Course Aim:

 To introduce concepts of production and operations management in an organization and expose to

analytical methods.

Learning Outcome:
 The students will be able to understand operations management, product & process design, analysis,
plant location, layout, Scheduling and Material Management.

Unit-I: Introduction to Operations Management

Introduction: Functional Subsystems of Organization - Definition - Systems Concept of Production.
Types of Production Systems: Flow Shop - Job Shop - Batch Manufacturing - The Project – Productivity.

Digital Notes Strategic Management: Corporate Strategic - Generic Competitive Strategies - Functional Strategies
Line Balancing - World Class Manufacturing.
Unit-II: Product & Process Design and Analysis
Product Design and Analysis New Product Development - Steps of Product Design.
Process Planning and Design: Selection of Process - Process Selection Decision - Process Planning
Design - Responsibilities of Process Planning Engineer - Steps in Process Planning - Process

Production and Operations Design - Process Research - Work Study - Method Study and Work Measurement.
Value Analysis/Value Engineering: When to Apply Value Analysis - Function - Aims - Value
Engineering Procedure - Advantages and Application Areas.
Management Standardization: Standardization Procedure - Advantages of Standardization - Application of
Standardization.
Ergonomic Considerations in Product Design.

R20MBA15
Unit-III: Plant Location & Plant Layout
Plant Location: Factors Influencing Plant Location - Single Facility Location Problem - Multifacility
Location Problems - Model for Multi-facility Location Problem - Method of Transformation - Model
to Determine X- Coordinates of New Facilities - Model to Determine Y-Coordinate.
MBA I Year II Semester Plant Layout: Classification of Layout - Advantages and Limitations of Product Layout - Advantages
and Limitations of Group Technology Layout - Layout Design Procedures.
Unit-IV: Scheduling
AY 2020-22 Scheduling: Johnson‘s Problem - Extension of Johnson‘s rule. Job Shop Scheduling: Introduction -
Types of Schedules - Schedule Generation - Heuristic Procedures - Two Jobs and Machines
Scheduling.
Unit-V: Materials Management
Components of Integrated Materials Management: Materials Planning - Inventory Control -
Purchase Management - Stores Management. Inventory Control: Inventory Decisions - Costs Trade
Off - Models of Inventory - Operation of Inventory Systems - Quantity Discount - Implementation
of Purchase Inventory Model - Purchasing Management. Stores Management: Incoming Materials
Control - Store Accounting - Obsolete Surplus and Scrap Management - ABC Analysis - XYZ
Analysis - VED Analysis - FSN Analysis - SDE Analysis. Computer Aided Techniques in POM.

REFERENCES:
 Panneerselvam, ―Production and Operations Management‖ PHI.
 Ajay K Garg, Production and Operations Management, TMH.
 Prof. L.C. Jhamb: Production Operations Management, 18th edition, Everest Publishing House.
 Dipak Kumar Bhattacharyya, Production and Operations Management, Universities Press.
 B. Mahadevan, Operations Management: Theory and Practice, Pearson.
 Kenneth K. Boyer, Rohit Verma, Operations Management:
Cengage Learning.
MRCET MBA MRCET MBA

UNIT 1 1. Vision: An organization‗s vision involves the mission and values of the organization. The
vision describes what the company is, what their purpose is and where they want to go in the
Introduction to Operation Management future. The vision is extremely important for every employee to embrace. Once a vision is
clearly defined, everyone in the organization should share and work toward the collective
goals of that vision.

FUNCTIONAL SUBSYSTEMS OF ORGANIZATION 2. Culture: The culture of the organization describes the atmosphere and environment. It
includes people's behavior, attitude and work ethic. An organization's culture should be
An organization consists mainly of four functional subsystems, viz. marketing, production, learning-based, so people always feel the need to learn new things and embrace change. The
finance and personnel as shown in following figure. organization's shared vision will help build a solid culture of which people will enjoy being a
part.

3. Strategy: A company‗s policies and procedures help make up the strategy of the
organization. The strategy encompasses hiring the right people, training them to embrace the
vision and the culture of the company, and teaching them the correct way to do their jobs.
Training them from the first day of employment is important to establish standards and make
sure everyone understands what is expected of them.

4. Structure: The structure of the organization is important. Structure can be defined as a

top-down managerial organization chart that is topped off by the CEO or president and
branches down to lower levels within the organization. It is important to have an established
structure from the beginning, so employees know and understand where they stand in the
organization, to whom they answer and who is in charge. With established structure, the
organization will avoid any confusion when it comes for people to perform certain functions.

Systems Concept of Production:

A system can be defined as a purposeful collection of people, objects & producers for
operating within an environment. Thus every organization can be represented as a system
The marketing function of an organization aims to promote its products among customers, consisting of interacting sub-system. The features of a system are that these have inputs and
which helps it to obtain substantial sales order. This, in turn, is communicated to the outputs .the basic process of the system converts the resource inputs into some useful form of
production subsystem which is concerned with the management of physical resources for the outputs. Depending upon the efficiency of the conversion process we may have undesirable
production of an item or provision of a service. To manufacture the products as per the outputs too-such as pollution, scraps or wastage, rejection, lose of human life etc. Using the
specifications, the production function needs to organize its resources (raw materials, generalized concepts of production we can say such system a production system.
equipments, labour and working capital) according to the predetermined production plans.
The finance function provides authorization and control to all other subsystems to utilize Input and Output of System
money more effectively through a well designed mechanism. The personnel function is a
supporting function which plans and provides manpower to all other subsystems of the 1. The inputs to the system can be labour, material, equipment (machines), facilities, energy,
organization and to itself by formulating proper recruitment and training programmes. information & technology. Other inputs to production system can be customers in a bank,
patients in a hospital, commuters to a public transport system, files papers to an office etc.
It is therefore, amply clear that all the functional subsystems of any business organization are 2. The outputs from a system can be finished products, transported goods, delivered
interwoven by many linkages. They cannot function in isolation. They are all parts of an messages, cured patients, serviced customers etc.
organization working together for a common purpose — for the operation to run successfully.
Independently, these subsystems have their own structure and ideas, but together they
become the core of the organization. Independently, these subsystems have their own
structure and ideas, but together they become the core of the organization. These subsystems
have to take relative decisions at different level of managements. They are:

MRCET MBA MRCET MBA

 accordance with the quantitative specifications and demand schedule with minimum
cost. According to this definition design and control of the production system are two
main functions of production and operation management.

 Production and Operation Management is a set of general principles for production

economies, facility design, job design, schedule design, quality control, inventory
control work study and cost band budgeting control. This definition explains the main
MANUFACTURING & SERVICE SYSTEM areas of an enterprise where the principles of production and operation management
can be applied. This definition clearly points out that the production and operation
1) The generalized model of production system including both manufacturing system as management is not a set of techniques.
well as service system. Example of manufacturing system are; manufacturing of cement,
fertilizer, coal, textile, steel, automobiles etc. example of service system include a post office, It is evident from the above definitions that production planning and its control are the main
hospital, bank, transport organization ,university etc. characteristics of production and operation management. In the case of poor planning and
control of production activities the organization may not be not be able to attain its objectives
2) The management of service system is slightly difficult than that of manufacturing system. and may result in loss of customer‗s‗ confidence and retardation in the progress of the
some of the features of service system are; establishment.

a) Outputs from the system is non-inventorial. We cannot generally produce to stock. In short, the main activities of operation and production management can be listed as;

b) Demand for the service is variable  Specialization and procurement of input resources namely management, material and
labor, equipment and capital.
c) Operation can be labour-intensive.  Product design and development to determine the production process for transforming
the input factors into output goods and services.
d) Location of service operation is dictated by location of user.  Specialization and control of transformation process for efficient production of goods
and services.
A system is a purposeful collection of people, objects & procedures to achieve a specific
goal. The production system is a system where land, labour, capital & management undergo TYPES OF PRODUCTION SYSTEMS
conversion process to achieve the specific goal as goods or service.
Production system of a company mainly uses facilities, equipments, and operating methods to
DEFINITION OF PRODUCTION MANAGEMENT
produce goods that that satisfy customers‗ demand. The various methods of production are
One cannot demarcate the beginning and end point of Production and Operation Management not associated with a particular volume of production. Similarly, several methods may be
in an establishment. The reason is that it is interrelated with many other functional areas of used at different stages of the overall production process.
business viz. marketing, finance, industrial relations policies etc .Alternately, Production and
Operation Management is not independent of marketing, financial, and personnel
management due to which it is difficult to formulate some single appropriate definition of 1. Job Method
Production and Operation Management. The following definitions try to explain main
characteristics of Production and Operation Management: With Job production, the complete task is handled by a single worker or group of workers.
Jobs can be small-scale/low technology as well as complex/high technology.
 In the words of Mr. E.L. Brech: ―Production and Operation Management is the
process of effective planning and regulating the operations of that section of an
Low technology jobs: here the organization of production is extremely simply, with the
enterprise which is responsible for the actual transformation of materials into finished
products‖. This definition limits the scope of operation and production management to required skills and equipment easily obtainable. This method enables customer's specific
those activities of an enterprise which is associated with the transformation process of requirements to be included, often as the job progresses. Examples include: hairdressers;
inputs into outputs. The definition does not include the human factors involved in tailoring
production process. It lays stress on materialistic features only.
 Production and Operation Management deals with decision making related to
production processes, so that the resulting goods and services are produced in High technology jobs: high technology jobs involve much greater complexity - and therefore
present greater management challenge. The important ingredient in high-technology job
MRCET MBA MRCET MBA

production is project management, or project control. The essential features of good project The aims of flow methods are:
control for a job are:
 Improved work & material flow
Clear definitions of objectives - how should the job progress (milestones, dates,  Reduced need for labour skills
stages) Decision-making process - how are decisions taking about the needs of each  Added value / completed work faster
process in the job, labour and other resources
Flow methods mean that as work on a task at a particular stage is complete, it must be passed
Examples of high technology / complex jobs: film production; large construction projects
directly to the next stage for processing without waiting for the remaining tasks in the
(e.g. the Millennium Dome)
"batch". When it arrives at the next stage, work must start immediately on the next process. In
order for the flow to be smooth, the times that each task requires on each stage must be of
2. Batch Method
equal length and there should be no movement off the flow production line. In theory,
As businesses grow and production volumes increase, it is not unusual to see the production therefore, any fault or error at a particular stage
process organized so that "Batch methods" can be used.
In order that flow methods can work well, several requirements must be met:
Batch methods require that the work for any task is divided into parts or operations. Each
(1) There must be substantially constant demand
operation is completed through the whole batch before the next operation is performed. By
using the batch method, it is possible to achieve specialization of labour. Capital expenditure
If demand is unpredictable or irregular, then the flow production line can lead to a substantial
can also be kept lower although careful planning is required to ensure that production
build up of stocks and possibility storage difficulties. Many businesses using flow methods
equipment is not idle. The main aims of the batch method are, therefore, to:
get round this problem by "building for stock" - i.e. keeping the flow line working during
quiet periods of demand so that output can be produced efficiently.
 Concentrate skills (specialization)
 Achieve high equipment utilization
(2) The product and/or production tasks must be standardized
This technique is probably the most commonly used method for organizing manufacture. A
Flow methods are inflexible - they cannot deal effectively with variations in the product
good example is the production of electronic instruments.
(although some "variety" can be accomplished through applying different finishes,
decorations etc at the end of the production line).
Batch methods are not without their problems. There is a high probability of poor work flow,
particularly if the batches are not of the optimal size or if there is a significant difference in
(3) Materials used in production must be to specification and delivered on time
productivity by each operation in the process. Batch methods often result in the build up of
significant "work in progress" or stocks (i.e. completed batches waiting for their turn to be Since the flow production line is working continuously, it is not a good idea to use materials
worked on in the next operation). that vary in style, form or quality. Similarly, if the required materials are not available, then
the whole production line will come to a close - with potentially serious cost consequences.
3. Flow Methods
(4) Each operation in the production flow must be carefully defined - and recorded in
Flow methods are similar to batch methods - except that the problem of rest/idle
detail
production/batch queuing is eliminated. Flow has been defined as a "method of production
organization where the task is worked on continuously or where the processing of material is (5) The output from each stage of the flow must conform to quality standards
continuous and progressive,"

MRCET MBA MRCET MBA

Since the output from each stage moves forward continuously, there is no room for sub- Strategies for improving productivity
standard output to be "re-worked" (compare this with job or batch production where it is
 Increased output for the same input
possible to compensate for a lack of quality by doing some extra work on the job or the batch
 Decreased input for the same output
before it is completed).
 Proportionate increase in the output is more than the proportionate increase in the
The achievement of a successful production flow line requires considerable planning, input
particularly in ensuring that the correct production materials are delivered on time and that
 Proportionate decrease in the input is more than the proportionate decrease in the
operations in the flow are of equal duration.
output
Common examples where flow methods are used are the manufacture of motor cars,  Simultaneous increase in the output with decrease in the input
chocolates and televisions.
Project manufacturing Factors Affecting Productivity
It is an operation designed to produce large, expensive, specialized products such as custom Productivity stands tall on four important pillars of Capital, Quality, Management and Techn
homes, defense weapons such as aircraft carriers and submarines, and aerospace products
ology.
such as passenger planes, and the space shuttle. Project manufacturing is highly flexible,
because each project is usually significantly different from the one before it, even if the These pillars are also responsible for positively as well as negatively affecting the Productivit
project‗s size and expense and high degree of customization, project manufacturing can take y ofthe Organization.
an extremely long time to complete. Project Manufacturing is an operation designed to 1. CAPITAL: An existing machine or facility if it
produce unique but similar products. It takes advantage of common manufacturing
is not functioning upto full capacity or turningout products which are not acceptable can lowe
requirements (and therefore efficiencies), while allowing for customization into ―unique‖
combinations. Unique orders may be managed like a project. The more components of that r productivity. A new machineor repair of existing machine would require capital input.
order that are common to other unique orders the more they may be manufactured – taking 2. QUALITY: Poor quality products would not meet customer requirements and would need
advantage of manufacturing methodology. Project Manufacturing then is the melding of
repairs and reworks on the product to meet the standards.
Manufacturing and Project Management at a level where the most advantage may be gleaned
from each to the financial advantage of the company. 3. MANAGEMENT:
With better scheduling, planning, coordinating and controlling activities of management the
machine operations can be carried to improve productivity.
PRODUCTIVITY
Effectiveness of production and operation system may be viewed as the efficiency with 4. TECHNOLOGY:
which inputs are converted into outputs. The conversion efficiency can be gauged by ratio of Technological improvements have increased productivity. Machinesof todaywould outperfor
the output to the inputs and is commonly known as productivity of the system.
m machineofyesterday but may not withstand machines of tomorrow.
Productivity = Output/Input
5. CAUTION: Without careful planning technology can reduce productivity as

Productivity describes various measures of the efficiency of production. Productivity is a it often leads to increased costs, inflexibility or mismatched operations.
crucial factor in production performance of firms and nations. Increasing national All leads to reduction in value.
productivity can raise living standards because more real income improves people's ability to CORPORATE STRATEGIES
purchase goods and services, enjoy leisure, improve housing and education and contribute to
social and environmental programs. Productivity growth also helps businesses to be more
profitable.
MRCET MBA MRCET MBA

A corporate strategy entails a clearly defined, long-term vision that organizations set, seeking  Liquidation strategy
to create corporate value and motivate the workforce to implement the proper actions to
4. Combination Strategies
achieve customer satisfaction. In addition, corporate strategy is a continuous process that
requires a constant effort to engage investors in trusting the company with their money,  Simultaneous strategy
thereby increasing the company‗s equity. Organizations that manage to deliver customer  Sequential strategy
value unfailingly are those that revisit their corporate strategy regularly to improve areas that
may not deliver the aimed results. 5. Generic Competitive Strategies

1. Corporate Strategies  Overall cost leadership strategy

 Stable growth strategies  Differentiation strategy
 Focus strategy
 Growth strategies
 Concentration on a single product or services 6. Functional Strategies
 Concentric diversification
 Vertical diversification  Marketing strategies

 Horizontal diversification  Financial strategies

 Conglomerate diversification  Personnel strategies

 Production/Manufacturing strategies

The above corporate strategies are taken based on the stages of business life cycle. These may
pertain to different aspects of a firm, yet the strategies that most organizations use are cost
leadership and product differentiation.
2. Endgame strategies
Cost leadership is a strategy that organizations implement by providing their products and
 Leadership strategy
services as low as consumers are willing to pay, thereby being competitive and realizing a
 Niche strategy
volume of sales that allows them to be the leaders in the industry. Typical examples of cost
 Harvest strategy
leaders are Wal-Mart in the retail industry, McDonalds in the restaurant industry, and Ikea,
 Disinvestment strategy
the furniture retailer that offers low-priced, yet good quality home equipment by sourcing its

3. Retrenchment strategies products in emerging markets, thereby having a high-profit margin.

 Turnaround strategy Product differentiation refers to the effort of organizations to offer a unique value

 Disinvestment strategy proposition to consumers. Typically, companies that manage to differentiate their products

MRCET MBA MRCET MBA

 a firm can achieve and sustain overall cost leadership, then it will be an above average
from the competition are gaining a competitive edge, thereby realizing higher profits. Often,
performer in its industry, provided it can command prices at or near the industry average.
competitors employ cost leadership to directly compete with these companies; yet, customer
2. Differentiation
satisfaction and customer loyalty are the factors that eventually make or break a strategy.
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions
that are widely valued by buyers. It selects one or more attributes that many buyers in an
Other examples of corporate strategies include the horizontal integration, the vertical industry perceive as important, and uniquely positions itself to meet those needs. It is
rewarded for its uniqueness with a premium price.
integration, and the global product strategy, i.e. when multinational companies sell a
homogenous product around the globe. 3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an
Corporate strategies are always growth-oriented, seeking to retain a company‗s existing industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others.
customer base while attracting new customers. The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while
in (b) differentiation focus a firm seeks differentiation in its target segment. Both
Generic Competitive Strategies:
variants of the focus strategy rest on differences between a focuser's target segment
and other segments in the industry. The target segments must either have buyers with
A firm's relative position within its industry determines whether a firm's profitability is above
unusual needs or else the production and delivery system that best serves the target
or below the industry average. The fundamental basis of above average profitability in the
segment must differ from that of other industry segments. Cost focus exploits
long run is sustainable competitive advantage. There are two basic types of competitive
differences in cost behaviour in some segments, while differentiation focus exploits
advantage a firm can possess: low cost or differentiation. The two basic types of competitive
the special needs of buyers in certain segments.
advantage combined with the scope of activities for which a firm seeks to achieve them, lead
to three generic strategies for achieving above average performance in an industry: cost
leadership, differentiation, and focus. The focus strategy has two variants, cost focus and
differentiation focus.
Functional Strategies:
Functional strategy - organizational plans prepared for various functional areas of a
company's organizational structure (e.g., marketing strategy, financial strategy, production
strategy etc.). Functional strategies can be part of overall corporate strategy or serve as
separate plans of strategy cascading/implementation within a functional area. [1]
Some common functional strategies are:

 Production strategy ("make or buy") - defines what the company produces itself, and
those purchases from suppliers or partners, that is, how far worked out the production
chain.
 Financial Strategy- to select the main source of funding: the development of their
1. Cost Leadership own funds (depreciation, profit, the issue of shares, etc.) or through debt financing (bank
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources loans, bonds, commodity suppliers' credits, etc.).
of cost advantage are varied and depend on the structure of the industry. They may include  Organizational strategy- decision on the organization of the staff (choose the type
the pursuit of economies of scale, proprietary technology, preferential access to raw materials of organizational structure, compensation system, etc.).
and other factors. A low cost producer must find and exploit all sources of cost advantage. if  Others, such as: research and development (R & D) strategy, investment strategy, etc.

MRCET MBA MRCET MBA

In addition, each of the functional strategies can be divided into components. For example, economic performance. If, on the other hand, the GDP rises from the previous year, the
organizational strategy can be divided into three components: government will propose policies to maintain economic growth, but will also seek to prevent
inflation.
 Strategy of building organizations - to select the type of structure (divisional,
functional, project, etc.); 3. Interest Rate Changes
 strategy to work with the staff - a way of training (mainly administrative staff),
Rising or shrinking GDP also affects interest rates. The interest rate refers to the amount of
training of staff (in a business or educational institutions), career planning, etc.;
money charged for loans. In the U.S., the Federal Reserve sets the basic interest rates. If the
 Strategy of remuneration (wages, rewards and penalties) - in particular, the approach
GDP rises, it means the economy has grown. GDP growth also means that people are
to the compensation of senior managers (salary, bonuses, profit sharing, etc.).
spending more money to purchase goods on the market. To prevent inflation, the Federal
Responsible for implementation of the strategy at the functional level are senior specialists
Reserve will raise the prime interest rate, making the supply of money scarcer. When the
(Ch. Engineer, Director of Finance). At the enterprise level - CEO, general director or
GDP shrinks, the Federal Reserve often lowers the interest rate, making it easier to borrow
director of the department, at the level of groups of companies - a collegiate body (board of
money and encouraging expenditures.
directors).

When the economy is healthy, you will typically see low unemployment and wage increases
GROSS DOMESTIC PRODUCT AND ITS IMPACT as businesses demand labor to meet the growing economy. A significant change in GDP,
whether up or down, usually has a significant effect on the stock market. It's not hard to
Gross domestic product (GDP) measures the value of a country‗s overall goods and services
understand why; a bad economy usually means lower earnings for companies, which
at market prices, without including income from abroad. In the U.S., for example, GDP
translates into lower stock prices. Investors often pay attention to both positive and negative
figures are released quarterly. Although the GDP gauges the economy‗s health, it can also
GDP growth when assessing an investment idea or coming up with an investment strategy.
have either a positive or negative effect on the economy. Because of its importance, financial
analysts and government officials pay close attention to the GDP.

Business Planning
Businesses use the GDP as a planning tool to decide whether they will expand or contract in
the coming year. If the GDP has grown since the last year, a company may take the growth as
a positive sign and hire more employees, build a new factory or purchase more raw materials
for production. Conversely, when the GDP shrinks, firms may not focus on expanding their
operations. Instead, many will concentrate on survival.

1. Change the Values

When a country releases its GDP data, its currency can appreciate or depreciate as a result.
Let‗s say that the U.S. releases its GDP for the past year, and the GDP has risen since the last
time the data was published. It will likely take more of a foreign currency--for example, the
British pound--to buy fewer U.S. dollars. If the U.S. GDP shrinks in comparison to the
previous year, it will generally cost fewer British pounds to buy more U.S. dollars.

2. Government Policies

As the GDP measures economic performance, governments watch it closely. A low GDP will
cause a government to embark on a different economic policy, one which will boost
MRCET MBA MRCET MBA
WORLD CLASS MANUFACTURING  Reduction of set up time and in tuning of machinery: It is important that
organizations are able to cut back time in setting up machinery and also tune
Introduction machinery before production.
 Cellular Manufacturing: It is important that production processes are divided into
Manufacturing has evolved considerably since the advent of industrial revolution. In current according to its nature, with similar nature combined together.
 Reduce WIP material: It is normal tendency of manufacturing organization to
global and competitive age, it is very important for organization to have manufacturing
practice which is lean, efficient, cost-effective and flexible. maintain high levels of WIP material. Increased WIP leads to more cost and decreased
WIP induces more focus on production and fast movement of goods.
World class manufacturing is a collection of concepts, which set standard for production and  Postpone product mutation: For to achieve a higher degree of customization many
manufacturing for another organization to follow. Japanese manufacturing is credited with changes are made to final product. However, it is important that mutation conceived
pioneer in concept of world-class manufacturing. World class manufacturing was introduced for the design stage implement only after final operation.
in the automobile, electronic and steel industry.  Removal the trivial many and focus on vital few: It is important for organization to
focus on production of products which are lined with forecast demand as to match
World class manufacturing is a process driven approach where various techniques and customer expectation.
philosophy are used in one combination or other.

Some of the techniques are as follows:

 Make to order
 Streamlined Flow
 Smaller lot sizes
 Collection of parts Principles of World Class Manufacturing
 Doing it right first time
 Cellular or group manufacturing There are three main principles, which drive world-class manufacturing.
 Total preventive maintenance
 Quick replacement  Implementation of JIT and lean management leads to reduction in wastage thereby
 Zero Defects reduction in cost.
 Just in Time  Implementation of TQM leads to reduction of defects and encourages zero tolerance
 Increased consistency towards defects.
 Higher employee involvement  Implementation of Total Preventive Maintenance leads to any stoppage of production
 Cross Functional Teams through mechanical failure.
 Multi-Skilled employees
 Visual Signaling
 Statistical process control

Idea of using above techniques is to focus on operational efficiency, reducing wastage and
creating cost efficient organization. This leads to creation of high-productivity organization,
which used concurrent production techniques rather than sequential production method.

World class manufacturers tend to implement best practices and also invent new practices as
to stay above the rest in the manufacturing sector. The main parameters which determine
world-class manufacturers are quality, cost effective, flexibility and innovation.

Steps to Achieve World Class Manufacturing

World class manufacturers implement robust control techniques but there are five steps,
which will make the system efficient. These five steps are as follows:

MRCET MBA MRCET MBA

UNIT 2 It is, therefore clear that product development is an important aspects of the operation
management function in every organization, be it services or manufacturing. An organization
armed with good product development process will be in a better position to bring new products
Product Design and analysis and services to the market ahead of competition and will be able to retain customers and its
market share in the sector.
INTRODUCTION
Aspects of Product Design and Analysis
A company has to be good at developing new products, without products there would be no
customers. Without customers, there would be no revenue. Developing a new product is a major  Design for Function: A product must perform the function which its customer
activity. Thomas Alva Edison, with as many as 1,300 inventions and 1100 patents to his credit expects it to do. If a product is designed by taking its functional features into account,
,said about the product development process,‖ Genius is 1 per cent inspiration and 99 per cent then it will create satisfied customers, and will further lead to having more repeat
perspiration,‖ Product development requires more of perspiration and less of genius to be customers. The factors which are to be considered for functional design are strength
successful. The company also must manage them in the face of changing tastes, technologies and and wear-ability of the product and its components
competitions. Every product seems to go through a life cycle—it is born. Goes through several  Design for Making: A product design that solves the functional problem smoothly,
phases, and eventually dies as newer products come along that better serve the consumers needs. but is impossible to manufacture, is of no use. Attention must be given to materials,
fastening devices etc., while designing a product. The hardness of the material
The product life cycle presents two major challenges:
specified at the design stage must be within the permitted range while machining. In
 First, because all products eventually decline, the firm must find new products to replace
some intricate design, to join components, we may require small size fasteners. If
aging ones (the problem of product development).
these are not available in the market, then the design may become infeasible at the
 Second, the firm must understand how the products age and adapt its marketing strategies
manufacturing stage. Making use of standard parts is an important aspect of product
as product pass through life cycle stages (the problem of product life-cycle strategies
design. Also, operational convenience of the machineries must be taken into account
The Operation management addresses the issue of innovation for product development by at the design stage.
enabling firms with some distinctiveness in their offerings. The distinctiveness may be on  Design for Selling: A product that functions well and is easy to make, but is wanted
account of products/services offered, technologies and channel employed and various processes by no one is of no avail. It makes no difference whether the product is pen or a CNC
used while providing the product or services to the customers. In recent years we have been machine; it has to sell itself to the customers. The features like, appearance and
witnessing a rise in customer expectations with respect to the products and services offered. convenience, depending on the customers‗ needs are to be considered.
Firms can benefits in this scenario, either by offering highly differentiated products and services
or by offering very cost effective products. Furthermore, firms can also benefit by bringing these NEW PRODUCT DEVELOPMENT
products and services much faster than the competitors and gain from the early mover advantage,
In order to achieve this, firms need to have a robust mechanism to understand customers‗ A successful product development requires a total-company effort. The most successful
expectations. Firms must also have the capability to reach faster once the expectations are innovating companies make a consistent commitment of resources to product development,
understood. In the 1950sand 1960s Hindustan Motors introduced variations of its Ambassador design a new product strategy that is linked to their strategic planning process, and set up formal
(Mark 2, Mark3 and so on) roughly once in ten years. Today, no automobile manufacturer can and sophisticated organizational arrangements for managing product development process. The
afford to take that much time to introduce new products and variations of existing ones. A good product development process for finding and growing new products consist of eight major steps
product development process addresses these issues and provides a firm with a set of tools, as explained below:
techniques and concepts to bring products faster and cheaper into the market and realize the
associated gains. Step 1: Generating
Organizations have experienced several tangible benefits from good product development Utilizing basic internal and external SWOT analyses, as well as current marketing trends, one
processes. Some of them are: can distance themselves from the competition by generating ideologies which take
affordability, ROI, and widespread distribution costs into account.
 The International Motor Vehicles Programme showed that while Japanese manufacturers Lean, mean and scalable are the key points to keep in mind. During the NPD process, keep
such as Honda and Toyota introduced as many as 85 models between1982 and 1989, their the system nimble and use flexible discretion over which activities are executed. You may
American counterpart were able to introduce only 49 models . This significantly affected want to develop multiple versions of your road map scaled to suit different types and risk
the competitive positioning of these firms. levels of projects.
Step 2: Screening the Idea
 Another study analyzed the market impact of new product introduction. It was shown that Wichita, possessing more aviation industry than most other states, is seeing many new
by introducing products six months ahead of competitors, a firm can gain as much as innovations stop with Step 2 – screening. Do you go/no go? Set specific criteria for ideas that
three times the cumulative profit earned over the life of the product
should be continued or dropped. Stick to the agreed upon criteria so poor projects can be sent

MRCET MBA MRCET MBA

back to the idea-hopper early on. Because product development costs are being cut in areas
like Wichita, “prescreening product ideas, ―means taking your Top 3 competitors‗ new Step 7: Commercialize
innovations into account, how much market share they‗re chomping up, what benefits end
At this stage, your new product developments have gone mainstream, consumers are
consumers could expect etc. An interesting industry fact: Aviation industrialists will often purchasing your good or service, and technical support is consistently monitoring progress.
compare growth with metals markets; therefore, when Boeing is idle, never assume that all Keeping your distribution pipelines loaded with products is an integral part of this process
airplanes are grounded, per se. too, as one prefers not to give physical (or perpetual) shelf space to competition. Refreshing
advertisements during this stage will keep your product‗s name firmly supplanted into the
Step 3: Testing the Concept minds of those in the contemplation stages of purchase.
As GauravAkrani has said, “Concept testing is done after idea screening.” And it is
important to note, it is different from test marketing. Step 8: Post Launch Review and Perfect Pricing
Aside from patent research, design due diligence, and other legalities involved with new Review the NPD process efficiency and look for continues improvements. Most new
product development; knowing where the marketing messages will work best is often the products are introduced with introductory pricing, in which final prices are nailed down after
biggest part of testing the concept. Does the consumer understand, need, or want the product consumers have ‗gotten in‗. In this final stage, you‗ll gauge overall value relevant to COGS
or service? (cost of goods sold), making sure internal costs aren‗t overshadowing new product
profits. You continuously differentiate consumer needs as your products age, forecast profits
Step 4: Business Analytics and improve delivery process whether physical, or digital, products are being perpetuated.
During the New Product Development process, build a system of metrics to monitor progress.
Include input metrics, such as average time in each stage, as well as output metrics that STEPS OF PRODUCT DESIGN
measure the value of launched products, percentage of new product sales and other figures
that provide valuable feedback. It is important for an organization to be in agreement for Designing a product is not simple to do. Many different ideas may come to mind for a new
these criteria and metrics. product, but not all of those ideas will be unique and function properly, which is important
Even if an idea doesn‗t turn into product, keep it in the hopper because it can prove to be a when creating a new product. Product design
valuable asset for future products and a basis for learning and growth. is when you create a brand-new product to
sell to customers. There are several different
stages to completing a product and making it
Step 5: Beta / Marketability Tests
successful.
Arranging private tests groups, launching beta versions, and then forming test panels after the
product or products have been tested will provide you with valuable information allowing last For instance, you work for a toy company.
minute improvements and tweaks. Not to mention helping to generate a small amount of You want to create a brand-new toy for
buzz. Word Press is becoming synonymous with beta testing, and it‗s effective; Thousands of customers to buy. To do this, you would
programmers contribute code, millions test it, and finally even more download the completed follow the steps of the product design process:
end-product. create an idea, determine product feasibility,
test the product, and then launch the product
Step 6: Technicalities + Product Development for customers to buy. Once all the necessary
Provided the technical aspects can be perfected without alterations to post-beta products, steps are finished, you can now enjoy the
heading towards a smooth step 7 is imminent. According to Akrani, in this step, ―The fruits of your labor.
production department will make plans to produce the product. The marketing department
will make plans to distribute the product. The finance department will provide the finance for
introducing the new product‖.  Idea Creation
As an example; In manufacturing, the process before sending technical specs to machinery During the idea creation stage, the company comes up with new concepts to create a product.
involves printing MSDS sheets, a requirement for retaining an ISO 9001 certification (the You want to concentrate on creating a product that will be useful to customers while also
organizational structure, procedures, processes and resources needed to implement quality being a good fit for the company. Creating products that fit with the company's purpose is
management.) important because you want customers to have a clear representation of your brand.
In internet jargon, honing the technicalities after beta testing involves final database
preparations, estimation of server resources, and planning automated logistics. Be sure to To come up with a new concept, it would be best for a bunch of employees to work together
have your technicalities in line when moving forward. and throw around ideas on what product should be developed. Imagine you are sitting at a

MRCET MBA MRCET MBA

table having a conversation with yourself about developing a product. You may have a good The sequence of operations in the manufacturing process is determined by
idea, but when there are a group of people, the idea can be even better. Joining ideas can help
one good idea become a great idea, because other people can help develop functions that can 1. The nature of the product
be beneficial to the product. 2. The materials used
3. The quantities being produced
 Product Feasibility 4. The existing physical layout of the plant.

Once all of the ideas have been created, the company has to determine the product feasibility.  Operations Design
It is up to the research and development team to analyze the ideas and determine which
products can be created and manufactured. The R&D team then will create a prototype to Operations design is concerned with the design of the individual manufacturing operations .It
give the company an idea of how the product will look and function. The prototype should consists of examining the man-machine relationship in the manufacturing process for
mirror what the actual product will be like, and once it does, it's time for the next step. converting the raw materials into the finished or semi-finished product .Operations design
must specify how much of man and machine time is required for each unit of production.
 Product Testing
Frame Work for Process Design
Now that the product has a prototype, is is ready for product testing among employees and
customers. Customer testing is important because this will determine whether the product is The design of the transformation process requires answers to several questions given below:
effective. Customers can give information on what improvements or changes are needed for
the product. Depending on the success of the testing, the product may have to go back to the 1. What are the characteristics of the product or service being supplied or offered to the
research and development team for changes. customer?

PROCESS PLANNING AND DESIGN 2. What is the expected volume of the output?

process planning is concerned with planning the conversion or transformation processes 3. What kinds of equipment or machinery are available?
needed to convert the materials into finished products .A production process is a series of
manufacturing operations performed at workstations to achieve the design specifications of 4. Should the equipment or machinery be custom built?
the planned output .A vast number of different operations and various kinds of equipments
and machines may be required to produce a complex product (for e.g. an aircraft or a ship). 5. What is the cost of equipment and machinery needed?
Simpler parts may require fewer operations (for e.g. a bolt and a nut).
6. What types of labor skills are available, in what quantities and at what wage rates?

7. How much money can be spent on the manufacturing process?

8. Should the process be capital intensive or labor intensive?

Process planning consists of two parts namely
9. Should the components or parts be made or purchased?(Make or buy decision)
1. Process design
2. Operations design 10. Which would be the best way to handle the materials?

Both stages provide information on what is required to effectively utilize the existing RESPONSIBILITIES OF PROCESS PLANNING ENGINEER
equipment and machinery and to determine what new equipment and machinery would be
required.  Prepare various strategies for all planning activities for projects.
 Maintain all asset investment plans and ensure compliance to capital expenditure.
 Process Design  Ensure accuracy for all operational requirements for projects and achieve all
investment objectives.
Process design is concerned with the overall sequence of operations required to achieve the  Evaluate all system capacity and analyze all production requirement and system
product specifications. It specifies the type of work stations that are to be used, the machines deficiencies.
and equipment necessary and the quantities in which each are required.  Provide support to all operations and extension requests.
MRCET MBA MRCET MBA
  Manage work as per component technical resource for all Water System Plans and Work selected for method study may be an identified problem area or an identified
assist to prepare all capital plans and project requirements. opportunity. It may be identified through a systematic review of available data, normal
 Analyze all engineering activities for all internal and external departments. monitoring or control processes, high levels of dissatisfaction and complaint or as part of a
 Prepare required presentation for all regulatory agencies. change in management policy, practice, technology or location, and usually because it meets
 Develop required to enhance performance of planning projects. certain conditions of urgency and/or priority.
 Manage all communication and provide efficient feedback for all processes.
 Ensure optimal utilization of all common tools and processes.  Record
 Prepare plans and schedule for all project delivery.
 Recommend appropriate improvements and ensure optimal quality of all project The Record stage of method study involves gathering sufficient data (in terms of both quality
schedules and evaluate reports. and quantity) to act as the basis of evaluation and examination. A wide range of techniques
 Perform regular analysis of all schedule trends. are available for recording; the choice depends on the nature of the investigation; the work
 Maintain an efficient performance of all schedule and analyze all software tools being studied; and on the level of detail required. Many of the techniques are simple charts
and assist in transmission and distribution of all various projects. and diagrams, but these may be supplemented by photographic and video recording, and by
 Administer all distribution and transmission system. computer based techniques.
 Manage all customer site and maintain product suite for all applications.
Especially with "hard" (clearly defined) problems, method study often involves the
 Evaluate all alternative transmissions for all distribution systems and install all
construction and analysis of models, from simple charts and diagrams used to record and
required AMSC products.
represent the situation to full, computerized simulations. Manipulation of and
experimentation on the models leads to ideas for development.
WORK STUDY
 Examine
1. Method Study
The recorded data are subjected to examination and analysis. Formalized versions of this
Method study is the process of subjecting work to systematic, critical scrutiny to make it process are critical examination and systems analysis. The aim is to identify, often through a
more effective and/or more efficient. It is one of the keys to achieving productivity structured, questioning process, those points of the overall system of work that require
improvement. improvements or offer opportunity for beneficial change.
It was originally designed for the analysis and improvement of repetitive manual work but it
 Develop
can be used for all types of activity at all levels of an organisation.
The Examine stage merges into the Develop stage of the investigation as more thorough
The process is often seen as a linear, described by its main steps of:
analysis leads automatically to identify areas of change. The aim here is to identify possible
actions for improvement and to subject these to evaluation in order to develop a preferred
 Select (the work to be studied);
solution.
 Record (all relevant information about that work);
 Examine (the recorded information);
Sometimes it is necessary to identify short-term and long-term solutions so that
 Develop (an improved way of doing things);
improvements can be made (relatively) immediately, while longer-term changes are
 Install (the new method as standard practice);
implemented and come to fruition.
 Maintain (the new standard proactive).

Although this linear representation shows the underlying simplicity of method study, in  Install
practice the process is much more one of repeated passes through the sequence of steps with
each dominating at a different stage of the investigation? The success of any method study project is realized when actual change is made 'on the
ground' - change that meets the originally specified terms of reference for the project. Thus,
The cyclic process often starts with a quick, rough pass in which preliminary data are the Install phase is very important. Making theoretical change is easy; making real change
collected and examined before subsequent passes provide and handle more comprehensive demands careful planning - and handling of the people involved in the situation under review.
and more detailed data to obtain and analyze a more complete picture. They may need reassuring, retraining and supporting through the acquisition of new skills.
Install, in some cases ,will require a parallel running of old and new systems, in others, it may
need the build-up of buffer stocks, and other planning to manage the change. what matters is
 Select
MRCET MBA MRCET MBA

that the introduction of new working methods is successful. There is often only one chance to 4. It is used in balancing production lines for new products.
make change!
5. Wok measurement is used in determining machine effectiveness.
 Maintain
6. To determine time standards to be used as a basis for labour cost control.
Some time after the introduction of new working methods, it is necessary to check that the
new method is working, that it is being properly followed, and that it has brought about the 7. To establish supervisory objectives and to provide a basis for measuring supervisory
desired results. This is the Maintain phase. Method drift is common - when people either efficiency.
revert to old ways of working, or introduce new changes. Some of these may be helpful and
should formally be incorporated; others may be inefficient or unsafe. A methods audit can be 8. To determine time standards to be used for providing a basis for wage incentive plans.
used to formally compare practice with the defined method and identify such irregularities.
VALUE ANALYSIS (VA) AND VALUE ENGINEERING (VE)
2. Work Measurement
Value Analysis is one of the major techniques of cost reduction and control. It is a disciplined
Work measurement is concerned with the determination of the amount of time required to approach which ensures the necessary functions for the minimum cost without diminishing
perform a unit of work. Work measurement is very important for promoting productivity of quality, reliability, performance and appearance.
an organization. It enables management to compare alternate methods and also to do initial
staffing. Work measurement provides basis for proper planning. It is a creative approach to eliminate the unnecessary costs which add neither to quality nor to
the appearance of the product. It is a systematic application of techniques to identify the
Since it is concerned with the measurement of time it is also called ‗Time Study‗. The exact functions of a product or a component and to provide the desired function at the lowest total
examination of time is very essential for correct pricing. To find the correct manufacturing cost.
time for a product, time study is performed. To give competitive quotations, estimation of
accurate labour cost is very essential. It becomes a basis for wage and salary administration These are the days of providing the customer with really best quality products at least cost
and devising incentive schemes. which is possible through value analysis which proves wrong rightly ―Best and Cheap‖ or
―Best is never cheap‖ or ―Cheap is Costly‖.
Objectives of Work Measurement:
 Value Analysis (VA) specifically deals with products already in production and is a
cost reduction technique. It is used to analyze product specifications as shown in
1. To compare the times of performance by alternative methods.
production documents to achieve similar or better performance at a lower cost while
maintaining all functional requirements defined by the customer.
2. To enable realistic schedule of work to be prepared.
 Value engineering is performed before the production stage and is considered a cost
3. To arrive at a realistic and fair incentive scheme. avoidance method.

4. To analyze the activities for doing a job with the view to reduce or eliminate unnecessary Value = Function/Cost
jobs.
Merits of Value Analysis:
5. To minimize the human effort.
Value analysis is really a very valuable technique of cost reduction and quality improvement.
6. To assist in the organization of labour by daily comparing the actual time with that of The specific merits of its are:
target time.
1. Improvement in Product Design:
Uses of Work Measurement:
It leads to improvements in the product design so that more useful products are given shape.
1. Wok measurement is used in planning work and in drawing out schedules. Now in case of ball points, we do not have clogging, there is easy and even flow of ink and
rubber pad is surrounding that reduces figures fatigue.
2. Wok measurement is used to determine standard costs.

3. Wok measurement is used as an aid in preparing budgets.

MRCET MBA MRCET MBA
2. High Quality is maintained: 9. Wide Spectrum of Application:

High quality implies higher value. Thus, dry cells were leaking; now they are leak proof; they The principles and techniques of value analysis can be applied to all areas-man be
are pen size with same power. Latest is that they are rechargeable. purchasing, hardware, products, systems, procedures and so on.

3. Elimination of Wastage: 10. Building and Improving Company Image:

Value analysis improves the overall efficiency by eliminating the wastages of various types. The company‗s status or image or personality is built up or improved to a great extent.
It was a problem to correct the mistakes. It was done by pasting a paper. Now, pens are there Improvement in quality and reduction in cost means competitive product and good name in
and liquid paper is developed which dries fast and can write back. product market; it is a good pay master as sales and profits higher and labour market it enjoys
reputation; it capital market, nobody hesitates to invest as it is a quality company.
4. Savings in Costs:
History of Value Analysis:
The main aim of value analysis is to cut the unwanted costs by retaining all the features of
performance or even bettering the performance. Good deal of research and development has Value engineering began at General Electric Co. during World War II. Because of the war,
taken place. Now milk, oils, purees pulp can be packed in tetra packing presuming the there were shortages of skilled labour, raw materials, and component parts. Lawrence Miles,
qualities and the tetra pack is degradable unlike plastic packs. Jerry Leftow, and Harry Erlicher at G.E. looked for acceptable substitutes. They noticed that
these substitutions often reduced costs, improved the product, or both. What started out as an
5. Generation of New Ideas and Products: accident of necessity was turned into a systematic process. They called their technique "value
analysis".
In case of took brushes, those in 1930‗s were flat and hard, over 60 to 70 years brushes have
come making brushing teeth easy, cosy and dosy as it glides and massages gums. When to apply Value Analysis:
We apply value analysis when we need……
6. Encourages Team-Spirit and Morale:
Value analysis is a tool which is not handled by one, but groups or teams and an organisation  Eliminating Costs
itself is a team of personnel having specification. A product is the product of all team efforts.
Therefore, it fosters team spirit and manures employee morale as they are pulling together for A critical advantage to using value analysis is its potential for reducing costs, which is a
greater success. benefit that permeates all advantages of the system. Because value analysis breaks down a
product or service into components, it enables you to analyze each component on its own,
7. Neglected Areas are brought under Focus:
evaluating its importance and efficiency. A value analysis correctly implemented and applied
The organizational areas which need attention and improvement are brought under the spot- allows you to identify components that are not worth the cost they require and that can be
light and even the weakest gets a chance of getting stronger and more useful finally join‗s the eliminated or replaced with an alternative. In this manner, the process for the product or
main strain.
service being analyzed is refined to be done at less expense.
8. Qualification of Intangibles:
 Modernizing
The whole process of value analysis is an exercise of converting the intangibles to tangible
for decision making purpose. It is really difficult to make decisions on the issues where the The value analysis process often allows users to root out practices that have grown out of date
things are (variables) not quantifiable. and can be replaced with more modern approaches. This is particularly beneficial when
However, value analysis does it. The decision makers are provided with qualified data and on something has been done the same way for an extended period of time. Because the old way
the basis of decisions are made. Such decisions are bound to be sound. works and was new when it was instituted, you have had little impetus to make changes.
However, a value analysis, which calls for questioning every step of a process, can reveal
new methods that are cheaper, more efficient and sometimes more effective.
MRCET MBA MRCET MBA

 Efficiency – It increases the efficiency of employees as it motivates them to come

 Design Flaws forward with their creative ideas. It also makes contributions to improve human
Value analysis can uncover design flaws that not only operate inefficiently but also create factors such as creativity, team work and positive attitude among employees. The
problems. In the case of a product, this could mean a high rate of malfunctioning items, team approach also improves the decision making.

creating customer complaints and warranty claims that put a strain on personnel and
 Time consideration – A product has value for the customer if it is available to
him on time. So time element has great importance in value engineering. It may have
inventory. It also can lead to bad publicity and damage to the product brand and the company
no value if it arrives later.
producing it. Similarly, in the case of a service, value analysis can help pinpoint design flaws
 Improvement in quality – This results in improvement in quality, reliability,
in the customer support system that causes service to fall short of customer expectations.
performance and maintainability of a product.

 Customer Service
Value analysis is oriented to weigh costs and the benefit to customers of a product or
service. It forces you to consider every aspect of a process in the context of how it
serves the customer, which could be a consumer or another business. This means that
Value Engineering Procedure:
each step in the process is scrutinized and questioned from the perspective of the
benefit that it provides the customer. If the benefit to the customer is small and the The 6 Steps of a Value Analysis
step is not necessary for the product or service as a whole, it can be eliminated,
allowing you to streamline your operation and to reduce the use of resources. 1. Blast
Functions  Identify the product and collect relevant information
―Specific purposes or intended use of an item (What is this? What is it supposed to do? What
In this first phase, the team attempts to understand why the project exists and who or what it
else can it do? ) is to produce. They obtain project data, present the original design or product concepts, and
 Function is that which makes a product, process or project work or sell. understand the project scope. Schedule, costs, budget, risk, and other non-monetary issues are
studied until the team is comfortable with the concept of the project, what it is to produce,
 All cost is for function.
and who its end users are.
 Primary functions posses value and are required to make a product work or sell.
 Secondary functions have no value and are present due to the current design of the This step also includes things like site visits and meetings with the project team, if required.
product. Project documents like plans, drawings, specifications, and reports are obtained and the value
 That characteristic that makes a product or service have value. engineering team becomes familiar with them.
 Determine by considering the user‗s actual needs.
 Define Different Functions
Aims of value engineering/value analysis:
This step represents the meat and potatoes of the value analysis. The team attempts to
 Increased profits – With the cost reduction of a product, the profits of an determine the functions the project serves. Functions come in two forms:
organization increased. This results in time reduction. It also ensures greater returns 1. Primary functions are those that represent the reason for the project‗s existence, for
on invested capital. The competitive position of company also improves. example, a building project might have adequate plumbing as a primary function.
2. Secondary functions are those that the project serves without being core to the
project.
 Improved product Design – With the modification in design, the customer will
get a new and more acceptable product. This phase represents the generation of improvement ideas. The team develops
alternative ways that the project can perform the functions that have been identified. At this

MRCET MBA MRCET MBA

step, the functions are looked at individually and each one gets a list of alternative ways to 1. Manufacturing Industry
perform the function. There is no judging between the importance of the various functions. 2. Services Industry
3. Construction Industry
2. Create 4. Product Design

 Different Alternatives STANDARDIZATION

This phase represents the generation of improvement ideas. The team develops
alternative ways that the project can perform the functions that have been identified. At this Standardization means producing maximum variety of products from the minimum variety of
step, the functions are looked at individually and each one gets a list of alternative ways to materials, parts, tools and processes. It is the process of establishing standards or units of
perform the function. There is no judging between the importances of the various functions. measure by which extent, quality, quantity, value, performance etc., may be compared and
measured.

 Advantages of Standardization
 Critically Evaluate each Alternatives
All the sections of company will be benefited from standardization as mentioned below.
At this stage, a priority is given to each project improvement idea. The ideas are discussed
and potential costs are determined. Once the risk-reward profile of each idea is itemized, the 1. Benefits to Design Department
team has determined which ideas are worth implementing into the project or feature.
 Fewer specifications, drawings and part list have to prepared and issued.
A few years ago, there was a pedestrian bridge built near my home which was originally
 More time is available to develop new design or to improve established design.
designed for emergency vehicles. Although this type of design is standard practice for the
bridges of this type, the value engineering team identified that emergency vehicle passage  Better resource allocation.
was not needed (verb/noun pair = ‗maintain passage for emergency vehicles‗). Also, a second
 Less qualified personnel can handle routine design work.
major outcome of this value analysis was to change the design to an aesthetic, curved bridge
because it was in a prominent location. The redesign of the bridge cost some money but this
was more than made up by the cost of the bridge construction. Thus, the value analysis paid 2. Benefits to Manufacturing Department
for itself about 10 times over in the reduced construction cost, and the bridge was
significantly more aesthetic.  Lower unit cost.
 Better quality products.
3. Refine:  Better methods and tooling.

 Develop the best alternative  Increased interchangeability of parts.

 Better utilization of manpower and equipment.
Once the value improvement options have been whittled down to the ones that make sense,
the value engineering team develop the options to the point of passing them back to the  Accurate delivery dates.
original project team. They must be clearly written and explained so that the project owner  Better services of production control, stock control, purchasing, etc.
and stakeholders can understand how it benefits the project and act on it. Any potential
negative factors are identified. Potential costs and cost savings are itemized.  More effective training.

 Implement the Alternative Standardization Procedure:

This last phase represents the presentation of the alternatives to the stakeholders. Often value 1) The first step consists of emerging of a proposal for a new standard or the revision
engineering represents a change in the normal practices that people are used to, an ―out of the or the amendment of an existing standard. The proposal can emerge from a
box thinking.‖ Thus the best salesperson on the team is often the best one to do the representative of any sector of the economy (such as a trade association or a
presentation. professional association).

Application Areas:
MRCET MBA MRCET MBA

2) The directorate of the standardization organization preliminarily examines the 1. Standardization Statistics
proposal to determine whether it is consistent with the underlying principles for 2. Standardization Chemistry
the preparation of standards. 3. Standardization IT Infrastructure
3) The division council of the standardization organization decides to approve or
reject the proposal for the preparation of new standard or amendment of the Ergonomic considerations in Product Design: Ergonomic is a human factor of
existing standard. engineering. It considers the human characteristics, behavior, usage and the living environment
while designing a product/process.
4) After the approval by the division council, the work of drafting the standard is
allotted to the existing technical committee or sectional committee. This What makes a product ―ergonomic‖? Much to the dismay of consumers, product designers,
committee does the maximum work involved in the preparation of the draft and even ergonomists, there is not a single answer to this seemingly simple question. That
standard. The technical committee is to work within the framework of the lack of a single answer hints at the heart of what ergonomics is really about, designing to fit
governing policies and procedures for the preparation of the standards. The the user. A product has different stages of use, including:
members of the committee are required to have good technical knowledge about
what is to be standardized. Also, they are to understand that the preparation of a  Building the product
standard needs consensus where the views of various parties are to be  Using the product
accommodated. Further, the committee is required to have a balance of members
 Maintaining/repairing the product
who can represent the needs of both suppliers and consumers. Representatives
from academia and government can bring additional balance to the committee.
These different stages may also have very different users. For instance, when building a
5) The technical committee prepares the draft standard or alternatively, the product (such as a refrigerator), a supplier may manufacture a sub-assembly (such as a
committee may appoint a subcommittee and/or panel for preparation of the draft. compressor) that is installed in the larger product. The user requirements to build the
6) After the draft has been prepared, the technical committee reviews it extensively compressor may be quite different than the user requirements to install that compressor into
and then passes it on to the secretariat for editing and wide circulation. the refrigerator. An example of two different types of users who are using the same product is
found in the hospital environment. Both patients and nurses ―use‖ a hospital bed, but each has
7) The draft is widely circulated. The aim of wide circulation is to inform every their own specific needs during use.
interest in the country or abroad which may be affected by the draft and to invite
critical review and comments. A product may fit user needs for one stage quite well, but not fit users in other stages.
8) The comments on the draft are systematically examined by the technical or Examining a product in one context would result in concluding that it is an ergonomic
sectional committee. In the light of committee discussions, the final version of the product, while looking at other contexts would provide very different conclusions.
draft is drawn up by the secretariat incorporating the comments accepted by the
technical or sectional committee. A truly ergonomic product considers the user needs at each stage
9) The final version of the draft is submitted to the division council for approval and
finally to the general council or its chairman. Once approved by these offices, the
draft gets the status of a standard.
10) The approved standard is then published by the secretariat and the published
standard is then released for sale to the public. The new standard or amendment of
the existing standard is given wide publicity by the standardization organization.
The standard after publication or revision is put to use. At this stage, it goes into
the maintenance phase. During the maintenance phase of the standard, it is normal
to discover that updates to the standard are needed because of the advances in the
technology. The process for updating of the standard is carried out by amending
the standard. In case no amendment is required in an existing standard, still the
standard is to be reaffirmed after a certain period. For reaffirmation of an existing

Standard, the process to be adopted is same as that of creation of the new standard.

Application of Standardization:

MRCET MBA MRCET MBA

 UNIT-III (concessional, if any), own requirements, subsidy for standby arrangements etc. If power
contributes substantially to your inputs costs and it is difficult to break even partly using your
own standby source, entrepreneur may essentially have to locate his/her enterprise in lower
Plant Location and Plant Layout surplus areas such as Maharashtra or Rajasthan.

Similarly adequate water supply at low cost may become a dominant decisional factor in case
of selection of industrial location for leather, chemical, rayon, food processing, chemical and
FACTORS INFLUENCING PLANT LOCATION
alike. Just to give you an idea what gigantic proportions can water as a resource assumes.
Note that a tone of synthetic rubber requires 60 thousand gallons, a tone of aluminum takes 3
(i) Availability of Raw Materials: lakhs gallons, and a tone of rayon consumes 2 lakh gallons of water.

One of the most important considerations involved in selection of industrial location has been Similarly, location of jute industry on river Hoogly presents an example where transportation
the availability of raw materials required. The biggest advantage of availability of raw media becomes a dominant decisional factor for plant location. Establishing sea food industry
material at the location of industry is that it involves less cost in terms of ‗transportation cost. next to port of embarkation is yet another example where transportation becomes the
deciding criteria for industrial location.
If the raw materials are perishable and to be consumed as such, then the industries always
tend to locate nearer to raw material source. Steel and cement industries can be such (iv) Government Policy:
examples. In the case of small- scale industries, these could be food and fruit processing,
meat and fish canning, jams, juices and ketchups, etc.
In order to promote the balanced regional development, the Government also offers several
incentives, concessions, tax holidays for number of years, cheaper power supply, factory
(ii) Proximity to Market: shed, etc., to attract the entrepreneurs to set up industries in less developed and backward
areas. Then, other factors being comparative, these factors become the most significant in
If the proof of pudding lies in eating, the proof of production lies in consumption. Production deciding the location of an industry.
has no value without consumption. Consumption involves market that is, selling goods and
products to the consumers. Thus, an industry cannot be thought of without market. (v) Availability of Manpower:
Therefore, while considering the market an entrepreneur has not only to assess the existing
Availability of required manpower skilled in specific trades may be yet another deciding
segment and the region but also the potential growth, newer regions and the location of
factor for the location of skill- intensive industries. As regards the availability of skilled
competitors. For example, if one‗s products are fragile and susceptible to spoilage, then the
labour, the existence of technical training institutes in the area proves useful. Besides, an
proximity to market condition assumes added importance in selecting the location of the
entrepreneur should also study labour relations through turnover rates, absenteeism and
enterprise.
liveliness of trade unionism in the particular area.
Similarly if the transportation costs add substantially to one‗s product costs, then also a
Such information can be obtained from existing industries working in the area. Whether the
location close to the market becomes all the more essential. If the market is widely scattered
labour should be rural or urban; also assumes significance in selecting the location for one‗s
over a vast territory, then entrepreneur needs to find out a central location that provides the
industry. Similarly, the wage rates prevalent in the area also have an important bearing on
lowest distribution cost. In case of goods for export, availability of processing facilities gains
selection of location decision.
importance in deciding the location of one‗s industry. Export Promotion Zones (EPZ) are
such examples.
While one can get cheaper labour in industrially backward areas, higher cost of their training
and fall in quality of production may not allow the entrepreneur to employ the cheap
(iii) Infrastructural Facilities: manpower and, thus, establish his/her enterprise in such areas.

Of course, the degree of dependency upon infrastructural facilities may vary from industry to (vi) Local Laws, Regulations and Taxes:
industry, yet there is no denying of the fact that availability of infrastructural facilities plays a
deciding role in the location selection of an industry. The infrastructural facilities include
Laws prohibit the setting up of polluting industries in prone areas particularly which are
power, transport and communication, water, banking, etc.
environmentally sensitive. Air (Prevention and Control of Pollution) Act, 1981 is a classical
example of such laws prohibiting putting up polluting industries in prone areas. Therefore, in
Yes, depending upon the types of industry these could assume disproportionate priorities.
order to control industrial growth, laws are enforced to decongest some areas while
Power situation should be studied with reference to its reliability, adequacy, rates
simultaneously encourage certain other areas.
MRCET MBA MRCET MBA

For example, while taxation on a higher rate may discourage some industries from setting up reasons why people in-spite of so many incentives and concessions on offer by the
in an area, the same in terms of tax holidays for some years may become the dominant Government, are not coming forward to establish industries in some backward areas.
decisional factor for establishing some other industries in other areas. Taxation is a Centre as
well as State Subject. In some highly competitive consumer products, its high quantum may (x) Climatic Conditions:
turn out to be the negative factor while its relief may become the final deciding factor for
some other industry. Climatic conditions vary from place to place in any country including India. And, climatic
conditions affect both people and manufacturing activity. It affects human efficiency and
(vii) Ecological and Environmental Factors: behaviour to a great extent. Wild and cold climate is conducive to higher productivity.
Likewise, certain industries require specific type of climatic conditions to produce their
In case of certain industries, the ecological and environmental factors like water and air goods. For example, jute and textiles manufacturing industries require high humidity.
pollution may turn out to be negative factor in deciding enterprise location. For example,
manufacturing plants apart from producing solid waste can also pollute water and air. As such, these can be established in Kashmir experiencing humidity-less climate. On the
Moreover, stringent waste disposal laws, in case of such industries, add to the manufacturing other hand, industrial units manufacturing precision goods like watches require cold climate
cost to exorbitant limits. and hence, will be established in the locations having cold climate like Kashmir and
Himachal Pradesh.
In view of this, the industries which are likely to damage the ecology and environment of an
area will not be established in such areas. The Government will not grant permission to the (xi) Political Conditions:
entrepreneurs to establish such industries in such ecologically and environmentally sensitive
areas. Political stability is essential for industrial growth. That political stability fosters industrial
activity and political upheaval derails industrial initiates is duly confirmed by political
(viii) Competition: situations across the countries and regions within the same country. The reason is not difficult
to seek.
In case of some enterprises like retail stores where the revenue of a particular site depends on
the degree of competition from other competitors‗ location nearby plays a crucial role in The political stability builds confidence and political instability causes lack of confidence
selecting the location of an enterprise. The areas where there is more competition among among the prospective and present entrepreneurs to venture into industry which is filled with
industries, the new units will not be established in these areas. On the other hand, the areas risks. Community attitudes such as the ―Sons of the Soil Feeling‖ also affect entrepreneurial
where there is either no or very less competition, new enterprises will tend to be established spirits and may not be viable in every case.
in such areas.
Besides, an entrepreneur will have also to look into the availability of community services
(ix) Incentives, Land Costs, Subsidies for Backward Areas: such as housing, schools and colleges, recreational facilities and municipal services. Lack of
these facilities makes people hesitant and disinterested to move to such locations for work.
With an objective to foster balanced economic development in the country, the Government
decentralizes industries to less developed and backward areas in the country. This is because Very closer to political conditions is law and order situation prevalent in an area also
the progress made in islands only cannot sustain for long. The reason is not difficult to seek. influences selection of industrial location. Hardly any entrepreneur will be interested to
establish his / her industry in an area trouble-torn by nexalites and terrorists like Jharkhand,
―Poverty anywhere is dangerous for prosperity everywhere.‖ That many have-not‗s will not Nagaland and Jammu & Kashmir
tolerate a few haves is evidently clear from ongoing protests leading to problems like
terrorism. Therefore, the Government offers several incentives, concessions, tax holidays,
cheaper lands, assured and cheaper power supply, price concessions for departmental (state)
purchases, etc. to make the backward areas also conducive for setting up industries. BREAK EVEN ANALYSIS

It is seen that good number of entrepreneurs considers these facilities as decisive factor to
establish industries in these locations. However, it has also been observed that these facilities
can attract entrepreneurs to establish industries in backward areas provided other required
facilities do also exist there.

For example, incentives and concessions cannot duly compensate for lack of infrastructural
facilities like communication and transportation facilities. This is precisely one of the major
MRCET MBA MRCET MBA
The break-even point (BEP) or break-even level represents the sales amount—in either unit In the long run, relocation may even benefit the organization. But, the relocation of the plant
(quantity) or revenue (sales) terms—that is required to cover total costs, consisting of both involves stoppage of production, and also cost for shifting the facilities to a new location. In
fixed and variable costs to the company. Total addition to these things, it will introduce some inconvenience in the normal functioning of the
profit at the break-even point is zero. It is only business. Hence at the time of starting any industry, one should generate several alternate sites for
possible for a firm locating the plant. After a critical analysis, it is the best site to be selected for commissioning the
plant. Location of warehouses and other facilities are also having direct bearing on the
The break-even point is one of the most operational performance of organization.
commonly used concepts of financial analysis,
and is not only limited to economic use, but can Facility location is a strategic management decision. Such a decision is usually made applying the
also be used by entrepreneurs, accountants, current conditions such as population, infrastructure, service requirements and others. Common
financial planners, managers and even marketers. location models deal with single and multiple facility location, covering, p-median, p-center
Break-even points can be useful to all avenues of problems, their applications and extensions. Many of these problems can be very difficult to
a business, as it allows employees to identify solve.
required outputs and work towards meeting these.
The strategic nature of facility location problems requires that models consider some aspect of
The Breakeven value is not a generic value and future uncertainty. Since the investment required by locating or relocating facilities is usually
will vary dependent on the individual business. large, facilities are expected to remain operable for an extended time period. Thus, the problem of
Some businesses may have a higher or lower facility location truly involves an extended planning horizon. Decision makers must not only
breakeven point, however it is important that select locations which will effectively serve changing demand over time, but must also consider
each business develop a break-even point the timing of facility expansions and relocations over the long term.
calculation, as this will enable them to see the
number of units they need to sell to cover their
variable costs. Each sale will also make a PLANT LAYOUT: CONCEPT, OBJECTIVES, PRINCIPLES AND TYPES
contribution to the payment of fixed costs as well.
Concept of Plant Layout:
For example, a business that sells tables needs to make annual sales of 200 tables to break-
even. At present the company is selling fewer than 200 tables and is therefore operating at a
The concept of plant layout may be described as follows:
loss. As a business, they must consider increasing the number of tables they sell annually in
order to make enough money to pay fixed and variable costs.
Plant layout is a plan for effective utilization of facilities for the manufacture of products;
involving a most efficient and economical arrangement of machines, materials, personnel,
If the business does not think that they can sell the required number of units, they could storage space and all supporting services, within available floor space.
consider the following options:
―Plant layout is a plan of optimum arrangement of facilities including personnel,
1. Reduce the fixed costs. This could be done through a number of negotiations, such as equipment‗s, storage space, material handling equipment and all other supporting services
reductions in rent, or through better management of bills or other costs. along with the decision of best structure to contain all these facilities.‖
2. Reduce variable costs by, for example, finding a new supplier that sells tables for less. (i) Plant layout is very complex in nature; because it involves concepts relating to
such fields as engineering, architecture, economics and business
Either option can reduce the break-even point so the business need not sell as many tables as management.
before, and could still pay fixed costs
(ii) Most of managers now realize that after the site for plant location is selected; it is better to
develop the layout and build the building around it – rather than to construct the building first
and then try to fit the layout into it.
PLANT FACILITY LOCATION PROBLEMS:
Objectives/Advantages of Plant Layout:
Business systems utilize facilities like plant and machinery, warehouses etc., while performing
the task of producing products and services a proper planning of these facilities would definitely
Following are the objectives/advantages of plant layout:
reduce their cost of operation and maintenance. Plant location decisions are very important
because they have direct bearing on factors like financial, employment and distribution patterns.
MRCET MBA MRCET MBA

(i) Streamline flow of materials through the plant (x) Principle of Satisfaction: A good layout should boost up employee morale, by providing
them with maximum work satisfaction.
(ii) Minimize material handling
Types of Plant Layout:
(iii) Facilitate manufacturing progress by maintaining balance in the processes
Two basic plans of the arrangement of manufacturing facilities are – product layout and
(iv) Maintain flexibility of arrangements and of operation process layout. The only other alternative is a combination of product and process layouts, in
the same plant.
(v) Maintaining high turnover of in-process inventory
(a) Product Layout (or Line Layout):
(vi) Effective utilization of men, equipment and space

(vii) Increase employee morale In this type of layout, all the machines are arranged in the sequence, as required to produce a
specific product. It is called line layout because machines are arrange in a straight line. The
(viii) Minimize interference (i.e. interruption) from machines raw materials are fed at one end and taken out as finished product to the other end.

(ix) Reduce hazards affecting employees Special purpose machines are used which perform the required jobs (i.e. functions) quickly
and reliably.
(x) Hold down investment (i.e. keep investment at a lower level) in equipment.
Product layout is depicted below:
Principles of Plant Layout:

(i) Principle of Minimum Movement: Materials and labour should be moved over
minimum distances; saving cost and time of transportation and material handling.
Advantages:
(ii) Principle of Space Utilization: All available cubic space should be effectively utilized –
both horizontally and vertically. 1. Reduced material handling cost due to mechanized handling systems and straight flow

(iii) Principle of Flexibility: Layout should be flexible enough to be adaptable to changes 2. Perfect line balancing which eliminates bottlenecks and idle capacity.
required by expansion or technological development.
3. Short manufacturing cycle due to uninterrupted flow of materials
(iv) Principle of Interdependence: Interdependent operations and processes should be
located in close proximity to each other; to minimize product travel. 4. Simplified production planning and control; and simple and effective inspection of work.

(v) Principle of Overall Integration: All the plant facilities and services should be fully 5. Small amount of work-in-progress inventory
integrated into a single operating unit; to minimize cost of production.
6. Lesser wage cost, as unskilled workers can learn and manage production.
(vi) Principle of Safety: There should be in-built provision in the design of layout, to provide
for comfort and safety of workers. Disadvantages:
(vii) Principle of Smooth Flow: The layout should be so designed as to reduce work 1. Lack of flexibility of operations, as layout cannot be adapted to the manufacture of any
bottlenecks and facilitate uninterrupted flow of work throughout the plant. other type of product.

(viii) Principle of Economy: The layout should aim at effecting economy in terms of 2. Large capital investment, because of special purpose machines.
investment in fixed assets.
3. Dependence of whole activity on each part; any breakdown of one machine in the sequence
(ix) Principle of Supervision: A good layout should facilitate effective supervision over may result in stoppage of production.
workers.

MRCET MBA MRCET MBA

4. Same machines duplicated for manufacture of different products; leading to high overall 4. Variety of jobs makes the work challenging and interesting.
operational costs.
5. Breakdown of one machine does not result in complete stoppage of work.
5. Delicate special purpose machines require costly maintenance / repairs.

Suitability of product layout:

Disadvantages:
Product layout is suitable in the following cases:
1. Backtracking and long movements occur in handling of materials. As such, material
1. Where one or few standardized products are manufactured. handling costs are higher.

2. Where a large volume of production of each item has to travel the production process, over 2. Mechanization of material handling is not possible.
a considerable period of time.
3. Production planning and control is difficult
3. Where time and motion studies can be done to determine the rate of work.
4. More space requirement; as work-in-progress inventory is high-requiring greater storage
4. Where a possibility of a good balance of labour and equipment exists. space.

5. Where minimum of inspection is required, during sequence of operations. 5. As the work has to pass through different departments; it is quite difficult to trace the
responsibility for the finished product.
6. Where materials and products permit bulk or continuous handling by mechanical parts.
Suitability of process layout:
7. Where minimum of set-ups are required.
Process layout is suitable in the following cases, where:
(b) Process Layout (or Functional Layout):
1. Non-standardized products are manufactured; as the emphasis is on special orders.
In this type of layout, all machines performing similar type of operations are grouped at one
location i.e. all lathes, milling machines etc. are grouped in the shop and they will be 2. It is difficult to achieve good labour and equipment balance.
clustered in like groups.
3. Production is not carried on a large scale.
A typical process layout is depicted below:
4. It is difficult to undertake adequate time and motion studies.

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

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

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

Advantages: products are too large or heavy to permit bulk or continuous handling by mechanical means.

1. Greater flexibility with regard to work distribution to machinery and personnel. Adapted to (c) Group Technology Layout or Combined Layout:
frequent changes in sequence of operations.
Product layouts are feasible only in case of mass production systems. When the production
2. Lower investment due to general purpose machines; which usually are less costly than volume is less, it may be difficult to justify dedication of resource to individual products.
special purpose machines. Therefore, organizations have been using process layouts for such situations. However, since
process layouts create more problems in production planning and control‗ due to complex routing
3. Higher utilization of production facilities; which can be adapted to a variety of products. of various components on the shop floor, operation managers were looking for alternatives to the

MRCET MBA MRCET MBA

process layout. On the other hand, there has been an increasing trend towards more variety. The information is gathered, a flow analysis can be combined with an activity analysis to develop the
industrial fans and blowers division of ABB Ltd, a multinational company operating in India relationship diagram. This space-relationship diagram is constructed by combining space
manufactures about 725 models, Titan Industries increased the jumpers of watch models from considerations with the relationship diagram. Based on space relationship diagram, modifying
850 in 1993 to 1200 in 1996, an average more than 100 new models every year. Group considerations and practical limitations, a number of alternative layouts are designed and
Technology (GT) layout provides an alternative method for configuring resources in evaluated.
organizations that have mid-value, mid variety product portfolios. Group Technology is a
philosophy that seeks to exploit commonality in manufacturing and uses this as the basis for Computerized methods: Under these methods the layout design procedures can be classified
grouping components and resources. The implications of GT are often known as cellular into constructive type algorithms and improvement type algorithms. Constructive type algorithms
manufacturing. In cellular manufacturing, the available components are grouped part families. An are:
approximate measure for manufacturing similarity is used to identify part families.
Corresponding to each part family, machine groups are identified and layout is formed  Automated Layout Design Program (ALDEP)
accordingly.  Computerized Relationship Layout Planning (CORELAP)
 Improvement type algorithms are:
Advantage of GT Layout
 Computerized Relative allocation of Facilities Technique (CRAFT)
The benefits of GT are many. Once the part families and the machine groups are identified, the
layout ensures that each cell has only a certain number of components to be processed. In
essence, it is akin to breaking a monolith structure into smaller, more manageable and
independent units of production. The components seldom travel outside their respective cell for
processing. Therefore, material handling becomes easier and traceability improves.

Moreover, employees are able to relate better to their workplace and make concerned
improvements. The new structure also helps to implement several other operations management
practices such as small group improvement, Kaizen and JIT manufacturing practices.

(d) Fixed Position Layout:

There are several situations in which the product manufactured is very bulky, difficult to move
and is often made in quantities of one or few pieces. In such situations, the layout design ought to
be very different. Typical examples include building very large machines tools and equipments,
ships, and aircraft building. Since the equipments are very large and bulky they dictate several
choices with respect to layout. The specific orientation of the equipment will dictate the
placement of specific resources required for the process. Layout planning in such cases is often a
question of a good work place organization Some examples include the nuclear engineering
division of Bharat Heavy Electrical Division at Tiruchirapalli, the final assembly panel of
advanced helicopter division.

LAYOUT DESIGN PROCEDURE

Design of Product layout:

Layout design for products can be classified into the following two methods
1. Manual methods
2. Computerized methods

Manual Methods: Under this category there are some conventional methods like travel chart
and Systematic Layout Planning (SLP). We will discuss Systematic Layout process:

Systematic Layout Design Method (SLP) : This is an organized approach to layout

planning. This approach has been developed by Muther. It is clear that once the appropriate

MRCET MBA MRCET MBA

 UNIT 4 inventories since a job is not completed until it must go directly to the next work centre on its
routing. Forward and backward scheduling
Scheduling

Introduction to scheduling:

Scheduling is the process of arranging, controlling and optimizing work and workloads in a
production process. Companies use backward and forward scheduling to allocate plant and
machinery resources, plan human resources, plan production processes and purchase
materials.

 Forward scheduling is planning the tasks from the date resources become available to
determine the shipping date or the due date.
 Backward scheduling is planning the tasks from the due date or required-by date to
determine the start date and/or any changes in capacity required.

The benefits of production scheduling include:

 Process change-over reduction
 Inventory reduction, leveling
 Reduced scheduling effort
 Increased production efficiency
 Labor load leveling
 Accurate delivery date quotes
 Real time information

Types of Scheduling

Types of scheduling can be categorized as forward scheduling and backward scheduling.

1. Forward scheduling
It is commonly used in job shops where customers place their orders on ―needed as soon as
possible‖ basis. Forward scheduling determines start and finish times of next priority job by
assigning it the earliest available time slot and from that time, determines when the job will
be finished in that work centre. Since the job and its components start as early as possible,
they will typically be completed before they are due at the subsequent work centers in the
routing. The forward method generates in the process inventory that are needed at subsequent
work centers and higher inventory cost. Forward scheduling is simple to use and it gets jobs
done in shorter lead times, compared to backward scheduling.

2. Backward scheduling
It is often used in assembly type industries and commit in advance to specific delivery dates.
Backward scheduling determines the start and finish times for waiting jobs by assigning them
to the latest available time slot that will enable each job to be completed just when it is due,
but done before. By assigning jobs as late as possible, backward scheduling minimizes

MRCET MBA MRCET MBA

UNIT 5 3. Purchase management:

Material Management Purchase Management refers to sourcing of goods & services from different suppliers. The
Purchase Management extension allows you to manage suppliers, quotations, purchase
orders, and incoming shipments. You can add suppliers to a product, specifying each
supplier's price & order quantity. A draft purchase order is created when any product goes out
INTEGRATED MATERIAL MANAGEMENT of stock. After receiving the incoming shipments and the inventories becomes updated. You
can also receive partial shipments too.
Integrated Material Management has following components
Features of Purchase Management -
1. Materials Planning:
 Select default procurement method as – auto or manual.
In any integrated Materials Management environment, planning for getting the materials is  Send quotation and purchase order emails to suppliers.
the starting point for the whole MM function. Materials planning set the procurement  Add any comments in purchase orders and incoming shipments for notifying the
function and the subsequent material functions rolling. suppliers.
 Mention cost price and minimal quantity for every product.
Material planning is a scientific way of determining the requirements starting with raw  Manage incoming shipments and products from store backend.
materials, consumables, spare parts and all other materials that are required to meet the given  Update received quantity of partial shipments.
production plan for a certain period.  An auto-draft purchase order is created for out of stock products.
 Merge two or more purchase orders.

Material planning is derived from the overall organizational planning and hence it is always a 4. Stores Management:
sub-plan of the broad organizational plan.
Stores management takes care:
What it does is forecasting and initiating for procurement of materials 1. That the required material is never out of stock;

2. Inventory Control: 2. That no material is available in (much) excess than required;

3. To purchase materials on the principle of economic order quantity so that the associated
What Is Inventory Control? costs can be minimized; and

Inventory control, also known as stock control, involves regulating and maximizing your 4. To protect stores against damage, theft, etc.
company‗s inventory. The goal of inventory control is to maximize profits with minimum
inventory investment, without impacting customer satisfaction levels. Inventory control is This can be achieved through:
also about knowing where all your stock is and ensuring everything is accounted for at any
given time. 1. A proper purchasing practice (i.e., when to order materials).

Inventory control involves warehouse management. This includes: 2. An adequate procedure of receipt and issue of materials.

 Keeping track of the stock that is already in the warehouse. This includes knowing 3. Proper methods of storing materials.
what products are being stocked and how much of a particular item is available.
 Aspects of warehousing designs, such as knowing where everything is and ensuring 4. An effective system of physical control of materials.
that the products are stored well.
5. A proper method of keeping store records.

Functions of Stores Department and the Duties of the Storekeeper:

MRCET MBA MRCET MBA

1. To receive materials, goods and equipment, and to check them for identification. of any type; for example men, materials, machines or money. When the resource involved is
material or goods in any stage of completion, inventory is referred to as stock''.
2. To receive parts and components which have been processed in the factory.
Inventory consists of the following-
3. To record the receipt of goods.
 Raw Materials: They are the physical resources to use in the production of finished goods.
4. To correct positioning of all materials and supplies in the store. The purpose of holding raw material is to ensure uninterrupted production in the event of
delays in delivery and to take advantage of bulk or other favorable terms of purchase.
5. To maintain stocks safely and in good and condition by taking all precautions to ensure  Bought out components: Items not manufactured/fabricated by the organization but used
that they do not suffer from damage, pilfering or deterioration. with or without further processing and/or packing the finished product, e.g. Rubber parts by
Egg co. Tin cans by a Vanaspati Mill.
6. To issue items to the users only on the receipt of authorized stores requisitions.  Work in process- or intermediate goods are in the process of production. Their
purpose is to disconnect the various stages of production which facilitate production
7. To record and update receipts and issues of materials. planning. Such Inventory helps to stabilize the rate of output at successive stages in the face
of fluctuation. Partly manufactured/processed inventories awaiting further mfg/processing
8. To check the bin card balances with the physical quantities in the bins. between two operations and are in the process of being fabricated or assembled into finished
products, including materials lying with subcontractors and material lying in shop food for
9. To make sure that stores are kept clean and in good order. further processing or assembly.
 Finished Goods: They are the inventory held for sale in ordinary course of business. Such
inventory serves as a buffer against fluctuations in demand for a product. Stock of finished
10. To prevent unauthorized persons from entering the stores.
goods facilitates a reasonable rate of output and enables the firm to provide a quick service to
customers. It helps to reduce the risk associated with stoppages or reductions in production on
11. To make sure that materials are issued promptly to the users. account of strikes, break down, shortage of material/power etc.
 MRO: Maintenance, Repair and operating supplies. The group include spare parts and
12. To plan store for optimum utilization of the cubic space (i.e., length, breadth and height). consumables which are required for use in the process but do not form a part of the finished
product, e.g. Lubricants, V Belt, Electrodes, Pencil, Soap etc
13. To ensure that the required materials are located easily.

14. To initiate purchasing cycle at the appropriate time so that the materials required are Things to Consider When Making a Decision in Inventory
never out of stock.

15. To coordinate and cooperate to the full extent with the purchasing, manufacturing,  Warehousing
inspection and production planning and control departments.
Physical space may cap the amount of material held on-site. At a manufacturing site, space
for raw materials must be adequate to supply production for a given period of time. Since
INVENTORY DECISIONS: square footage devoted to storage does not contribute directly to sales, most decisions attempt
to reduce the amount of floor space used without jeopardizing supply for production. Smaller
The approach to stock in manufacturing company needs to be different from that in a trading or a
supply shipments more frequently may be one solution. Finished goods may also be shipped
commercial business. For a Supermarket the main reason for holding stock will be to provide
frequently or sent to off-site storage to maximize room for raw materials.
good customer service. A high degree of such service will be required. If the cornflakes are out of
stock, the customer will go elsewhere. The goods classed as "Stock" will mainly be finished
goods; ready for sale, ordering from Suppliers will be done largely without considering the  Cost
consequences on any manufacturing activity. For a manufacturing company, stock control
systems must take account of manufacturing activities. Inevitably there will be clashes or trade Several cost factors influence inventory management decisions. The value of raw materials
offs between the level of stock carried, the service given to the customers, the cash flow involved represents stalled cash flow, assets that don't actively contribute to the bottom line. This feeds
in carrying stock and the influence stock ordering policy has on manufacturing costs. the theory of "just in time" delivery, where raw materials arrive as they are consumed, thus
eliminating costs associated with warehouse space and unused inventory. Bulk purchasing is
"Stocks" will cover finished goods stocks, but also raw materials, work in process and the flip side of the scenario. Suppliers may offer discounts on quantities of materials in excess
components ready for use. The term "Inventory" refers to the stock of raw materials, Parts and of your immediate needs. This can improve profit margin on finished goods, but only if
finished products at hand at a given time (a tangible asset which can be seen, weighed or additional warehousing and finance charges are avoided.
counted). In a wider sense "inventory consists of usable but idle resources''. The resources may be

MRCET MBA MRCET MBA

 Cost trade off: Independent Demand

If the order quantity is less, the cost of order will be more but inventory carrying cost will be Independent demand inventory systems are at their very essence market driven. Whether the
less. On the other hand, if the order quantity is more, the ordering cost will be less but the inventory is raw materials or a finished product, it is the end product of that particular
inventory carrying cost will be more. organization. Pulls from inventory occur as an external customer purchases the units, either
directly or as restock to a forward retail position.
 Delivery Time
Items with an independent demand tend to be managed through one of two processes:
Lead time between order and delivery of raw materials is an important factor. If a supplier periodic review or perpetual inventory management.
can deliver the day after an order is placed, an inventory manager has the greatest flexibility,
effectively using the supplier's warehousing space for free. When the time between order and  Periodic Review: This process involves regular review of usage and reorder to a
delivery is weeks, an inventory manager must factor this in to maintain sufficient supply, carrying point.
while balancing warehousing space and inventory costs. Unless there is the option to switch  Perpetual Inventory: This process revolves around reorders when an item reaches a
product lines in the event of supply shortages, ensuring constant supply is usually an pre-set minimum stocking level, or reorder point.
inventory manager's chief priority.
While demand can be somewhat indirectly influenced via pricing, merchandising, marketing
 Turnaround and a whole spectrum of marketing initiative, in the end the market determines the inventory
turns. The challenges in predicting independent demand is that there may not be a history, or
Turnaround has several definitions when considering inventory. Where finished goods are the history may not match due to the life cycle stage of the product.
concerned, turnaround refers to how long stock sits before sale. An inventory manager wants
this time to be as short as possible, though this may be a function of sales and marketing. On Dependent Demand
the inbound side, turnaround refers to how long current stock supplies production. Where
minimum and maximum inventory levels are set, the minimum level considers supply Dependent demand inventory systems are classically associated with Enterprise Resource
turnaround and delivery time, while maximum values address warehousing and cost factors. Planning systems. The known demand is generally based on production numbers and the
inventory represents the raw materials required to meet those requirements.
Models of Inventory:
This overall demand model allows the use of such inventory management models as
Understanding which of the core inventory management models applies to divisions of you Economic Ordering Quantity, Safety Stock Analysis, Fill Rates, and Cycle Service Levels.
business it a critical first step in using the right techniques to manage your inventory.
Inventory management models fall into two fundamental categories: independent and In this demand model, supply chain concerns become more and more critical to inventory
dependent inventory demand models. control decisions. Lead times, quantity price breaks, and the costs of expediting orders all
play a role.
 Purchase model with instantaneous replenishment and without shortages: in this
model of inventory, orders of equal size are placed at periodic intervals. The items Knowing the type of demand you need to accommodate is the first step in developing your
against an order are replenished instantaneously and the items are consumed at own customized inventory management models. Different segments of your inventory may
constant rate. actually service a different demand type.
 Manufacturing model without shortages: if a company manufactures its
Learning how to recognize the operating demand conditions is the first step to growing into a
components which is required for its main products, then the corresponding model of
more efficient organization. The next step is implementing the processes that support the
inventory is called manufacturing model without shortages.
inventory management models.
 Purchasing model without shortages: in this model, the items on the order will be
received instantaneously after they are exhausted in the company. Quantity Discount
 Manufacturing model with shortage: in this model, the items are produced and When items are purchased in bulk, the buyers are given discount in the purchase price of
consumed simultaneously for a portion of cycle time. goods. This is called Quantity Discount.
Incoming Material Control

The quality of incoming materials is tested by anyone of the following methods.

MRCET MBA MRCET MBA
  20% of items account for 20% of annual consumption value of items.
 Acceptance sampling for attributes
 70% of items account for 10% of annual consumption value of items.
 Acceptance sampling for variables

Acceptance sampling is a technique for controlling quality of raw materials or finished goods. XYZ Analysis
Based on producers‗ risk, consumers‗ risk, acceptance quality level and lot tolerance
defective, one can design a suitable plan for acceptance sampling.  X class items represent 70% of the total stock value but only account for 10%
number-wise.
Store Accounting  Y class items represent 20% of the total stock value but only account for 20%
number-wise.
Store accounting is very much useful in determining the material cost of a product. The issues
of store are accounted using anyone of the following methods:  Z class items represent 10% of the total stock value but only account for 70%
number-wise.
 First in first out method (FIFO): here, assumption is that the old stock is depleted
first. VED Analysis
 Last in first out method (LIFO): here, assumption is the most recent receipts are VED analysis attempts to classify the items used into three broad categories.
issued first
 Average cost method: the issues to the production department are divided into  Vital: vital category items are those without which the production activities would
equal batches from each shipment at a stock. come to a halt.
 Standard cost method: a standard rate for the materials is fixed based on the  Essential: essential items are those items whose stock-out cost is very high for the
detailed analysis of market prices. This cost will be used for the fixed period. company.
 Market price method: the prevailing market rate of material is applied for costing  Desirable: desirable items are those whose stock-out causes only minor disturbance in
the material at the time of issue. the production schedule.

Obsolete Surplus and Scrap Management

FSN Analysis
The following are the main reasons for accumulation of obsolete surplus and scrap items.
In FSN analysis, items are classified according to their rate of consumptions. Items are
broadly classified into three categories.
 Change in product design
 Faulty planning, over estimation of demand
 F – Fast moving items
 Faulty purchase procedur  S – Slow moving items
We can avoid these by using following methods.  N – Non-moving items

 Periodically, items can be classified into moving and non-moving items. SDE Analysis
 If there is a change in design, then corresponding details must be circulated among
concerned departments. It attempts to classify items on the basis of its availability in the market.

ABC Analysis (Refer Class-work problem)  Scares: these are generally short in supply or channelized through government
agencies
ABC analysis is one such technique which classifies items into A, B and C class items.  Difficult: these items are available but are difficult to procure
 Easy: these items are easily and readily available
 10% of items account for 70% of annual consumption value of items.

MRCET MBA MRCET MBA

Computer Aided Techniques in POM

Computer-aided design (CAD): It involves creating computer models defined by
geometrical parameters. These models typically appear on a computer monitor as a three-
dimensional representation of a part or a system of parts, which can be readily altered by
changing relevant parameters. CAD systems enable designers to view objects under a wide
variety of representations and to test these objects by simulating real-world conditions.

Computer-aided manufacturing (CAM): It uses geometrical design data to control

automated machinery. CAM systems are associated with computer numerical control (CNC)
or direct numerical control (DNC) systems. These systems differ from older forms of
numerical control (NC) in that geometrical data are encoded mechanically. Since both CAD
and CAM use computer-based methods for encoding geometrical data, it is possible for the
processes of design and manufacture to be highly integrated. Computer-aided design and
manufacturing systems are commonly referred to as CAD/CAM.

MRCET MBA