Jagannath Institute of Management Sciences Lajpat Nagar. BBA Sem IV

Transcription

1 Jagannath Institute of Management Sciences Lajpat Nagar BBA Sem IV

2 1.1 INTRODUCTION Production/operations management is the process, which combines and transforms various resources used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organization. Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs into the required (products/services) having the requisite quality level. The set of interrelated management activities, which are involved in manufacturing certain products, is called as production management. If the same concept is extended to services management, then the corresponding set of management activities is called as operations management. 1.2 HISTORICAL EVOLUTION OF PRODUCTION AND OPERATIONS MANAGEMENT For over two centuries operations and production management has been recognised as an important factor in a country s economic growth. The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour. He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient. In the early twentieth century, F.W. Taylor implemented Smith s theories and developed scientific management. From then till 1930, many techniques were developed prevailing the traditional view. Brief information about the contributions to manufacturing management is shown in the Table 1.1. TABLE 1.1 Historical summary of operations management Date Contribution Contributor 1776 Specialization of labour in manufacturing Adam Smith 1799 Interchangeable parts, cost accounting Eli Whitney and others 1832 Division of labour by skill; assignment of jobs by skill; basics of time study Charles Babbage 1900 Scientific management time study and work study developed; dividing planning and doing of work Frederick W. Taylor 1900 Motion of study of jobs Frank B. Gilbreth 1901 Scheduling techniques for employees, machines jobs in 1915 manufacturing Economic lot sizes for inventory control Henry L. Gantt F.W. Harris 1927 Human relations; the Hawthorne studies Elton Mayo 1931 Statistical inference applied to product quality: quality control charts W.A. Shewart 1935 Statistical sampling applied to quality control: inspection 1940 sampling plans Operations research applications in World War II H.F. Dodge & H.G. Roming P.M. Blacker and others Digital computer John Mauchlly and J.P. Eckert 1947 Linear programming G.B. Dantzig, Williams & others 1950 Mathematical programming, on-linear and stochastic A. Charnes, W.W. Cooper processes & others 1951 Commercial digital computer: large-scale computations available. Sperry Univac 1960 Organizational behaviour: continued study of people 1970 at work Integrating operations into overall strategy and policy, L. Cummings, L. Porter W. Skinner J. Orlicky and

3 Production management becomes the acceptable term from 1930s to 1950s. As F.W. Taylor s works become more widely known, managers developed techniques that focussed on economic efficiency in manufacturing. Workers were studied in great detail to eliminate wasteful efforts and achieve greater efficiency. At the same time, psychologists, socialists and other social scientists began to study people and human behaviour in the working environment. In addition, economists, mathematicians, and computer socialists contributed newer, more sophisticated analytical approaches. With the 1970s emerges two distinct changes in our views. The most obvious of these, reflected in the new name operations management was a shift in the service and manufacturing sectors of the economy. As service sector became more prominent, the change from production to operations emphasized the broadening of our field to service organizations. The second, more suitable change was the beginning of an emphasis on synthesis, rather than just analysis, in management practices. 1.3 CONCEPT OF PRODUCTION Production function is that part of an organization, which is concerned with the transformation of a range of inputs into the required outputs (products) having the requisite quality level. Production is defined as the step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user. Thus production is a value addition process. At each stage of processing, there will be value addition. Edwood Buffa defines production as a process by which goods and services are created. Some examples of production are: manufacturing custom-made products like, boilers with a specific capacity, constructing flats, some structural fabrication works for selected customers, etc., and manufacturing standardized products like, car, bus, motor cycle, radio, television, etc. 1.4 PRODUCTION SYSTEM Fig. 1.1 Schematic production system The production system of an organization is that part, which produces products of an organization. It is that activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management. A simplified production system is shown above. The production system has the following characteristics:

4 1. Production is an organized activity, so every production system has an objective. 2. The system transforms the various inputs to useful outputs. 3. It does not operate in isolation from the other organization system. 4. There exists a feedback about the activities, which is essential to control and improve system performance Classification of Production System Production systems can be classified as Job Shop, Batch, Mass and Continuous Production systems. Fig. 1.2 Classification of production systems JOB SHOP PRODUCTION Job shop production are characterised by manufacturing of one or few quantity of products designed and produced as per the specification of customers within prefixed time and cost. The distinguishing feature of this is low volume and high variety of products. A job shop comprises of general purpose machines arranged into different departments. Each job demands unique technological requirements, demands processing on machines in a certain sequence. Characteristics The Job-shop production system is followed when there is: 1. High variety of products and low volume. 2. Use of general purpose machines and facilities. 3. Highly skilled operators who can take up each job as a challenge because of uniqueness. 4. Large inventory of materials, tools, parts. 5. Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order priorities.

5 Advantages Following are the advantages of job shop production: 1. Because of general purpose machines and facilities variety of products can be produced. 2. Operators will become more skilled and competent, as each job gives them learning opportunities. 3. Full potential of operators can be utilised. 4. Opportunity exists for creative methods and innovative ideas. Limitations Following are the limitations of job shop production: 1. Higher cost due to frequent set up changes. 2. Higher level of inventory at all levels and hence higher inventory cost. 3. Production planning is complicated. 4. Larger space requirements. BATCH PRODUCTION Batch production is defined by American Production and Inventory Control Society (APICS) as a form of manufacturing in which the job passes through the functional departments in lots or batches and each lot may have a different routing. It is characterised by the manufacture of limited number of products produced at regular intervals and stocked awaiting sales. Characteristics Batch production system is used under the following circumstances: 1. When there is shorter production runs. 2. When plant and machinery are flexible. 3. When plant and machinery set up is used for the production of item in a batch and change of set up is required for processing the next batch. 4. When manufacturing lead time and cost are lower as compared to job order production. Advantages Following are the advantages of batch production: 1. Better utilisation of plant and machinery. 2. Promotes functional specialisation. 3. Cost per unit is lower as compared to job order production. 4. Lower investment in plant and machinery. 5. Flexibility to accommodate and process number of products. 6. Job satisfaction exists for operators. Limitations Following are the limitations of batch production: 1. Material handling is complex because of irregular and longer flows. 2. Production planning and control is complex.

6 3. Work in process inventory is higher compared to continuous production. 4. Higher set up costs due to frequent changes in set up. MASS PRODUCTION Manufacture of discrete parts or assemblies using a continuous process are called mass production. This production system is justified by very large volume of production. The machines are arranged in a line or product layout. Product and process standardisation exists and all outputs follow the same path. Characteristics Mass production is used under the following circumstances: 1. Standardisation of product and process sequence. 2. Dedicated special purpose machines having higher production capacities and output rates. 3. Large volume of products. 4. Shorter cycle time of production. 5. Lower in process inventory. 6. Perfectly balanced production lines. 7. Flow of materials, components and parts is continuous and without any back tracking. 8. Production planning and control is easy. 9. Material handling can be completely automatic. Advantages Following are the advantages of mass production: 1. Higher rate of production with reduced cycle time. 2. Higher capacity utilisation due to line balancing. 3. Less skilled operators are required. 4. Low process inventory. 5. Manufacturing cost per unit is low. Limitations Following are the limitations of mass production: 1. Breakdown of one machine will stop an entire production line. 2. Line layout needs major change with the changes in the product design. 3. High investment in production facilities. 4. The cycle time is determined by the slowest operation. CONTINUOUS PRODUCTION Production facilities are arranged as per the sequence of production operations from the first operations to the finished product. The items are made to flow through the sequence of operations through material handling devices such as conveyors, transfer devices, etc. Characteristics Continuous production is used under the following circumstances: 1. Dedicated plant and equipment with zero flexibility.

7 2. Material handling is fully automated. 3. Process follows a predetermined sequence of operations. 4. Component materials cannot be readily identified with final product. 5. Planning and scheduling is a routine action. Advantages Following are the advantages of continuous production: 1. Standardisation of product and process sequence. 2. Higher rate of production with reduced cycle time. 3. Higher capacity utilisation due to line balancing. 4. Manpower is not required for material handling as it is completely automatic. 5. Person with limited skills can be used on the production line. 6. Unit cost is lower due to high volume of production. Limitations Following are the limitations of continuous production: 1. Flexibility to accommodate and process number of products does not exist. 2. Very high investment for setting flow lines. 3. Product differentiation is limited. 1.5 PRODUCTION MANAGEMENT Production management is a process of planning, organizing, directing and controlling the activities of the production function. It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization. E.S. Buffa defines production management as, Production management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications, in the amount and by the schedule demanded and out of minimum cost Objectives of Production Management The objective of the production management is to produce goods services of right quality and quantity at the right time and right manufacturing cost. 1. RIGHT QUALITY The quality of product is established based upon the customers needs. The right quality is not necessarily best quality. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements. 2. RIGHT QUANTITY The manufacturing organization should produce the products in right number. If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to shortage of products.

8 3. RIGHT TIME Timeliness of delivery is one of the important parameter to judge the effectiveness of production department. So, the production department has to make the optimal utilization of input resources to achieve its objective. 4. RIGHT MANUFACTURING COST Manufacturing costs are established before the product is actually manufactured. Hence, all attempts should be made to produce the products at pre-established cost, so as to reduce the variation between actual and the standard (pre-established) cost. 1.6 OPERATING SYSTEM Operating system converts inputs in order to provide outputs which are required by a customer. It converts physical resources into outputs, the function of which is to satisfy customer wants i.e., to provide some utility for the customer. In some of the organization the product is a physical good (hotels) while in others it is a service (hospitals). Bus and taxi services, tailors, hospital and builders are the examples of an operating system. Everett E. Adam & Ronald J. Ebert define operating system as, An operating system ( function) of an organization is the part of an organization that produces the organization s physical goods and services. Ray Wild defines operating system as, An operating system is a configuration of resources combined for the provision of goods or services Concept of Operations An operation is defined in terms of the mission it serves for the organization, technology it employs and the human and managerial processes it involves. Operations in an organization can be categorised into manufacturing operations and service operations. Manufacturing operations is a conversion process that includes manufacturing yields a tangible output: a product, whereas, a conversion process that includes service yields an intangible output: a deed, a performance, an effort Distinction between Manufacturing Operations and Service Operations Following characteristics can be considered for distinguishing manufacturing operations with service operations: 1. Tangible/Intangible nature of output 2. Consumption of output 3. Nature of work (job) 4. Degree of customer contact 5. Customer participation in conversion 6. Measurement of performance. Manufacturing is characterised by tangible outputs (products), outputs that customers consume overtime, jobs that use less labour and more equipment, little customer contact, no customer participation in the conversion process (in production), and sophisticated methods for measuring production activities and resource consumption as product are made.

9 Service is characterised by intangible outputs, outputs that customers consumes immediately, jobs that use more labour and less equipment, direct consumer contact, frequent customer participation in the conversion process, and elementary methods for measuring conversion activities and resource consumption. Some services are equipment based namely rail-road services, telephone services and some are people based namely tax consultant services, hair styling. 1.7 OPERATIONS MANAGEMENT A Framework for Managing Operations Managing operations can be enclosed in a frame of general management function as shown in Fig Operation managers are concerned with planning, organizing, and controlling the activities which affect human behaviour through models. PLANNING Activities that establishes a course of action and guide future decision-making is planning. The operations manager defines the objectives for the operations subsystem of the organization, and the policies, and procedures for achieving the objectives. This stage includes clarifying the role and focus of operations in the organization s overall strategy. It also involves product planning, facility designing and using the conversion process. ORGANIZING Activities that establishes a structure of tasks and authority. Operation managers establish a structure of roles and the flow of information within the operations subsystem. They determine the activities required to achieve the goals and assign authority and responsibility for carrying them out. CONTROLLING Activities that assure the actual performance in accordance with planned performance. To ensure that the plans for the operations subsystems are accomplished, the operations manager must exercise control by measuring actual outputs and comparing them to planned operations management. Controlling costs, quality, and schedules are the important functions here. BEHAVIOUR Operation managers are concerned with how their efforts to plan, organize, and control affect human behaviour. They also want to know how the behaviour of subordinates can affect management s planning, organizing, and controlling actions. Their interest lies in decisionmaking behaviour. MODELS As operation managers plan, organise, and control the conversion process, they encounter many problems and must make many decisions. They can simplify their difficulties using models like aggregate planning models for examining how best to use existing capacity in short-term, break even analysis to identify break even volumes, linear programming and computer simulation for capacity utilisation, decision tree analysis for long-term capacity problem of facility expansion, simple median model for determining best locations of facilities etc.

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11 Fig. 1.3 General model for managing operations

12 1.7.2 Objectives of Operations Management Objectives of operations management can be categorised into customer service and resource utilisation. CUSTOMER SERVICE The first objective of operating systems is the customer serivce to the satisfaction of customer wants. Therefore, customer service is a key objective of operations management. The operating system must provide something to a specification which can satisfy the customer in terms of cost and timing. Thus, primary objective can be satisfied by providing the right thing at a right price at the right time. These aspects of customer service specification, cost and timing are described for four functions in Table 1.2. They are the principal sources of customer satisfaction and must, therefore, be the principal dimension of the customer service objective for operations managers. TABLE 1.2 Aspects of customer service Principal Principal customer wants function Primary considerations Other considerations Manufacture Goods of a given, requested or Cost, i.e., purchase price or cost of obtaining goods. acceptable specification Timing, i.e., delivery delay from order or request to receipt of goods. Transport Management of a given, requested Cost, i.e., cost of movements. Timing, i.e., or acceptable specification 1. Duration or time to move. 2. Wait or delay from requesting to its commencement. Supply Goods of a given, requested or Cost, i.e., purchase price or cost of obtaining acceptable specification goods. Timing, i.e., delivery delay from order or request to receipt of goods. Service Treatment of a given, requested or Cost, i.e., cost of movements. acceptable specification Timing, i.e., 1. Duration or time required for treatment. 2. Wait or delay from requesting treatment to its commencement. Generally an organization will aim reliably and consistently to achieve certain standards and operations manager will be influential in attempting to achieve these standards. Hence, this objective will influence the operations manager s decisions to achieve the required customer service. RESOURCE UTILISATION Another major objective of operating systems is to utilise resources for the satisfaction of customer wants effectively, i.e., customer service must be provided with the achievement of

13 effective operations through efficient use of resources. Inefficient use of resources or inadequate customer service leads to commercial failure of an operating system. Operations management is concerned essentially with the utilisation of resources, i.e., obtaining maximum effect from resources or minimising their loss, under utilisation or waste. The extent of the utilisation of the resources potential might be expressed in terms of the proportion of available time used or occupied, space utilisation, levels of activity, etc. Each measure indicates the extent to which the potential or capacity of such resources is utilised. This is referred as the objective of resource utilisation. Operations management is also concerned with the achievement of both satisfactory customer service and resource utilisation. An improvement in one will often give rise to deterioration in the other. Often both cannot be maximised, and hence a satisfactory performance must be achieved on both objectives. All the activities of operations management must be tackled with these two objectives in mind, and many of the problems will be faced by operations managers because of this conflict. Hence, operations managers must attempt to balance these basic objectives. Table 1.3 summarises the twin objectives of operations management. The type of balance established both between and within these basic objectives will be influenced by market considerations, competitions, the strengths and weaknesses of the organization, etc. Hence, the operations managers should make a contribution when these objectives are set. TABLE 1.3 The twin objectives of operations management The customer service objective. To provide agreed/adequate levels of customer service (and hence customer satisfaction) by providing goods or services with the right specification, at the right cost and at the right time. The resource utilisation objective. To achieve adequate levels of resource utilisation (or productivity) e.g., to achieve agreed levels of utilisation of materials, machines and labour. 1.8 MANAGING GLOBAL OPERATIONS The term globalization describes businesses deployment of facilities and operations around the world. Globalization can be defined as a process in which geographic distance becomes a factor of diminishing importance in the establishment and maintenance of cross border economic, political and socio-cultural relations. It can also be defined as worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments. There are four developments, which have spurred the trend toward globalization. These are: 1. Improved transportation and communication technologies; 2. Opened financial systems; 3. Increased demand for imports; and 4. Reduced import quotas and other trade barriers. When a firm sets up facilities abroad it involve some added complexities in its operation. Global markets impose new standards on quality and time. Managers should not think about domestic markets first and then global markets later, rather it could be think globally and act

14 locally. Also, they must have a good understanding of their competitors. Some other important challenges of managing multinational operations include other languages and customs, different management style, unfamiliar laws and regulations, and different costs. Managing global operations would focus on the following key issues: To acquire and properly utilize the following concepts and those related to global operations, supply chain, logistics, etc. To associate global historical events to key drivers in global operations from different perspectives. To develop criteria for conceptualization and evaluation of different global operations. To associate success and failure cases of global operations to political, social, economical and technological environments. To envision trends in global operations. To develop an understanding of the world vision regardless of their country of origin, residence or studies in a respectful way of perspectives of people from different races, studies, preferences, religion, politic affiliation, place of origin, etc. 1.9 SCOPE OF PRODUCTION AND OPERATIONS MANAGEMENT Production and operations management concern with the conversion of inputs into outputs, using physical resources, so as to provide the desired utilities to the customer while meeting the other organizational objectives of effectiveness, efficiency and adoptability. It distinguishes itself from other functions such as personnel, marketing, finance, etc., by its primary concern for conversion by using physical resources. Following are the activities which are listed under production and operations management functions: 1. Location of facilities 2. Plant layouts and material handling 3. Product design 4. Process design 5. Production and planning control 6. Quality control 7. Materials management 8. Maintenance management. LOCATION OF FACILITIES Location of facilities for operations is a long-term capacity decision which involves a long term commitment about the geographically static factors that affect a business organization. It is an important strategic level decision-making for an organization. It deals with the questions such as where our main operations should be based? The selection of location is a key-decision as large investment is made in building plant and machinery. An improper location of plant may lead to waste of all the investments made in plant and machinery equipments. Hence, location of plant should be based on the company s expansion

15 plan and policy, diversification plan for the products, changing sources of raw materials and many other factors. The purpose of the location study is to find the optimal location that will results in the greatest advantage to the organization. PLANT LAYOUT AND MATERIAL HANDLING Plant layout refers to the physical arrangement of facilities. It is the configuration of departments, work centres and equipment in the conversion process. The overall objective of the plant layout is to design a physical arrangement that meets the required output quality and quantity most economically. According to James Moore, Plant layout is a plan of an optimum arrangement of facilities including personnel, operating equipment, storage space, material handling equipments and all other supporting services along with the design of best structure to contain all these facilities. Material Handling refers to the moving of materials from the store room to the machine and from one machine to the next during the process of manufacture. It is also defined as the art and science of moving, packing and storing of products in any form. It is a specialised activity for a modern manufacturing concern, with 50 to 75% of the cost of production. This cost can be reduced by proper section, operation and maintenance of material handling devices. Material handling devices increases the output, improves quality, speeds up the deliveries and decreases the cost of production. Hence, material handling is a prime consideration in the designing new plant and several existing plants. PRODUCT DESIGN Product design deals with conversion of ideas into reality. Every business organization have to design, develop and introduce new products as a survival and growth strategy. Developing the new products and launching them in the market is the biggest challenge faced by the organizations. The entire process of need identification to physical manufactures of product involves three functions: marketing, product development, manufacturing. Product development translates the needs of customers given by marketing into technical specifications and designing the various features into the product to these specifications. Manufacturing has the responsibility of selecting the processes by which the product can be manufactured. Product design and development provides link between marketing, customer needs and expectations and the activities required to manufacture the product. PROCESS DESIGN Process design is a macroscopic decision-making of an overall process route for converting the raw material into finished goods. These decisions encompass the selection of a process, choice of technology, process flow analysis and layout of the facilities. Hence, the important decisions in process design are to analyse the workflow for converting raw material into finished product and to select the workstation for each included in the workflow. PRODUCTION PLANNING AND CONTROL Production planning and control can be defined as the process of planning the production in advance, setting the exact route of each item, fixing the starting and finishing dates for each item, to give production orders to shops and to follow up the progress of products according to orders.

16 The principle of production planning and control lies in the statement First Plan Your Work and then Work on Your Plan. Main functions of production planning and control includes planning, routing, scheduling, dispatching and follow-up. Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen. Routing may be defined as the selection of path which each part of the product will follow, which being transformed from raw material to finished products. Routing determines the most advantageous path to be followed from department to department and machine to machine till raw material gets its final shape. Scheduling determines the programme for the operations. Scheduling may be defined as the fixation of time and date for each operation as well as it determines the sequence of operations to be followed. Fig. 1.4 Scope of production and operations management Dispatching is concerned with the starting the processes. It gives necessary authority so as to start a particular work, which has already been planned under Routing and Scheduling. Therefore, dispatching is release of orders and instruction for the starting of production for any item in acceptance with the route sheet and schedule charts. The function of follow-up is to report daily the progress of work in each shop in a prescribed proforma and to investigate the causes of deviations from the planned performance.

17 QUALITY CONTROL Quality Control (QC) may be defined as a system that is used to maintain a desired level of quality in a product or service. It is a systematic control of various factors that affect the quality of the product. Quality control aims at prevention of defects at the source, relies on effective feed back system and corrective action procedure. Quality control can also be defined as that industrial management technique by means of which product of uniform acceptable quality is manufactured. It is the entire collection of activities which ensures that the operation will produce the optimum quality products at minimum cost. The main objectives of quality control are: To improve the companies income by making the production more acceptable to the customers i.e., by providing long life, greater usefulness, maintainability, etc. To reduce companies cost through reduction of losses due to defects. To achieve interchangeability of manufacture in large scale production. To produce optimal quality at reduced price. To ensure satisfaction of customers with productions or services or high quality level, to build customer goodwill, confidence and reputation of manufacturer. To make inspection prompt to ensure quality control. To check the variation during manufacturing. MATERIALS MANAGEMENT Materials management is that aspect of management function which is primarily concerned with the acquisition, control and use of materials needed and flow of goods and services connected with the production process having some predetermined objectives in view. The main objectives of materials management are: To minimise material cost. To purchase, receive, transport and store materials efficiently and to reduce the related cost. To cut down costs through simplification, standardisation, value analysis, import substitution, etc. To trace new sources of supply and to develop cordial relations with them in order to ensure continuous supply at reasonable rates. To reduce investment tied in the inventories for use in other productive purposes and to develop high inventory turnover ratios. MAINTENANCE MANAGEMENT In modern industry, equipment and machinery are a very important part of the total productive effort. Therefore, their idleness or downtime becomes are very expensive. Hence, it is very important that the plant machinery should be properly maintained. The main objectives of maintenance management are: 1. To achieve minimum breakdown and to keep the plant in good working condition at the lowest possible cost. 2. To keep the machines and other facilities in such a condition that permits them to be used at their optimal capacity without interruption. 3. To ensure the availability of the machines, buildings and services required by other sections of the factory for the performance of their functions at optimal return on investment.

18 TYPES OF PRODUCTION SYSTEMS Production systems can be basically classified mainly into two types, Intermittent Production and Continuous Production. Further classification is as outlined below: Types of production System Intermittent production Continuous production Project Job Shop Batch Mass Process production production production production production Assly Line Production Synthetic Process Analytical Process 1.0 Intermittent Production Production system is flexible Design of the product can be changed from time to time We can adjust production system according to the order Characteristics of Intermittent Production General purpose machines and equipment are used Variety of the product can be produced Production is not continuous Process layout is adopted Volume of production is small Production is as per the customer order 1.1 Project Production Single assignment job is there Complex in nature

19 This system is for specific time period Specific expenditure is there All the operations are carried out in a fixed position layout Examples are: - ships, locomotives air crafts, roads, building, spacecrafts Characteristics of Project Production Short life cycle Low Volume end of the continuum High customization The sequence of operations is unique to each project Products cannot be produced to stock because needs of next customer unknown Fixed position layout Involvement of different agencies Examples are: - ships, locomotives,aircrafts, roads, building, spacecrafts. Fig. 1. Classifications of production systems 1.2 JOB-SHOP PRODUCTION Job-shop production are characterised by manufacturing one or few quantity of products designed and produced as per the specification of customers within prefixed time and cost. The distinguishing feature of this is low volume and high variety of products. A job-shop comprises of general-purpose machines arranged into different departments. Each job demands unique technological requirements, demands processing on machines in a certain sequence Job-shop Production is characterized by 1. High variety of products and low volume. 2. Use of general purpose machines and facilities. 3. Highly skilled operators who can take up each job as a challenge because of uniqueness. 4. Large inventory of materials, tools, parts. 5. Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order priorities.

20 1.2.2 Advantages Following are the advantages of Job-shop Production: 1.Because of general purpose machines and facilities variety of products can be produced. 2. Operators will become more skilled and competent, as each job gives them learning opportunities. 3. Full potential of operators can be utilized 4. Opportunity exists for Creative methods and innovative ideas Limitations Following are the limitations of Job-shop Production: 1. Higher cost due to frequent set up changes. 2. Higher level of inventory at all levels and hence higher inventory cost 3. Production planning is complicated. 4. Larger space requirements. 1.3 Batch Production American Production and Inventory Control Society (APICS) defines Batch Production as a form of manufacturing in which the job pass through the functional departments in lots or batches and each lot may have a different routing. It is characterised by the manufacture of limited number ofproducts produced at regular intervals and stocked awaiting sales Characteristics of Batch Production 1. Shorter production runs. 2. Plant and machinery are flexible. 3. Plant and machinery set up is used for the production of item in a batch and change of set up is required for processing the next batch. 4. Manufacturing lead-time and cost are lower as compared to job order production Advantages Following are the advantages of Batch Production: 1. Better utilisation of plant and machinery. 2. Promotes functional specialisation. 3. Cost per unit is lower as compared to job order production. 4. Lower investment in plant and machinery. 5. Flexibility to accommodate and process number of products. 6. Job satisfaction exists for operators Limitations Following are the limitations of Batch Production: 1. Material handling is complex because of irregular and longer flows. 2. Production planning and control is complex. 3. Work in process inventory is higher compared to continuous production.

21 4. Higher set up costs due to frequent changes in set up. 2.0 Continuous Production Production facilities are arranged as per the sequence of production operations from the first operationsto the finished product. The items are made to flow through the sequence of operations throughmaterial handling devices such as conveyors, transfer devices, etc Continuous Production is characterised by 1. Dedicated plant and equipment with zero flexibility. 2. Material handling is fully automated. 3. Process follows a predetermined sequence of operations. 4. Component materials cannot be readily identified with final product. 5. Planning and scheduling is a routine action Advantages Following are the advantages of Continuous Production: 1. Standardisation of product and process sequence. 2. Higher rate of production with reduced cycle time. 3. Higher capacity utilisation due to line balancing. 4. Manpower is not required for material handling as it is completely automatic. 5. Person with limited skills can be used on the production line. 6. Unit cost is lower due to high volume of production Limitations Following are the limitations of Continuous Production: 1. Flexibility to accommodate and process number of products does not exist. 2. Very high investment for setting flow lines. 3. Product differentiation is limited. 2.1 Mass Production and Assembly Line Production Manufacture of discrete parts or assemblies using a continuous process are called Mass Production. This production system is justified by very large volume of production. The machines are arranged in a line or product layout. Product and process standardisation exists and all outputs follow the same path Mass Production is characterised by 1. Standardisation of product and process sequence. 2. Dedicated special purpose machines having higher production capacities and output rates. 3. Large volume of products. 4. Shorter cycle time of production. 5. Lower in process inventory. 6. Perfectly balanced production lines.

22 7. Flow of materials, components and parts is continuous and without any back tracking. 8. Production planning and control is easy. 9. Material handling can be completely automatic Advantages Following are the advantages of Mass Production: 1. Higher rate of production with reduced cycle time. 2. Higher capacity utilisation due to line balancing. 3. Less skilled operators are required. 4. Low process inventory. 5. Manufacturing cost per unit is low Limitations Following are the limitations of Mass Production: 1. Breakdown of one machine will stop an entire production line. 2. Line layout needs major change with the changes in the product design. 3. High investment in production facilities. 4. The cycle time is determined by the slowest operation. 2.2 Process Production Process production is characterized by the manufacture of a single product. The flexibility of such plants is almost zero as only one type of product can be produced in the plant Examples are refineries, petrol, kerosene, and diesel oil Characteristics of Process Production Special purpose machines and equipments are used Material handling is highly mechanized In this manufacturing cycle time is almost zero. The whole plant is like one large machine where materials are entered at the one end. Labor required is having semi skilled workmen and skilled technicians are required Supervision in this type of production is high Types of Process Production There are two types of Process Production 1. Analytical Process: Here raw material is broken down into its component parts. Ex: Crude oil in refinery is broken down into individual fractions like Kerosene. Petrol, Naptha etc. 2. Synthetic Process: Mixing of two or more parts of materials to form a finishesd product like soap.

23 PLANT LAYOUT Definition: Plant layout refers to the arrangement of physical facilities such as machines, equipment, tools, furniture etc. in such a manner so as to have quickest flow of material at the lowest cost and with the least amount of handling in processing the product from the receipt of raw material to the delivery of the final product. Objectives of good Plant Layout: A well designed plant layout is one that can be beneficial in achieving the following objectives: Proper and efficient utilization of available floor space Transportation of work from one point to another point without any delay Proper utilization of production capacity. Reduce material handling costs Utilize labour efficiently Reduce accidents Provide for volume and product flexibility Provide ease of supervision and control Provide for employee safety and health Allow easy maintenance of machines and plant. Improve productivity TYPES OF LAYOUT: There are mainly four types of plant layout: (a) Product or line layout (b) Process or functional layout (c) Fixed position or location layout (d) Combined or group layout PRODUCT OR LINE LAYOUT: In this type of layout the machines and equipments are arranged in one line depending upon the sequence of operations required for the product. It is also called as line layout. The material moves to another machine sequentially without any backtracking or deviation i.e the output of one machine becomes input of the next machine. It requires a very little material handling. It is used for mass production of standardized products.

24 Advantages of Product layout: Low cost of material handling, due to straight and short route and absence of backtracking Smooth and continuous operations Continuous flow of work Lesser inventory and work in progress Optimum use of floor space Simple and effective inspection of work and simplified production control Lower manufacturing cost per unit Disadvantages of Product layout: Higher initial capital investment in special purpose machine (SPM) High overhead charges Breakdown of one machine will disturb the production process. Lesser flexibility of physical resources. PROCESS LAYOUT: In this type of layout the machines of a similar type are arranged together at one place. This type of layout is used for batch production. It is preferred when the product is not standardized and the quantity produced is very small. Advantages of Process layout: Lower initial capital investment is required. There is high degree of machine utilization, as a machine is not blocked for a single product The overhead costs are relatively low

25 Breakdown of one machine does not disturb the production process. Supervision can be more effective and specialized. Greater flexibility of resources. Disadvantages of Process layout: Material handling costs are high due to backtracking More skilled labour is required resulting in higher cost. Work in progress inventory is high needing greater storage space More frequent inspection is needed which results in costly supervision COMBINED LAYOUT: A combination of process & product layout is known as combined layout. Manufacturing concerns where several products are produced in repeated numbers with no likelihood of continuous production, combined layout is followed FIXED POSITION OR LOCATION LAYOUT: Fixed position layout involves the movement of manpower and machines to the product which remains stationary. The movement of men and machines is advisable as the cost of moving them would be lesser. This type of layout is preferred where the size of the job is bulky and heavy. Example of such type of layout islocomotives, ships, boilers, generators, wagon building, aircraft manufacturing, etc.

26 Advantages of Fixed position layout: The investment on layout is very small. The layout is flexible as change in job design and operation sequence can be easily incorporated. Adjustments can be made to meet shortage of materials or absence of workers by changing the sequence of operations. Disadvantages of Fixed position layout: As the production period being very long so the capital investment is very high. Very large space is required for storage of material and equipment near the product. As several operations are often carried out simultaneously so there is possibility of confusion and conflicts among different workgroups. Capacity Amount of output a system is capable of achieving over a specific period of time. (Russell & Taylor) : Capacity = (no. of machines or workers) x (no. shifts) x (utilization) x (efficiency) Best operating level is the percent of capacity utilization that minimizes average unit cost. Capacity utilization is seldom figured at 100%. Several factors are considered when calculating utilization, for example you would have to determine if it is feasible to run machinery 100% of the time. By doing so, you would not have any time for maintenance on the machines. Operating at

27 100% would certainly provide a higher profit margin for a period of time; therefore, short term profit would be very good. However, in planning projects you have to plan long term, for machinery to continue operating you would have to calculate some down time to do preventive maintenance. Other things to consider is the off time for workers, with lunches, meetings, breaks, they will not work 100% of the time at are on the job. Utilization and Efficiency: EFFECIENY AND UTILIZATION: To calculate utilization you need to divide the actual hours worked by the scheduled available hours. Efficiency is calculated by divided the standard hours earned by the actual hours charged. Both measures expressed in percentage Example:- Design capacity= 50 trucks/day Effective capacity= 40 trucks/day Actual output= 36 units/day

28 Production Planning and Control What are the Objectives and Functions of Production Planning and Control? For efficient, effective and economical operation in a manufacturing unit of an organization, it is essential to integrate the production planning and control system. Production planning and subsequent production control follow adaption of product design and finalization of a production process. Production planning is an activity that is performed before the actual production process takes place. It involves determining the schedule of production, sequence of operations, economic batch quantities, and also the dispatching priorities for sequencing of jobs. Production control is mainly involved in implementing production schedules and is the corollary to short-term production planning or scheduling. Production control includes initiating production, dispatching items, progressing and then finally reporting back to production planning. In general terms, production planning means planning of the work to be done later and production control refers to working out or the implementation of the plan. Objectives of production planning and control 1. Effective utilization of resources Production planning results in effective utilization of resources, plant capacity and equipments. This results in low-cost and high returns for the organization. 2. Steady flow of production Production planning ensures a regular and steady flow of production. Here, all the machines are put to maximum use. This results in a regular production, which helps to give a routine supply to customers. 3. Estimate the resources Production planning helps to estimate the resources like men, materials, etc. The estimate is made based on sales forecast. So production is planned to meet sales requirements. 4. Ensures optimum inventory Production planning ensures optimum inventory. It prevents over-stocking and under-stocking. Necessary stocks are maintained. Stock of raw material is maintained at a proper level in order to meet the production demands. Stock of finished goods is also maintained to meet regular demands from customers. 5. Co-ordinates activities of departments Production planning helps to co-ordinate the activities of different departments. For e.g. the marketing department co-ordinates with production department to sell the goods. This results in profit to the organization. 6. Minimize wastage of raw materials Production planning minimizes wastage of raw materials. It ensures proper inventory of raw materials and materials handling. This helps to minimize wastages of raw material. It also ensures production of quality goods. This results in a minimum rejects. So proper production planning and control results in minimum wastage.

29 7. Improves the labor productivity Production planning improves the labor productivity. Here, there is maximum utilization of manpower. Training is provided to the workers. The profits are shared with the workers in form of increased wages and other incentives. Workers are motivated to perform their best. This results in improved labor efficiency. 8. Helps to capture the market Production planning helps to give delivery of goods to customers in time. This is because of regular flow of quality production. So the company can face competition effectively, and it can capture the market. 9. Provides a better work environment Production planning provides a better work environment to the workers. Workers get improved working conditions, proper working hours, leave and holidays, increased wages and other incentives. This is because the company is working very efficiently. 10. Facilitates quality improvement Production planning facilitates quality improvement because the production is checked regularly. Quality consciousness is developed among the employees through training, suggestion schemes, quality circles, etc. 11. Results in consumer satisfaction Production planning helps to give a regular supply of goods and services to the consumers at far prices. It results in consumer satisfaction. 12. Reduces the production costs Production planning makes optimum utilization of resources, and it minimizes wastage. It also maintains optimum size of inventories. All this reduces the production costs. Other important objects of PPC are:- To plan production facilities in the best possible manner along with the proper systematic planning of production activities. Providing men, machines, materials etc. of right quality, quantity and also providing them at the right time forms a very important factor. To inform, about the difficulties or the various awkward positions expected to crop up later, to the management beforehand. Major functions of production planning and control 1. Planning 2. Routing i.e. determination of the manufacturing path. 3. Loading i.e. assigning of job to men and machine. 4. Scheduling i.e. establishing time for starting & finishing each operation or job. 5. Dispatching i.e. issue of orders. 6. Follow-up i.e. ensuring that work proceeds according to plans & there is no variation. This means to ensure smooth flow of work.

30 Planning The main function of the PPC is to plan everything, which mainly includes the planning, the organizing, the staffing, the maintaining the control over the various things and also to maintain the coordination between the different departments. For the proper working of the PPC, it is very important to classify the various functions of the manager in the suitable groups of the activities. Objectives:- Production planning helps to estimate the resources like men, materials, etc. The estimate is made based on sales forecast. So production is planned to meet sales requirements. Production planning results in effective utilization of resources, plant capacity and equipments. This results in low-cost and high returns for the organization. Production planning helps to co-ordinate the activities of different departments. For e.g.:- the marketing department co-ordinates with production department to sell the goods. This results in profit to the organization. Routing Routing is one important function in production planning & control. It is useful for smooth & efficient working of the whole plant or factory. It decides the path of work & the sequence of operations. The demand for a more systematic method of carrying the work through the shop gave rise to the practice of routing. In fact, production planning starts with routing which includes the following activities: a. Determining the quality of the product to be manufactured; b. Determining the men, machines & materials to be used; c. Determining the types, number & sequence of manufacturing operations; & d. Determining the place of production. Routing has the following objectives: 1. It determines the sequence of manufacturing operations. 2. It ensures the strict adherence to the sequence so determined. 3. It strives for the best possible & cheapest sequence of operations. 4. It influences the design & layout of the factory building with a view to get quick & better production results. 5. It also influences the installation of plants & factory for better results. Advantages of routing: 1. Well chalked out division of labor. 2. Production of goods according to schedule. 3. Maximization of productivity. 4. Interruption free production. 5. Reduction in cost of production. 6. Optimum use of all factors of production. 7. scientific layout of the plant. Loading

31 Assigning specific job to men, machines and work centers as per their capacities is called loading. In PPC, a loading chart is prepared for each work centre. Loading chart shows planned utilization of men and material and machine available. It also helps to avoid over loading, under loading and bottle necks in the production. The following information are required for preparation of loading Time need for a job Total work load Avaibility of labor,material, machines Capacity of each worker and machine Scheduling Scheduling is concerned with time table of production. Scheduling arranges the different manufacturing operations in order of priority, fixing the time & date for the commencement & completion of each operation. It includes all requisites of production like scheduling of parts, materials, machines, etc. Perfect coordination must exist between operations so that parts that are separately produced are brought to the final assembly in right time. In brief, scheduling means fixing or deciding the amount of work to be done & fixing the time for starting & finishing each operation. It is like a timetable of the production plan. Essentials of master scheduling: 1. Inventory policy & position. 2. Procurement including subcontract. 3. Sales forecast. 4. Departmental manufacturing capacities. 5. Operations required & operations schedule. 6. Specific operations presenting critical path or imbalance of production flow. 7. Specific customer demands or delivery requirements. 8. Alternative delivery schedules. 9. Production plan including quantitative data. 10. Production standards. 11. Demand for finished products. Uses of scheduling: 1. Scheduling is certainly a necessity in a large setup which produces a variety of products with numerous components. The time within which products must be manufactured forms an important element in production control. 2. Scheduling also determines the total time required to perform a given piece of work or assembly. 3. Time & motion study helps standardization of methods of work after a careful analysis of all the vital factors surrounding the manufacturing processes. Dispatching Releasing orders and instructions for starting of production as per route sheet and schedule chart is called dispatching. Dispatching is concerned with starting the processes & operations of production. Dispatching is based on the route sheets & schedule sheets. Dispatching provides the necessary authority to start the routed & schedule work. It is similar to putting oneself into the train after

32 deciding the route of the particular train & the destination. Functions of dispatching: 1. To ensure that the right materials are moved from stores to machines & from operation to operation. 2. To distribute machine loading & schedule charts, route sheets, operation instruction cards & identification tags for each works order. 3. To instruct tools department to issue the right tools, accessories & fixtures in time. 4. To authorize the work to be taken in hand as per the predetermined dates & time. 5. To direct inspection at various stages of production for inspection report. 6. To maintain proper report of the various subsidiary orders issued with each production order, for filing & reference. 7. To inform the follow-up section that production is starting. Follow-up Follow-up expedites the movement of materials & production process as a whole. It looks into determination of the present situation boosting the department lagging behind & removing the bottlenecks in the production line. Once production begins it is necessary to check that it is proceeding according to plan. Before dispatching new orders to the manufacturing department the progress of outstanding orders must be known. There are certain factors over which the manufacturing department has no control & hence follow-up is necessary. The most important factors causing disturbances in production schedule are: excessive labor, absenteeism, machine breakdown, errors in drawings, strikes, late delivery of materials etc. the function of follow-up is to maintain proper records of work, delays & bottleneck. Such records can be used in future to control production. Follow-up Documents: Follow-up documents are prepared with the objective to identify the products. They also help to check completion dates with due dates. They vary greatly according to the type of production. These documents include the following information: 1. Labels with part numbers. 2. Order numbers mentioned on the article. 3. Number of products or batches of products. 4. Daily progress sheets showing the position of every order in process. 5. Reports showing orders behind schedule. Production planning and control yields the following main advantages, 1. Avoidance of Rush Orders Production is well planned and its time aspects are well controlled. Therefore, production control reduces the number of risk-orders and overtime work on plant. 2. Avoidance of Bottlenecks The incomplete work does not get accumulated because production control maintains an even flow of work. 3. Cost Reduction Production control programs minimizes the idleness of men and machines, keeps in process inventories at a satisfactory level, leads to a better control of raw materials inventory, reduces costs of

33 storage and materials handling, helps in maintaining quality and containing rejection and thus reduces unit cost of production. 4. Effective Utilization of Resources It reduces the loss of time by the workers waiting for materials and makes most effective use of equipments. 5. Co-Ordination It serves to co-ordinate the activities of plant and results in a concerted effort by workmen. 6. Benefits to Workers Adequate wages, stable employment, job Security, improved working conditions, increased personal satisfaction, high morale. 7. Efficient Service to Customers it ensures better service to the customers by enabling production to be conducted in accordance with the time schedules and therefore deliveries are made on promised dates OVERVIEW Steps in Production Planning and Control Production planning and control is one of the most important phases of production management, it is, as a matter of fact, the nervous system of a manufacturing organization. In manufacturing organization, it is essential that production is carried on in the best manner at the lowest cost, and the goods are of right quality and are produced at the proper time. This can be ensured only through proper planning of production. but mere planning of production will not solve the problem because production plans are not capable of self-actuating and do not lead to automatic accomplishment. For that the production manager has to take certain steps like, he has to regulate work assignment, review the work progress, and devise methods to bring conformity between the actual performance and planned performance so that plans chalked out are adhered to and the standards set at the planning stage are properly attained and improved. This is the function of production control. Production control, therefore, is a directive function which involves the coordination and integration of operations and activities of different factors of production with a view to optimizing efficiency. Optimum efficiency is attainable by proper planning of work, laying down of exact routes which operations shall follow, correct fixing of time-table within which productive operations shall start and come to a close, uninterrupted releasing of orders and work facilities, and timely initiation of appropriate follow-up steps to ensure smooth functioning of the enterprise. In other words, production control involves planning, routing, scheduling, dispatching and follow-up. 1. Planning The first important step in production planning and control is concerned with the careful preparation of production plans. Production plans determine what will be produced and where, at what type, by whom, and how. For detailed planning of operations, the relevant information may be obtained from several sources in the enterprise. Information about quantity and quality of products to be manufactured may be obtained from customers orders and the sales budget, and information about production facilities may be obtained from the management and the engineering department. Thus, the planning function formulates production plans, and translates them into requirements for men, machinery and materials.

34 Whatever be the planning period, production planning helps in avoiding randomness in production, providing regular and steady flow of production activities, utilizing production facilities to its maximum for minimizing operating costs and meeting delivery schedules; coordinating various departments of the enterprise for maintaining proper balance of activities, and above all, providing the basis for control in the enterprise. 2. Routing The next important function of production planning and control is routing which involves the determination of the path (i.e. route) of movement of raw materials through various machines and operations in the factory. Routing includes the planning of where and by whom work shall be done, the determination of the path that work shall follow, and the necessary sequence of operations. To find this path, emphasis is placed on determining operating data, which usually includes planning of where and by whom work should be done, the determinations of the path that work shall follow, and the necessary sequence of operations. These operating data are contained in the standard process sheet which helps in making out a routing in the standard process sheet which helps in making out a routing chart showing the sequence of operations and the machines to be used. If the machine loan chart indicates the non-availability of certain machines, alternate routing may also be included on the routing chart. The most efficient routing may have to be compromised with the availability of the machines at a particular time. In other words, routing establishes the operations, their path and sequence, and the proper class of machines and personnel required for these operations. From the above, it can be inferred that routing is one of the highly essential elements and prime considerations of production control because many production control functions are closely related processes and are dependent on routing functions. Thus, it is essential to solve the different problems concerning: appropriate personnel; full utilization of machines; and determining with precise degree the time required in the production process. 4. Scheduling Scheduling is planning the time element of production i.e. prior determination of when work is to be done. It consists of the starting and completion times for the various operations to be performed. In other words, scheduling function determines when an operation is to be performed, or when work is to be completed, the difference lies in the details of the scheduling procedure. To work out effectively, the scheduling, as a part of production control function, determines the time when each operation called for on the route sheet is to be done on the specified machine in order to meet the desired delivery dates. Good control function directs not only the time that each particular operation should start but also indicates the progress of each manufacturing part, the amount of work ahead of each machine, and the availability of each machine for the assignment of new work. Schedules are of two types: Master schedule and Detailed schedule. Activities, if recorded on plantwise basis, would be preparing master schedule, while mere detailed schedules are employed to plan the manufacturing and assembly operations required for each product. 5. Dispatching

35 Dispatching is the part of production control that translates the paper work into actual production. It is the group that coordinates and translates planning into actual production. Dispatching function proceeds in accordance with the details worked out under routing and scheduling functions. As such, dispatching sees to it that the material is moved to the correct work place, that tools are ready at the correct place for the particular operations, that the work is moving according to routing instructions. Dispatching carries out the physical work as suggested by scheduling. Thus, dispatching implies the issuance or work orders. These work orders represent authority to produce. These orders contain the following information: The name of the product; The name of the part to be produced, sub-assembly or final assembly; The order number; The quantity to be produced; Descriptions and numbers of the operations required and their sequence, The departments involved in each operation The tools required for particular operation; and Machines involved in each operation and starting dates for the operations. 6. Expediting Expedition or follow-up is the last stage in the process of production control. This function is designed to keep track of the work effort. The aim is to ensure that what is intended and planned is being implemented. Expediting consists in reporting production data and investigating variances from predetermined time schedules. The main idea behind expedition is to see that promise is backed up by performance. It includes the following functions: 1. Check-up to ensure that all materials, tools, component parts, and accessories are available at all work centers in specified quantities for starting and carrying out manufacturing operations. 2. Check-up on the status of work-in-progress and completed work at various work stations. This includes collecting information relating to the starting and completion time and date of work completed, status of work-in-progress relative to scheduled completion dates, position of movements of materials, component parts, and sub-assemblies within the plant, and inspection results. 3. Preparation of progress records and keeping the control boards up-to-date. 4. Reporting to manufacturing management on all significant deviations so that corrective action may be taken. It also includes reporting to production planning department so that future plans may be adjusted. Thus production planning and control by completing the above discussed phases ensures the manufacturing of goods of right quality, quantity and at competitive market rates. One thing must be borne in mind that production planning and control is a never-ending process, and its various functions are inter-dependent.

36 WHAT IS CAPACITY PLANNING? Capacity planning : Capacity planning is central to the long-term success of an organization. Capacity plans are made at two levels: (i) Long-term capacity plans :which deal with investments in new facilities and equipments covering the requirements for at least two years into the future and (ii) Short-term capacity plans :which focus on work-force size, overtime budgets, inventories etc. A long term strategic decision that establishes a firm s overall level resources. Three major capacity decisions are: a) How much capacity to be installed, b) When to increase capacity and c) How much to increase Capacity planning is the process of determining the production capacity needed by an organization to meet changing demand for its products. Capacity is the rate of productive capability of a facility. Capacity is usually expressed as volume of output per time period. It is the process of determining the necessary to meet the production objectives. The objectives of capacity planning are: To identify and solve capacity problem in a timely manner to meet consumer needs. To maintain a balance between required capacity and available capacity. The goal of capacity planning is to minimize this discrepancy. Capacity is calculated: (number of machines or workers) (number of shifts) (utilization) (efficiency). THE NEED FOR CAPACITY PLANNING: Capacity planning is the first step when an organization decided to produce more or a new product. Once capacity is evaluated and a need for a new expanded facility is determined, facility location and process technology activities occur. Too much capacity would require exploring ways to reduce capacity, such as temporarily closing, selling, or consolidating facilities. Consolidation might involve relocation, a combining of technologies, or a rearrangement of equipment and processes. Capacity planning is done in order to estimate whether the demand is higher than capacity or lower than capacity. That is compare demand versus capacity. It helps an organization to identify and plan the actions necessary to meet customer s present and future demand. HOW IS CAPACITY MEASURED? For some organization capacity is simple to measure. General Motors Corporation can use numbers of automobiles per year. But what about organization whose product lines are more diverse? For these firms, it is hard to find a common unit of output. As a substitute, capacity can be expressed in terms of input. A legal office may express capacity in terms of the number of attorneys employed per year. A custom job shop or an auto repair shop may express capacity in terms of available labour hours and/or machine hours per week, month, or year.

37 Capacity can be expressed in terms of input & output, depending on the nature of business. Organization Automobile manufacturer Steel producer Power company Airline Hospital Tax office Output Input Measure Numbers of autos Tones of steel Megawatts of electricity Numbers of seat Number of beds Number of accountants Types of Capacity Production capacity: Maximum rate of production or output of an organization. (e.g., 100 cars per day etc.. ) Design capacity: The maximum output that can possibly be attained. Effective capacity: The maximum output given a product mix, scheduling difficulties, machine maintenance, quality factors, absenteeism etc. Maximum capacity: The maximum output that a facility can achieve under ideal conditions. Also known as peak capacity CAPACITY PLANNING DECISION: Capacity planning normally involves the following activities: 1. Assessing existing capacity. 2. Forecasting capacity needs. 3. Identifying alternative ways to modify capacity. 4. Evaluating financial, economical, and technological capacity alternatives. 5. Selecting a capacity alternative most suited to achieving strategic mission. THREE STEPS OF CAPACITY PLANNING: Determine Service Level Requirements: The first step on the capacity planning process is to categorize the work done by systems and to quantify users expectation for how the work gets down. (a) Define workloads (b) Determine the unit of work (c) Identify service levels for each workload Analyze current capacity: Next, the current capacity of the system must be analyzed to determine how it is meeting the needs of the users. (a) Measure service levels and compare to objectives (b) Measure overall resources usages. (c) Measure resource usages by workload (d) Identify components of response time

38 Planning for future: Finally, using forecasts of future business activity, future system requirements are determined. Implementing the required changes in system configuring will ensure that sufficient capacity will be available to maintain service level, even as circumstanced change in the future. (a) Determine future processing requirements (b) Plan future system configuration ESTIMATING FUTURE CAPACITY NEEDS: Capacity requirements can be evaluated from two extreme perspectives- short term and long term. Short-term Requirements- Managers often use forecast of product demand to estimate the short-term work load the facility must handle. By looking ahead up to 12 months, managers anticipate output requirements for different products or services. Then they compare requirements with existing capacity and detect when capacity adjustments are needed. Long-term Requirements- Long term capacity requirements are more difficult to determine because future demand and technologies are uncertain. Forecasting five or ten years into the future is a risky and difficult task. What products or services will the firm are producing then? Today s product may not even exist in the future. Obviously, long-term capacity requirement are dependent on marketing plans, product development, and the life cycles of the products. Changing in process technology must also be anticipated. Even if producers remain unchanged, the methods for generating them may change dramatically. Capacity planning must involve forecasts of technology as well as product. Developing capacity alternatives To enhance capacity management, the following approaches to capacity alternatives could be developed: a) Designing flexibility into the system b) Differentiating between new and mature products or services c) Taking a big-picture approach to capacity changes d) Preparing to deal with chunks of capacity e) Attempting to smooth out capacity requirements STRATIGES FOR MODIFYING CAPACITY: After existing and future capacity requirements are assessed, alternative ways of modifying capacity must be identified. Short-term Responses- For short-term periods of up to one year, fundamental capacity is fixed. Major facilities are seldom opened or closed on a regular monthly or yearly basis. Many short-term adjustments for increasing or decreasing capacity are possible, however. Which adjustment to make depended on whether the conversion process is primarily labour-or capital-intensive and whether the product is one that can be stored in inventory. Long-term Responses- Expansion from World War II through the 1960s, the U.S. economy was one of abundance and growth. Since the 1970s the United States has encountered problems of scarce resources and a more competitive economy. Organization today cannot be locked into thinking only about expanding the resource base; they must also consider optimal approaches to contracting it.

39 Example:- A warehousing operation foresees the need for an additional 100,000 square feet of space by the end of the next five year. One option is to add an additional 50,000 square feet now and another 50,000 square feet two year from now. Another option is to add the entire 100,000 square feet now. Estimated costs for building the entire addition now are $50/square foot. If expanded incrementally, the initial 50,000 square feet will cost $60/square foot. The 50,000 square feet to be added later are estimated at $80/square foot. Which alternative is better? At a minimum, the lower construction costs plus excess capacity costs of total construction now must be compared with higher costs of deferred construction. The operation manager must consider the costs, benefits, and risks of each option. WHAT IS DONE IF THERE IN AN INBALANCED BETWEEN DEMAND AND CAPACITY: If there is an imbalance in the demand and the capacity in the short term then it can be tackled by temporary measures /adjustments such as increasing/ decreasing the labour force or creating and carrying inventory in the lean period to be used up in the peak-demand period. If there is an imbalance in the long term demand and the capacity then an organization can respond by changing /modifying the capacity. If capacity is short then it can create new facility or expand existing facility If there is excess capacity then it can temporarily close/ sell/ consolidate facilities. Consolidation can be done by relocation (combining technologies) rearrangement of equipment. WHAT ARE THE MODELS AND TECHNIQUES THAT ARE USEFUL FOR CAPACITY PLANNING? Present value analysis: It is used to evaluate the time of capital investment and fund flows. Aggregate planning models: it is useful for examining the way of using the examining the way of using the existing capacity in the short terms. Break even analysis: to determine the minimum break even volumes of production. Linear programming: this is helpful in determining the optimum product mix for maximizing contribution, considering the capacity constraints. Computers simulation: it is helpful to determine the effects of various scheduling policies. Decision tree analysis: this can be applied for long term capacity problems. WHAT ARE ECONOMIES OF SCALE? Economies of Scale: Best Operating System Level Diseconomies of Scale: Occurs only at a certain level of output eg: Higher Rework. Economies of Scale: It is well known principle of economics. It indicates the relationship between cost and capacity in an operating system. When output increases in an operating system, the system is likely to experience cost advantages on account several factors. Due the following reasons the average unit cost begins to fall with the rise in output level : Spreading the fixed costs of capacity over a larger output Improved utilization of several resources in the system Cost benefit in procurement on account of increased volume. Efficient use of supervisory and management staff.

40 Diseconomies of Scale:

41 The economies of scale cease to occur beyond a level of production or output. This is called Diseconomies of scale. There can be several reasons for this: Inefficient management due to largeness of operation and resultant lack of coordination. Overuse of machineries and break down of material handling equipments Over hiring of employees, or excessive overtime. Service slowdowns due to increasing complexities Increase in quality problems because of mismanagement and lack of focus. Economies of scale is the best operating level; the level at which it costs less per unit to produce. A work center considers spreading fixed costs out over a large number of units, the cost of buying large supply of raw material to obtain quantity discounts, the cost of storing the inventory to determine the best operating level. The more products a work center can produce while not increasing the fixed costs maximizes the profit.

42 PRODUCTION AND OPERATIONS MANAGEMENT Jagannath University

43 PAPER 2.6: PRODUCTION AND OPERATIONS MANAGEMENT Unit 1 Introduction to Production and Operation functions Understanding the relationship between production and other functions Effect of time element on OM Examples of manufacturing systems Designing the product Need Factors to be considered Considerations during PLC Standardisation Modular design Reliability Reverse enginnering Unit 2 Capacity Planning Importance Capacity measurement Planning process for manufacturing and service industry Facility Planning Location facilities Locational flexibility Facility design process and techniques Locational break even analysis. Unit 3 Process Planning Procedure Characteristic of production process systems Process from selection with PLC phases. Work Study Significance Methods, evolution of normal / standard time Job design and rating. Unit 4 Layout Importance and function Objectives Flow patterns Factors for good layout design procedure REL Chart Assembly line balancing PPC Function Planning phase, action phase, control phase Aggregate production planning line of balance Forecasting methods. Unit 5 Material requirement planning and control Inventory control systems and techniques Network techniques Unit 6 Maintenance functions Preventive vs Breakdown Query models. Quality Control Introduction to control charts and acceptance sampling procedures Quality control Total Quality Management

44 UNIT 1 1A. PRODUCTION AND OPERATION 1A.1 INTRODUCTION Management is an exciting subject because it deals with setting, seeking, and reaching objectives. We are all managers of our own lives, and the practice of management is found in every facet of human activity: schools, businesses, churches, government, unions, armed forces, and families. Establishing and achieving objectives are challenging and rewarding missions for nay enterprise, and we will discover that the managerial hurdles to be overcome for success are surprisingly similar for all organizations. A manager s role is to set goals and amass and mobilize the re sources of men and women, materials, machines, methods, money, and markets to accomplish the desired results within predetermined constraints of time, effort and cost. 1A.2 MANAGEMENT: DEFINED There are numbers definitions of management. Probably the most popular are often quoted is getting things done through other people. This and most other definitions have merit and highlight important aspects of management. For the purpose of this book, the following definitions will be used. Management is a distinct process consisting of activities of planning, organizing, actuating, and controlling, performed to determine and accomplish stated objectives with the use of human beings and other resources. 1A.3 KEY CHARACTERISTICS TO UNDERSTANDING MANAGEMENT The following list will be beneficial to the beginning student of management. Although portions of the following were implied in the above discussion, this orderly list may prove helpful in systematizing your thoughts for this chapter. 1.2 Management is purposeful. Management deals with the achievement of something specific, expressed as an objectives or goal. Managerial success is commonly measured by the extent to which objectives are achieved. Management exists because it is an effective means of getting needed work accomplished. The fact that some executives have subordinates reporting to them does not ipso facto make them managers. 1.3 Management makes things happen. Managers focus their attention and efforts on bringing about successful action. They know where to start, what to do to keep things moving, and how to follow through. Successful managers have an urge for accomplishment. This means that in some cases the person practicing management may find that she or he is not winning a popularity contest, but members of the group still respect the managers. The management member gets along with people by not only liking them but also being firm and helpful and expecting the best. 1.4 Management is an activity, not a person or group of per sons. The word managing is more precise and descriptive than management. Popular usage, however has made management the widely accepted term Management is not people; it is an activity like walking, reading, swimming, or running. People who perform management can be designated as managers, members of management, or executive leaders. In addition, management is a distinct activity. It can be studied, knowledge about it obtained, and skill in its application acquired 1.5 Management is accomplished by with, and through the efforts of others. To participate in management necessitates relinquishing the normal tendency to perform all things yourself and get tasks accomplished by, with, and through the efforts of group members. This is far more difficult than it sound. Normally a person acquires ability in a specialized type of work and wins promotions through easing knowledge and skill in this field of specialization. How ever, the time comes when further promotion requires shifting from the role of a specialist to that of a management member. The prime measures of success becomes setting or securing

45 agreement on the proper goals and getting others to accomplish these goals. How successfully this deliberate shift is made determines the potential of the new manager. This characteristic merit recognition by the ambitious specialist. All too frequently the best salesperson who is promoted to district sales manager remains a salesperson because he or she fails to comprehend the managerial difference between getting salespeople to sell and knowing how to sell. Likewise, the employee training expert who is advanced to assistant personnel manager may continue to be a training, expert, thus not succeeding in the new managerial post. 1.3 Management is usually associated with the efforts of a group. It is common to associate management with a group. How ever, management is also applicable to an individual s efforts. For example, a person manages many personal affairs. The group emphasis steam from the fact that an enterprise comes into existence to attain goals, and these are achieved more readily by a group than by one person alone. People become members of an enterprise to satisfy their needs and because they feel their giants will outweigh their losses or burdens as members of a group. 1.4 Management is intangible. It has been called the unseen force, its presence evidenced by the results of its efforts orderliness, enthusiastic employees, buoyant spirit, and adequate work output. Strange as it may seem, in some instances the identity of management is brought into focus by its absence or by the presence of its direct opposite, mismanagement. The result of mismanagement is clear. 1.5 Management is aided, not replaced by the computer. The computer is an extremely powerful tool of management. It can widen a manager s vision and sharpen insight by supplying more and faster information for making key decisions. The computer has enabled the manager to conduct analysis far beyond the normal human s analytical capacities. It has forced managers to reexamine their analytical processes and judgment in view of the almost unbelievable data processing and feedback facilities of the modern computer. However, a manger must supply judgment and imagination as well as interpret and evaluate what the data meant in each individual case. It is doubtful that General George Washington would have crossed the Delaware River if he had relied on a computer to help him decide. The data of using leaky boats at night during a snowstorm to face a numerically superior enemy would have indicated a low probability of success. However, despite such rationale, Washington believed he could succeed, seized the initiative, assumed the large risk, and won his objectives. 1.6 Management is an outstanding means for exerting real impact on human life. A manager can do much to improve the work environment, to stimulate people to better things, and to make favorable actions take place. Frustrations and disappointments need not be accepted and passively viewed as inevitable. A manager can achieve progress, bring hope, and help groups members acquire the better things in life. 1A.4 MEANING OF MANAGEMENT The chief characteristic of management is the integration and application of the knowledge and analytical approaches developed by numerous disciplines. The manager s problem is to seek a balance among these special approaches and to apply the pertinent concepts in specific situations which require action. The manager must be oriented to solving problems with techniques tailored to the situations; yet he must develop a unified framework of thought that encompasses the total and integrated aspects of the entire organization. What, then, is management, and what does it do? In general usage, the word management identifies a special group of people whose job it is to direct the effort and activities of other people toward common objectives. Simply stated, management gets things done through other people. For the purpose of this book, management is defined as the process by which a cooperative group directs actions toward common goals. This process involves techniques by which a distinguishable group of people (managers) coordinates activities of other people, managers seldom actually perform the activities them selves. This process consists of certain basic functions which provide an analytical approach for studying management.

46 The concept of management has broadened in scope with the introduction of new perspective by different fields of study. 1A.5 HISTORY OF PRODUCTION AND OPERATIONS MANAGEMNET The traditional view of production management began in the eighteenth century. Upto 1900, the traditional view prevailed and Frederick W. Taylor brought in the concept of scientific management. The important events in this field and the contributors are detailed in Table 1.1. below: TABLE 1.1 Year Contribution Contributor 1776 Specialization of labour in manufacturing Adam Smith 1832 Division of labour by skill, assignment of jobs by skill, basics of time Charless Babbage study 1900 Scientific management, time study and work study developed Frederick W. Taylor 1900 Motion of job Frank B. Gilbreth 1901 Scheduling techniques for employees, machines and jobs in Henry L. Gantt manufacturing 1915 Economic lot size for inventory control F.W. Harris 1931 Statistical inference applied to product quality, quality control charts Walter A Shewhart Linear programming George B. Dantzing 1955 Digital computer, large scale computations made easy IBM 1A.6 FUNCTIONS OF PRODUCTION AND OPERATIONS MANAGEMENT Production and operations management concerns not only with the production of goods and services but also all the activities connected with the production. When the word production is mentioned, it brings in the things like factories, machines, equipments, assembly lines. This is nothing but things related to manufacturing. In the past, emphasis was on manufacturing management, which subsequently got changed into production management. Production concepts and techniques are being applied to a wide range of activities and situations which have little or noting to do with factories or manufacturing. These activities resulted not in the realization of goods but in services like banking, hotel management, health services, educations, transportation, recreating, government operations. Due to the widening of the scope, the name was changed from production management into operations management, where the concepts, tools and techniques are applied on diverse nature of activities. First let us define production. This is a process or a set of procedures to be executed in order to convert or transform a set of inputs into a pre-determined set of outputs in accordance with the objectives assigned to the production system. Generally, a system consists of a transformation or conversion process for a given input to be converted into the required output with a feedback mechanism, so that any deviation or irregularities can be identified and corrected, In the production environment the input may be labour, energy, capital, information and technology, the transformation process is the production processes and the output may take the form of products or services or processed information.

47 4. Engineering Operations management, with its widened scope, is responsible for the management of productive systems, that is, it is responsible for systems which either create goods or private service or both. The operations management personnel have the ultimate responsibility for the creating of goods or services. The variety of jobs which the operations group will oversee will differ form one organization to another. But the basic task of coordinating the use of resources through the management process, which involves planning, organizing, staffing, directing and controlling. Planning involved determining a future course of action. The planning process begins by deciding what is desired and then designing the way for accomplishing that objective. Organizing refers to the administrative structure of the organization. It involves putting the parts of the system together in such a way that desired results can be achieved. Staffing involves selection and training of personnel who will operate the system. Directing refers to the release of commands or orders, making suggestions or otherwise motivating subordinates to perform their assigned duties in a timely and efficient manner. Controlling involves to the release of commands or orders making suggestions or otherwise motivating subordinates to perform their assigned duties in a timely and efficient manner. Controlling involves measuring the results of operations, deciding if they are acceptable and instituting corrective action if need be. 1A.7 RELATIONSHIP BETWEEN POM AND OTHER FUNCTIONS There are three primary functions, which exist in most of the organizations and hey are Operations, Marketing and Finance. These three cannot be mutually exclusive and the functional overlap is unavoidable. The level of overlapping varies from one organisation to another. In addition to these three major functions of business organizations, the operation management function has to interact with many supporting functions. The supporting functions are research and development, product design, industrial engineering, maintenance, personnel, accounting, costing, materials, etc. The level of interaction and presence of some departments may be Exchange of information on current and future decided based on the size of the organization, product line and type of management. 2 3 Finance 1 Production / Operations 4 Marketing 3. Research Accounting 2. Personnel 5. Purchase 6. distribution FIGURE : 1.1 SYSTEMS VIEW OF A BUSINESS

48 The operations management personnel and the other major of support functional personnel have to necessarily interact with each other in the activities identified below: Finance: Economic analysis of investment products Budgeting and timing of funds Provision and release of funds Marketing Developing and maintaining the market Advertisement and sales promotion Sales forecast Production improvement / new product development. Research and Development: Idea generation Product formulations Prototype Development Test Marketing Product Design: Preliminary and final design Detailed Drawings Assembly and parts manufacturing drawings Quality standards Exchange of information on current and future capabilities Maintenance: Evolution of maintenance policy Implementation for general unkeep of equipment Industrial Engineering: Scheduling Setting up of standards Work methods: time study Quality audit and contact Material handling

49 Materials Procurement of materials and equipment Inventory control Economic order quantity and timing of purchase Inspection and clearance Vendor evaluation and rating Personnel: Recruitment and training Labour relations Wage and Salary administration Manpower Projections Accounting and Costing: Preparation of financial statements Cost data on labour, materials and overhead Report on scrap, downtime and inventories Payables, receivables management Insurance 1A.8 EFFECT OF TIME ELEMENT ON POM In detail we have already seen the effect of production operations management (POM) in the management process. The decision of POM has to be there for short duration activities as well as for long duration ones like the jobs of corporate planning. The detailed task list and the time horizon on which its effect will be there are given in Table 1.2 below: TABLE 1.2 Long Term Horizon Intermediate Time Horizon Short Time Horizon Product Design Product variation Transport and delivery arrangement Quality policy Methods selection Preventive maintenance scheduling Technology to be employed Quality implementation, inspection and control Process, Site selection methods Implementation of safety decisions Selection of plant and Machinery and plant loading Industrial relations Machinery decisions

50 Manpower training and Forecasting Checking / setting up work development phased standards and incentive rates programme Long gestation period raw Deployment of man-power Product scheduling material supply projects phased development Warehousing Overtime decision Available materials allocation and handling Insurance policy Design of jobs Shift working decisions Temporary hiring or lay-off of man-power Manpower scheduling Breakdown Maintenance Setting up of work standards Purchasing policy Progress check and change in priorities in production scheduling Effluent and waste disposal Purchasing policy systems Safety and maintenance Purchasing source selection systems developer and evaluation Make or buy decision Temporary Manpower Supervision and immediate attention to problem areas in labour, materials, machines, and other resources. Inventory policy for new material, work in progress and finished goods 1A.9 PRIORITY One of the primary responsibilities of the production and operations management is the productive use of resources. Productivity is a measure of the relative amount of input needed to secure a given amount of ailed and Feederick W. Taylor brought in the concept output. It is commonly expressed as the ratio of quantity of scientific management. The important events in this of output to quantity of input Productivity = Output / Input The enhancement of productivity is the need of the organisation and it can be made possible by either increasing the output and keeping the input at the same level or reducing the input and maintaining the output. The rate of increase in productivity will be very high if output is increased with simultaneous reduction of inputs. 1A.10 MANUFACTURING OPERATIONS VERSUS SERVICE OPERATIONS: Manufacturing implies production of a tangible out put, such as an automobile, a refrigerator, or something similar that we can see or touch and feel. Service on the other hand, generally implies an act rather than a physical product. A doctor s examination, TV and audio repair, entertainment like film shows are examples of services. The difference between manufacturing and service are in Table 1.3 below:

51 Table 1.3 Characteristic Manufacturing Service Output Tangible Intangible Customer contact Low High Labour content Low High Uniformity of output High Low Measurement of productivity Easy difficult 1A.11 EXAMPLE OF MANUFACTURING SYSTEMS JOB PRODUCTION In job production the whole product is looked as one job which is to be completed before going on to next. The most common examples are building a ship or a large civil construction job. Job production is not confined to large projects, it could be the making of a special piece of equipment or a tool. BATCH PRODUCTION If qualities of more than one are being made, it is sometimes convenient to spit the production into a series of manufacturing stages or operations. Each operation is completed as one of the single items being made, before the next operation is started. In this way a group of identical products, or a batch are made, which move through the production process together. If more than one types of product is being made, then hatches of different products may be moving around the shop floor some times requiring operations from the same machine. This leads to problems of how long a machine should be processing a batch of one tope of product before going on to the next process, a different one,. Or which batch should be worked on first. This type of problem tends to make the planning and control of batch production a difficult task. FLOW PRODUCTION When there is a continuous demand for a product, it is some time worthwhile setting-up facilities to make that product and no other product. In these circumstances flow production may be the best way of operating. Here the manufacturing is broken down into operations, but each unit moves, or flows, from one operation to the next individually, and not as one of a batch examples are motor manufacturing, fertilizer, pharmaceutical and urea manufacturing. Since only one product is being made there are no problem about priorities, but it is necessary to balance the work load at all stages of manufacture. Examples are motor car manufacturing. INTERMITTENT PRODUCTION The intermittent production system examples are machine shop production, building contractor. The continuous production examples are chemical plants automobile industry etc. most of the companies cannot be classified straight as intermittent or continuous production, rather in one department of the company continuous production is there while in other departments intermittent production exists. The time required for a continuous production system is always less than the intermittent production systems. The assembly line production of cars or scooters where the product is coming off every few minutes is considered as continuous production. On the other hand in intermittent production systems the products are in a state of partial completion for several weeks or days.

52 CONTINUOUS PRODUCTION In continuous production system, the most common material handling equipments are belt conveyors, roller conveyors, chutes, rails etc. It is because in continuous production systems one or a few standard products are manufactured with pre-determined sequence of operations with inflexible material handling devices. In intermittent production system portable material handling equipments are used and various products are produced with greater flexibility in the systems. Continuous production system require a larger investment than intermittent production system because of fixed path material handling equipments, costly control mechanism and special purpose machines for various operations. Even the marketing techniques also differ for continuous production system and intermittent production system. Intermittent production system the marketing efforts are directed towards meeting the individual orders for various products while in continuous productions the marketing efforts are directed to wards developing distribution channels for the large volume of out put. The design of a production system starts with the firm and re-occurs intermittently when redesign is necessary. The major decision in the design of production system is the location of plant. Once the location, has been decided the next decision relates to layout of facilities. Another problem which concerns the decision of production system is how products are designed and manufactured. *****

53 1B. PRODUCT DESIGN 1B.1 PRODUCT DESIGN From the production manager s point of view, the key output of the product design activity is the product specification. These specifications provide the basis for a host of decisions he must make, including the purchase of materials, selection of equipment, assignment of workers, and often even the size and layout of the productive facility. Product specifications, while commonly thought of a blueprint or engineering drawings, may take a variety of other forms ranging from highly precise quantitative statements to rather fluid guidelines. At the outset, it should be understand that this is an idealized case, synthesized from a number of approaches to product design. It should also be mentioned that product design and development rarely follow the discrete sequence suggested by the diagram. Typically, there are frequently looped to the prior steps, and certain activities are often performed concurrently. Further, the extent to which these phase are formalized and specified varies from industry to industry. Generally, firms which require a good deal of research and tooling or heavily dependent on innovation to complete in the marketplace, adhere to a more formalized program than those that do not. 1B. 2 NEED FOR DESIGN In the discussion of product selection noted that the product definition derived from the selection process varies in completeness and is often intervened with the product design decision. For a steel producer, for example, the decision to add a new alloy would constitute both the product decision and the product design. On the other hand, it is probably more typical for the product selection phase to yield just the bare bones of the final product. A refrigerator manufacturer may decide to add a panatela to his line. In both instances, however, this decision would not require a detailed investigation of design factors ate the selection phase since these companies presumably have mastered the general skill required to produce these products. PRELIMINARY DESIGN Whether or not it is a separate phase in the sequence of design activities, preliminary design is usually devoted to developing several alternative design that meet the conceptual features of the selected product. If the refrigerator manufacturer decides that he will produce freezers, questions of style, storage capacity, size of motor etc. will likely be encountered here. During preliminary design it also is common to specify the key product attributes of reliability, maintainability, and service life. Customer Marketing Product design Sales Product Purchasing Operations Process design Suppliers Time FIGURE : 1.2 PRODUCT DEVELOPMENT STAGES

54 FINAL DESIGN Products innovations Process innovations Need undulated Output rate stimulated Technology stimulated Cost stimulated Uncoordinated processes Performance maximization Integrated Cost FIGURE: 1.3 PRODUCT PROCESS RELATIONSHIP During the final design phase, prototype are developed and bugs are worked out of the design so that the product is sound from an engineering standpoint. Thus ultimate output of the final design includes the complete specification of the product, its component, and, in the case of manufactured item, the assembly drawings, which provide the basis for its full scale production. Again, the degree of design specificity varies according to the type of product being considered. To produce an automobile required precise quantitative statements regarding the tensile strengths of steel for the chassis, tolerances for the engine components, the composition and thickness of brake lining, and so on. In contrast, the final design of treatment given a hospital patient would be unspecified since the exact nature of medial care must of necessity by determined during the production stage. At this point too, the effectiveness of alternative designs must be balanced with cost consideration, and inevitably-compromises must be made. This especially true in selecting the configuration and material for manufactured items. The complexity of this tradeoff can be seen when we consider that even such a relatively unsophisticated product as a home freezer has roughly 500 component, each of which could conceivable be subjected to an alternative cost analysis. Typical consideration that must enter the analysis are component compatibility and simplification. 1B. 3 FACTORS TO BE CONSIDERED 1. Materials Should be cheap Should be able to withstand design requirements Minimum wastage during production Easily workable and machineable 2. Manufacturing Facility Product design should be commensurate with resources available like equipments,

55 Labour and layout 3. Ergonomics Should be easy to operate Look up position for overhead Should cause minimum fatigue to the workers and provide comfort to them 4. Maintenance Ease of maintenance and service 5. Standardization 6. Tolerance 7. Valve engineering 8. Inter-changeability 9. Simplification Origin of the product idea and selection from among alternatives: The product decision involves two major activities prior to final product design. The first is gathering ideas for alternatives product, and the second is selecting from among the alternatives the product or products that are to be produced. We will consider these activities in order. Before we consider where the product idea comes from, it is useful to defined just we mean by the term product. For our purposes, a product is the output from a productive system offered for sale (in the case of a business) or otherwise made available) in the case of a governmental or philanthropic organization), to some consumer. It should be noted that his is a production definition as opposed to a marketing definition. A marketing definition required that the concept of a product include reference to such intangible as satisfaction and symbolism in order to convey the fact that, for promotional purpose, a product that meet certain psychological demands for the consumer. Production, on the other hand, need only meet prescribed product specification; it is not required to determine how the product is perceived in the marketplace. Product ideas may originate from any number of sources, some of which are not obvious. Marketing textbooks and journals frequently cite unusual examples of sources of new-product ideas to emphasize that business must be keenly attuned to all possible sources to ensure that the golden idea is not missed or passed over without adequate consideration. A meat packing company once got the idea of developing an onion soup from a suggestion of one of its executive s wives. An appliance manufacturer developed a foot warmer on the basis of a customer inquiry. A maker of pottery designed a new vase after seeing a similar one at a museum exhibit. A producer of plastic products designed a film slide viewer after reading a list of needed invention published by a bank. While such examples constitute the exceptional rather than the more common sources of ideas for new products, they indicate that ideas are to be found almost anywhere and that aggressive firms cannot afford to discount an idea simply because it originates from an unusual source. Nevertheless, one authoritative report of source for new producxt ideas indicates that the great majority of ideas are generated within the firm rather than by external sources. Choosing among alternative products. The idea-gathering process, of properly carried out, will often lead to more ideas that can be translated into producible product. Thus a screening procedure designed to eliminate those ideas which clearly are infeasible must be instituted. The screening procedure seeks to determine if the product is generally compatible with the company s objectives and resources. Regarding objectives, a product may be dropped

56 if it is deficient in profit potential or in prospective growth or stability of sales, or if its is deleterious to the company image. In terms of resource, a product may be dropped if its exceeds the company s capital availability or is incompatible with the company s managerial and technical skills or physical facilities. Of the several techniques available to aid in the screening process, perhaps the most commonly used are rating check sheets. In one such sheet, a number of important consideration are enumerated for example, sales volume, patent protection, competition and the product is categorized from very good in very poor for each of these considerations. The product selected will show a rating pattern that meets the company s standard, from favourable to unfavorable ratings. More refined rating devices apply numerical weights to the important consideration and quantify the goodness categories. Compatibility refers to the fitting together and proper articulation of parts during operation. Problems of compatibility arise not only with parts that must, mesh, such as freezer door latches, but also with parts that must respond similarly to conditions of stress. Drawbridge components must of course fit together, but they must also have similar tensile strength so as to accommodate high winds and similar expansion coefficients as to adjust equally to variations in heat and cold. Simplification refers to the exclusion of those features that raise production costs. Problems of simplification arise mainly in manufacturing, where such seemingly innocuous requirements as rounded edges or nonstandard hole sizes may create productions bottlenecks and subsequent repair problems when the items is in use. Where the product is a service, simplification arise in regard to such things as form design ) Employment agencies) or customer routings (baggage pickup at an airline terminal). In addition to the above activities, which are more or less universal, some organizations engage in rather formalized product testing programs and redesign activities during the final design stage. Product testing may take the form of test marketing in the case of consumer products or test firing of a weapons system in the case of military. In both instances a good deal of planning would necessarily precede the tests. Product redesign generally takes place after the prototype has been tested, and may be major or minor in scope. If the design in major, the product may be recycled through the preliminary design phase, if the change is minor, the product will probably be carried through to production. It should be noted, however, that there are minor changes and minor changes. In some instances an apparently slight modification to some component may greatly alter the integrity of the entire product. 1B.4 PRODUCT LIFE CYCLE Every product has it s life as human beings to have. The life span of a product is decided by many factors, viz., the product itself, the substitutes competitor s strategy, company s own position in the market. This concept is widely used in marketing to describe the sales performance of a product over time. The basic idea is that product go through five stages, viz., Introduction Growth Maturity Saturation Decline

57 Sales volume Start-up Rigid growth Maturation Commodity Stages of decline FIGURE : 1.4 PRODUCT LIFE CYCLE 1B.5 CONSIDERATIONS DURING PLC Introduction: The product is put on the market and awareness and acceptance are minimal Growth: The product begins to make rapid sales gains because of the cumulative effects of introductory promotion, distribution, and word-of-mouth influence. Maturity: Sales growth continues but at a declining rate, because of the diminishing number of potential customer who remain unaware of the product or who have taken no action. Saturation: Sales reach and remain on a plateau (market by the level of replacement demand) Decline: sales begin to diminish absolutely, as the product is gradually edged out by better products or substitutes. During the introduction stage, sales volume is yet to pick up due to the factor that the product is yet to be fully positioned by the company. In this stage the supply outstrips the demand. The growth stage sees an increasing sales volume, which outstrips the supply. The company derives the maximum benefit from this stage. Efforts are made to stretch this phase, as this is highly beneficial to the very existence of the organisation itself. The difference between output and sales represents inventory, which is built up became output exceeds demand. During steady state operations at the product maturity stage. Supply and demand for the product have reached equilibrium, so that a replacement is available for each item sold. When the product begins to decline in sales, some excess inventory is again built up, but then is eliminated as the system cuts back production. During the final stage residual demand for the product at last exceeds production. During the final stage, residual demand for the product at last exceeds production. Theoretically, the amount of this demand is equal to the amount of the previous inventory build-up, since management would plan to stop production at that point in time when existing inventory