials and tools should be arranged to permit the best sequence of motions.
6. ‘Drop deliveries’ or ejectors should be used wherever possible, so that the operative does
not have to use his hands to dispose of finished parts.
7. Provision should be made for adequate lightning, and a chair of type and height to
permitgood posture should be provided. The height of the workplace and seat should be
arranged to allow alternate standing and seating.
(C) DESIGN OF TOOLS AND EQUIPMENTS
1. The colour of the workplace should contrast with that of work and thus reduce eyefatigue.
2. The hands should be relieved of all work of ‘holding’ the work piece where this can be done
by a jig or fixture or foot operated device.
3. Two or more tools should be combined where possible.
4. Where each finger performs some specific movement, as in typewriting, the load shouldbe
distributed in accordance with the inherent capacities of the fingers.
5. Handles such as those used on screw drivers and cranks should be designed to
permitmaximum surface of the hand to come in contact with the handle.
6. Levers, cross bars and wheel bars should be in such position that operator can
manipulatethem with least body change and with greatest mechanical advantage.
7.5.2 Recording Techniques of Motion Study
Most of the techniques mentioned in method study is used in the motion study. They are as follows:
1. Macro Motion Study
(a) Flow process chart
(b) Two handed process chart.
2. Micro Motion Study SIMO
chart.
[Note: Explained earlier in this chapter.]
7.6 WO RK MEA SUREMENT

Work measurement is also called by the name ‘time study’. Work measurement is absolutely
essential for both the planning and control of operations. Without measurement data, we cannot
determine the capacity of facilities or it is not possible to quote delivery dates or costs. We are not in
a position to determine the rate of production and also labour utilisation and efficiency. It may not be
possible to introduce incentive schemes and standard costs for budget control.
7.6.1 Objectives of Work Measurement
The use of work measurement as a basis for incentives is only a small part of its total application.
The objectives of work measurement are to provide a sound basis for:
1. Comparing alternative methods.
2. Assessing the correct initial manning (manpower requirement planning).
3. Planning and control.
4. Realistic costing.
5. Financial incentive schemes.
6. Delivery date of goods.
7. Cost reduction and cost control.
8. Identifying substandard workers.
9. Training new employees.
7.6.2 Techniques of Work Measurement
For the purpose of work measurement, work can be regarded as:
1. Repetitive work: The type of work in which the main operation or group of operations
repeat continuously during the time spent at the job. These apply to work cycles of extremely short
duration.
2. Non-repetitive work: It includes some type of maintenance and construction work, where
the work cycle itself is hardly ever repeated identically.
Various techniques of work measurement are:
1. Time study (stop watch technique),
2. Synthesis,
3. Work sampling,
4. Predetermined motion and time study,
5. Analytical estimating.
Time study and work sampling involve direct observation and the remaining are data based and
analytical in nature.
1. Time study: A work measurement technique for recording the times and rates of working
for the elements of a specified job carried out under specified conditions and for analysing the data
so as to determine the time necessary for carrying out the job at the defined level of performance. In
other words measuring the time through stop watch is called time study.
2. Synthetic data: A work measurement technique for building up the time for a job or pans of
the job at a defined level of performance by totalling element times obtained previously from time
studies on other jobs containing the elements concerned or from synthetic data.
3. Work sampling: A technique in which a large number of observations are made over a
period of time of one or group of machines, processes or workers. Each observation records what is
happening at that instant and the percentage of observations recorded for a particular activity, or
delay, is a measure of the percentage of time during which that activities delay occurs.
4. Predetermined motion time study (PMTS): A work measurement technique whereby
times established for basic human motions (classified according to the nature of the motion and
conditions under which it is made) are used to build up the time for a job at the defined level of
performance. The most commonly used PMTS is known as Methods Time Measurement (MTM).
5. Analytical estimating: A work measurement technique, being a development of estimating,
whereby the time required to carry out elements of a job at a defined level of performance is
estimated partly from knowledge and practical experience of the elements concerned and partly
from synthetic data.
The work measurement techniques and their applications are shown in Table 7.2. TABLE 7.2:
Work measurement techniques and their application
Techniques Applications Unit of measurement
1. Time study Short cycle repetitive jobs. Centiminute (0.01 min)
Widely used for direct work.
2. Synthetic Data Short cycle repetitive jobs. Centi minutes
3. Working sampling Long cycle jobs/heterogeneous Minutes
operations.
4. MTM Manual operations confined to TMU (1 TMU = 0.006 min)
one work centre.
5. Analytical estimation Short cycle non-repetitive job. Minutes
7.7 TIME STUDY
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.”
7.7.1 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 theworking
conditions likely to affect the time study work.
3. Breakdown the operation into elements. An element is a instinct part of a specifiedactivity
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 eachelement
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
consideringfrequency of occurrence of each element.
9. Make a detailed job description describing the method for which the standard time
isestablished.
10. Test and review standards wherever necessary. The basic steps in time study arerepresented
by a block diagram in Fig. 7.5.
7.7.2 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 as shown in Fig. 7.6.
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.
Fig. 7.5 Steps in time study
Fig. 7.6 Components standard time
OT – Observed Time
PRF – Performance Rating Factor
NT – Normal Time
PA – Process Allowances
RPA – Rest and Personal Allowances
SA – Special Allowances
PoA – Policy Allowances
A llowa nc e s
The normal time for an operation does not contain any allowances for the worker. It is impossible to
work throughout the day even though the most practicable, effective method has been developed.
Even under the best working method situation, the job will still demand the expenditure of human
effort and some allowance must therefore be made for recovery from fatigue and for relaxation.
Allowances must also be made to enable the worker to attend to his personal needs. The allowances
are categorised as: (1) Relaxation allowance, (2) Interference allowance, and (3) Contingency
allowance.
1. RELAXATION ALLOWANCE
Relaxation allowances are calculated so as to allow the worker to recover from fatigue. Relaxation
allowance is a addition to the basic time intended to provide the worker with the opportunity to
recover from the physiological and psychological effects of carrying out specified work under
specified conditions and to allow attention to personal needs. The amount of allowance will depend
on nature of the job.
Relaxation allowances are of two types: fixed allowances and variable allowances. Fixed
allowances constitute:
(a) Personal needs allowance: It is intended to compensate the operator for the time necessary
to leave, the workplace to attend to personal needs like drinking water, smoking, washing
hands. Women require longer personal allowance than men. A fair personal allowance is 5%
for men, and 7% for women.
(b) Allowances for basic fatigue: This allowance is given to compensate for energy expended
during working. A common figure considered as allowance is 4% of the basic time.
2. VARIABLE ALLOWANCE
Variable allowance is allowed to an operator who is working under poor environmental conditions
that cannot be improved, added stress and strain in performing the job.
The variable fatigue allowance is added to the fixed allowance to an operator who is engaged
on medium and heavy work and working under abnormal conditions. The amount of variable fatigue
allowance varies from organization to organization.
3. INTERFERENCE ALLOWANCE
It is an allowance of time included into the work content of the job to compensate the operator for
the unavoidable loss of production due to simultaneous stoppage of two or more machines being
operated by him. This allowance is applicable for machine or process controlled jobs.
Interference allowance varies in proportion to number of machines assigned to the operator.

The interference of the machine increases the work content.
4. CONTINGENCY ALLOWANCE
A contingency allowance is a small allowance of time which may be included in a standard time to
meet legitimate and expected items of work or delays. The precise measurement of which is
uneconomical because of their infrequent or irregular occurrence.
This allowance provides for small unavoidable delays as well as for occasional minor extra
work:
Some of the examples calling for contingency allowance are:
Tool breakage involving removal of tool from the holder and all other activities to insert new
tool into the tool holder.
Power failures of small duration.
Obtaining the necessary tools and gauges from central tool store. Contingency allowance
should not exceed 5%.
5. POLICY ALLOWANCE
Policy allowances are not the genuine part of the time study and should be used with utmost care
and only in clearly defined circumstances.
The usual reason for making the policy allowance is to line up standard times with
requirements of wage agreement between employers and trade unions.
The policy allowance is an increment, other than bonus increment, applied to a standard time
(or to some constituent part of it, e.g., work content) to provide a satisfactory level of earnings for a
specified level of performance under exceptional circumstances. Policy allowances are sometimes
made as imperfect functioning of a division or part of a plant.
ILLUSTRATION 1: Assuming that the total observed time for an operation of assembling an
electric switch is 1.00 min. If the rating is 120%, find normal time. If an allowance of 10% is
allowed for the operation, determine the standard time.
SOLUTION:
Obsessed time (or) selected time = 1.00 min
Rating = 120%
Allowance = 10%
Rating %
As we know that, normal time = Observed time ×
100
= 1.00 × = 1.20 min
Allowance @ 10% = 1.20 × = 0.12 min

∴ Standard time = Normal time + Allowances
= 1.20 + 0.12 = 1.32 min.
ILLUSTRATION 2: An operator manufactures 50 jobs in 6 hours and 30 minutes. If this time
includes the time for setting his machine. Calculate the operator’s efficiency.
Standard time allowed for the job was:
Setting time = 35 min
Production time per piece = 8 min SOLUTION:
As standard time = Set up time + Time per piece × No. of pieces produced
∴ Standard time for manufacturing 50 jobs
= 35 + 8 × 50
= 435 min
= 7 hours and 15 min.
Standard time × 100
Efficiency of operator =
Actual time
= = 111.5%.
ILLUSTRATION 3: Following datas were obtained by a work study. Man from a study
conducted by hours.
(i) Maintenance time
(a) Get out and put away tools = 12.0 min/day
(b) Cleaning of machine = 5.0 min/day
(c) Oiling of machine = 5.0 min/day
(d) Replenish coolant supply = 3.0 min/day
(ii) Interruption
(a) Interruption by foreman = 5.0 min/day (b) Interruption by porter etc. = 4.0
min/day
(iii) Delay time due to power failure etc. = 6.0 min/day
(iv) Personal time = 20.0 min/day
Calculate total allowances, total available cycle time productive hours, considering a working
day of 8 hours.
SOLUTION:
Total allowance (sometimes also known as station time)
= Total maintenance time + Interruption time +
Delay time + Personal time
= (12.0 + 5 + 5 + 3.0) + (5.0 + 4.0) + 6.0 + 20.0
= 25.0 + 9.0 + 6.0 + 20.0
= 60.0 min per day
∴ Total available cycle time = Total work period – Total allowances
= 480 – 60 = 420 min/day
Time available
Productive hours =
Number of hours
= = 52.5 min.
ILLUSTRATION 4: Find out the standard time using the following data:
Average time for machine elements = 6 min
Average time for manual elements = 4 min
Performance rating = 110%
Allowances = 10%
SOLUTION:
Normal time = Machinery time + Manual time × Rating
= 6 + 4 × 1.1
= 6 + 4.4 = 10.4 min
∴ Standard time = Normal time + Allowances
= 10.4 + 10.4 ×
= 10.4 (1 + 0.1) = 11.44 min.
EX ERC ISES
Section A
1. What do you mean by productivity?
2. What is work study?
3. What do you mean by work measurement?
4. How do you ascertain productivity?
5. What do you mean by total productivity measure?
6. What do you mean by partial productivity measure?
7. What is micro-motion study?
8. What is motion study?
9. What is time study?
Section B
1. How do you achieve efficiency?
2. Explain the scope of method study.
Section C
1. Discuss the factors influencing productivity.
2. Discuss the productivity improvement techniques.
3. Discuss the steps involved in method study.
4. Discuss different types of charts and diagrams used in methods study.
5. Discuss the principles of motion study.
6. Discuss the recording technique of motion study.
7. Discuss the various techniques of work measurement.
8. Discuss the steps in making time study.
9. Discuss the different types of allowances.
Skill development
1. Steps involved in the preparation of pizza (method study).

2. Cycle time involved for placing of order till serving (Standard Time Calculation).
3. Process chart used for pizza preparation.
C A SELET
1. TOYS AND JOB DESIGN AT THE HOVEY AND BEARD COMPANY

The following is a situation that occurred in the Hovey and Beard Company, as reported by J.
V. Clark.
This company manufactured a line of wooden toys. One part of the process involved spray
painting partially assembled toys, after which the toys were hung on moving hooks that carried them
through a drying oven. The operation, staffed entirely by women, was plagued with absenteeism,
high turnover, and low morale. Each woman at her paint booth would take a toy from the tray beside
her, position it in a fixture, and spray on the color according to the required pattern. She then would
release the toy and hang it on the conveyor hook. The rate at which the hooks moved had been
calculated so that each woman, once fully trained, would be able to hang a painted toy on each hook
before it passed beyond her reach.
The women who worked in the paint room were on a group incentive plan that tied their
earnings to the production of the entire group. Since the operation was new, they received a learning
allowance that decreased by regular amounts each month. The learning allowance was scheduled to
fall to zero in six months because it was expected that the women could meet standard output or
more by that time. By the second month of the training period, trouble had developed. The women
had progressed more slowly than had been anticipated, and it appeared that their production level
would stabilize somewhat below the planned level. Some of the women complained about the speed
that was expected of them, and a few of them quit. There was evidence of resistance to the new
situation.
Through the counsel of a consultant, the supervisor finally decided to bring the women together
for general discussions of working conditions. After two meetings in which relations between the
work group and the supervisor were somewhat improved, a third meeting produced the suggestion
that control of the conveyor speed be turned over to the work group. The women explained that they
felt that they could keep up with the speed of the conveyor but that they could not work at that pace
all day long. They wished to be able to adjust the speed of the belt, depending on how they felt.
After consultation, the supervisor had a control marked, “low, medium, and fast” installed at the
booth of the group leader, who could adjust the speed of the conveyor anywhere between the lower
and upper limits that had been set. The women were delighted and spent many lunch
hours deciding how the speed should be varied from hour to hour throughout the day. Within a week,
a pattern had emerged: the first half-hour of the shift was run on what the women called “medium
speed” (a dial setting slightly above the point marked “medium”). The next two and one-half hours
were run at high speed, and the half-hour before lunch and the half-hour after lunch were run at low
speed. The rest of the afternoon was run at high speed, with the exception of the last 45 minutes of
the shift, which were run at medium speed.
In view of the women’s report of satisfaction and ease in their work, it is interesting to note that
the original speed was slightly below medium on the dial of the new control. The average speed at
which the women were running the belt was on the high side of the dial. Few, if any, empty hooks
entered the drying oven, and inspection showed no increase of rejects from the paint room.
Production increased, and within three weeks the women were operating at 30 to 50 percent above
the level that had been expected according to the original design.
Evaluate the experience of the Hovey and Beard Company as it reflects on job design, human
relationships, and the supervisor’s role. How would you react as the supervisor to the situation
where workers determine how the work will be performed? If you were designing the spray-painting
set-up, would you design it differently?
[From J. V. Clark, “A Healthy Organization,” California Management Review, 4, 1962]
2. PRODUCTIVITY GAINS AT WHIRLPOOL

Workers and management at Whirlpool Appliance’s Benton Harbor plant in Michigan have set
an example of how to achieve productivity gains, which has benefited not only the company and its
stockholders, but also Whirlpool customers, and the workers themselves.
Things weren’t always rosy at the plant. Productivity and quality weren’t good. Neither were
labor-management relations. Workers hid defective parts so management wouldn’t find them, and
when machines broke down, workers would simply sit down until sooner or later someone came to
fix it. All that changed in the late 1980s. Faced with the possibility that the plant would be shut
down, management and labor worked together to find a way to keep the plant open. The way was to
increase productivity-producing more without using more resources. Interestingly, the improvement
in productivity didn’t come by spending money on fancy machines. Rather, it was accomplished by
placing more emphasis on quality. That was a shift from the old way, which emphasized volume,
often at the expense of quality. To motivate workers, the company agreed to gain sharing, a plan that
rewarded workers by increasing their pay for productivity increases.
The company overhauled the manufacturing process, and taught its workers how to improve
quality. As quality improved, productivity went up because more of the output was good, and costs
went down because of fewer defective parts that had to be scrapped or reworked. Costs of inventory
also decreased, because fewer spare parts were needed to replace defective output, both at the
factory and for warranty repairs. And workers have been able to see the connection between their
efforts to improve quality and productivity.
Not only was Whirlpool able to use the productivity gains to increase workers’ pay, it was also
able to hold that lid on price increases and to funnel some of the savings into research.
Q uestions
1. What were the two key things that Whirlpool management did to achieve productivitygains?
2. Who has benefited from the productivity gains?
3. How are productivity and quality related?
4. How can a company afford to pay it workers for productivity gains?
(Source: Based on “A Whirlpool Factory Raises Productivity-And Pay of Workers:’ by Rick Wartzman,
from The Wall Street journal, 1992.)
3. STATE AUTOMOBILE LICENSE RENEWALS

Vinay, manager of a metropolitan branch office of the state department of motor vehicles,
attempted to perform an analysis of the driver’s license renewal operations. Several steps were to be
performed in the process. After examining the license renewal process, he identified the steps and
associated times required to perform each step as shown in table below.
State Automobile License Renewals Process Times
Job Average Time to Perform
(Seconds)
1 Review renewal application for correctness 15

2 Process and record payments 30
3 Check file for violations and restrictions 60
4 Conduct Eye Test 40
5 Photograph applicant 20
6 Issue temporary license 30
Vinay found that each step was’ assigned to a different person. Each application was a separate
process in the sequence shown in the exhibit. Vinay determined that his office should be prepared to
accommodate the maximum demand of processing 120 renewal applicants per hour.
He observed that the work was unevenly divided among the clerks, and that the clerk who was
responsible for checking violations tended to shortcut her task to keep up with the other clerks. Long
lines built up during the maximum demand periods.
Vinay also found that general clerks who were each paid Rs.12.00 per hour-handled jobs 1,2,3,
and 4. Job 5 was performed by a photographer paid Rs.16 per hour, Job 6, the issuing of temporary
licenses, was required by state policy to be handled by a uniformed motor vehicle officer. Officers
were paid Rs.18 per hour, but they could be assigned to any job except photography.
A review of the jobs indicated that job 1, reviewing the application for correctness, had to be
performed before any other step. Similarly, job 6, issuing the temporary license, could not be
performed until all the other steps were completed. The branch offices were charged Rs.20 per hour
for each camera to perform photography.
Vinay was under severe pressure to increase productivity and reduce costs, but the regional
director of the department of motor vehicles also told him that he had better accommodate the
demand for renewals. Otherwise, “heads would roll.”
Q uestions
1. What is the maximum number of applications per hour that can be handled by the
presentconfiguration of the process?
2. How many applications can be processed per hour if a second clerk is added to checkfor
violations?
3. Assuming the addition of one more clerk, what is the maximum number of applicationsthe
process can handle?
4. How would you suggest modifying the process to accommodate 120 applications perhour?
(Source: P. R. Olsen, W. E. Sasser, and D. D. Wyckoff, Management of Service Operations: Text, Cases, and
Readings, Pp. 95-96, @ 1978.)
4. MAKING HOTPLATES
Group of 10 workers were responsible for assembling hotplates (instruments for heating
solutions to a given temperature) for hospital and medical laboratory use. A number of different
models of hotplates were being manufactured. Some had a vibrating device so that the solution
could be mixed while being heated. Others heated only test tubes. Still others could heat solutions in
a variety of different containers.
With the appropriate small tools, each worker assembled part of a hotplate. The partially
completed hotplate was placed on a moving belt, to be carried from one assembly station to the next.
When the hotplate was completed, an inspector would check it over to ensure that it was working
properly. Then the last worker would place it in a specially prepared cardboard box for shipping.
The assembly line had been carefully balanced by industrial engineers, who had used a time
and motion study to break the job down into subassembly tasks, each requiring about three minutes
to accomplish. The amount of time calculated for each subassembly had also been “balanced” so
that the task performed by each worker was supposed to take almost exactly the same amount of
time. The workers were paid a straight hourly rate.
However, there were some problems. Morale seemed to be low, and the inspector was finding a
relatively high percentage of badly assembled hotplates. Controllable rejects-those “caused” by the
operator rather than by faulty materials-were running about 23 percent.
After discussing the situation, management decided to try something new. The workers were
called together and asked if they would like to build the hotplates individually. The workers decided
they would like to try this approach, provided they could go back to the old program if the new one
did not work well. After several days of training, each worker began to assemble the entire hotplate.
The change was made at about the middle of the year. Productivity climbed quickly. By the end
of the year, it had leveled off at about 84 percent higher than during the first half of the year,
although no other changes had been made in the department or its personnel. Controllable rejects
had dropped from 23 percent to 1 percent during the same period. Absenteeism had dropped from 8
percent to less than 1 percent. The workers had responded positively to the change, and their morale
was higher. As one person put it, “Now, it is my hotplate.” Eventually, the reject rate dropped so low
that the assembly workers themselves did all routine final inspection. The fulltime inspector was
transferred to another job in the organization.
Q uestions
1. What changes in the work situation might account for the increase in productivity andthe
decrease in controllable rejects?
2. What might account for the drop in absenteeism and the increase in morale?
3. What were the major changes in the situation? Which changes were under the controlof the
manager? Which were controlled by workers?
4. What might happen if the workers went back to the old assembly line method?
(Source: The Modern Manager, by Edgar F. Huse, copyright @ 1979 by West Publishing Company.)
8
MAINTENANCE MANAGEMENT
C HA PTER O UTLINE
8.1 Introduction and Meaning 8.6 Maintenance Schedule Techniques
8.2 Objectives of Maintenance 8.7 Total Productive Maintenance (TPM)
8.3 Types of Maintenance •Exercises
8.4 Maintenance Planning •Skill Development
8.5 Maintenance Scheduling

Past and current maintenance practices in both the private and Government sectors would imply
that maintenance is the actions associated with equipment repair after it is broken. The dictionary
defines maintenance as “the work of keeping something in proper condition, upkeep.” This would
imply that maintenance should be actions taken to prevent a device or component from failing or
to repair normal equipment degradation experienced with the operation of the device to keep it in
proper working order. Data obtained in many studies over the past decade indicates that most
private and Government facilities do not expend the necessary resources to maintain equipment in
proper working order. They wait for equipment failure to occur and then take whatever actions
are necessary to repair or replace the equipment. Nothing lasts forever and all equipment has
associated with it some predefined life expectancy or operational life.
8.2 O BJ EC TIVES O F MA INTENA NC E
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
205
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.
8.3 TYPES O F MA INTENA NC E
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.
8.3.1 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 labour 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 labour 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.
8.3.2 Preventive Ma intena nc e
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.
8.3.3 Predic tive Ma intena nc e
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 labour.
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.
C onc ept of Relia bility in Ma intena nc e

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,
Number of bulbs survived till the specified time limit
Reliability = Failurerate =
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 signalling 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 Fig. 8.1. This is called bath-tub curve.
In Fig. 8.1, there will be large number of failures in the early period. This is mainly due to
nonalignment while shipping the product, or misfit while manufacturing (assembling), or very
high initial friction between moving parts, etc.
Fig. 8.1 Product failure rate
Relia bility 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.
8.4 MA INTENA NC E PLA NNING
Planning of maintenance jobs basically deals with answering two questions, ‘what’ and ‘How’ of
the job; ‘what activities are to be done?’ and ‘how those jobs and activities are to be done?’ While
answering these two questions, other supplementary questions are to be answered, e.g., ‘where
the jobs is to be done?’ and ‘why the job is to be done?’ etc., but all these will be helping in
developing ‘what’ and ‘how’ of the job. It is very essential that engineering knowledge must be
applied extensively to maintenance jobs for development of appropriate job plans using most
suited techniques, tools materials and special facilities etc.
As the job planning forms the basic foundations, over which the efficiency and cost of
actions depends, persons responsible for job planning should have adequate capabilities, such as,
knowledge about jobs and available techniques, facilities and resources, analytical ability,
conceptual logical ability and judgmental courage etc.
Steps of J ob Pla nning

The main steps to be followed for proper job planning are:
1. Knowledge base: It includes knowledge about equipment, job, available techniques,
materials and facilities.
2. Job investigation at site: It gives a clear perception of the total jobs.
3. Identify and document the work: Knowing the earlier two steps and knowing the needs
of preventive, predictive and other maintenance jobs.
4. Development of repair plan: Preparation of step by step procedures which would
accomplish the work with the most economical use of time, manpower and material.
5. Preparation tools and facilities list indicating the needs of special tools, tackles and
facilities needed.
6. Estimation of time required to do the job with work measurement technique and
critical path analysis.
8.5 MA INTENA NC E SC HEDULING
Scheduling is the function of coordinating all of the logistical issue around the issues regarding
the execution phase of the work. Scheduled of maintenance jobs basically deals with answering
two questions—‘Who’ and ‘When’ of job, i.e., “who would do the job” and “when the job would
be started and done”.
Effective scheduling essentially needs realistic thinking, based on substantial data and
records. Majority of scheduling work needs to occur in areas such as overhead labour hours safety
and toolbox meetings, break times and training times etc. Addition of corrective and approved
improvement actions as dictated by the prioritization system and operations plan etc.
Requirements for Sc hedulers

A scheduler should also have knowledge about job, techniques, facilities, analytical ability and
judgmental courage. The scheduler must obtain knowledge/information about following ability
and judgmental courage. The scheduler must obtain information about following facts, before
starting his job:
1. Manpower availability by trade, location, shift, crew arrangement and permissible
overtimelimit etc.
2. Man hour back log on current or unfinished jobs.
3. Availability of the equipment or area where the work has to be performed.
4. Availability of proper tools, tackles, spares, consumables, structural and other
requiredmaterials.
5. Availability of external manpower and their capabilities; these may be from other
shops/departments of the plant or from contractors (local, nearby, ancillary etc).
6. Availability of special equipments, jigs/fixtures, special lifting and handling facilities
andcranes etc. This should also include labour and time saving devices like pneumatic
hammers and excavators etc.
7. Starting date of the job; also often completion time of total job is predetermined and,
inthat case, resources are to be arranged accordingly.
8. Past schedules and charts (updated) if the same job has been done earlier, etc.
8.6 MA INTENA NC E SC HEDULE TEC HNIQ UES
Different types of schedules are made suiting the respective job plans and different techniques are
used for making and following those schedules. The first step of all scheduling is to break the job
into small measurable elements, called activities and to arrange them in logical sequences
considering the preceding, concurrent and succeeding activities so that a succeeding activity
should follow preceding activities and concurrent activities can start together.
Arranging these activities in different fashion makes different types of schedules. They are as
follows:
1. Weekly general schedule is made to provide weeks worth of work for each employee in
an area.
2. Daily schedule is developed to provide a day’s work for each maintenance employee of
the area.
3. Gantt charts are used to represent the timings of tasks required to complete a project.
4. Bar charts used for technical analysis which represents the relative magnitude of the
values.
5. PERT/CPM are used to find the time required for completion of the job and helps in the
allocation of resources.
[Note: Discussed in detail in Chapter 5.]
8.6.1 Modern Scientific Maintenance Methods

Reliability centered maintenance: Reliability centered maintenance (RCM) is defined as “a
process used to determine the maintenance requirements of any physical asset in its operating
context”.
Basically, RCM methodology deals with some key issues not dealt with by other
maintenance programs. It recognizes that all equipment in a facility is not of equal importance to
either the process or facility safety. It recognizes that equipment design and operation differs and
that different equipment will have a higher probability to undergo failures from different
degradation mechanisms than others. It also approaches the structuring of a maintenance program
recognizing that a facility does not have unlimited financial and personnel resources and that the
use of both need to be prioritized and optimized. In a nutshell, RCM is a systematic approach to
evaluate a facility’s equipment and resources to best mate the two and result in a high degree of
facility reliability and cost-effectiveness.
RCM is highly reliant on predictive maintenance but also recognizes that maintenance
activities on equipment that is inexpensive and unimportant to facility reliability may best be left
to a reactive maintenance approach. The following maintenance program breakdowns of
continually
top-performing facilities would echo the RCM approach to utilize all available maintenance
approaches with the predominant methodology being predictive.
<10% Reactive 25% to
35% Preventive
45% to 55% Predictive.
Because RCM is so heavily weighted in utilization of predictive maintenance technologies,
its program advantages and disadvantages mirror those of predictive maintenance. In addition to
these advantages, RCM will allow a facility to more closely match resources to needs while
improving reliability and decreasing cost.
Advantages
(a) Can be the most efficient maintenance program.
(b) Lower costs by eliminating unnecessary maintenance or overhauls.
(c) Minimize frequency of overhauls.
(d) Reduced probability of sudden equipment failures.
(e) Able to focus maintenance activities on critical components.
(f) Increased component reliability.
(g) Incorporates root cause analysis.
Disadvantages
(a) Can have significant startup cost, training, equipment, etc. (b)
Savings potential not readily seen by management.
How to Initia te Relia bility C entered Ma intena nc e?

The road from a purely reactive program to a RCM program is not an easy one. The following is a
list of some basic steps that will help to get moving down this path.
1. Develop a master equipment list identifying the equipment in your facility.
2. Prioritize the listed components based on importance to process.
3. Assign components into logical groupings.
4. Determine the type and number of maintenance activities required and periodicity using:
Manufacturer technical manuals
Machinery history
Root cause analysis findings—Why did it fail?
Good engineering judgment
5. Assess the size of maintenance staff.
6. Identify tasks that may be performed by operations maintenance personnel.
7. Analyze equipment failure modes and effects.
8. Identify effective maintenance tasks or mitigation strategies.
8.6.2 Six Sigma Maintenance
It is the application of six sigma principles in maintenance. Six sigma is a maintenance process
that focuses on reducing the variation in business production processes. By reducing variation, a
business can achieve tighter control over its operational systems, increasing their cost
effectiveness and encouraging productivity breakthrough.
Six sigma is a term created at Motorola to describe the goal and process used to achieve
breakthrough levels of quality improvement. Sigma is the Greek symbol used by statisticians to
refer to the six standard deviations. The term six sigma refers to a measure of process variation
(six standard deviations) that translates into an error or defect rate of 3.4 parts per million. To
achieve quality performance of six sigma level, special sets of quality improvement
methodologies and statistical tools developed. These improvement methods and statistical tools
are taught to a small group of workmen known as six sigma champions who are assigned full-
time responsibility to define, measure, analyze, improve and control process quality. They also
facilitate the improvement process by removing the organizational roadblocks encountered. Six
sigma methodologies improve any existing business process by constantly reviewing and re-
tuning the process. To achieve this, six sigma uses a methodology known as DMAIC (Define
opportunities, Measure performance, Analyse opportunity, Improve performance, Control
performance). This six sigma process is also called DMAIC process.
Six sigma relies heavily on statistical techniques to reduce failures and it incorporates the
basic principles and techniques used in Business, Statistics, and Engineering. Six sigma
methodologies can also be used to create a brand new business process from ground up using
design for six sigma principles.
SIX SIGMA MAINTENANCE PROCESS

The steps of six sigma maintenance are same as DMAIC process. To apply six sigma in
maintenance, the work groups that have a good understanding of preventive maintenance
techniques in addition to a strong leadership commitment. Six sigma helps in two principal inputs
to the maintenance cost equation: Reduce or eliminate the need to do maintenance (reliability of
equipment), and improve the effectiveness of the resources needed to accomplish maintenance.
Following are the steps involved in six sigma maintenance process.
Define
This step involves determining benchmarks, determining availability and reliability
requirements, getting customer commitments and mapping the flow process.
Measure
This step involves development of failure measurement techniques and tools, data collection
process, compilation and display of data.
Analysis
This step involves checking and verifying the data and drawing conclusions from data. It
also involves determining improvement opportunities, finding root causes and map causes.
Improve
This step involves creating model equipment and maintenance process, total maintenance
plan and schedule and implementing those plans and schedule.
Control
This step involves monitoring the improved programme. Monitor improves performance and
assesses effectiveness and will make necessary adjustments for the deviation if exists.
8.6.3 Enterprise Asset Management (EAM)

Enterprise asset management is an information management system that connects all
departments and disciplines within a company making them an integrated unit. EAM is also
referred as computerised maintenance management system. It is the organized and systematic
tracking of an organization’s physical assets i.e., its plant, equipment and facilities. EAM aims at
best utilisation of its physical assets. It ensures generation of quality data and timely flow of
required data throughout the organization. EAM reduces paper work, improves the quality,
quantity and timeliness of the information and provides information to technicians at the point of
performance and gives workers access to job specific information at the work site.
8.6.4 Lea n Ma intena nc e

Lean maintenance is the application of lean principle in maintenance environments. Lean system
recognises seven forms of waste in maintenance. They are over production, waiting,
transportation, process waste, inventory, waste motion and defects. In lean maintenance, these
wastes are identified and efforts are made for the continuous improvement in process by
eliminating the wastes. Thus, lean maintenance leads to maximise yield, productivity and
profitability.
Lean maintenance is basically equipment reliability focussed and reduces need for
maintenance troubleshooting and repairs. Lean maintenance protects equipments and system from
the route causes of malfunctions, failures and downtime stress. From the sources of waste uptime
can be improved and cost can be lowered for maintenance.
8.6.5 Computer Aided Maintenance

For effective discharge of the maintenance function, a well designed information system is an
essential tool. Such systems serve as effective decision support tools in the maintenance planning
and execution. For optimal maintenance scheduling, large volume of data pertaining to men,
money and equipment is required to be handled. This is a difficult task to be performed manually.
For a planned and advanced maintenance system use of computers is essential. Here programmes
are prepared to have an available inputs processed by the computer. Such a computer based
system can be used as and when required for effective performance of the maintenance tasks.
There are wide varieties of software package available in the market for different types of
maintenance systems.
A computerised maintenance system includes the following aspects:
Development of a database
Analysis of past records if available
Development of maintenance schedules
Availability of maintenance materials
Feedback control system
Project management.
Following are some computer based maintenance systems which can be implemented:
Job card system: It is essential to prepare a job card for each component to record the
maintenance work carried out or the work to be done. Job card shows the plant code, equipment
code, the job code, the nature of the jobs, the start time and finishing time of the card, man-hour
spent and etc. The use of computers facilitates the issue of job cards, recording of job history and
control of manpower.
Spare part life monitoring system: Under this system, information about a spare part such
as its description, anticipated life and date of its installation in equipment is recorded. As and
when a particular sparepart is replaced during breakdown failures or scheduled maintenance, the
updating of this information is done in their respective files stored in the computer. This helps to
prepare the following reports:
Spares repeatability in various machines indicating the performance of such spare parts.
Comparisons of the actual life with the estimated life of the spare parts.
Spare parts tracking system: In most of the cases maximum time is consumed in
procurement of spare parts. The total time required to rectify the breakdown is summation of the
time to identify the cause of the failure, time to determine the requirements of spare parts, time to
procure spare parts and the time to rectify the failure. In a computerised system, the spare part
tracking system is beneficial in getting required material at the earliest. A spare part file is created
that contains the information about the material code, spare part identification number, the
assembly or sub-assembly number and the place where the spare part is used. This helps in
knowing the current position about a particular spare part and facilitates timely requirement for
future demands.
8.7 TO TA L PRO DUC TIVE MA INTENA NC E (TPM)
Total productive maintenance (TPM) is a maintenance program, which involves a newly defined
concept for maintaining plants and equipment. The goal of the TPM program is to markedly
increase production while, at the same time, increasing employee morale and job satisfaction. It
can be considered as the medical science of machines.
TPM brings maintenance into focus as a necessary and vitally important part of the business.
It is no longer regarded as a non-profit activity. Downtime for maintenance is scheduled as a part
of the manufacturing day and, in some cases, as an integral part of the manufacturing process.
The goal is to hold emergency and unscheduled maintenance to a minimum.
TPM was introduced to achieve the following objectives. The important ones are listed
below.
Avoid wastage in a quickly changing economic environment.
Producing goods without reducing product quality.
Reduce cost.
Produce a low batch quantity at the earliest possible time.

Goods send to the customers must be non-defective.
8.7.1 Similarities and Differences between TQM and TPM
The TPM program closely resembles the popular Total Quality Management (TQM) program.
Many of the tools such as, employee empowerment, benchmarking, documentation, etc. used in
TQM are used to implement and optimize TPM. Following are the similarities between the two:
1. Total commitment to the program by upper level management is required in
bothprogrammes,
2. Employees must be empowered to initiate corrective action, and
3. A long-range outlook must be accepted as TPM may take a year or more to implementand
is an on-going process. Changes in employee mind-set toward their job responsibilities
must take place as well.
The differences between TQM and TPM are summarized below.
Category TQM TPM
Object Quality (Output and effects) Equipment (Input and cause)
Mains of attaining Systematize the management. Employees participation and it is
goal It is software oriented hardware oriented
Target Quality for PPM Elimination of losses and wastes.
8.7.2 Pillars of TPM
PILLAR 1-5S
TPM starts with 5S. Problems cannot be clearly seen when the work place is unorganized.
Cleaning and organizing the workplace helps the team to uncover problems. Making problems
visible is the first step of improvement.
Japanese term English translation Equivalent ‘S’ term

Seiri Organization Sort
Seiton Tidiness Systematise
Seiso Cleaning Sweep
Seiketsu Standardisation Standardise
Shitsuke Discipline Self-discipline
SEIRI—Sort out
This means sorting and organizing the items as critical, important, frequently used items,
useless, or items that are not need as of now. Unwanted items can be salvaged. Critical items
should be kept for use nearby and items that are not be used in near future, should be stored in
some place. For this step, the worth of the item should be decided based on utility and not cost. As
a result of this step, the search time is reduced.
Priority Frequency of use How to use
Low Less than once per year, Throw away, Store away from the
Once per year< workplace
Average At least 2/6 months, Store together but offline

Once per month, Once per week
High Once per day Locate at the workplace
SEITON—Organise
The concept here is that “Each items has a place, and only one place”. The items should be
placed back after usage at the same place. To identify items easily, name plates and coloured tags
has to be used. Vertical racks can be used for this purpose, and heavy items occupy the bottom
position in the racks.
SEISO—Shine the Workplace
This involves cleaning the work place free of burrs, grease, oil, waste, scrap etc. No loosely
hanging wires or oil leakage from machines.
SEIKETSU—Standardization
Employees has to discuss together and decide on standards for keeping the work place/
machines/pathways neat and clean. This standards are implemented for whole organization and
are tested/inspected randomly.
SHITSUKE—Self-discipline
Considering 5S as a way of life and bring about self-discipline among the employees of the
organization. This includes wearing badges, following work procedures, punctuality, dedication to
the organization etc.
PILLAR 2—JISHU HOZEN (AUTONOMOUS MAINTENANCE)
This pillar is geared towards developing operators to be able to take care of small maintenance
tasks, thus freeing up the skilled maintenance people to spend time on more value added activity
and technical repairs. The operators are responsible for upkeep of their equipment to prevent it
from deteriorating.
Steps in JISHU HOZEN
1. Train the employees: Educate the employees about TPM, its advantages, JH advantages
and steps in JH. Educate the employees about abnormalities in equipments.
2. Initial cleanup of machines
Supervisor and technician should discuss and set a date for implementing step 1.
Arrange all items needed for cleaning.
On the arranged date, employees should clean the equipment completely with the help
of maintenance department.
Dust, stains, oils and grease has to be removed.
Following are the things that have to be taken care while cleaning. They are oil
leakage, loose wires, unfastened nits and bolts and worn out parts.
After clean up problems are categorized and suitably tagged. White tags are place
where operators can solve problems. Pink tag is placed where the aid of
maintenance department is needed.
Contents of tag are transferred to a register.
Make note of area, which were inaccessible.
Finally close the open parts of the machine and run the machine.
3. Counter measures
Inaccessible regions had to be reached easily, e.g., if there are many screw to open a
flywheel door, hinge door can be used. Instead of opening a door for inspecting the
machine, acrylic sheets can be used.
To prevent work out of machine parts necessary action must be taken.
Machine parts should be modified to prevent accumulation of dirt and dust.
4. Tentative standard
JH schedule has to be made and followed strictly.
Schedule should be made regarding cleaning, inspection and lubrication and it also
should include details like when, what and how.
5. General inspection
The employees are trained in disciplines like pneumatics, electrical, hydraulics,
lubricant and coolant, drives, bolts, nuts and safety.
This is necessary to improve the technical skills of employees and to use inspection
manuals correctly.
After acquiring this new knowledge the employees should share this with others.
By acquiring this new technical knowledge, the operators are now well aware of
machine parts.
6. Autonomous inspection
New methods of cleaning and lubricating are used.
Each employee prepares his own autonomous chart/schedule in consultation with
supervisor.
Parts which have never given any problem or part which don’t need any inspection are
removed from list permanently based on experience.
Including good quality machine parts. This avoid defects due to poor JH.
• Inspection that is made in preventive maintenance is included in JH.
The frequency of cleanup and inspection is reduced based on experience.
7. Standardization
Up to the previous stem only the machinery/equipment was the concentration.
However, in this step the surroundings of machinery are organized. Necessary items
should be organized, such that there is no searching and searching time is reduced.
Work environment is modified such that there is no difficulty in getting any item.
Everybody should follow the work instructions strictly.
Necessary spares for equipments is planned and procured.
8. Autonomous management
OEE and OPE and other TPM targets must be achieved by continuous improve
through Kaizen.
PDCA (Plan, Do, Check and Act) cycle must be implemented for Kaizen.
PILLAR 3—KAIZEN
‘Kai’ means change, and ‘Zen’ means good (for the better). Basically Kaizen is for small
improvements, but carried out on a continual basis and involve all people in the organization.
Kaizen is opposite to big spectacular innovations. Kaizen requires no or little investment. The
principle behind is that “a very large number of small improvements are more effective in an
organizational environment than a few improvements of large value.” This pillar is aimed at
reducing losses in the workplace that affect our efficiencies. By using a detailed and thorough
procedure we eliminate losses in a systematic method using various Kaizen tools. These activities
are not limited to production areas and can be implemented in administrative areas as well.
Kaizen Policy
1. Practice concepts of zero losses in every sphere of activity.
2. Relentless pursuit to achieve cost reduction targets in all resources.
3. Relentless pursuit to improve overall plant equipment effectiveness.
4. Extensive use of PM analysis as a tool for eliminating losses.
5. Focus of easy handling of operators.
Kaizen Target
Achieve and sustain zero loses with respect to minor stops, measurement and adjustments,
defects and unavoidable downtimes. It also aims to achieve 30% manufacturing cost reduction.
Tools used in Kaizen

1. PM analysis
2. Why-Why analysis
3. Summary of losses
4. Kaizen register
5. Kaizen summary sheet.
The objective of TPM is maximization of equipment effectiveness. TPM aims at
maximization of machine utilization and not merely machine availability maximization. As one of
the pillars of TPM activities, Kaizen pursues efficient equipment, operator and material and
energy utilization, which is extremes of productivity and aims at achieving substantial effects.
Kaizen activities try to thoroughly eliminate 16 major losses.
16 Ma jor Losses in a O rg a niza tion

Loss Category
1.Failure losses —Breakdown loss
2.Setup/adjustment losses
3.Cutting blade loss
4.Start up loss
5.Minor stoppage/Idling loss
6.Speed loss —operating at low speeds
7.Defect/rework loss
8.Scheduled downtime loss
9.Management loss Losses that impede equipment efficiency
10.Operating motion loss Losses that impede human work efficiency
11.Line organization loss
12.Logistic loss
13.Measurement and adjustment loss
14.Energy loss
15.Die, jig and tool breakage loss Losses that impede effective use of
16.Yield loss production resources
PILLAR4—PLANNEDMAINTENANCE
It is aimed to have trouble free machines and equipments producing defect free products for total
customer satisfaction. This breaks maintenance down into 4 ‘families’ or groups, which was
defined earlier.
1. Preventive maintenance
2. Breakdown maintenance
3. Corrective maintenance
4. Maintenance prevention
With planned maintenance, we evolve our efforts from a reactive to a proactive method and
use trained maintenance staff to help train the operators to better maintain their equipment.
Policy
1. Achieve and sustain availability of machines;
2. Optimum maintenance cost;
3. Reduces spares inventory; and
4. Improve reliability and maintainability of machines. Target
1. Zero equipment failure and breakdown;
2. Improve reliability and maintainability by 50%;
3. Reduce maintenance cost by 20%; and
4. Ensure availability of spares all the time.Six Steps in Planned Maintenance
1. Equipment evaluation and recoding present status;
2. Restore deterioration and improve weakness;
3. Building up information management system;
4. Prepare time based information system, select equipment, parts and members and mapout
plan;
5. Prepare predictive maintenance system by introducing equipment diagnostic
techniques;and
6. Evaluation of planned maintenance.
PILLAR 5—QUALITY MAINTENANCE

It is aimed towards customer delight through highest quality through defect free manufacturing.
Focus is on eliminating non-conformances in a systematic manner, much like Focused
Improvement. We gain understanding of what parts of the equipment affect product quality and
begin to eliminate current quality concerns, then move to potential quality concerns. Transition is
from reactive to proactive (Quality Control to Quality Assurance).
QM activities is to set equipment conditions that preclude quality defects, based on the basic
concept of maintaining perfect equipment to maintain perfect quality of products. The conditions
are checked and measure in time series to very that measure values are within standard values to
prevent defects. The transition of measured values is watched to predict possibilities of defects
occurring and to take counter measures before hand.
Policy
1. Defect free conditions and control of equipments;
2. QM activities to support quality assurance;
3. Focus of prevention of defects at source;

4. Focus on poka-yoke (fool proof system);
5. In-line detection and segregation of defects; and
6. Effective implementation of operator quality assurance.
Target
1. Achieve and sustain customer complaints at zero;
2. Reduce in-process defects by 50%; and
3. Reduce cost of quality by 50%.
Data Requirements
Quality defects are classified as customer end defects and in house defects. For customerend
data, we have to get data on:
1. Customer end line rejection; and
2. Field complaints.
In-house, data include data related to products and data related to process. Data
Related to Product
1. Product-wise defects;
2. Severity of the defect and its contribution—major/minor;
3. Location of the defect with reference to the layout;
4. Magnitude and frequency of its occurrence at each stage of measurement;
5. Occurrence trend in beginning and the end of each production/process/changes
(likepattern change, ladle/furnace lining etc.); and
6. Occurrence trend with respect to restoration of
breakdown/modifications/periodicalreplacement of quality components. Data Related
to Processes
1. The operating condition for individual sub-process related to men, method, material
andmachine;
2. The standard settings/conditions of the sub-process; and
3. The actual record of the settings/conditions during the defect occurrence.
PILLAR 6—TRAINING
It is aimed to have multi-skilled revitalized employees whose morale is high and who has eager to
come to work and perform all required functions effectively and independently. Education is
given to operators to upgrade their skill. It is not sufficient know only ‘Know-How’ by they
should also learn ‘Know-Why’. By experience they gain, ‘Know-How’ to overcome a problem
what to be done. This they do without knowing the root cause of the problem and why they are
doing so. Hence, it becomes necessary to train them on knowing ‘Know-Why’. The employees
should be trained to achieve the four phases of skill. The goal is to create a factory full of experts.
The different phase of skills is:
Phase 1: Do not know.

Phase 2: Know the theory but cannot do.
Phase 3: Can do but cannot teach.
Phase 4: Can do and also teach. Policy
1. Focus on improvement of knowledge, skills and techniques;
2. Creating a training environment for self-learning based on felt needs;
3. Training curriculum/tools/assessment etc. conducive to employee revitalization;
and
4. Training to remove employee fatigue and make work enjoyable.Target
1. Achieve and sustain downtime due to want men at zero on critical machines; 2.
Achieve and sustain zero losses due to lack of knowledge/skills/techniques; and
3. Aim for 100% participation in suggestion scheme. Steps
in Educating and Training Activities
1. Setting policies and priorities and checking present status of education and training;
2. Establish of training system for operation and maintenance skill upgradation;
3. Training the employees for upgrading the operation and maintenance skills;
4. Preparation of training calendar;
5. Kick-off of the system for training; and
6. Evaluation of activities and study of future approach.
PILLAR 7—OFFICE TPM
Office TPM should be started after activating four other pillars of TPM (JH, KK, QM, PM).
Office TPM must be followed to improve productivity, efficiency in the administrative functions
and identify and eliminate losses. This includes analyzing processes and procedures towards
increased office automation. Office TPM addresses twelve major losses. They are:
1. Processing loss;
2. Cost loss including in areas such as, procurement, accounts, marketing, sales leading
tohigh inventories;
3. Communication loss;
4. Idle loss;
5. Set-up loss;
6. Accuracy loss;
7. Office equipment breakdown;
8. Communication channel breakdown, telephone and fax lines;
9. Time spent on retrieval of information;
10. Non availability of correct on-line stock status;
11. Customer complaints due to logistics; and

12. Expenses on emergency dispatches/purchases.Office TPM and its Benefits
1. Involvement of all people in support functions for focusing on better plant performance;
2. Better utilized work area;
3. Reduce repetitive work;
4. Reduced inventory levels in all parts of the supply chain;
5. Reduced administrative costs;
6. Reduced inventory carrying cost;
7. Reduction in number of files;
8. Reduction of overhead costs (to include cost of non-production/non-capital equipment);
9. Productivity of people in support functions;
10. Reduction in breakdown of office equipment;
11. Reduction of customer complaints due to logistics;
12. Reduction in expenses due to emergency dispatches/purchases;
13. Reduced manpower; and
14. Clean and pleasant work environment.
PILLAR 8—SAFETY, HEALTH AND ENVIRONMENT
Target
1. Zero accident, 2. Zero
health damage, and
3. Zero fires.
In this area focus is on to create a safe workplace and a surrounding area that is not damaged
by our process or procedures. This pillar will play an active role in each of the other pillars on a
regular basis.
A committee is constituted for this pillar, which comprises representative of officers as well
as workers. The committee is headed by senior vice President (Technical). Utmost importance to
safety is given in the plant. Manager (safety) is looking after functions related to safety. To create
awareness among employees various competitions like safety slogans, quiz, drama, posters, etc.
related to safety can be organized at regular intervals.
Today, with competition in industry at an all time high, TPM may be the only thing that
stands between success and total failure for some companies. It has been proven to be a program
that works. It can be adapted to work not only in industrial plants, but also in construction,
building maintenance, transportation, and in a variety of other situations. Employees must be
educated and convinced that TPM is not just another ‘program of the month’ and that
management is totally committed to the program and the extended time frame necessary for full
implementation. If everyone involved in a TPM program does his or her part, an unusually high
rate of return compared to resources invested may be expected.
EX ERC ISES
Section A
1. Define maintenance.
2. What is reactive maintenance?
3. What is preventive maintenance?
4. What is predictive maintenance?
5. What is maintenance planning?
6. What is scheduling?
7. What is reliability centred maintenance?
8. What is six sigma maintenance?
Section B
1. Explain the steps of job planning.
2. What are the requirements of schedules?
3. What are the maintenance techniques used?
4. Explain the six sigma maintenance process.
Section C
1. Discuss the different types of maintenance.
2. Discuss the enterprise asset management.
Skill development
1. Method of maintenance of equipment. (i.e. preventive maintenance or
Breakdownmaintenance)
2. Maintenance schedule followed.
9
WASTE MANAGEMENT
C HA PTER O UTLINE
9.1 Introduction and Meaning 9.3 Identification and Control of Waste
9.2 Reasons for Generation and Accumulation 9.4 Disposal of Scrap
of Obsolete, Surplus and Scrap Items •Exercises

The industrial waste and scrap consists of spoiled raw-materials, rejected components, defective
parts, waste from production departments etc. involves some commercial values. They should be
disposed of periodically and proper credit of the amount should be taken in the books of accounts.
Hence, waste management places an important role in managing operations. Wastes can be
categorised into obsolete, surplus and scrap items.
1. Obsolete items: These are those materials and equipments which are not damaged and
which have economic worth but which are no longer useful for the Company’s operation owing to
many reason such as, changes in product line, process, materials, and so on.
2. Surplus items: These are those materials and equipments which have no immediate use
but have accumulated due to faulty planning, forecasting and purchasing. However, they have a
usage value in future.
3. Scrap: It is defined as process wastage, such as, turnings, borings, sprues and flashes.
They may have an end-use within the plant having commercial values. Hence, should be disposed
of periodically.
9.2 REA SO NS FO R G ENERA TIO N A ND A C C UMULA TIO N O F O BSO LETE,
SURPLUS A ND SC RA P ITEMS
Following are the reasons for the generation and accumulation of obsolete, surplus and scrap
items:
1. Changes in product design: This may lead to some items getting invalid so far as the
final product is concerned. Hence, the entire stock of such items as surplus obsolete.
227
2. Rationalization: Sometimes raw materials are renationalized so as to minimise variety

and simplify procurement. The rationalization process renders some items as surplus or obsolete.
3. Cannibalization: When a machine breakdown occurs, sometimes it is rectified using
parts of an identical machine which is not functioning due to various reasons. This process of
‘cannibalization’ is not uncommon in many project-based industries. When continued unchecked,
this results in obsolete and scrap items.
4. Faulty planning and forecasting: The marketing department may have projected a sales
forecast which might be on the higher side. Any material planning has to be based on sales
forecasts and this could result in surplus items. Wrong indenting by the user departments also
leads to accumulation.
5. Faulty purchase practices: Sub-optimizing decisions like buying in bulk to take care of
discounts and transportation economy without taking into account factors such as, shelf life,
storage space requirements and technological changes once again lead to the accumulation of
surplus and obsolete stocks.
6. Other causes: Many items are held as insurable spares for many years without any
consumption. Faulty store-keeping methods, without adequate preservation, lead to spoilage.
Inferior materials handling, improper codification and poor manufacturing methods also result in
obsolete, surplus and scrap items. Poor maintenance of machine tools may result in excessive
tools wear and greater process scrap.
9.3 IDENTIFIC A TIO N A ND C O NTRO L O F WA STE
The combing process of combining the stock records and movement analysis has been found very
effective in locating such stocks in the total inventory. Stock issue cards should be combed and
items which have not been consumed (non-moving) for a period of one year must be isolated. A
list of such items and their value in terms of money and time must be made. Similarly, such lists
must be prepared for items which have not moved for 2 years, 3 years, 5 years and above. Such
lists can then be put up to top management for disposal action. Care must be taken to prepare a
separate list of imported spares and insurance items. Such combing and movement analysis must
be done on a continuous basis. A typical movement analysis statement is shown in Exhibit 9.1.
EXHIBIT 9.1 Movement analysis statement
Sl. No. Part A Last data of Stock on hand in number Value of
number B issue of days consumption orders on
description C hand
Whenever changes in production programme, design and product lines are contemplated, a
senior executive from materials management must definitely be kept in the picture. This helps in
several ways. He is in a position to inform top management of the amount of stock of materials
on hand that are likely to be rendered obsolete if and when the changes are introduced. This
could even guide the management as to when the changes could be made so that the existing
stock can be consumed in full. The materials manager in turn can freeze further orders for such
materials and try to negotiate with the suppliers to take back the stock. For some items he can
introduce the buy-back clause wherein the suppliers takes back items not consumed within a
specific period. For new items which may be required, he can try to develop sources and place
orders so that changes can be expeditiously introduced. All this highlights that a close
coordination is required in order to avoid stock pilling obsolete and surplus items. Selective
control based on ABC analysis, accurate forecasting techniques and proper preservation minimise
such accumulation. In the case of storage of perishable items the Central Warehousing
Corporation has devised a scheme to enlarge its scope to cover certain specialized lines of
storage. The schemes drawn up by the corporation include setting up a chain of cold storage
plants for potatoes, and fruit, and storage facilities for certified seeds.
Many organizations have introduced formal documentation in introducing changes in design
or product. It is called the ‘Effective Point Advice.’ This is popularly known as EPA. Here, the
proposed changes, details of new materials and products required, details of materials and the
products which will be invalid/obsolete when the change occurs and the approximate date when
the change is expected to be introduced are detailed and circulated to concerned departments. EPA
thereby helps in tapering off the stocks of ‘invalid’ items, cancellation of orders for such items,
placing orders for buying and/or manufacturing new items and related activities. EPA systems
help in better coordination for profitable introduction of changes with minimum ‘side effects’
such as the accumulation of obsolete items.
The reclamation of scrap has not attracted the attention of the top management in Indian
Industry. Optimal utilization of scrap would allow conservation of the use of scarce natural
resources, such as iron ore. This is because scrap is an important element which goes into the
manufacture of steel and castings.
It is possible to salvage scrap for usage within the firm in some cases. Press parts are
normally made from sheets and plates. The off-cuts generated during such process can be
profitably utilized in making smaller press components such as washers. Rationalizing the supply
size, changes in process such as reversing the dies may result in minimization of scrap. Big
organizations have a full-fledged scrap salvaging department. These departments segregate the
scrap into categories, like turnings, borings, plate cuttings, endpieces of billets, punching etc.
Colour coding the scrap is also done to avoid the mixing of different categories of scrap. It is also
advantageous to the end-users in each category and supply of scrap at the appropriate time for
production. Often informing the production department at the right time about the volume of
scrap generated enables prevention of excessive scrap through timely changes in production
methods, tooling and materials.
9.4 DISPO SA L O F SC RA P
Disposal of scrap when handled in an imaginative manner can result in handsome returns to the
organization. An effective disposal requires a compact disposal organization reporting to the
materials manager, continuous market survey on the prices of various categories of scrap
generated in the plant and constant touch with the industries which generate similar scrap and
with the end-users.
Disposal action follows when the scrap cannot be utilised within the organization. In
practice, it has been found that it is profitable to dispose the scrap directly to end-users rather than
to middlemen who normally form a cartel of their own which leads to lower returns. Before
disposal action it is essential that the scrap is segregated according to metal, size, etc. when the
scrap
is mixed, the return is even lower than the lowest element in the mixture. This is because the
buyer of scrap will have to segregate it at an extra cost. A cursory analysis of scrap prices will
reveal that sheet and plate cuttings will fetch fewer amounts per a tonne compared to that of
turnings and borings. Also when costly scrap such as copper, aluminium and tungsten are
involved, it is imperative that they are segregated as returns are huge and price levels are
different. Since scrap is generated process-wise, it comes out in a segregated condition and there
should be no difficulty in sorting.
Auction and Tender methods are frequently used for disposal of scrap. Parties in both the
cases are normally required to inspect the scrap in the scrap yard and deposit earnest money. Very
often the company insists on a basic price depending upon the category of scrap. The disposal
section works, in this aspect, in close coordination with the finance department. In many cases the
disposal section may try to enter into a long-term contact with end-users such as steel plants.
Many companies have found to their displeasure scrapped components appearing in the
market and competing with their parts as ‘original equipment’. This is the price which
organizations pay for not dismantling and disfiguring the scrap before disposal. Automobile spare
parts and bearings especially are prone to such dangers. For this purpose some organizations go to
the extent of requesting vehicle users to demolish filters and plugs before scrapping them. This is
very important aspect.
In view of the paucity of raw materials and shortage of credit, it is necessary that optimum
usage of materials is made and funds tied up in obsolete surplus and scrap items minimised. This
is only possible when top management shows commitment and support. The employees of the
organizations are naturally the best people to suggest improvements in materials, processes and
new end users for scrap. It is they who can minimise the accumulation of scrap through
coordination. Therefore, top management should work out formal reward systems to promote
employee participation in this matter. A few organizations have suggestion box schemes which
pay rich dividends to the organization. Employees, too get rewards and recognition in the process.
EX ERC ISES
Section A
1. What is obsolete items?
2. What is surplus items?
3. What is scrap?
Section B
1. Explain the reason for generation and accumulation of obsolete, surplus and scrap items. Section
C
1. Discuss the identification and control of waste.
2. Discuss the disposal of scrap.
Skill development
1. Scraps, wastes and obsolete items in Restaurants.
2. Method of Disposal of wastes, scrap and obsolete items.
10
AUTOMATION
C HA PTER O UTLINE
10.1 Introduction 10.8 Automated Flow Lines
10.2 Types of Automation 10.9 Automated Guided Vehicles Systems
10.3 Computer Integrated Manufacturing 10.10 Automated Storage/Retrieval Systems
10.4 Reasons for Automation 10.11 Carousel Storage Systems
10.12 Carousel Storage Applications
10.5 Advantages of Automation
•Exercises
10.6 Disadvantages of Automation
10.7 Automation Strategies
•Caselet
10.1 INTRO DUC TIO N

Automation is a technology concerned with the application of mechanical, electronic, and
computerbased systems to operate and control production. This technology includes automatic
machine tools to process parts, automatic assembly machines, industrial robots, automatic
material handling and storage systems, automatic inspection systems for quality control, feedback
control and computer process control, computer systems for planning, data collection and
decision-making to support manufacturing activities.
10.2 TYPES O F A UTO MA TIO N
Automated production systems can be classified into three basic types:
1. Fixed automation,
2. Programmable automation, and3. Flexible automation.
231
1. FIXED AUTOMATION
It is a system in which the sequence of processing (or assembly) operations is fixed by the
equipment configuration. The operations in the sequence are usually simple. It is the integration
and coordination of many such operations into one piece of equipment that makes the system
complex. The typical features of fixed automation are:
(a) High initial investment for custom–Engineered equipment;
(b) High production rates; and
(c) Relatively inflexible in accommodating product changes.
The economic justification for fixed automation is found in products with very high demand
rates and volumes. The high initial cost of the equipment can be spread over a very large number
of units, thus making the unit cost attractive compared to alternative methods of production.
Examples of fixed automation include mechanized assembly and machining transfer lines.
2. PROGRAMMABLE AUTOMATION
In this the production equipment is designed with the capability to change the sequence of
operations to accommodate different product configurations. The operation sequence is controlled
by a program, which is a set of instructions coded so that the system can read and interpret them.
New programs can be prepared and entered into the equipment to produce new products. Some of
the features that characterise programmable automation are:
(a) High investment in general-purpose equipment;
(b) Low production rates relative to fixed automation;
(c) Flexibility to deal with changes in product configuration; and
(d) Most suitable for batch production.
Automated production systems that are programmable are used in low and medium volume
production. The parts or products are typically made in batches. To produce each new batch of a
different product, the system must be reprogrammed with the set of machine instructions that
correspond to the new product. The physical setup of the machine must also be changed over:
Tools must be loaded, fixtures must be attached to the machine table also be changed machine
settings must be entered. This changeover procedure takes time. Consequently, the typical cycle
for given product includes a period during which the setup and reprogramming takes place,
followed by a period in which the batch is produced. Examples of programmed automation
include numerically controlled machine tools and industrial robots.
3. FLEXIBLE AUTOMATION
It is an extension of programmable automation. A flexible automated system is one that is capable
of producing a variety of products (or parts) with virtually no time lost for changeovers from one
product to the next. There is no production time lost while reprogramming the system and altering
the physical setup (tooling, fixtures, and machine setting). Consequently, the system can produce
various combinations and schedules of products instead of requiring that they be made in separate
batches. The features of flexible automation can be summarized as follows:
(a) High investment for a custom-engineered system.
(b) Continuous production of variable mixtures of products.
(c) Medium production rates.
(d) Flexibility to deal with product design variations.
The essential features that distinguish flexible automation from programmable automation
are: (1) the capacity to change part programs with no lost production time; and (2) the capability
to changeover the physical setup, again with no lost production time. These features allow the
automated production system to continue production without the downtime between batches that
is characteristic of programmable automation. Changing the part programs is generally
accomplished by preparing the programs off-line on a computer system and electronically
transmitting the programs to the automated production system. Therefore, the time required to do
the programming for the next job does not interrupt production on the current job. Advances in
computer systems technology are largely responsible for this programming capability in flexible
automation. Changing the physical setup between parts is accomplished by making the
changeover off-line and then moving it into place simultaneously as the next part comes into
position for processing. The use of pallet fixtures that hold the parts and transfer into position at
the workplace is one way of implementing this approach. For these approaches to be successful;
the variety of parts that can be made on a flexible automated production system is usually more
limited than a system controlled by programmable automation.
The relative positions of the three types of automation for different production volumes and
product varieties are depicted in Fig. 10.1.
Number of different parts
Fig. 10.1 Types of production automation
10.3 C O MPUTER INTEG RA TED MA NUFA C TURING

The computers had done a dramatic impact on the development of production automation
technologies. Nearly all modern production systems are implemented today using computer
systems. The term computer integrated manufacturing (CIM) has been coined to denote the
pervasive use of computers to design the products, plan the production, control the operations,
and perform the
various business related functions needed in a manufacturing firm. Computer Aided Design and
Computer Aided Manufacturing (CAD/CAM) in another term that is used synonymously with
CIM.
The good relationship exists between automation and CIM with a conceptual model of
manufacturing. In a manufacturing firm, the physical activities related to production that take
place in the factory can be distinguished from the information-processing activities. The physical
activities include all of the manufacturing processing, assembly, materials handling and
inspections that are performed on the product. These operations come in direct contact with the
physical activities during manufacture. Raw materials flow in one end of the factory and finished
products flow out the other end. The physical activities (processing, handling, etc.) take place
inside the factory. The information-processing functions form a ring that surrounds the factory,
providing the data and knowledge required to produce the product successfully. These
information processing functions include: (1) business activities, (2) product design, (3)
manufacturing planning, and (4) manufacturing control. These four functions form a cycle of
events that must accompany the physical production activities.
10.4 REA SO NS FO R A UTO MA TIO N
Following are some of the reasons for automation:
1. Increased productivity: Automation of manufacturing operations holds the promise of
increasing the productivity of labour. This means greater output per hour of labour input. Higher
production rates (output per hour) are achieved with automation than with the corresponding
manual operations.
2. High cost of labour: The trend in the industrialized societies of the world has been
toward ever-increasing labour costs. As a result, higher investment in automated equipment has
become economically justifiable to replace manual operations. The high cost of labour is forcing
business leaders to substitute machines for human labour. Because machines can produce at
higher rates of output, the use of automation results in a lower cost per unit of product.
3. Labour shortages: In many advanced nations there has been a general shortage of
labour. Labour shortages stimulate the development of automation as a substitute for labour.
4. Trend of labour toward the service sector: This trend has been especially prevalent in
India. There are also social and institutional forces that are responsible for the trend. There has
been a tendency for people to view factory work as tedious, demeaning, and dirty. This view has
caused them to seek employment in the service sector of the economy government, insurance,
personal services, legal, sales, etc. Hence, the proportion of the work force employed in
manufacturing is reducing.
5. Safety: By automating the operation and transferring the operator from an active
participation to a supervisory role, work is made safer.
6. High cost of raw materials: The high cost of raw materials in manufacturing results in
the need for greater efficiency in using these materials. The reduction of scrap is one of the
benefits of automation.
7. Improved product quality: Automated operations not only produce parts at faster rates
but they produce parts with greater consistency and conformity to quality specifications.
8. Reduced manufacturing lead time: With reduced manufacturing lead time automation
allows the manufacturer a competitive advantage in promoting good customer service.
9. Reduction of in-process inventory: Holding large inventories of work-in-process

represents a significant cost to the manufacturer because it ties up capital. In-process inventory is
of no value. It serves none of the purposes of raw materials stock or finished product inventory.
Automation tends to accomplish this goal by reducing the time a workpart spends in the factory.
10.High cost of not automating: A significant competitive advantage is gained by
automating a manufacturing plant. The benefits of automation show up in intangible and
unexpected ways, such as, improved quality, higher sales, better labour relations, and better
company image.
All of these factors act together to make production automation a feasible and attractive
alternative to manual methods of manufacture.
10.5 A DVA NTA G ES O F A UTO MA TIO N
Following are some of the advantages of automation:
1. Automation is the key to the shorter workweek. Automation will allow the
averagenumber of working hours per week to continue to decline, thereby allowing
greater leisure hours and a higher quality life.
2. Automation brings safer working conditions for the worker. Since there is less
directphysical participation by the worker in the production process, there is less chance
of personal injury to the worker.
3. Automated production results in lower prices and better products. It has been estimated
thatthe cost to machine one unit of product by conventional general-purpose machine
tools requiring human operators may be 100 times the cost of manufacturing the same
unit using automated mass-production techniques. The electronics industry offers many
examples of improvements in manufacturing technology that have significantly reduced
costs while increasing product value (e.g., colour TV sets, stereo equipment, calculators,
and computers).
4. The growth of the automation industry will itself provide employment opportunities.
Thishas been especially true in the computer industry, as the companies in this industry
have grown (IBM, Digital Equipment Corp., Honeywell, etc.), new jobs have been
created. These new jobs include not only workers directly employed by these companies,
but also computer programmers, systems engineers, and other needed to use and operate
the computers.
5. Automation is the only means of increasing standard of living. Only through
productivityincreases brought about by new automated methods of production, it is
possible to advance standard of living. Granting wage increases without a commensurate
increase in productivity will results in inflation. To afford a better society, it is a must to
increase productivity.
10.6 DISA DVA NTA G ES O F A UTO MA TIO N
Following are some of the disadvantages of automation:
1. Automation will result in the subjugation of the human being by a machine.
Automationtends to transfer the skill required to perform work from human operators to
machines.
In so doing, it reduces the need for skilled labour. The manual work left by automation
requires lower skill levels and tends to involve rather menial tasks (e.g., loading and
unloading workpart, changing tools, removing chips, etc.). In this sense, automation tends
to downgrade factory work.
2. There will be a reduction in the labour force, with resulting unemployment. It is logicalto
argue that the immediate effect of automation will be to reduce the need for human
labour, thus displacing workers.
3. Automation will reduce purchasing power. As machines replace workers and these
workersjoin the unemployment ranks, they will not receive the wages necessary to buy
the products brought by automation. Markets will become saturated with products that
people cannot afford to purchase. Inventories will grow. Production will stop.
Unemployment will reach epidemic proportions and the result will be a massive
economic depression.
10.7 A UTO MA TIO N STRA TEG IES
There are certain fundamental strategies that can be employed to improve productivity in
manufacturing operations technology. These are referred as automation strategies.
1. Specialization of operations: The first strategy involves the use of special purpose
equipment designed to perform one operation with the greatest possible efficiency. This is
analogous to the concept of labour specializations, which has been employed to improve labour
productivity.
2. Combined operations: Production occurs as a sequence of operations. Complex parts
may require dozens, or even hundreds, of processing steps. The strategy of combined operations
involves reducing the number of distinct production machines or workstations through which the
part must be routed. This is accomplished by performing more than one operation at a given
machine, thereby reducing the number of separate machines needed. Since each machine
typically involves a setup, setup time can be saved as a consequence of this strategy. Material
handling effort and nonoperation time are also reduced.
3. Simultaneous operations: A logical extension of the combined operations strategy is to
perform at the same time the operations that are combined at one workstation. In effect, two or
more processing (or assembly) operations are being performed simultaneously on the same
workpart, thus reducing total processing time.
4. Integration of operations: Another strategy is to link several workstations into a single
integrated mechanism using automated work handling devices to transfer parts between stations.
In effect, this reduces the number of separate machines though which the product must be
scheduled. With more than one workstation, several parts can be processed simultaneously,
thereby increasing the overall output of the system.
5. Increased flexibility: This strategy attempts to achieve maximum utilisation of
equipment for job shop and medium volume situations by using the same equipment for a variety
of products. It involves the use of the flexible automation concepts. Prime objectives are to
reduce setup time and programming time for the production machine. This normally translates
into lower manufacturing lead time and lower work-in-process.
6. Improved material handling and storage systems: A great opportunity for reducing
non-productive time exists in the use of automated material handling and storage systems. Typical
benefits included reduced work-in-process and shorter manufacturing lead times.
7. On-line inspection: Inspection for quality of work is traditionally performed after the
process. This means that any poor quality product has already been produced by the time it is
inspected. Incorporating inspection into the manufacturing process permits corrections to the
process as product is being made. This reduces scrap and brings the overall quality of product
closer to the nominal specifications intended by the designer.
8. Process control and optimization: This includes a wide range of control schemes
intended to operate the individual process and associated equipment more efficiency. By this
strategy, the individual process times can be reduced and product quality improved.
9. Plant operations control: Whereas the previous strategy was concerned with the control
of the individual manufacturing process, this strategy is concerned with control at the plant level
of computer networking within the factory.
10.Computer integrated manufacturing (CIM): Taking the previous strategy one step
further, the integration of factory operations with engineering design and many of the other
business functions of the firm. CIM involves extensive use of computer applications, computer
data bases, and computer networking in the company.
10.8 A UTO MA TED FLO W LINES
An automated flow line consists of several machines or workstations which are linked together by
work handling devices that transfer parts between the stations. The transfer of work parts occurs
automatically and the workstations carry out their specialized functions automatically. The flow
line can be symbolized as shown in Fig. 10.2. A raw workpart enters one end of the line and the
processing steps are performed sequentially as the part moves from one station to the next. It is
possible to incorporate buffer zones into the flow line, either at a single location or between every
workstation. It is also possible to include inspection stations in the line to automatically perform
intermediate checks on the quality of the workparts. Manual stations might also be located along
the flow line to perform certain operations which are difficult or uneconomical to automate.
Raw PROC AUTO-Automated Processing Stations Finished
Work part in part out
Station 1 Station 2 Station 3 Station 4 Station 5
Fig. 10.2 Configuration of an automated flow line

Automated flow lines are generally the most appropriate means of productions in cases of
relatively stable product life; high product demand, which requires high rates of production; and
where the alternative method of manufacture would invoice large labour content.
The objectives of the use of flow line automation are:

1. To reduce labour costs;
2. To increase production rates;
3. To reduce work-in-process;
4. To minimize distances moved between operations;
5. To achieve specialization of operations; and
6. To achieve integration of operations.
There are two general forms that the workflow can take. These two configurations are inline
and rotary.
In-line Type
The in-line configuration consists of a sequence of workstations in a more-or-less straight line
arrangement. The flow of work can take a few 90° turns, either for workpiece reorientation,
factory layout limitations, or other reasons, and still qualify as a straight-line configuration. A
common pattern of workflow, for example, is a rectangular shape, which would allow the same
operator to load the starting workpiece and unload the finished workpiece.
Rota ry Type
In the rotary configuration, the workparts are indexed around a circular table or dial. The
workstations are stationary and usually located around the outside periphery of the dial. The parts
ride on the rotating table and are registered or positioned, in turn, at each station for its processing
or assembly operation. This type of equipment is often referred to as an indexing machine or dial
index machine and the configurations.
The choice between the two types of configurations depends on the application. The rotary
type is commonly limited to smaller workpieces and to fewer stations. There is no flexibility in
the design of the rotary configuration. The rotary configuration usually involves a lower-cost
piece of equipment and typically requires less factory floor space. The in-line design is preferable
for larger work pieces and can accommodate a larger number of workstations. In-line machines
can be fabricated with a built-in storage capability to smooth out the effect of work stoppages at
individual stations and other irregularities.
10.9 A UTO MA TED G UIDED VEHIC LES SYSTEMS
An automated or automatic guided vehicle system (AGVS) is a materials handling system that
uses independently operated, self-propelled vehicles that are guided along defined pathways in
the floor. The vehicles are powered by means of on-board batteries that allow operation for
several hours (8 to 16 hours is typical) between recharging. The definition of the pathways is
generally accomplished using wires embedded in the floor or reflective paint on the floor surface.
Guidance is achieved by sensors on the vehicles that can follow the guide wires or paint.
10.9.1 Types of AGVS

The types of Automated Guided Vehicles Systems (AGVS) can be classified as follows:
1. Driverless trains: The type consists of a towing vehicle (which is the AGV) that pulls
one or more trailers to form a train. It was the first type of AGVS to be introduced and is still
popular. It is useful in applications where heavy payloads must be moved large distances in
warehouses of factories with intermediate pickup and drop-off points along the route.
2. AGVS pallet trucks: Automated guided pallet trucks are used to move palletized loads
along predetermined routes. In the typical application the vehicle is backed into the loaded pallet
by a human worker who steers the truck and uses its forks to elevate the load slightly. Then the
worker who steers the truck to the guide path, programs its destination, and the vehicle proceeds
automatically to the destination for unloading. A more recent introduction related to the pallet
truck is the forklift AGV. This vehicle can achieve significant vertical movement of its forks
reach loads on shelves.
3. AGVS unit load carriers: This type of AGVS is used to move unit loads from one
station to another station. They are often equipped for automatic loading and unloading by means
of powered rollers, moving belts, mechanized lift platforms, or other devices. The light-load AGV
is a relatively small vehicle with a corresponding light load capacity. It does not require the same
large aisle width as the conventional AGV. Light-load guided vehicles are designed to move small
loads through plants of limited size engaged in light manufacturing. The assembly line AGVS is
designed to carry a partially completed subassembly through a sequence of assembly
workstations to build the product.
AGVS technology is far from mature, and the industry, and the industry is continually
working to develop new systems in response to new application requirements. An example of a
new and evolving AGVS design involves the placement of a robotic manipulator on an automated
guided vehicle to provide a mobile robot for performing complex handling tasks at various
locations in a plant.
10.9.2 Applications of Automated Guided Vehicle Systems
Automated guided vehicle systems are used in a growing number and variety of applications. Its
applications can be categorised into the following types:
1. Driverless train operations: These applications involve the movement of large
quantities of materials over relatively large distances. For example, the moves are within a large
warehouse or factory building, or between buildings in a large storage depot. For the movement
of trains consisting of 5 to 10 trailers, this becomes an efficient handling method.
2. Storage/Distribution systems: Unit load carries and pallet trucks are typically used in
these applications. These storage and distribution operations involve the movement of materials
in unit loads (sometimes individual items are moved) from or to specific locations. The
applications often interface the AGVS with some other automated handling or storage system,
such as an automated storage/retrieval system (AS/RS) in a distribution centre. The AGVS
delivers incoming items of unit loads from the receiving dock to the AS/RS, which places the
items in storage, and the AS/RS retrieves individual pallet loads or items form storage and
transfer them to vehicles
for delivery to the shipping dock. When the rates of incoming loads and the outgoing loads are in
balance, this mode of operation permits loads to be carried in both directions by the AGVS
vehicles, thereby increasing the handling system efficiency.
3. Assembly line operations: AGV systems are being used in a growing number of
assembly-line applications. In these applications, the production rate is relatively low and there
are a variety of different models made on the production line. Between the workstations,
components are kitted and placed on the vehicle for the assembly operations that are to be
performed on the partially completed product at the next station. The workstations are generally
arranged in parallel configurations to add to the flexibility of the line. Unit load carries and light-
load guided vehicles are the type of AGVS used in these assembly lines.
4. Flexible manufacturing systems: Another application of AGVS technology is in flexible
manufacturing systems (FMS). In this application, the guided vehicles are used as the materials
handling system in the FMS. The vehicles deliver work from the staging area (where work is
placed on pallet fixtures, usually manually) to the individual workstations in the system. The
vehicles also move work between stations in the manufacturing system. At a workstation, the
work is transferred from the vehicle platform into the work area of the station for processing. At
the completion of processing by that station a vehicle returns to pick up the work and transport it
to the next area. AGV systems provide a versatile material handling system to complement the
flexibility of the FMS operation.
Example: Using roborts and automation together, manufacturing is carried out without using
manpower (unmanned) from raw material to finished products.
5. Miscellaneous applications: Other applications of automated guided vehicle systems
include non-manufacturing and non-warehousing applications, such as, mail delivery in office
buildings and hospital material handling operations. Hospital guided vehicles transport meal
trays, linen, medical and laboratory supplies, and other materials between various departments in
the building. These applications typically require movement of the vehicles between different
floors of the hospital and will use elevators for this purpose.
10.10 AUTOMATED STORAGE/RETRIEVAL SYSTEMS

An automated storage/retrieval system (AS/RS) is defined by the Materials Handling Institute as,
“A combination of equipment and controls which handles, stores and retrieves materials with
precision, accuracy and speed under a defined degree of automation”.
AS/R systems are custom-planned for each individual application, and they range in
complexity from relatively small mechanized systems that are controlled manually to very large
computer-controlled systems that are fully integrated with factory and warehouse operations.
The AS/RS consists of a series of storage aisles that are serviced by one or more storage/
retrieval (S/R) machines, usually one S/R machine per aisle. The aisles have storage racks for
holding the materials to be stored. The S/R machines are used to deliver materials to the storage
racks and to retrieve materials from the racks. The AS/RS has one or more input stations where
materials are delivered for entry into storage and where materials are picked up from the system.
The input/output stations are often referred to as pickup and deposit (P&D) stations in the
terminology of AS/RS systems. The P&D stations can be manually operated or interfaced to some
form of automated handling system, such as a conveyor system or AGVS.
10.10.1 Types of A S/RS

Several important categories of automated storage/retrieval systems can be distinguished. These
include:
1. Unit load AS/RS: This is typically a large automated system designed to handle unit
loads stored on pallets or other standard containers. The system is computer-controlled and the
S/R machines are automated and designed to handle the unit load containers. The unit load
system is the generic AS/RS.
2. Miniload AS/RS: This storage system is used to handle small loads (individual parts or
supplies) that are contained in bins or drawers within the storage system. The S/R machine is
designed to retrieve the bin and deliver it to a P&D station at the end of the aisle so that the
individual items can be withdrawn from the bins. The bin or drawer is then returned to its
location in the system. The miniload AS/RS system is generally smaller than the unit load AS/RS
and is often enclosed for security of the items stored.
3. Man-on-board AS/RS: The man-on-board AS/RS system represents an alternative
approach to the problem of storing and retrieving individual items in the system. Whereas the
miniload system delivers the entire bin to the end-of aisle pick station, the man-on-board system
permits the individual items to be picked directly at their storage locations. This offers an
opportunity to reduce the transaction time of the system.
4. Automated item retrieval system: These systems are also designed for retrieval of
individual items or small unit loads such as cases of product in a distribution warehouse. In this
system, the items are stored in single-file lanes rather than in bins or drawer. When an item is to
be retrieved, it is released from its lane onto a conveyor for delivery to the pickup station. The
supply of items in each lane is generally replenished from the rear of the retrieval system, so that
there is flow-through of the items, thus permitting first in first out (FIFO) inventory control.
5. Deep-lane AS/RS: The deep-lane AS/RS is a high density unit load storage system that is
appropriate when large quantities are to be stored but the number of separate types of material is
relatively small. Instead of storing each unit load so that it can be accessed directly from the aisle,
the deep-lane system stores up to 10 or so loads in a single rack, one load behind the next. Each
rack is designed for ‘flow-through’ with input on one side and output on the other side. Loads
are picked from one side of the rack system by a special S/R type machine designed for retrieval
and another special machine is used on the entry side of the rack system for input of loads.
10.10.2 Ba sic C omponents of a n A S/RS

All automated storage/retrieval systems consist of certain basic building blocks. These
components are:
Storage structure
Storage/retrieval (S/R) machine
Storage modules (e.g., pallets for unit loads)
Pickup and deposit stations.
1. The storage structure is the fabricated steel framework that supports the loads contained
in the AS/RS. The structure must possess sufficient strength and rigidity that it does not
deflect significantly due to the loads in storage or other forces on the framework. The
individual storage components in the structure must be designed so to accept and hold the
storage modules used to contain the stored materials.
2. The S/R machine (sometimes called a crane) is used to accomplish a storage transaction,
delivering loads from the input station into storage, or retrieving loads from storage and
delivering them to the output station. To perform these transactions, the storage/retrieval
machine must be capable of horizontal and vertical travel to align its carriage with the
storage compartment in the storage structure, and it must also pull the load from or push
the load into the storage compartment.
3. The storage modules are the containers of the stored material. Examples of storage
modules include pallets, steel wire baskets and containers, tote pans, storage bins, and
special drawers (used in miniload AS/RS systems). These modules are generally made to
a standard base size that can be handled automatically by the carriage shuttle of the S/R
machine.
4. The pickup and deposit stations are used to transfer loads to and from the AS/RS. They
are generally located at the end of the aisles for access by the S/R machine and the
external handling system that brings loads to the AS/RS and takes loads away. The pickup
stations and deposit stations may be located at opposite ends of the storage aisle or
combined at the same location. This depends on the origination point of the incoming
loads and the destination of the output loads. The P&D stations must be designed so that
they are compatible with the S/R machine shuttle and the external handling system.
10.11 CAROUSEL STORAGE SYSTEMS

A carousel storage system is series of bins or baskets fastened to carries that are connected
together and revolve around a long, oval track system. The track system is similar to a trolley
conveyor system. Its purpose is to position bins at a load/unload station at the end of the oval. The
operation is similar to the powered overhead rack system used by dry cleaners to deliver finished
garments to the front of the store. The typical operation of the storage carousel is mechanized
rather than automated. The load/unload station is manned by a human worker who activates the
powered carousel to deliver a desired bin to the station. One or more parts are removed from the
bin, and the cycle is repeated.
Carousels come in a variety of sizes, ranging between 10 and 100 ft in length of the oval. As
the length of the carousel is increased, the storage density increases, but the average transaction
time (Storage or retrieval) decreases. Accordingly, the typical carousel size ranges perhaps
between 30 and 50 ft to achieve a proper balance between these opposing factors.
10.12 C A RO USEL STO RA G E A PPLIC A TIO NS
The carousel storage system provides for a relatively high throughout rate and is often an
attractive to the miniload AS/RS in the following types of applications:
1. Storage and retrieval operations: In certain operations individual items must be

selected from the group of item stored in the bin or basket. Sometimes called ‘pick and load’
operations, this type of procedure is common for order picking of service parts or other items in
wholesale firm, tools in a toolroom, raw materials from a stockroom, and work-in-process in a
factory. In small assembly operations such as electronics, carousels are used to accomplish kitting
of parts that will be transported to the assembly workstations.
2. Transport and accumulation: These are applications in which the carousel is used to
transport and sort materials as they are stored. One example of this is in progressive assembly
operations where the workstations are located around the periphery of a continuously moving
carousel and the workers have access to the individual storage bins of the carousel. They remove
work from the bins to complete their own respective assembly tasks, and then place their work
into another bin for the next operation at some other workstation.
3. Unique applications: These involve specialised uses of carousel storage systems.
Examples include electrical testing of components, where the carousel is used to store the item
during testing for a specified period of time; and drawer or cabinet storage, in which standard
drawer-type cabinets are mounted on the carousel.
Storage carousels are finding an increasing number of applications in manufacturing
operations, where it’s relatively low cost, versatility, and high reliability have been acknowledged.
It represents a competitive to the miniload AS/RS and other AS/RS configurations for work-in-
progress storage in manufacturing plant.
EX ERC ISES
Section A
1. What do you mean by automation?
2. What is computer integrated manufacturing?
3. What is computer aided manufacturing?
4. What is AGVS?
Section B
1. What are the advantage and disadvantage of automation?
2. Explain the types of AGVS.
3. Explain the application of automated guided vehicle systems.
4. What are the basic components of an AS/RS?
5. What are the application of AS/RS?
Section C
1. Discuss different types of automation.
2. Discuss the reasons for automation.
3. Discuss the different strategies of automation.
4. Discuss the concept of automated flow line.
5. Discuss the concept of automated storage/retrieval system.
Skill Development
FAST FOOD RESTAURANT VISIT: Get the information for the following questions: 1.
Type of automation exists. (Flexibility or fixed)
2. Usage of automated guided vehicles if any.
3. How is the flow managed in automation (i.e. one or more workers).
4. Automated storage system (packing) if any.
C A SELET
The following are the case studies to understand the overall functions of productions and
operations management:
1. BRUEGGER’S BAGEL BAKERY
Bruegger’s Bagel Bakery makes and sells a variety of bagels, including plain, onion, poppy
seed, and cinnamon raisin, as well as assorted flavors of cream cheese. Bagels are the major
source of revenue for the company.
The bagel business is a Rs.3 billion industry. Bagels are very popular with consumers. Not
only are they relatively low in fat, they are filling, and they taste good! Investors like the bagel
industries because it can be highly profitable: it only costs about Rs.10 to make a bagel, and they
can be sold for Rs.50 each or more. Although some bagel companies have done poorly in recent
years, due mainly to poor management, Bruegger’s business is booming;
It is number one nationally, with over 450 shops that sell bagels, coffee, and bagel
sandwiches for takeout or on premise consumption. Many stores in the Bruegger’s chain generate
an average of Rs.800, 000 in sales annually.
Production of bagels is done in batches, according to flavor, with each flavor being produced
on a daily basis. Production of bagels at Bruegger’s begins at a processing plant, where the basic
ingredients of flour, water, yeast, and flavorings are combined in a special mixing machine. After
the dough has been thoroughly mixed, it is transferred to another machine that shapes the dough
into individual bagels. Once the bagels have been formed, they are loaded onto refrigerated trucks
for shipping to individual stores. When the bagels reach a store, they are unloaded from the trucks
and temporarily stored while they rise. The final two steps of processing involve boiling the
bagels in a kettle of water and malt for one minute, and then baking the bagels in an oven for
proximately 15 minutes. The process is depicted in Figure 1.
Quality is an important feature of a successful business. Customers judge the quality of
bagels by their appearance (size, shape, and shine), taste, and consistency. Customers are also
sensitive to the service they receive when they make their purchases. Bruegger’s devotes careful
attention to quality at every stage of operation, from choosing suppliers of ingredients, careful
monitoring of ingredients, and keeping equipment in good operating condition to monitoring
output at each step in the process. At the stores, employees are instructed to watch for deformed
bagels and to remove them when they find them. (Deformed bagels are returned to the main plant
where they are sliced into bagel chips, packaged, and then taken back to the stores for sale,
thereby reducing the scrap rate.) Employees who work in the stores are carefully chosen and then
trained so that they are competent to operate the necessary equipment in the stores and to provide
the desired level of service to customers.
The company operates with minimal inventories of raw materials and inventories of partially
completed bagels at the plant and very little inventory of bagels at the stores. One reason for this
is to maintain a high degree of freshness in the final product by continually supplying fresh
product to the stores. A second reason is to keep costs down; minimal inventories mean less space
is needed for storage.
Q uestions
1. Bruegger’s maintains relatively little inventory at either its plants or its retail stores. List
the benefits and risks of this policy.
2. Quality is very important to Bruegger’s.
(a) What features of bagels do customers look at to judge their quality of bagels?
(b) At what points in the production process do workers check bagel quality?
(c) List the steps in the production process, beginning with purchasing ingredients,
andending with the sale, and state how quality can be positively affected at each step.
3. Which inventory models could be used for ordering the ingredients for bagels?
Whichmodel do you think would be most appropriate for deciding how many bagels to
make in a given batch?
4. Bruegger’s has bagel-making machines at its plants. Another possibility would be to have
a bagel-making machine at each store, what advantages does each alternative have?
(Source: production/Operations Management, William J.Stevenson,)
2. AN AMERICAN TRAGEDY: HOW A GOOD COMPANY DIED

The Rust Belt is back. So exports surge, long-moribund industries glow with new found
profits, and unemployment dips to lows not seen in a decade. But in the smokestack citadels,
there’s disquiet. Too many machine tool and auto parts factories are silent; too many U.S.
industries still can’t hold their own.
What went wrong since the heyday of the 1960s? That’s the issue Max Holland, a
contributing editor of The Nation, takes up in his nutsy-boltsy but fascinating study, When the
Machine Stopped. (Max Holland, When the Machine Stopped: A Contemporary Tale from
industrial America (Boston, Mass: Harvard Business School Press, 1988)
The focus of the story is Burg master Corp., a Los Angeles-area machine tool maker founded
in 1944 by Czechoslovakian immigrant Fred Burg. Holland’s father worked there for 29 years,
and the author interviewed 22 former employees. His shop-floor view of this small company is a
refreshing change from academic treatises on why America can’t compete.
The discussion of spindles and numerical control can be tough going. But Holland
compensates by conveying the pany’s early days and the disgust and cynicism accompanying its
decline. Moreover, the fate of Burgmaster and its brethren is crucial to the U.S. industrial
economy: Any manufactured item is either made by a machine tool.
Producing innovative turret drills used in a wide variety of metalworking tasks, Burgmaster
was a thriving enterprise by 1965, when annual sales amounted to about Rs. 8 million. The
company needed backing to expand, however, so it sold out to Buffalo-based conglomerate
Houdaille Industries Inc. Houdaille was in turn purchased in a 1979 leveraged buyout led by
Khlberg Kravis Roberts & Co. By 1982, when debt, competition, and a sickly machine-tool
market had battered Burgmaster badly, Houdaille went to Washington with a petition to withhold
the investment tax credit for certain Japanese-made machine tools.
Thanks to deft lobbying, the Senate passed a resolution supporting Houdaille’s position, but
President Regan refused to go along. Houdaille’s subsequent attempt to link Burgmaster up with a
Japanese rival also failed, and Burgmaster was closed.
Holland uses Burgmaster’s demise to explore some key issue of economic and trade policy.
Houdaille’s charge that a cartel led by the Japanese government had injured U.S. toolmakers, for
example, became a rallying point for those who would blame a fearsome Japan Inc. for the
problems of U.S. industry.
Holland describes the Washington wrangling over Houdaille in painful detail. But he does
show that such government decisions are often made without much knowledge of what’s going on
in industry. He shows, too that Japanese producers succeeded less because of government help
than because of government helps than because they made better, cheaper machines.
For those who see LBOs as a symptom of what ails the U.S. economy, Holland offers plenty
of ammunition. He argues persuasively that the LBO CRIPPLED Burgmaster by creating
enormous pressure to generate cash. As Burgmaster pushed its products out as fast as possible, he
writes, it routinely shipped defective machines. It promised customers features that engineers
hadn’t yet designed. And although KKR disputes the claim, Holland concludes that the LBO
choked off Burgmaster’s investment funds just when foreign competition made them most
necessary. As for Houdaille, it was recapitalized and sold to Britain’s Tube Investments Group.
But Burgmaster’s problems had started even before the LBO. Holland’s history of the
company under Houdaille is a veritable catalog of modern management techniques that flopped.
One of the most disastrous was a system for computerizing production scheduling that was too
crude for complex machine-tool manufacturing. Holland gives a dramatic depiction of supply
snafus that resulted in delays and cost increases.
As an independent company, “Burgmaster thrived because the Burgs knew their business,”
Holland writes. Their departure under Houdaille was followed by an “endless and ultimately
futile search for a better formula!’ But he concludes: “No formula was a substitute for
management involvement on the shop floor!’
In the end, however, Holland puts most of the blame for the industry’s decline on
government policy. He targets tax laws and macroeconomic policies tbat encourage LBOs and
speculation instead of productive investment. He also criticizes Pentagon procurement policies for
favoring exotic, custom machines over standard, low-cost models. This adds up to an industrial
policy, Holland writes-a bad one.
The point is well taken, but Holland gives it excessive weight. Like their brethren in Detroit
and Pittsburgh, domestic tool-makers in the 1970s were too complacent when imports seized the
lower end of the product line. The conservatism that had for years served them in their cyclical
industry left them ill-prepared for change. Even now some of the largest U.S. toolmakers are
struggling to restructure. Blame the government, yes. But blame the industry, too.
Q uestions
1. Write a brief report that outlines the reasons (both internal and external) for Burgmaster’s
demise, and whether operations management played a significant role in the demise.
(Source: Reprinted from April 17 , 1989 issue of Business Week by special permission, copyright @
1989.by The McGraw-Hill companies).
3. HOME-STYLE COOKIES
The Company
The Lew-Mark Baking Company is located in a small town in western New York State. The
bakery is run by two brothers. Lew and Mark, who formed the company after they purchased an
Archway Cookie franchise. With exclusive rights in New York and New Jersey, it is the largest
Archway franchise. The company employs fewer than 200 people, mainly bluecollar workers, and
the atmosphere is informal.
The Product
The company’s only product is soft cookies, of which it makes over 50 varieties. Larger
companies, such as Nabisco, Sunshine, and Keebler, have traditionally produced biscuit cookies,
in which most of the water has been baked out, resulting in crisp cookies. Archway cookies have
no additives or preservatives. The high quality of the cookies has enabled the company to develop
a strong market niche for its product.
The Customers
The cookies are sold in convenience stores and supermarkets throughout New York and New
Jersey. Archway markets its cookies as “good food” no additives or preservatives and this appeals
to a health-conscious segment of the market. Many customers are over 45 years of age, and prefer
a cookie that is soft and not too sweet. Parents with young children also buy the cookies.
The Production Process
The company has two continuous band ovens that it uses to bake the cookies. The production
process is called a batch processing system. It begins as soon as management gets orders from
distributors. These orders are used to schedule production. At the start of each shift, a list of the
cookies to be made that day is delivered to the person in charge of mixing. That person checks a
master list, which indicates the ingredients needed for each type of cookie, and enters that
information into the computer. The computer then determines the amount of each ingredient
needed, according to the quantity of cookies ordered, and relays that information to storage silos
located outside the plant where the main ingredients (flour, sugar, and cake flour) are stored. The
ingredients are automatically sent to giant mixing machines where the ingredients are combined
with proper amounts of eggs, water, and flavorings. After the ingredients have been mixed, the
batter is poured into a cutting machine where it is cut into individual cookies. The cookies are
then dropped onto a conveyor belt and transported through one of two ovens. Filled cookies, such
as apple, date, and raspberry, require an additional step for filling and folding.
The nonfilled cookies are cut on a diagonal rather than round. The diagonal-cut cookies
require less space than straight-cut cookies, and the result is a higher level of productivity. In
addition, the company recently increased the length of each oven by 25 feet, which also increased
the rate of production.
As the cookies emerge from the ovens, they are fed onto spiral cooling racks 20 feet high and
3 feet wide. As the cookies come off the cooling racks, workers place the cookies into boxes
manually, removing any broken or deformed cookies in the process. The boxes are then wrapped,
sealed, and labeled automatically.
Inventory
Most cookies are loaded immediately onto trucks and shipped to distributors. A small
percentage is stored temporarily in the company’s warehouse, but they must be shipped shortly
because of their limited shelf life. Other inventory includes individual cookie boxes, shipping
boxes, labels, and cellophane for wrapping. Labels are reordered frequently, in small batches,
because FDA label requirements are subject to change, and the company does not want to get
stuck with labels it can’t use. The bulk silos are refilled two or three times a week, depending on
how quickly supplies are used.
Cookies are baked in a sequence that minimizes downtime for cleaning. For instance,
lightcolored cookies (e.g., chocolate chip) are baked before dark-colored cookies (e.g., fudge),
and oatmeal cookies are baked before oatmeal raisin cookies. This permits the company to avoid
having to clean the processing equipment every time a different type of cookie is produced.
Quality
The bakery prides itself on the quality of its cookies. A quality control inspector samples
cookies randomly as they come off the line to assure that their taste and consistency are
satisfactory, and that they have been baked to the proper degree. Also, workers on the line are
responsible for removing defective cookies when they spot them. The company has also installed
an X-ray machine on the line that can detect small bits of metal filings that may have gotten into
cookies during the production process. The use of automatic equipment for transporting raw
materials and mixing batter has made it easier to maintain a sterile process.
Scrap
The bakery is run very efficiently and has minimal amounts of scrap. For example, if a batch
is mixed improperly, it is sold for dog food. Broken cookies are used in the oatmeal cookies.
These practices reduce the cost of ingredients and save on waste disposal costs. The company also
uses heat reclamation: The heat that escapes from the two ovens is captured and used to boil the
water that supplies the heat to the building. Also, the use of automation in the mixing process has
resulted in a reduction in waste compared with the manual methods used previously.
New Products
Ideas for new products come from customers, employees, and observations of competitors’
products. New ideas are first examined to determine whether the cookies can be made with
existing equipment. If so, a sample run is made to determine the cost and time requirements. If the
results are satisfactory, marketing tests are conducted to see if there is a demand for the product.
Potential Improvements
There are a number of areas of potential improvement at the bakery. One possibility would
be automate packing the cookies into boxes. Although labour costs are not high, automating the
process might save some money and increase efficiency. So far, the owners have resisted making
this change because they feel an obligation to the community to employ the 30 women who now
do the boxing manually. Another possible improvement would be to use suppliers who are located
closer to the plant. That would reduce delivery lead times and transportation costs, but the owners
are not convinced that local suppliers could provide the same good quality. Other opportunities
have been proposed in recent years, but the owner rejected them because they feared that the
quality of the product might suffer.
Q uestions
1. Briefly describe the cookie production process.
2. What are two ways that the company has increased productivity? Why did increasing
thelength of the ovens result in a faster output?
3. Do you think that the company is making the right decision by not automating the
packingof cookies? Explain your reasoning. What obligation does a company have to its
employees in a situation such as this? What obligation does it have to the community? Is
the size of the town a factor? Would it make a difference if the company was located in a
large city? Is the size of the company a factor? What if it was a much larger company?
4. What factors cause Lew-mark to carry minimal amounts of certain inventories?
Whatbenefits results from this policy?
5. As a consumer, what things do you consider in judging the quality of cookies you buyin a
supermarket?
6. What advantages and what limitations stem from Lew-Mark’s not using preservatives in
cookies?
7. Briefly describe the company’s strategy.
GLOSSARY
ABC Classification: Classification of inventory in three groups: an A group comprising items

with a less volume and large rupee value, a B group comprising items with moderate volume
and moderate rupee value, and C group comprising items with a large volume and small
volume.
Acceptance sampling: A statistical quality control technique used in deciding to accept or reject
a shipment of input or output.
Activity Chart: A graphical tool to analyze and time the small, physical actions of workers and
machine in performing a routine, repetitive, worker-machine task so that idle time can be
identified.
Aggregate capacity planning: It is the process of testing the feasibility of aggregate output plans
and evaluating overall capacity utilisation.
Aggregate production (output) planning: The process of determining output levels of product
groups over the coming six to eighteen months on a weekly or monthly basis.
Automated guided vehicles systems: An Automated or Automatic Guided Vehicle System
(AGVS) is a materials handling system that uses independently operated, self-propelled
vehicles that are guided along defined pathways in the floor.
Automated storage/retrieval systems: An Automated Storage/Retrieval System (AS/RS) is
defined by the Materials Handing Institute as, “A combination of equipment and controls
which handles, stores and retrieves materials with precision, accuracy and speed under a
defined degree of automation”.
Automation is a technology concerned with the application of mechanical, electronic, and
computer based systems to operate and control production.
Backorders: Outstanding or unfilled customer orders.
Backward Scheduling: Determining the start and finish times for waiting jobs by assigning them
to the latest available time slot that will enable each job to be completed just when it is due,
but not before.
250
Batch production: American Production and Inventory Control Society (APICS) 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 define batch production. It is characterized by the
manufacture of limited number of products produced at regular intervals and stocked
awaiting sales.
Bill of Material: A document describing the details of an item’s product buildup, including all
component items, their buildup sequence, the quantity needed for each, and the work centers
that perform the buildup sequence.
Bottleneck Operation: The station on an assembly line that requires the longest task time.
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.
Break-Even Analysis: A graphical and algebraic representation of the relationships among
volume of output, cost, and revenues.
Break-Even-Point: The level of output volume for which total cost equals total revenues.
Capacity: A facility’s maximum productive capability, usually expressed as volume of output per
period of time.
Capacity planning: Design of the production system involves planning for the inputs, conversion
process and outputs of production operation.
Capacity requirement planning: Capacity Requirements Planning (CRP) is an iterative process
of modifying the MPS or planned resources to make capacity consistent with the production
schedule.
Carrying (holding) Costs: Costs of maintaining the inventory warehouse and protecting the
inventoried items.
Cellular layout The arrangement of a facility so that equipment used to make similar parts or
families of parts is grouped together.
Chance event Am event leading potentially to several different outcomes, only one of which will
definitely occur; the decision maker has no control over which outcome will occur.
Codification is a process of representing each item by a number, the digit of which indicates the
group, the sub-group, the type and the dimension of the item.
Combination layout: This is also called the hybrid or mixed type of layout usually a process
layout is combined with the product layout. For example, refrigerator manufacturing uses a
combination layout. The process or functional layout is used to produce various operations
like stamping, welding, heat treatment are carried out in different work centres as per the
requirement. The final assembly of the product is done in a product type layout.
Computer integrated manufacturing: The term Computer Integrated Manufacturing (CIM) has
been coined to denote the pervasive use of computers to design the products, plan the
production, control the operations, and perform the various business related functions needed
in a manufacturing firm.
Computer-aided design (CAD) Computer software programs that allow a designer to carry out
geometric transformations rapidly.
Computer-aided manufacturing (CAM) Manufacturing systems utilizing computer software

programs that control the actual machine on the shop floor.
Computer-integrated manufacturing (CIM) Computer information systems utilizing a shared
manufacturing database for engineering design, manufacturing engineering, factory
production, and information management.
Consumer’s risk (type II error) The risk or probability of incorrectly concluding that the
conversion process is in control.
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.
Control chart: A chart of sampling data used to make inferences about status of a conversion
process.
Controlling: Activities that assure that actual performance is in accordance with planned
performance.
Enterprise asset management (EAM): Enterprise asset management is an information
management system that connects all departments and disciplines within a company making
them an integrated unit.
Ergonomics (Human engineering): ILO defines human engineering as, “The application of
human biological sciences along with engineering sciences to achieve optimum mutual
adjustment of men and his work, the benefits being measured in terms of human efficiency
and well-being.”
Factory building: Factory building is a factor, which is the most important consideration for
every industrial enterprise. A modern factory building is required to provide protection for
men, machines, materials, products or even the company’s secrets.
Fixed automation is a system in which the sequence of processing (or assembly) operations is
fixed by the equipment configuration.
Fixed position layout: This is also called the project type of layout. In this type of layout, the
material, or major components remain in a fixed location and tools, machinery, men and
other materials are brought to this location. This type of layout is suitable when one or few
pieces of identical heavy products are to be manufactured and when the assembly consists of
large number of heavy parts, the cost of transportation of these parts is very high.
Flexible automation is an extension of programmable automation. A flexible automated system
is one that is capable of producing a variety of products (or parts) with virtually no time lost
for changeovers form one product to the next.
Flow diagram: Flow diagram is a drawing, of the working area, showing the location of the
various activities identified by their numbered symbols and are associated with particular
flow process chart either man type or machine type.
Flow process chart: Flow process chart gives the sequence of flow of work of a product or any
part of it through the work centre or the department recording the events using appropriate
symbols. It is the amplification of the operation process chart in which operations;
inspection, storage, delay and transportation are represented.
Group layout: A grouping of equipment for performing a sequence of operations on family of

similar components. Group Technology (GT) is the analysis and comparisons of items to
group them into families with similar characteristics.
Infinite loading: Assigning jobs to work centers without considering the work center’s capacity
(as if the capacity were infinite).
Input/output control: Activities to monitor actual versus planned utilization of a work center’s
capacity.
Inspection is the most common method of attaining standardization, uniformity and quality of
workmanship. It is the cost art of controlling the production quality after comparison with
the established standards and specifications. It is the function of quality control.
100% Inspection: This type will involve careful inspection in detail of quality at each strategic
point or stage of manufacture where the test is involved is non-destructive and every piece is
separately inspected.
Inventory refers to the materials in stock. It is also called the idle resource of an enterprise.
Inventories represent those items which are either stocked for sale or they are in the process
of manufacturing or they are in the form of materials which are yet to be utilised.
Inventory control is a planned approach of determining what to order, when to order and how
much to order and how much to stock so that costs associated with buying and storing are
optimal without interrupting production and sales.
Job shop production: Job shop production are characterized by manufacturing of one or few
quantity of products designed and produced as per the specification of customers within
prefixed time and cost.
Just-in-time (JIT): A manufacturing system whose goal it is to optimize process and procedures
by continuously pursuing waste reduction.
Kaizen The Japanese concept of continuous improvement in all things.
Kanban: Literally, a” visual record;” a method of controlling materials flow through a JIT
manufacturing systems by using cards to authorize a work station to transfer or produce
materials.
Layout Physical location or configuration of departments, work centers, and equipment in the
conversion process; spatial arrangement of physical resources used to create the product. Lead-
time: The time passing between ordering and receiving goods.
Lean maintenance is the application of lean principle in maintenance environments, which
recognizes seven forms of waste in maintenance.
Load-distance model: An algorithm for laying out work centers to minimize product-flow, based
on the number of loads moved and the distance between each pair of work centers.
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.
Master production scheduling (MPS): MPS is a schedule showing week-by-week how many of
each product must be produced according to customer orders and demand forecasts.
Material handling: Haynes defines, “Material handling embraces the basic operations in
connection with the movement of bulk, packaged and individual products in a semi-solid or
solid state by means of gravity manually or power-actuated equipment and within the limits
of individual producing, fabricating, processing or service establishment”.
Material requirements planning: Material Requirement Planning (MRP) is a system of
planning and scheduling the time phased material requirements for releasing materials and
receiving materials that enable the master production schedule to be implemented.
Materials management is a function, which aims for integrated approach towards the
management of materials in an industrial undertaking. Its main object is cost reduction and
efficient handling of materials at all stages and in all sections of the undertaking. Its function
includes several important aspects connected with material such as, purchasing, storage,
inventory control, material handling, standardisation etc.
Mathematical modelling: Creating and using mathematical representations of management
problems and organizations to predict outcomes of proposed courses of action.
Method study is the systematic recording and critical examination of existing and proposed ways
of doing work, as a means of developing and applying easier and more effective methods and
reducing costs.
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.”
Methods time measurement: A widely accepted form of predetermined time study.
Micro-motion study: Micro-motion study provides a technique for recording and timing an
activity. It is a set of techniques intended to divide the human activities in a groups of
movements or micro-motions (called Therbligs) and the study of such movements helps to
find for an operator one best pattern of movements that consumes less time and requires less
effort to accomplish the task.
Multiple activity chart: It is a chart where activities of more than subject (worker or equipment)
are each recorded on a common time scale to show their inter-relationship.
Obsolete items are these materials and equipments which are not damaged and which have
economic worth but which are no longer useful for the company’s operation owing to
many reason such as changes in product line, process, materials, and so on.
Operating characteristic (OC) curve: Given a sampling plan, the graph of the probability of
accepting a shipment as a function of the quality of the shipment.
Operating system: An operating system (function) of an organization is the part of an
organization that produces the organization’s physical goods and services.
Operation process chart: It is also called outline process chart. An operation process chart gives
the bird’s eye view of the whole process by recording only the major activities and
inspections involved in the process.
Operations management: The set of interrelated management activities, which are involved in
services management is called as operations management.
Operations planning and scheduling systems: Operations planning and scheduling systems
concern the volume and timing of outputs, the utilisation of operations capacity at desired
levels for competitive effectiveness.
Order quantity: As part of the operating doctrine, the amount of stock that behavioral sciences.
Parameters of purchasing: The success of any manufacturing activity is largely dependent on
the procurement of raw materials of right quality, in the right quantities, from right source,
at the right time and at right price popularly known as five ‘R’s’ of the efficient purchasing.
Pegging The process of tracing through the MRP records and all levels in the product structure to
identify how changes in the records of one component will affect the records of one
component will affect the records of other components.
Percent defective: The percent of units that is defective.
Plant layout: Plant layout refers to the physical arrangement of production facilities. It is the
configuration of departments, work centres and equipment in the conversion process. It is a
floor plan of the physical facilities, which are used in production.
According to Moore, “Plant layout is a plan of an optimum arrangement of facilities
including personnel, operating equipment, storage space, material handling equipment and
all other supporting services along with the design of best structure to contain all these
facilities”.
Predetermined time study: A work measurement technique that involves observing or thinking
through a job, recording job elements, recording reestablished motion units, and calculating a
performance standard.
Predictive maintenance: 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”.
Preventive maintenance: Preventive maintenance can be defined as follows: 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 (PM): JIT Philosophy espousing daily, extensive checkups and repairs
for production equipment, lengthening their useful life well beyond the traditional time
frame.
Process design: Process design is a macroscopic decision-making of an overall process route for
converting the raw material into finished goods.
Process layout: This layout is recommended for batch production. All machines performing
similar type of operations are grouped at one location in the process layout e.g., all lathes,
milling machines, etc., are grouped in the shop will be clustered in like groups.
Procurement costs: Costs of placing an order, or setup costs if ordered items are manufactured
by the firm.
Producer’s risk (type I error) The risk or probability of incorrectly concluding that the
conversion process is out of control.
Product development and design is the process of developing a new product with all the
features, which are essential for effective use in the field, and designing it accordingly. At the
design stage, one has to take several aspects of design like, design for selling, design for
manufacturing and design for usage.
Product layout: In this type of layout, machines and auxiliary services are located according to
the processing sequence of the product. If the volume of production of one or more products
is large, the facilities can be arranged to achieve efficient flow of materials and lower cost
per unit. Special purpose machines are used which perform the required function quickly and
reliably.
Product life cycle: Pattern of demand throughout the product’s life; similar patterns and stages
can be identified for the useful life of a process.
Production management deals with decision-making related to production processes so that the
resulting goods or services are produced according to specifications, in the amount and by
the schedule demanded and out of minimum cost.
Production planning and control can be defined as, “the direction and coordination of firms’
resources towards attaining the prefixed goals”.
Production planning and control: Production planning and control can be defined as the process
of planning the production in advance, setting the exact route of each item, fixing the starting
and finishing dates for each item, to give production orders to shops and to follow up the
progress of products according to orders.
The principle of production planning and control lies in the statement ‘First Plan Your Work’
and then ‘Work on Your Plan’.
Production system: The production system of an organization is that part, which produces
products of an organization. It is that activity whereby resources, flowing within a defined
system, are combined and transformed in a controlled manner to add value in accordance
with the policies communicated by management.
Productivity: Efficiency; a ratio of outputs to inputs. Total factor productivity is the ratio of
outputs to the total inputs of labor, capital, materials, and energy; partial factor productivity
is the ratio of outputs to one, two or three of these inputs.
Programmable automation, the production equipment is designed with the capability to change
the sequence of operations to accommodate different product configurations.
Purchasing is an important function of materials management. In any industry purchase means
buying of equipments, materials, tools, parts etc. required for industry.
Purchasing: Activities relating to procuring materials and supplies consumed during production.
Quality is a measure of how closely a good or service conforms to specified standard.
Quality standards may be any one or a combination of attributes and variables of the product
being manufactured. The attributes will include performance, reliability, appearance,
commitment to delivery time, etc.
Quality: The degree to which the design specifications for a product or service are appropriate to
its function and use, and the degree to which a product or service conforms to its design
specifications.
Quality and control: Different meaning could be attached to the word quality under different
circumstances. The word quality does not mean the quality of manufactured product only. It
may refer to the quality of the process (i.e., men, material, and machines) and even that of
management.
Quality control: Quality Control (QC) may be defined as “a system that is used to maintain a
desired level of quality in a product or service”. 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 that ensures that the operation will
produce the optimum quality products at minimum cost.
Quality circle (QC): A small group of employees who meet frequently to resolve company
problems.
Recorder point: As part of the operating doctrine, the inventory level at which stock should be
recorded.
Reliability: 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.
Reliability centered maintenance: Reliability Centered Maintenance (RCM) is defined as “a
process used to determine the maintenance requirements of any physical asset in its
operating context”.
Resource requirement planning: Resource requirements planning (rough-cut capacity
planning) is the process of testing the feasibility of master production schedule in terms of
capacity. This step ensures that a proposed MPS does not inadvertently overload any key
department, work centre, or machine, making the MPS unworkable.
Rough-cut capacity planning: The process of testing the feasibility of master production
schedules in terms of capacity.
Routing: The processing steps or stages needed to create a product or to do a job.
Sampling inspection: In this method randomly selected samples are inspected. Samples taken
from different patches of products are representatives.
Scheduling is the function of coordinating all of the logistical issue around the issues regarding
the execution phase of the work. Scheduled of maintenance jobs basically deals with
answering two questions—‘Who’ and ‘When’ of job, i.e., “who would do the job” and “when
the job would be started and done”.
Scrap is defined as process wastage, such as turnings, borings, sprues and flashes. They may
have an end-use within the plant having commercial values. Hence, should be disposed of
periodically.
Shortest-processing-time rule (SPT) A priority rule that gives top priority to the waiting job
whose operation time at a work center is shortest.
SIMO chart: Simultaneous Motion Cycle chart (SIMO chart) is a recording technique for
micromotion study. A SIMO chart is a chart based on the film analysis, used to record
simultaneously
on a common time scale the Therbligs or a group of Therbligs performed by different parts
of the body of one or more operators.
Six sigma maintenance: It is the application of six sigma principles in maintenance. Six sigma is
a maintenance process that focuses on reducing the variation in business production
processes.
Statistical process control: Statistical Process Control (SPC) is the application of statistical
techniques to determine whether the output of a process conforms to the product or service
design.
Stores management: This involves physical control of materials, preservation of stores,
minimization of obsolescence and damage through timely disposal and efficient handling,
maintenance of stores records, proper location and stocking.
String diagram: The string diagram is a scale layout drawing on which, length of a string is used
to record the extent as well as the pattern of movement of a worker working within a limited
area during a certain period of time.
Surplus items are those materials and equipments which have no immediate use but have
accumulated due to faulty planning, forecasting and purchasing. However, they have a usage
value in future.
Total quality management is an effective system of integrating the quality development, quality
maintenance and quality improvement efforts of various groups in an organization so as to
enable marketing, engineering, production and service at the most economical levels which
allow for full customer satisfaction.
Two handed process chart: A two handed (operator process chart) is the most detailed type of
flow chart in which the activities of the workers hands are recorded in relation to one
another. The two handed process chart is normally confined to work carried out at a single
workplace. This also gives synchronised and graphical representation of the sequence of
manual activities of the worker.
Value analysis is defined as “an organized creative approach which has its objective, the efficient
identification of unnecessary cost—cost which provides neither quality nor use nor life nor
appearance nor customer features”.
Work measurement is the application or techniques designed to establish the time for a qualified
worker to carry out a specified job at a defined level or performance.
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.
EXAMINATION QUESTION BANK
PLA NT LA YO UT A ND LO C A TIO N & MA TERIA L HA NDLING

1. Define plant layout and give its objectives.
2. What are the various types of layouts ? Explain and give their relative advantages.
3. State the factors governing the choice of site for a manufacturing plant in a city or asub-
urban part of a country.
4. Suggest suitable locations for the plants of following products: (i) Ships,
(ii) Cameras,
(iii) Readymade garments and (iv) Antibiotic medicines.
Give reasons for your choice.
5. Define plant layout. Describe the major steps of planning any layout.
6. Discuss product type layout, where it is used. State its advantages and disadvantages.
7. Essential difference between product layout and process layout.
8. Explain the three basic layouts.
9. How to develop the process and product layout?
10. Explain the term ‘material handling’. What are the advantages of a well planned
andintegrated system of material handling?
11. What do you understand by ‘Plant Design’? Discuss the various factors to be
consideredin deciding the location of a plant.
12. To compare three sites, the various factors are listed, as given below. Select the
optimallocation and give reasons for your choice:
259
Site A Site B Site C
Rs. Rs. Rs.
Rent 20,000 10,000 10,000

Labour 1,35,000 1,30,000 1,60,000
Freight charges 81,000 64,000 28,000
Taxes Nil 3,500 2,000
Power 6,000 6,000 6,000
Community attitude Indifferent Want business Indifferent
Employee housing Excellent Adequate Poor
13. A new young entrepreneur wants to set up a small plant. There are three differentpossible
sites with different advantages. The total initial investments going to be of the order of
Rs. 2,00,000. Calculate rates of return of the three sites and choose the optimal location
for the purpose of locating the small plant.
Site A Site B Site C
Rs. Rs. Rs.
1. Expected sales 2,50,000 2,50,000 3,00,000

2. Distribution expenses 40,000 40,000 75,000
3. Raw material 90,000 80,000 70,000
4. Cartage 20,000 25,000 35,000
5. Power & Water supply 20,000 30,000 30,000
6. Wages & Salaries 25,000 30,000 25,000
7. Other expenses 15,000 15,000 20,000
[Ans. 20%, 15%, 22.5% : Site C]
Total sales−Total expeness
N.B. Rate of return = ×100
Total investment
14. What factors are considered while designing a factory building? Will you prefer an ‘L’
shape building or a rectangular building for a new plant? Why?
15. Give the advantages of a multistorey building over a single storey building for a factory.
MO TIO N A ND TIME STUDY

16. Define production and productivity. Explain the difference between the two.
17. There are three car manufacturing factories A, B and C, and they are producing thesame
type of cars. They are employing 1000, 2000 and 3000 men and producing 10, 15 and 25
cars per month respectively. Find the labour productivity of each firm and the production
of each firm per year.
[Ans. (i) 1/100, 3/400, 1/400, 1/120 (ii) 120, 180, 300]
18. What do you understand by productivity? In what units can it be expressed?

19. A manufacturing concern was producing 120 locomotives per year by employing 20,000
men in the past. To increase production they have now recruited 1,000 men more and as a
result production has increased to 140 locomotives per year. Find:
(i) What was the labour productivity previously?
(ii) What is the labour productivity now?
(iii) What is the percentage increase in production and productivity?
[Ans. (i) 3/500 (ii) 1/150 (iii) 16.6%, 11.1%]
20. What is the difference between method study and work measurement? State the
objectivesof both.
21. What steps are followed for doing a method study of job process?
22. In method study all activities can be recorded with the help of certain symbols. Write
thesymbols and explain what each stands for.
23. What are the objectives of method study?
24. Which are the recording techniques used in the method improvement?
25. Enumerate the principles of motion economy pertaining to work place layout.
26. In estimating the standard time of a job, what different elements of time are considered?
Explain.
27. Write the procedure of time study.
28. Describe the steps for taking a time study.
29. Why is it necessary to apply rating to the actual time which an operators takes to
performan operation?
30. What are the various allowances considered in time study?
31. Define standard time, basic time, observed time and rating factor. Write the
relationsbetween these quantities and allowances.
32. The normal cycle time for an operation is 1.14 minutes. It is estimated that 405 minutesof
480 minutes day are available to the operators for production purposes.
Determine the standard time (S.T.) and the number of pieces for a standard hour.
[Ans. S.T.= 1.35 minutes, 44 pieces]
33. What is the purpose of work measurement? Enumerate its users.
35. Define ‘Rating’. What is its necessity?
36. What is utility of man-machine chart? How such chart can be drawn?
37. Write short note on performance rating.
38. What are the techniques of work measurement? Explain each of them briefly.
39. Why is a jobs broken down into elements and what are the general rules for selectionof
elements?
40. With nicely drawn charts explain the significant characteristics of ‘man-machine’ and
‘multiple activities’ charts.
41. What are the basic differences between:

(i) Operation process chart and Flow process chart, and (ii)
Flow diagram and String diagram.
42. Explain how with the help of ergonomic concepts motion economy can be ensured
indesigning a work-place-layout.
43. Explain how ‘work study’ concepts can be utilised to improve ‘productivity’.
44. Explain the term ‘work-study’. State some of its applications in industries.
45. Explain the following:
(i) Flow diagram (ii) Work-measurement.
46. Explain the roles of man-machine chart and two-hand process chart in workplace layout.
47. Under what conditions would you employ the principles of motion economy in
developinga workplace layout?
48. What information is contained in an operation chart?
49. Discuss briefly the principles of micro-motion study and the basic ‘Therbligs’ as advocated
by Gilbreth.
50. Enumerate the principles of motion economy with particular reference to workplacelayout
and ergonomic design of a product.
51. Write short notes on multiple activity and SIMO charts.
52. Training of time study observer by rating film and how to reduce human error causedby
conservatism.
53. What is productivity? Mention the benefits of higher productivity.
54. Explain the productivity of land, buildings, machines and manpower.
55. What are the factors contributing to productivity improvement?
56. Determine how productivity can be improved by reducing work.
57. Define work study and explain its basic procedure.
58. What are the prerequisites of conducting work study?
59. Define method study and its procedures.
60. Explain the factors involved in the selection of job.
61. Explain the various process chart symbols with notations.
62. What are the primary and secondary questions involved in method study?
63. State and explain the principles of motion economy.
64. Explain the two-handed process chart.
65. What is micro-motion study, explain its importance.
66. Sketch the various Therbligs symbols, with its abbreviations.
67. What is work measurement and describe the various purpose involved.
68. What are the basic procedure and techniques of work measurement?
69. Explain the basic steps for conducting time study.
70. What are relaxation allowances and how is it calculated?

72. The observed time is recorded to be 15 minutes for a job done by a worker whose ratingis
80. Following allowances are recommended by the management: Personal needs
allowance—5% of basic time
Basic fatigue allowance—2% of basic time
Contingency work allowance—1% of basic time
Contingency delay allowance—2% of basic time
Determine basic time, work content and standard time for the job.
73. How is interference allowance different from other allowances?
74. Explain the technical set-up and work specification of time standard.
75. List and explain the various uses of time standard.
76. Why would combining work measurement techniques be a good strategy in establishinga
standard?
77. Determine the standard time using the experienced industrial engineers worker rating.
78. Find the standard times using the worker rating of inexperienced engineer.
PRO DUC TIO N PLA NNING A ND C O NTRO L

79. What do you understand by ‘Centralised Production Planning and Control’? Give its
advantages.
80. Define process planning. Why is it required?
81. List and explain the factors to be considered in detail before deciding a process plan fora
job.
82. What do you understand by the ‘follow-up’ function of production planning and control?
Explain.
83. Give a specimen of ‘Gantt Charts’ which is normally used in the production planning and
control department and describe briefly how it could be used for checking the actual
progress of a job against the schedule.
84. Difference between loading and scheduling.
85. Describe the objectives and functions of production planning and follow-up.
86. What is the main difference between planning and follow-up.
87. Describe clearly the function of routing, scheduling and dispatching?
88. Show how the Gantt chart is used for planning a project?
89. Describe clearly the function of routing scheduling inspection procedures.
90. Show how the Gantt chart is used for planning a project?
91. Describe clearly the function of routing, scheduling and dispatching.
92. Describe what is the utility of Gantt chart as a tool of production. Prepare a Gantt
chartshowing picture of future operation?
93. Define operations management.
94. Explain the operation management responzibility.
95. Explain the operation functions in organization.

96. Explain manufacturing operations versus service operations.
97. Explain the historical evolution of production and operations management.
98. Explain the framework for managing operations.
99. How is product development and design associated with production planning?
100. Explain the effects of three S?
101. What is the role of models in operation management?
102. Explain the general procedure for facility location planning. What are the different types
of manufacturing and service operations?
103. Explain how project planning and project scheduling relate.
104. Discuss how a Gantt chart can be used as a scheduling tool?
105. Identify the relevant costs that should be considered in developing a plan for aggregate
output and capacity.
106. How is rough-cut capacity and aggregate capacity planning compared?
107. What are the merits and demerits of the three pure strategies of aggregate planning
process?
108. What roll does forecasting play in aggregate planning process?
109. Explain how aggregate plans and MPS initiate functional activities.
110. Explain how aggregate planning and scheduling cost are affected by forecast errors.
111. Describe the critical parameters of job shop scheduling problem.
112. Identify the elements of human behaviour that are affected by job shop scheduling.
113. Is job shop scheduling a planning activity or a control activity? Explain.
114. What are priority-sequencing rules? Why are they needed.
115. Discuss major difference between finite and infinte loading.
116. What types of demands are formally considered in MRP?
117. Explain the MRP system. Discuss different inputs and outputs of MRP.
118. What are the logics used in MRP? Explain its methodology.
MA TERIA LS MA NA G EMENT
119. Find the economic batch quantity from the following data:
Cost of carrying inventory — 15% of value per year
Set up cost — Rs. 5,000 per batch
Average yearly consumption — 3,000 units
Cost per unit — Rs. 100
[Ans. 1414, 1500]
120. Find the economic batch quantity for manufacturing 20,000 fountain pens per year:
Value of raw material in each fountain pen = 2.00 Labour
including on cost per fountain pen = 2.50
Set up cost per batch = Rs. 600.00
Cost of carrying inventory = 12 per cent of the value per year
[Ans. 6667]
121. What is meant by economic batch quantity? Derive the formula for it.
122. Determine the economic batch quantity from the following data:
Total sales in a year = 1500 units
Set up cost per job order = Rs. 1800
Cost of unit product = Rs. 120
Inventory carrying charges = 10 per cent of the value of the product.
[Ans. Calculated 668]
123. What is the object of inventory control? Explain.
124. Find the economic order quantity from the following data:
Average annual demand = 30,000 units
Inventory carrying cost = 12% of the unit value per year
Cost of placing an order = Rs. 70
Cost per unit = Rs. 2
125. Discuss the concept and utility of ABC analysis as applied to inventory control.
126. Explain briefly ABC analysis.
127. What are basic components of an inventory system?
128. In what ways can inventories serve to reduce the cost and to increase the cost?
129. Determine the economic order quantity for a product whose average daily consumption
rate is 80 units. The cost of each unit is Re. 0.50 and the inventory carrying charges is Re.
0.20. The cost of placing and receiving the order is Rs. 10. Assuming total working days in
a year as 300, obtain the annual inventory capital also.
130. Explain the term inventroy. How would you classify it? Explain, how you would carry out
material requirement planning? State the basic steps involved in setting up MRP.
131. Discuss the functions of purchasing department in an industry. Explain some methods
ofpurchasing commonly adopted in an industrial purchasing. Why should the purchasing
documents be legally sound?
132. In what way can inventories serve to reduce costs? Explain the term ‘economic ordered
quantity’ and how you would compute it. State all the assumptions made.
133. Define ergonomics and discuss the factors of ergonomics.
134. What is the scope and importance of materials management?
135. What do you mean by materials management?
136. What is the need for integrated concept and also mention the advantages of integrated
materials management concept?
137. What are micro and macro factors in materials management and explain in detail?
138. What is the importance and scope of purchasing in materials management?
139. What are the objectives/goals and functions of purchasing department in
materialsmanagement?
140. What are the various types of purchase systems? Explain various stages under each system
in detail.
141. What are the differences between purchasing capital equipment and purchasing of
consumption materials?
142. Explain the preparations of forms and records for purchasing with examples.
143. What are the various methods of purchasing (open purchase, restricted enquiry, open
tender enquiry) and explain these importance and steps in each method.
144. What are the differences between centralized and decentralized purchasing and their
advantages?
145. What is vendor development and what are various steps in source selection?
146. What is supplier evaluation and mention various steps in selecting best supplier?
147. What is stores management and mention the objectives and functions of stores
management?
148. Mention and explain various stores systems and procedures.
149. Mention and explain various store accounting and stock verification procedures.
150. Explain in detail about obsolete, surplus and scrap management.
151. Define codification, standardization and simplification and also mention advantages and
disadvantages on each.
152. What is ABC, FSND, and VED analysis and explain their importance in
materialsmanagement?
153. What are various mechanisms and advantages of ABC analysis?
154. What are the need, scope and importance of keeping inventory in any firm?
155. Explain clearly the various costs that are involved in inventory problems with suitable
examples. How they are inter-related?
156. What is an inventory system? Explain clearly the different costs that are involved in
inventory problems with suitable examples.
157. What are the basic ideas involved in EOQ concept? Discuss.
158. What is economic order quantity?
159. An aircraft company uses rivets at an approximate customer rate of 2,500 kg per year.Each
unit costs Rs. 30 per kg. and the company personnel estimate that it costs Rs. 130 to place
an order, and that the carrying cost inventory is 10% per year. How frequently should
orders for rivets be placed? Also determine the optimum size of each order.
160. A manufacturing company purchases 9,000 parts of a machine for its annual
requirements,ordering one-month usage at a time. Each part costs Rs. 20. The ordering
cost per order is Rs. 15, and the carrying charges are 15% of the average inventory per
year. You have been asked to suggest a more economical purchasing policy for the
company. What advice would you offer, and how much would it save the company per
year?
161. The demand of an item is uniform at a rate of 25 units per month. The fixed cost is Rs. 15
each time a production is made. The production cost is Re. 1 per item, and the inventory
carrying cost is Re. 0.30 per item per month. If the shortage cost is Rs. 1.50 per item per
month, determine how often to make a production run and of what size it should be?
162. Define the terms ‘safety stock’ and ‘EOQ’ with the help of ideal inventory model.
163. Explain the problem of inventory control with deterministic demand.
164. What is ABC analysis? Why is it necessary? What are the basic steps in implementing it?
165. Explain the importance of ‘ABC’ analysis in the problem of inventory control of an
organization using a large number of items.
166. Explain the basis of selective inventory control and state the different selection techniques
adopted in inventory control system. Give a brief note on each.
167. Explain the concept of JIT. How does it help the manufacturing system to improve
productivity?
168. Explain the basic elements of JIT.
169. What are the merits and demerits of JIT?
170. What do you understand by kanban? Explain the method to calculate the number
ofkanban?
171. Explain the philosophy involved in JIT systems. What are the major requirements for a
successful JIT implementation?
Q UA LITY C O NTRO L
172. What is importance of inspection in an industry? Describe the various kinds of
inspections.
173. Sub-groups of five items each are taken from a manufacturing process are regular
intervals. A certain quality characteristics is measured, and X and R values are calculated
for each sub-group. After 25 subgroups X = 357.50 and R = 9.90. Compute the control
limits. It is assumed that all the points lie within both the control charts.
[Ans. X chart 14.53,14.07, R chart 0.835, 0]

174. What is inspection? What is the basic difference between inspection and quality control?
175. The results of inspection of 10 samples each containing 4Xunits
and Rarecharts.
tabulated in the
No. of Sub-group size Average Range
Observations a b c d X R
1 47 32 44 35 39.50 15
2 33 33 34 34 33.50 1
3 34 34 31 34 33.25 3
4 12 21 24 47 26.00 35
5 35 23 38 40 34.00 17
6 19 37 31 27 28.50 18
7 23 45 26 37 32.75 22
8 33 12 29 43 29.25 31
9 25 22 37 33 29.25 15
10 29 32 30 13 26.00 19
following form. Compute the control limits for the

[Ans. X Chart 42.866, 17.75; R Chart 39.216]
176. What do you understand by acceptance sampling? When is it used? Give its advantages
and disadvantages.
177. Describe briefly the double acceptance sampling plan.
178. Describe the single sampling and double sampling inspection procedures.
179. What are factors that determine sample size?
180. State some possible objectives X and R charts.
181. Determine the control limit for X and R chart if EX = 357.50, ER = 9.90, number of sub-
groups = 20. It is given that A2 = 0.18 , D3 = 0.41 and D4 = 1.59.
182. Discuss briefly the S.Q.C. procedures by charts and diagrams. What is meant by ‘quality
circle’? Is there any additional benefit derived from this?
183. Explain the terms ‘quality’ and ‘quality control’. How does quality control differ from
conventional inspection?
184. Explain the following terms in reference to quality control:
(i) Producer’s risk, (ii) Consumer’s risk, (iii) Average outgoing quality, (iv) Single
sampling plan of inspection, and (v) p-chart.
185. What are the major points to be looked into while introducing statistical control charts for
quality assurance in an industry? Show typical X and R charts. With reference to S.Q.C.,
define clearly the terms Specified: acceptance quality level (A.Q.L), Product’s risk,
Consumer’s risk, Operating characteristics curve (O.C).
186. Discuss the importance of quality control in an industry. Why is statistical quality control
preferred? Explain.
187. Discuss the general structure for double sampling plan. What are its advantages
anddisadvantages? Explain.
188. Define quality and explain its role in the modern business environment.
189. What are the benefits of quality control?
190. Define the inspection? What are the types of inspection?
191. What are the objectives of inspection?
192. Differentiate sampling inspection and 100% inspection.
193. Explain the difference between quality control and quality improvement.
194. What are the drawbacks of centered approach inspection?
195. Define the attributes and variables.
196. Differentiate the attributes and variables.197. What are the benefits of quality control?
198. State the objectives of inspection. In a mass production how the stage inspections
arefavourable?
199. Define quality circles.
200. Explain the objectives of quality circles.
201. What is the difference between quality circles and quality improvement teams?
202. What are the 7QC tools? Explain.

203. Explain briefly TQC.
204. What are the disadvantages of TQC?
205. What are the benefits of using control charts?
206. Differentiate between discrete data and continuous data, with suitable examples.
207. Explain the difference between chance causes and assignable causes. Give examples ofeach.
208. Define and explain type I and type II errors in the context of control charts. How does the
choice of control limits influence these two errors?
209. How are rational samples selected? Explain the importance of this in the total quality systems
approach.
210. Explain some causes that would make the control chart pattern follow a gradually increasing
trend.
211. What is the effect of sample size on control limits?
212. What are the advantages and disadvantages of using variables rather than attributes incontrol
charts?
213. Explain the difference in interpretation between an observation falling below the lower
control limit on an X-bar chart and one falling below the lower control limit on an R-chart.
Discuss the impact of each on the revision of control charts.
214. State the objective of X-bar and R charts. Compare X-bar with R chart. Discuss the
circumstances in which either of the two or a combination of these will be used for the
purpose of control.
215. What kinds of errors are possible when control charts for variables are applied? Explain.
216. Explain the concept of process capability. When should it be estimated? Discuss its impact on
the production of scrap and/or rework.
217. What are the objectives of the control charts?
218. What are the advantages and disadvantages of control charts for attributes over those of
variables?
219. Discuss the assumptions that must be satisfied to justify using a p-chart. How are they
different from the assumptions required for a C-chart?
220. How do you construct and interpret the X-bar and R-chart?
221. How do you construct and interpret the p-chart?
222. Explain the difference between specification limits and control limits. Is there a
desiredrelationship between the two?
223. Explain the difference between natural tolerance limits and specification limits. What
assumption is made in constructing the natural tolerance limits?
224. What is process capability analysis, and when should it be conducted? What are some of its
benefits?
225. Differentiate the process capability and specifications.
226. What is process capability?
227. What are the methods for evaluating the process capability?
228. What are process capability indices?
229. In an automatic filling process 175 gm of a certain chemical is delivered into eachcontainer.
The permissible variation is ± 4 gm. To investigate the capability of the process, samples of 5
each, were taken from 10 successive batches, and data were recorded, as given below:
Batch 1 2 3 4 5 6 7 8 9 10
177 176 174 175 175 176 170 177 174 175
Weight of 176 178 177 178 175 177 175 177 181 175
each sample of 5 177 178 177 180 174 178 178 172 174 174
178 180 176 172 173 178 177 176 176 175
175 175 175 176 174 175 173 177 175 173
Assuming the process to the within control establish the capability of the process and
compare it with standard specifications.
230. The following are the X-bar and R-values of 4 subgroups of readings: X-bar = 10.2, 12.1,
10.8 and 10.9, R = 1.1, 1.3, 0.9 and 0.8. The specification limits for the components are
10.7 ± 0.2. Establish the control limits for X-bar and R-charts. Will the product able to
meet it specification?
Given: (a) A2 (factor for X-bar chart) = 0.58
(b) D4 (factor for R chart) = 2.11
(c) D3 (factor for R chart) = 0.00
231. A certain dimension is specified in mm as 3.5100 ± 0.0050. Control charts for X-bar andR
indicate that the X-bar chart shows lack of statistical control but the R chart always shows
control. From the R chart the estimate of σ′ is 0.0010. If the aimed at process average X′-bar
is to be 3.5100, what should be the upper control limit for X-bar with a subgroup size of 4?
What should be the upper reject limit on the X-bar chart assuming the use of 3-sigma reject
limits?
232. The following are the inspection results of 20 lots of magnets, each lot being of 750 magnets.
Number of defective magnets in each lot is 48, 56, 47, 71, 83, 48, 50, 53, 70, 67, 47, 34, 85,
37, 57, 29, 45, 52, 51, and 30. Calculate the average fraction defective and three sigma
control limits for p-chart and state whether the process is in control.
233. Discuss the advantages and disadvantages of sampling.
234. Distinguish between producer’s risk and consumer’s risk.
235. What is the importance of OC curve in the selection of sampling plans?
236. Describe the impact of the sample size and the acceptance number on the OC curve.
237. Discuss the relative advantages and disadvantages of single, double and multiple sampling
plans.
238. Explain the acceptance-rejection plans.

239. Explain the terms AOQ and AOQL for single sampling and double sampling plans.
240. What are the advantages and disadvantages of variable sampling plans over those for
attributes?
241. What are the parameters of a variable sampling plan for which the process averagequality is
of interest?
242. Differentiate the attribute sampling plan and variable sampling plan.
243. State and explain the advantages and limitations of acceptance sampling over 100%
inspection.
244. What do you mean by ISO 9000?
245. What are the various causes in ISO 9000?
246. Explain the goals and standards of ISO 9000 quality systems.
STA TISTIC A L TA BLE
Factors for determining from R the 3-sigma control limits for X and R charts
Number of Factors for Factors for R chart
observations
X Chart,
in A2 Lower control limit Upper control limit
subgroup, N D3 D4
2 1.88 0 3.27
3 1.02 0 2.57
4 0.73 0 2.28
5 0.58 0 2.11
6 0.48 0 2.00
7 0.42 0.08 1.92
8 0.37 0.14 1.86
9 0.34 0.18 1.82
10 0.31 0.22 1.78
11 0.29 0.26 1.74
12 0.27 0.28 1.72
13 0.25 0.31 1.69
14 0.24 0.33 1.67
15 0.22 0.35 1.65
16 0.21 0.36 1.64
17 0.20 0.38 1.62
18 0.19 0.39 1.61
19 0.19 0.40 1.60
20 0.18 0.41 1.59

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PUBLISHING FOR ONE WORLD

PREFACE TO THE SECOND EDITION

PREFACE TO THE FIRST EDITION

Preface to the Second Edition v

Preface to the First Edition vi

1 INTRODUCTION TO PRODUCTION AND OPERATION MANAGEMENT 1–21

1.2 Historical Evolution of Production and Operations Management 1

1.3 Concept of Production 3

1.4 Production System 3

1.4.1 Classification of Production System 4

1.5 Production Management 7

1.5.1 Objectives of Production Management 7

1.6 Operating System 8

1.6.1 Concept of Operations 8

1.6.2 Distinction between Manufacturing Operations and Service Operations 8

1.7.1 A Framework for Managing Operations 9

1.7.2 Objectives of Operations Management 11

1.8 Managing Global Operations 12

1.9 Scope of Production and Operations Management 13

2 PLANT LOCATION AND LAYOUT 22–64

2.2 Need for Selecting a Suitable Location 22

2.3 Factors Influencing Plant Location/Facility Location 27

2.3.1 General Locational Factors 27

2.3.2 Specific Locational Factors for Manufacturing Organisation 31

2.3.3 Specific Locational Factors for Service Organisation 32

2.4 Location Theories 33

2.5 Location Models 34

2.5.1 Factor Rating Method 34

2.5.2 Weighted Factor Rating Method 35

2.5.3 Load-distance Method 36

2.5.4 Centre of Gravity 38

2.5.5 Break Even Analysis 39

4 MATERIALS MANAGEMENT 75–106

4.2 Scope or Functions of Materials Management 75

4.3 Material Planning and Control 77

4.3.1 Techniques of Material Planning 78

4.4.1 Objectives of Purchasing 79

4.4.2 Parameters of Purchasing 79

4.4.3 Purchasing Procedure 82

4.4.5 Special Purchasing Systems 88

4.5 Stores Management 89

4.6 Inventory Control or Management 91

4.6.1 Meaning of Inventory 91

4.6.2 Reasons for Keeping Inventories 91

9.3 Identification and Control of Waste 228

1.1 INTRO DUC TIO N

1951 Commercial digital computer: large-scale computations

The production system has the following characteristics:

1.4.1 C la ssific a tion of Produc tion System

3. Work in process inventory is higher compared to continuous production.

2. Material handling is fully automated.

1.5.1Objectives of Production Management

1.6.1 Concept of Operations

Service is characterised by intangible outputs, outputs that customers consumes immediately,

1.7.1 A Framework for Managing Operations

1. MA NA G ING G LO BA L O PERA TIO NS

PLANT LAYOUT AND MATERIAL HANDLING

Fig. 1.4 Scope of production and operations management