Chapter-4: Operations, Material and Maketing Management: Definition & Importance of Operational Management

Management Science Notes by N.Aruna Kumari, Asst. Prof.
Humanities & Sciences
CHAPTER-4: OPERATIONS, MATERIAL AND MAKETING

MANAGEMENT
Operations management: Plant location; Types of plant layout; Methods of production – job,
batch, and mass production; Work study-basic procedure involved in method study and work
measurement.
Materials management: Objectives; Need for inventory control; EOQ, ABC Analysis;
Purchase procedure; Value analysis; JIT, Six sigma; TQM; Supply chain management; Stores
management and stores records.
Marketing: Functions of marketing; Marketing mix, and marketing strategies based on

product life cycle; Channels of distribution.
Definition & importance of Operational Management:

Operation Management is the Management of Systems or processes that create goods and
or provide services.
Operational strategy is essential to achieve operational goals set by organization in

alignment with overall objective of the company. Operational strategy is design to achieve
business effectiveness and or competitive advantage. The effectiveness of services is
depends on the supply chain from Direct Suppliers, Indirect Suppliers, Producer,
Distributor and Final Customer.
In any organization 3 types of operations have concluded under operations management:

(1) Upper-level management, (2) Operational Processes (3) Supporting Processes.
Operation management includes many activities including, forecasting, capacity planning,
facilities and layout, scheduling, managing inventories, assuring quality, motivating and
training employees, locating facilities, purchasing, distribution and maintenance.
1. Plant location and layout:

Location of an enterprise is an important entrepreneurial decision as it affects the
operational as well as financial performance. So entrepreneur is required to identify that
location at which the enterprise will have easy access to physical, economic and social
endowments. The general objective in selecting a location is to minimize total cost of
production and distribution. The selected location should be in a position to help in
generating maximum revenue and provide an opportunity for further growth and
expansion. An entrepreneur is expected to evaluate his targets in terms of time and cost
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Management Science Notes by N.Aruna Kumari, Asst. Prof. Humanities & Sciences
variable and try to select a proper location and seek possession of the site before the zero
date. Generally, financial institutions are also interested to inspect the location or site of the
plant before sanctioning any loan to the enterprise concerned. Efforts should also be made
by the entrepreneur to remove all uncertainties associated with the site before the zero
date. Entrepreneur should also know that any change in location or site at a later date not
only targets will be missed but even the viability of the project may also be lost. Thus, ideal
location site helps in smooth and efficient functioning of an enterprise. It ensures a
reduction in costs as well as improves productivity and financial viability of the enterprise.
Need for Enterprise Location

The need for location or site is generally government by the following circumstances:
(i) To promote the establishment of a new enterprise.
(ii) To undertake expansion, decentralisation and diversification necessary for meeting
(iii) To manage the situations arising due to non-renewal of existing lease of an
establishment demand of products.
(iv) To develop new location if existing location has been declared as undesirable or
unsuitable.
(v) To arrange a new location by shifting from existing location due to change in market
pattern, depletion of raw materials, change in production processes and transport
facilities, etc.
(vi) To open new branch or production facility at new places for increasing the volume
of production and distribution activities.
Importance of Enterprise Location

Selection of plant location or site is quite important due to the following reasons:
(i) It enables the enterprise to operate smoothly, efficiently and with the minimum
cost.
(ii) It controls wastages in efforts and talents at the entrepreneurs.
(iii) It reduces uncertainty in results.
(iv) It encourages effective mobilization of raw-materials, labour and potential
customers.
(v) it develops the area by attracting other potential entrepreneurs and endowments
like physical, economic and social variables.
Steps in Enterprise Location

Following steps are important in selecting a particular location or site for the plant:
(i) Selection of the region.
(ii) Selection of the locality or community.
(iii) Selection of the exact site and
(iv) Selection of an optimum site.
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Generally, entrepreneur is free to select and location or site for the plant development.
However, regulatory provisions of the government also affect the choice of plant location or
site.
Location, Localisation and Planned Location of Industries

Location is concerned with a particular site where entrepreneur is interested to establish
his enterprise or plant having lowest cost objective. If a particular industry is concentrated
mainly in one areas is called as localisation of industries. For example, Kolkata and Mumbai
are known for jute and textiles industry respectively. Planned location of industries is a
systematic approach by which location of industries is planned to give each region or area
or place a variety of industries to promote dispersal of industries. For example, in
Ludhiana, different types of industries have been developed and no particular industry is
concentrated in that particular area.
Factors Influencing the selection of the Location of an Enterprise or Plant or Project

Following are the important factors which are normally to be considered when selecting
the location of an enterprise or project:
(a) Availability of Land: Land should be large enough to meet out present requirement
with provision for further expansion. Land should be for industrial use (land usage
pattern to be adhered to) and proper layout of plant and equipment must be
possible as per the technical feasibility study. Drainage level of land, soil testing
report (should be suitable for the construction of the factory) should be favourable
to the project requirements.
(b) Availability of Raw Materials: Availability of required quantity and quality of raw
materials at a reasonable cost. Cost of materials generally constitutes a major chunk
of total cost of production and thus, the impact of raw materials on location depends
upon their nature and the source of their deposits.
(c) Supply of Manpower: Every enterprise requires an adequate supply of manpower

with appropriate skills. Availability of skilled manpower, cost of labour, labour
expectations, local culture affect the supply of manpower to the enterprise.
Sometimes, it becomes difficult to obtain high skilled people to work at very remote
places with big town facilities. Alfred Weber rightly remarked that that “an
industrial site will deviate from the point of minimum transportation cost to the
cheaper labour centre if the additional cost of transportation at the new centre is
more than compensated by the savings in labour cost.” However, this situation has
been changed. Labour is mobile and there is a level of minimum wages fixed by the
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Government from time to time. Moreover certain industries are capital intensive
and they require less labour.
(d) Transport and Communication Facilities: Transport services are required for
assembling of materials and distribution of products. At the time of selection of a
particular efforts should be made to ensure that transportation facilities are easily
available at reasonable rates. Site should be well connected by road and rail or
nearer to national highways, major railway yard etc., Transportation of equipment,
material, product and personnel is an important requirement and it should be
ensured in time and in efficient manner.
(e) Proximity to the Market: Availability of consumer market also affects the viability
of the enterprise. An entrepreneur can improve his customer relations if they are
available in nearby areas and easily render rapid services to them. Enterprises
engaged in the production of perishable commodities and those producing for a
local market are also interested to develop their plants in potential consumer’s area
as it would ensure a reduction in transportation cost involved in distributing the
finished products. Actually, an enterprise tends to disperse only if they find a new
consumer market.
(f) Water, Power and Fuel: Uninterrupted operations of an enterprise is the result of
sufficient supply of water, power and fuel etc. In this context, efforts are required to
assess local sources of water. Besides, required water supply to be assessed in terms
of water conditions or sub-soil water etc. Availability of power in the region is to be
evaluated in terms of actual requirements. Some industries consume lot power
(aluminium) or water (Paper industry) and these variables are a very important
factor for them. Nowadays, industries are facing the problem of power shortages
and they are shifting to the fuel option––coal. For example, coal is the major source
of fuel for the iron and steel industry and these industries are located near the coal
mines.
(g) Regional Development: In our country, government is pursuing the policy of

balanced regional development to solve the problems like slum, disparity of income
and wealth and optimum use of resources. In order to ensure balanced regional
development, government has declared certain areas as backward areas and zero
industry areas. Government gives certain benefits like tax benefits but it is necessary
to evaluate the process to what extent they would outweigh the disadvantages.
(h) External Economies: In some cases, an enterprise prefers to be located in those

centres where other industrial units are already located. There are certain facilities
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like transportation, warehousing, banking, insurance, communication and factoring

services etc. which are easily available and industrial units tend to be concentrated
in these areas. Besides, raw materials are also available at cheaper prices and in
large quantity. For example, by product of one enterprise may be used as raw
material by another enterprise. Enterprises working as distilleries are generally
located in nearby areas of Sugar mills because they supply molasses as raw
materials to distilleries.
(i) Personal Factors: Personal preferences and prejudices of an entrepreneur also

effect the selection of location. Entrepreneurial preferences are also affected by law
and order, political stability and safety etc. Thus, entrepreneurs prefer to locate
their enterprises in those areas which are safe and free from law and order
problems.
(j) Local Laws and Regulations: In certain cases local laws and regulations impose
restrictions on the development of industrial units in special areas. For example,
consent of various agencies like local Panchayat, municipality, government, state
planning bodies is mandatory for the entrepreneurs otherwise they cannot run their
enterprises in municipal or local areas. Similarly, high rate of income-tax, sale-tax,
octroi, etc. discourage entrepreneur to develop their plant in a particular area or
state. But facility of tax holidays encourages them otherwise to develop their units in
a particular area or state.
(k) Ecological and Environmental Factors: Certain industrial units are required to be
governed by the ecological and environmental provisions of Pollution Control Act.
Industrial units are required to follow the norms of Pollution Control Board. They
have to make efforts for the disposal of effluents are directed by the pollution
control authorities. They have to arrange the nearest source where effluent (after
treatment) could be discharged.
2. Plant Layout:
Layout involves determining the space requirement for the facilities and arranging them in
a manner to ensure steady flow of operations with minimum overall cost. In order words, a
layout is a floor plan for arranging the desired facilities, machinery, equipment in an
optimum locations so as to permit the quickest flow of materials and manpower at the
lowest cost and with the least amount of in process handling from receipt of raw material
to shipment of finished products.
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Since, a layout once made cannot be changed/modified easily and without incurring
considerable cost on one hand and disrupting the operations on the other hand, layout
decisions are strategic decisions. Hence, layout has to be considered at the time of planning
a new venture. A good layout should result in comfort, convenience, better appearance,
safety, efficiency and profits. A poorly planned layout causes congestion, disruption in flow
of man and/or materials, accidents, delays, rejections leading to frustration and
inefficiency. In a production unit layout includes factory design, that is layout of workshop,
raw material stock yards, finished goods stores, generator, compressor room etc. In
hospitals it involves fixing the location of wards, operation theater, out-patient
departments, canteen, doctors and nurses duty rooms etc. At another level layout planning
involves layout of different machines, work stations etc., in the shop floor and patient’s
beds, drug store, doctors and nurses seats and other facilities in a hospital ward.
Considerations of Plant Layout
· Maximum use of the available space.

· Compatibility with the production technology and product mix.
· Minimum movement of materials as well as men.
· Provision of proper space for maintenance.
· Arrangement of proper in-transit storage and stacking space.
· Promotes effective supervision.
· Proper lighting and ventilation.
· Provision of maximum flexibility.
· Safety of operators and other staff.
· Minimum handling of materials.
· Provision for future expansion.
· Security against fire, theft, detoriation etc.
· Maximum flexibility to accommodate changes in production volume and product mix.
· Should meet the specific requirement of the production process viz., air conditioning,
air cooling, dust control, humidity control and may be required.
Advantages of Proper Plant Layout
1. Increase in Productivity
2. Maximum utilization of Space
3. Effective Supervision and Control
4. Economy in Material
5. Improved Safety and Handling
6. Improved Working Environment and Morale
7. Better Quality Control.
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Types of Layout
As discussed so far the plant layout facilitates the arrangement of machines, equipment and
other physical facilities in a planned manner within the factory premises. An entrepreneur
must possess an expertise to lay down a proper layout for new or existing plants. It differs
from plant to plant, from location to location and from industry to industry. But the basic
principles governing plant layout are more or less same.
As far as small business is concerned, it requires a smaller area of space and can be located
in any kind of building as long as the space is available and it is convenient. Plant layout for
Small Scale business is closely linked with the factory building and built up area.
From the point of view of plant layout, we can classify small business or unit into three
categories:
I. Manufacturing units
II. Traders
III. Service Establishments
I. Manufacturing Units
In case of manufacturing unit, plant layout may be of four types:
(a) Product or line layout
(b) Process or functional layout
(c) Fixed position or location layout
(d) Combined or group layout
(a) Product or Line Layout:

Under this, machines and equipments are arranged in one line depending upon the
sequence of operations required for the product. The materials move from one workstation
to another sequentially without any backtracking or deviation. Under this, machines are
grouped in one sequence. Therefore materials are fed into the first machine and finished
goods travel automatically from machine to machine, the output of one machine becoming
input of the next, e.g. in a paper mill, bamboos are fed into the machine at one end and
paper comes out at the other end. The raw material moves very fast from one workstation
to other stations with a minimum work in progress storage and material handling.
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The grouping of machines should be done keeping in mind the following general principles.
(i) All the machine tools or other items of equipments must be placed at the point
demanded by the sequence of operations.
(ii) There should no points where one line crossed another line.
(iii) Materials may be fed where they are required for assembly but not necessarily at
one point.
(iv) All the operations including assembly, testing packing must be included in the line.
Advantages: Product layout provides the following benefits:

(i) Low cost of material handling, due to straight and short route and absence of
backtracking.
(ii) Smooth and uninterrupted operations.
(iii) Continuous flow of work.
(iv) Lesser investment in inventory and work in progress.
(v) Optimum use of floor space.
(vi) Shorter processing time or quicker output.
(vii) Less congestion of work in the process.
(viii) Simple and effective inspection of work and simplified production control.
(ix) Lower cost of manufacturing per unit.
Disadvantages: Product layout suffers from following drawbacks:

(i) High initial capital investment in special purpose machine.
(ii) Heavy overhead charges.
(iii) Breakdown of one machine will hamper the whole production process.
(iv) Lesser flexibility as specially laid out for particular product.
Suitability: Product layout is useful under following conditions:

(i) Mass production of standardized products.
(ii) Simple and repetitive manufacturing process.
(iii) Operation time for different process is more or less equal.
(iv) Reasonably stable demand for the product.
(v) Continuous supply of materials.
Therefore, the manufacturing units involving continuous manufacturing process, producing

few standardized products continuously on the firm’s own specifications and in
anticipation of sales would prefer product layout e.g. chemicals, sugar, paper, rubber,
refineries, cement, automobiles, food processing and electronics etc.
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(b) Process Layout:
In this type of layout machines of a similar type are arranged together at one place. E.g.
machines performing drilling operations are arranged in the drilling department, machines
performing casting operations be grouped in the casting department. Therefore the
machines are installed in the plants, which follows the process layout.
Hence, such layouts typically have drilling departments, milling department, welding
department, heating department and painting department etc. the process or functional
layout is followed from historical period. It evolved from the handicraft method of
production. The work has to be allocated to each department in such a way that no
machines are chosen to do as many different job as possible i.e. the emphasis is on general
purpose machine.
The work, which has to be done, is allocated to the machines according to loading
schedules with the object of ensuring that each machine is fully loaded. Process layout
showing movement of two products:
The grouping of machines according to the process has to be done keeping in mind the
following principles.
(i) The distance between departments should be as short as possible for avoiding long
distance movement of material.
(ii) The departments should be in sequence of operations
(iii) The arrangement should be convenient for inspection and supervision.
Advantages: Process layout provides the following benefits:

(i) Lower initial capital investment in machines and equipments. There is high degree of
machine utilization, as a machine is not blocked for a single product.
(ii) The overhead costs are relatively low.
(iii) Change in output design and volume can be more easily adapted to the output of
variety of products.
(iv) Breakdown of one machine does not result in complete work stoppage.
(v) Supervision can be more effective and specialised.
(vi) There is a greater flexibility of scope for expansion.
Disadvantages: Process layout suffers from following drawbacks:

(i) Material handling costs are high due to backtracking.
(ii) More skilled labour is required resulting in higher cost.
(iii) Time gap or lag in production is higher.
(iv) Work in progress inventory is high needing greater storage space.
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(v) More frequent inspection is needed which results in costly supervision.
Suitability: Process layout is adopted when

(i) Products are not standardized.
(ii) Quantity produced is small.
(iii) There are frequent changes in design and style of product.
(iv) Job shop type of work is done.
(v) Machines are very expensive.
Thus, process layout or functional layout is suitable for job order production involving non-
repetitive processes and customer specifications and non-standardised products, e.g.
tailoring, light and heavy engineering products, made to order furniture industries, jewelry.
(c) Fixed Position or Location Layout:

In this type of layout, the major product being produced is fixed at one location. Equipment
labour and components are moved to that location. All facilities are brought and arranged
around one work center. This type of layout is not relevant for small scale entrepreneur.
Advantages: Fixed position layout provides the following benefits:

(i) It saves time and cost involved on the movement of work from one workstation to
another.
(ii) The layout is flexible as change in job design and operation sequence can be easily
incorporated.
(iii) It is more economical when several orders in different stages of progress are being
executed simultaneously.
(iv) Adjustments can be made to meet shortage of materials of absence of workers by
changing the sequence of operations.
Disadvantages: Fixed position layout has the following drawbacks:

(i) Production period being very long, capital investment is very heavy.
(ii) Very large space is required for storage of material and equipment near the product.
(iii) As several operations are often carried out simultaneously, there is possibility of
confusion and conflicts among different workgroups.
Suitability: The fixed position layout is followed in following conditions:

(i) Manufacture of bulky and heavy products such as locomotives, ships, boilers,
generators, wagon building, aircraft manufacturing, etc.
(ii) Construction of building, flyovers, dams.
(iii) Hospital, the medicines, doctors and nurses are taken to the patient (product).
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(d) Combined Layout:

Certain manufacturing units may require all three processes namely intermittent process
(job shops), the continuous process (mass production shops) and the representative
process combined process [i.e. miscellaneous shops].
I. Industries
In most of industries, only a product layout or process layout or fixed location layout does
not exist. Thus, in manufacturing concerns where several products are produced in
repeated numbers with no likelihood of continuous production, combined layout is
followed. Generally, a combination of the product and process layout or other combination
are found, in practice, e.g. for industries involving the fabrication of parts and assembly,
fabrication tends to employ the process layout, while the assembly areas often employ the
product layout. In soap, manufacturing plant, the machinery manufacturing soap is arrange
don the product line principle, but ancillary services such as heating, the manufacturing of
glycerin, the power house, the water treatment plant etc. are arranged on a functional
basis.
II. Traders
When two outlets carry almost same merchandise, customers usually buy in the one that is
more appealing to them. Thus, customers are attracted and kept by good layout i.e. good
lighting, attractive colours, good ventilation, air conditioning, modern design and
arrangement and even music. All of these things mean customer convenience appeal and
greater business volume.
The customer is always impressed by service, efficiency and quality. Hence, the layout is
essential for handling merchandise, which is arranged as per the space available and the
type and magnitude of goods to be sold keeping in mind the convenience of customers.
There are three kinds of layouts in retail operations today.

(a) Self service or modified self service layout.
(b) Full service layout.
(c) Special layouts.
The self-service layouts, cuts down on sales clerk’s time and allow customers to select
merchandise for themselves. Customers should be led through the store in a way that will
expose them to as much display area as possible, e.g. Grocery Stores or department stores.
In those stores, necessities or convenience goods should be placed at the rear of the store.
The use of colour and lighting is very important to direct attention to interior displays and
to make the most of the stores layout.
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All operations are not self-service. Certain specialty enterprises sell to fewer number of
customers or higher priced product, e.g. Apparel, office machines, sporting goods, fashion
items, hardware, good quality shoes, jewelry, luggage and accessories, furniture and
appliances are all examples of products that require time and personal attention to be sold.
These full service layouts provide area and equipment necessary in such cases.
Some layouts depend strictly on the type of special store to be set up, e.g. TV repair shop,
soft ice cream store, and drive-in soft drink stores are all examples of business requiring
special design. Thus, good retail layout should be the one, which saves rent, time and
labour.
3. Services Centers and Establishment

Services establishments such as motels, hotels, restaurants, must give due attention to
client convenience, quality of service, efficiency in delivering services and pleasing office
ambience. In today’s environment, the clients look for ease in approaching different
departments of a service organisation and hence the layout should be designed in a fashion,
which allows clients quick and convenient access to the facilities offered by a service
establishment.
Applicability of Plant Layout
Plant layout is applicable to all types of industries or plants. Certain plants require special
arrangements which, when incorporated make the layout look distinct from the types
already discussed above. Applicability of plant layout in manufacturing and service
industries is discussed below.
In case of the manufacturing of ‘detergent powder’, a multi-storey building is specially

constructed to house the boiler. Materials are stored and poured into the boiler at different
stages on different floors. Other facilities are also provided around the boiler at different
stations.
Another applicability of this layout is the manufacture of ‘talcum powder’. Here machinery
is arranged vertically i.e. from top to bottom. Thus, material is poured into the first machine
at the top and powder comes out at the bottom of the machinery located on the ground
floor.
Yet another applicability of this layout is the ‘newspaper plant’, where the time element is
of supreme importance, the accomplishment being gapped in seconds. Here plant layout
must be simple and direct so as to eliminate distance, delay and confusion. There must be a
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perfect coordination of all departments and machinery or equipments, as materials must

never fail.
3. Methods of production – job, batch, and mass production;
The various methods of production are not associated with a particular volume of
production. Similarly, several methods may be used at different stages of the overall
production process.
Job Method
With Job production, the complete task is handled by a single worker or group of
workers. Jobs can be small-scale/low technology as well as complex/high technology.
Low technology jobs: here the organisation of production is extremely simply, with the
required skills and equipment easily obtainable. This method enables customer's specific
requirements to be included, often as the job progresses. Examples include: hairdressers;
tailoring
High technology jobs: high technology jobs involve much greater complexity - and
therefore present greater management challenge. The important ingredient in high-
technology job production isproject management, or project control. The essential
features of good project control for a job are:
- Clear definitions of objectives - how should the job progress (milestones, dates, stages)
- Decision-making process - how are decisions taking about the needs of each process in the
job, labour and other resources
Examples of high technology / complex jobs: film production; large construction projects
(e.g. the Millennium Dome)
Batch Method
As businesses grow and production volumes increase, it is not unusual to see the
production process organised so that "Batch methods" can be used.
Batch methods require that the work for any task is divided into parts or operations. Each
operation is completed through the whole batch before the next operation is performed. By
using the batch method, it is possible to achieve specialisation of labour. Capital
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expenditure can also be kept lower although careful planning is required to ensure that
production equipment is not idle. The main aims of the batch method are, therefore, to:
- Concentrate skills (specialisation)

- Achieve high equipment utilisation
This technique is probably the most commonly used method for organising manufacture. A
good example is the production of electronic instruments.
Batch methods are not without their problems. There is a high probability of poor work
flow, particularly if the batches are not of the optimal size or if there is a significant
difference in productivity by each operation in the process. Batch methods often result in
the build up of significant "work in progress" or stocks (i.e. completed batches waiting for
their turn to be worked on in the next operation).
Flow Methods
Flow methods are similar to batch methods - except that the problem of rest/idle
production/batch queuing is eliminated.
Flow has been defined as a "method of production organisation where the task is worked
on continuously or where the processing of material is continuous and progressive,"
The aims of flow methods are:
- Improved work & material flow

- Reduced need for labour skills
- Added value / completed work faster
Flow methods mean that as work on a task at a particular stage is complete, it must be
passed directly to the next stage for processing without waiting for the remaining tasks in
the "batch". When it arrives at the next stage, work must start immediately on the next
process. In order for the flow to be smooth, the times that each task requires on each stage
must be of equal length and there should be no movement off the flow production line. In
theory, therefore, any fault or error at a particular stage
In order that flow methods can work well, several requirements must be met:
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(1) There must be substantially constant demand
If demand is unpredictable or irregular, then the flow production line can lead to a
substantial build up of stocks and possibility storage difficulties. Many businesses using
flow methods get round this problem by "building for stock" - i.e. keeping the flow line
working during quiet periods of demand so that output can be produced efficiently.
(2) The product and/or production tasks must be standardised
Flow methods are inflexible - they cannot deal effectively with variations in the product
(although some "variety" can be accomplished through applying different finishes,
decorations etc at the end of the production line).
(3) Materials used in production must be to specification and delivered on time
Since the flow production line is working continuously, it is not a good idea to use materials
that vary in style, form or quality. Similarly, if the required materials are not available, then
the whole production line will come to a close - with potentially serious cost consequences.
(4) Each operation in the production flow must be carefully defined - and recorded
in detail
(5) The output from each stage of the flow must conform to quality standards
Since the output from each stage moves forward continuously, there is no room for sub-
standard output to be "re-worked" (compare this with job or batch production where it is
possible to compensate for a lack of quality by doing some extra work on the job or the
batch before it is completed).
The achievement of a successful production flow line requires considerable planning,

particularly in ensuring that the correct production materials are delivered on time and
that operations in the flow are of equal duration.
Common examples where flow methods are used are the manufacture of motor cars,
chocolates and televisions.
4. Work study-basic procedure involved in method study and

work measurement.
Organization’s Most Important Jobs
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▪ Finding the customers and retaining them. For this, continually provide maximum value
for money (VFM) to the customers to sustain highest level of customer satisfaction.
▪ Improving overall productivity and thereby, minimizing the overall costs as much
below the price as possible and thus maximizing profits.
Value for Money to Customers (VFM)

Value to customer (VFM) = (Total quality “Q” X Total service inclusive of pre, during and
post customer service “S” X Relationship with customers “R”) divided by (Price “P” X Lead
times “L”)
Therefore, value for money to customers should be continually enhanced by continual
improvements in:
▪ Quality.
▪ Price: price being normally an outcome of the market forces of supply and demand, in
order to make profits the overall costs should be kept well below those price levels.
Only the price competitiveness can be achieved.
▪ Delivery.
▪ Service and relations.
Productivity
Productivity is the measure of output per unit of input.
Therefore, the equation for productivity = Output quantity/ Input quantity
It is important that the output should be an acceptable output to the users or customers. So
enters the quality. Therefore, in order to reckon and emphasize qualitative changes in
output and input, the equation of productivity will read as given below:
Productivity = Output quality and quantity/ Input quality and quantity
Productivity, thus, can be improved by three ways:
▪ Increase output and keep input constant.
▪ Keep output constant and decrease input.
▪ Increase both, output as well as input making sure that the proportion of increase in
output is more than that of input.
Normally, outputs are: goods (products) and/or services.
Normally, inputs are various resources: man (labor), machine (equipment), material,
money (capital) and also, time and information.
Work Study: The Pioneering Technique of Improving Value for Money and
Productivity
Work study, under the major discipline of industrial engineering, emerged as the earliest
effectiveness and efficiency technique that even to date remains the basic to all other
techniques that developed later. Work study was the sequel to Taylor’s famous scientific
management.
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Work Study is defined as the systematic examination of the methods of carrying on

activities so as to improve the effective use of resources and to set up standards of
performance for the activities being carried out.
Work study has two major branches:
1. Method study
2. Work measurement
Method Study
Method study is the systematic recording and critical examination of existing and proposed
ways of doing work, as a means of developing and applying easier and more effective
methods and reducing costs.
It uses different sets of techniques to do so.
Objectives of Method Study
▪ Improvement in use of all the inputs i.e. men, machines, material, money and also, time
and information.
▪ Economy in human effort and reduction of unnecessary fatigue.
▪ Layout improvements.
▪ Improvement in design of plant and equipment.
▪ Improvement in safety standards and procedures.
▪ Development of better working environment.
Seven Steps of Carrying Out Method Study: The Process
1. Define existing method.
2. Record existing method.
3. Examine existing method.
4. Develop new method.
5. Define new method.
6. Install new method.
7. Maintain new method.
Different Recording Techniques
▪ Outline process charts
▪ Flow process chart: man type, material type, equipment type
▪ Two handed process chart
▪ Multiple activity chart: using time scale
▪ Simo chart: using time scale
▪ Flow diagrams
▪ String diagrams
▪ Cyclegraph
▪ Chronocyclegraph
▪ Travel Chart
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Work Measurement
Work measurement is the application of techniques designed to establish the time for a
qualified worker to carry out a task at a defined rate of working or at a defined level of
performance.
It measures the time taken in performance of an operation or a series of operations and in
can separate out ineffective time from effective time. Thus ineffective time can be studied
and by way of method study described in earlier paragraphs, the ineffective operations can
be reduced or eliminated.
Fair Day’s Work
Amount of work that can be produced by a qualified worker/employee when working at
normal pace and effectively utilizing his time and where work is not restricted by process
limitations.
Objectives of Work Measurement

▪ Finding ineffective time in an activity or a process (series of activities).
▪ Setting standard (norms) for output level.
▪ Evaluating workers’ performance.
▪ Assessing and planning manpower needs.
▪ Determining available capacity.
▪ Comparing various work methods.
▪ Facilitating operations scheduling.
▪ Establishing wage incentive schemes.
Some Techniques of Work Measurement

▪ Stop-watch time study.
▪ Work sampling.
▪ Predetermined time standards (PTS).
▪ Standard Data.
Conceptual Framework for Carrying Out Work Measurement

It is essential to understand the following concepts in order to undertake work
measurement exercise in any organization:
▪ Qualified worker: Qualified worker is one who is accepted as having the necessary
physical attributes, who possess the required intelligence and education and who has
acquired the necessary skills and knowledge to carry out the work in hand to
satisfactory standards of safety, quantity and quality.
▪ Standard rating: Rating is the assessment of the worker’s rate of working relative to
the observer’s concept of the rate corresponding to standard pace (or standard rate).
▪ Standard performance (pace or rate): It is the rate of output which a qualified
worker will naturally achieve without over-exertion as an average over the working day
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or shift, provided that he knows and adheres to the specified method and provided that
he is motivated to apply himself to his work. The time taken to achieve the standard
performance by the qualified worker is called “standard time”.
Steps in Carrying Out Work Measurement (Determining the Standard Time): The
Process
1. Obtain and record all available information about the job, the worker and the
surrounding conditions likely to affect the execution of the work.
2. Record the complete description of the method, break it down into elements.
3. Measure with a stopwatch and record the time taken by the worker to perform each
element of the operation.
4. Assess the rating of the worker.
5. Extend the observed time to “basic time” by factorizing the actual time (observed time)
by the assessed rating.
6. Determine the allowances (e.g. personal allowances, relaxation allowances, allowances
for the working conditions etc) to be made over and above the “basic time” for the
operation.
7. Apply those allowances on the “basic time”.
8. Thus, determine the “standard time” for the operation.
Materials management: Objectives; Need for inventory control

Definition
It is concerned with planning, organizing and controlling the flow of materials from their
initial purchase through internal operations to the service point through distribution.
OR
Material management is a scientific technique, concerned with Planning, Organizing
&Control of flow of materials, from their initial purchase to destination.
Material management is required to get:
1. The Right quality
2. Right quantity of supplies
3. At the Right time
4. At the Right place
5. For the Right cost
PURPOSE OF MATERIAL MANAGEMENT

• To gain economy in purchasing
• To satisfy the demand during period of replenishment
• To carry reserve stock to avoid stock out
• To stabilize fluctuations in consumption
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• To provide reasonable level of client services

Objectives:
Primary
• Right price
• High turnover
• Low procurement
• & storage cost
• Continuity of supply
• Consistency in quality
• Good supplier relations
• Development of personnel
• Good information system
Secondary
• Forecasting
• Inter-departmental harmony
• Product improvement
• Standardization
• Make or buy decision
• New materials & products
• Favorable reciprocal relationships
Inventory Control:
Inventory control is also important to maintaining the right balance of stock in your
warehouses. ... Too much inventorycan trigger profit losses––whether a product expires,
gets damaged, or goes out of season. Key to proper inventory control is a deeper
understanding of customer demand for your products.
1. Meet variation in Production Demand
Production plan changes in response to the sales, estimates, orders and stocking
patterns. Accordingly the demand for raw material supply for production varies
with the product plan in terms of specific SKU as well as batch quantities.
Holding inventories at a nearby warehouse helps issue the required quantity and
item to production just in time.
2. Cater to Cyclical and Seasonal Demand
Market demand and supplies are seasonal depending upon various factors like
seasons; festivals etc and past sales data help companies to anticipate a huge surge
of demand in the market well in advance. Accordingly they stock up raw materials
and hold inventories to be able to increase production and rush supplies to the
market to meet the increased demand.
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3. Economies of Scale in Procurement

Buying raw materials in larger lot and holding inventory is found to be cheaper for
the company than buying frequent small lots. In such cases one buys in bulk and
holds inventories at the plant warehouse.
4. Take advantage of Price Increase and Quantity Discounts
If there is a price increase expected few months down the line due to changes in
demand and supply in the national or international market, impact of taxes and
budgets etc, the company’s tend to buy raw materials in advance and hold stocks as
a hedge against increased costs.
Companies resort to buying in bulk and holding raw material inventories to take
advantage of the quantity discounts offered by the supplier. In such cases the
savings on account of the discount enjoyed would be substantially higher that of
inventory carrying cost.
5. Reduce Transit Cost and Transit Times
In case of raw materials being imported from a foreign country or from a far away
vendor within the country, one can save a lot in terms of transportation cost buy
buying in bulk and transporting as a container load or a full truck load. Part
shipments can be costlier.
In terms of transit time too, transit time for full container shipment or a full truck
load is direct and faster unlike part shipment load where the freight forwarder waits
for other loads to fill the container which can take several weeks.
There could be a lot of factors resulting in shipping delays and transportation too,
which can hamper the supply chain forcing companies to hold safety stock of raw
material inventories.
6. Long Lead and High demand items need to be held in Inventory
Often raw material supplies from vendors have long lead running into several
months. Coupled with this if the particular item is in high demand and short supply
one can expect disruption of supplies. In such cases it is safer to hold inventories
and have control.
Functional areas of material management
1. Purchasing
2. Central service supply
3. Central stores
4. The print shops
5. The pharmacy
6. Dietary & Linen services
PROCUREMENT
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1. Directorate general of supply & disposal (DGS & D, Govt. Of India]

2. Medical stores depot (M. S.D. Government of India, Ministry of H & FW]
3. Private or public sector undertakings.
4. Receiving donations.
Economic Order Quantity(EOQ):

Economic order quantity (EOQ) is an equation for inventory that determines the ideal
order quantity a company should purchase for its inventory given a set cost of production,
demand rate and other variables. This is done to minimize variable inventory costs, and the
formula takes into account storage, or holding, costs, ordering costs and shortage costs. The
full equation is as follows:
where :
S = Setup costs
D = Demand rate
P = Production cost
I = Interest rate (considered an opportunity cost, so the risk-free rate can be used)
Example of Using EOQ
EOQ takes into account the timing of reordering, the cost incurred to place an order and
costs to store merchandise. If the company is constantly placing small orders to maintain a
specific inventory level, the ordering costs are higher, along with the need for additional
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storage space. Assume, for example, a retail clothing shop carries a line of men’s jeans and
the shop sells 1,000 pairs of jeans each year. It costs the company $5 per year to hold a pair
of jeans in inventory, and the fixed cost to place an order is $2. The EOQ formula is the
square root of: (2 X 1,000 pairs X $2 order cost) / ($5 holding cost), or 28.284 with
rounding. The ideal order size to minimize costs and meet customer demand is slightly
over 28 pairs of jeans. A more complex portion of the EOQ formula provides the reorder
point.
ABC Analysis;
Inventory optimization in supply chain, ABC analysis is an inventory categorization
method which consists in dividing items into three categories, A, B and C: A being the most
valuable items, C being the least valuable ones. This method aims to draw managers’
attention on the critical few (A-items) and not on the trivial many (C-items).
Prioritization of the management attention
Inventory optimization is critical in order to keep costs under control within the supply
chain. Yet, in order to get the most from management efforts, it is efficient to focus on
items that cost most to the business.
The Pareto principle states that 80% of the overall consumption value is based on only
20% of total items.
The ABC approach states that, when reviewing inventory, a company should rate items
from A to C, basing its ratings on the following rules:
• A-items are goods which annual consumption value is the highest. The top 70-
80% of the annual consumption value of the company typically accounts for only
10-20% of total inventory items.
• B-items are the interclass items, with a medium consumption value. Those 15-
25% of annual consumption value typically accounts for 30% of total inventory
items.
• C-items are, on the contrary, items with the lowest consumption value. The lower
5% of the annual consumption value typically accounts for 50% of total inventory
items.
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Suggested policy guidelines for A , B & C classes of items

A items (High cons. Val) B items (Moderate cons.Val) C item (Low cons. Val)
Very strict cons. control Moderate control Loose control
No or very low safety stock Low safety stock High safety stock
Phased delivery (Weekly) Once in three months Once in 6 months
Weekly control report Monthly control report Quarterly report
Maximum follow up Periodic follow up Exceptional
As many sources as possible Two or more reliable Two reliable
Accurate forecasts Estimates on past data Rough estimate
Central purchasing /storage Combination purchasing Decentralized
Max.efforts to control LT Moderate Min.clerical efforts
To be handled by Sr.officers Middle level Can be delegated
❖ The annual consumption value is calculated with the formula:

(Annual demand) x (item cost per unit).
Through this categorization, the supply manager can identify inventory hot spots,
and separate them from the rest of the items, especially those that are numerous but
not that profitable.
Example:
The graph above illustrates the yearly sales distribution of a US eCommerce in 2011 for all
products that have been sold at least one. Products are ranked starting with the highest
sales volumes. Out of 17000 references:
• Top 2500 products (Top 15%) represent 70% of the sales.
• Next 4000 products (Next 25%) represent 20% of the sales.
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• Bottom 10500 products (Bottom 60%) represents 10% of the sales.
Advantages of ABC Analysis:

1. Close and strict control is facilitated on the most important items which help in overall
inventory valuation or overall material consumption.
2. Proper regulation of investment in inventory which will ensure optimum utilization of
available funds.
3. Helps in maintaining a high inventory turnover rates.
Purchase procedure:
Purchasing: It deals with investment, overheads dealing with other and also result in
server losses mass production industries that requires large purchasing for a continues
flow of materials, demand for an efficient purchase decision. It implies procurement of raw
materials machinery, service etc. needed for production and maintenance of the concern.
It has several benefits in terms of reduced costs, higher inventory turnover, buying the
materials at the best prices, turnover, buying the materials at the best prices, continues
supplies, reduced lead time and so on.
Objectives:
1. To procure right material
2. To procure materials in desired quantities
3. To procure material of desired quality
4. Purchasing from reliable source
5. To pay less for materials purchased
6. To receive and deliver materials at right place and time.
Purchasing process:
The following are the logical steps in the purchasing process:
1. Requisitioning purchases
2. Exploring sources of supply
3. Issuing of tenders and obtaining quotations
4. Opening of tenders and quotations and preparation of comparative
statement
5. Negotiating over the purchase price and terms of supply
6. Placing purchase order
7. Receiving of materials along with the invoice
8. Checking inward invoice
9. Inspecting and testing materials
10. Forwarding the materials to stores
11. Checking invoice and passing of bills for payments
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Value analysis;
Value Analysis is one of the major techniques of cost reduction and control. It is a
disciplined approach which ensures the necessary functions for the minimum cost without
diminishing quality, reliability, performance and appearance.
It is a creative approach to eliminate the unnecessary costs which add neither to quality
nor to the appearance of the product. It is a systematic application of techniques to identify
the functions of a product or a component and to provide the desired function at the lowest
total cost.
These are the days of providing the customer with really best quality products at least cost
which is possible through value analysis which proves wrong rightly “Best and Cheap” or
“Best is never cheap” or “Cheap is Costly”.
What is Value Analysis?

Before understanding the meaning of phrase “value analysis” or “value engineering”, let us
know about value. ‘Value’ is one of those terms having good many connotations and even
contradictory definitions.
ADVERTISEMENTS:
‘Value’ is a word that is very often used by individuals without being clearly understood.
Forget about common people. Even different departments of the same organisation have
different opinions of the ‘value’ of the product that the company manufactures.
The designer equates value with reliability; purchase people with price paid for them;
production personnel with that of cost from the angle of manufacture; sales people with
what customer is willing to pay.
In the field of value investigation, value refers to economic value, which itself can be sub-
divided into four types as cost value, exchange value, use value and esteem value.
“Cost Value” is the measure of sum of all costs incurred in producing the product. The ‘cost
value’, therefore is the sum of raw-material cost, labour cost, tool cost and overheads
expended to produce the product.
“Exchange Value” is the measure of all the properties, qualities and features of the product
which make the product possible of being traded for another product or for money. In a
conventional sense, ‘exchange value’ refers to the price that a purchaser will offer for the
product, the price being dependent upon the satisfaction value which derives from the
product.
It is a rational and structured process consisting of:
(a) Functional analysis to define the reason for the existence of a product or its
components,
(b) Creatively analysis for generating new and better alternatives and
(c) Measurement for evaluating the value of present and future concepts.
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Value Analysis and Value Engineering:

‘VA’ and ‘VE’ are closely related terms so much so that many people use them
interchangeably. Though the philosophy understanding the two is the same the
identification of unnecessary costs yet they are different. The difference lies in the time and
stage at which the technique is applied.
“Value Analysis” is the application of a set of techniques to an existing product with a view
to improve its value. Thus, it is remedial process. “Value Engineering” is the application of
exactly the same set of techniques to a new product at the design stage project concept or
preliminary design when no hardware exists to ensure that bad features not added. Thus, it
is a ‘preventive’ measure. In that sense, ‘VE’ is fundamental and VA is collateral because
‘prevention is better than cure.”
Merits of Value Analysis:

Value analysis is really a very valuable technique of cost reduction and quality
improvement. The specific merits of its are:
1. Improvement in Product Design:
It leads to improvements in the product design so that more useful products are given
shape. Now in case of ball points, we do not have clogging, there is easy and even flow of
ink and rubber pad is surrounding that reduces figures fatigue.
2. High Quality is maintained:
High quality implies higher value. Thus, dry cells were leaking; now they are leak proof;
they are pen size with same power. Latest is that they are rechargeable.
3. Elimination of Wastage:
Value analysis improves the overall efficiency by eliminating the wastages of various types.
It was a problem to correct the mistakes. It was done by pasting a paper. Now, pens are
there and liquid paper is developed which dries fast and can write back.
4. Savings in Costs:
The main aim of value analysis is to cut the unwanted costs by retaining all the features of
performance or even bettering the performance. Good deal of research and development
has taken place. Now milk, oils, purees pulp can be packed in tetra packing presuming the
qualities and the tetra pack is degradable unlike plastic packs.
5. Generation of New Ideas and Products:
In case of took brushes, those in 1930’s were flat and hard, over 60 to 70 years brushes
have come making brushing teeth easy, cosy and dosy as it glides and massages gums.
6. Encourages Team-Spirit and Morale:
Value analysis is a tool which is not handled by one, but groups or teams and an
organisation itself is a team of personnel having specification. A product is the product of
all team efforts. Therefore, it fosters team spirit and manures employee morale as they are
pulling together for greater success.
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7. Neglected Areas are brought under Focus:

The organisational areas which need attention and improvement are brought under the
spot-light and even the weakest gets a chance of getting stronger and more useful finally
join’s the main strain.
8. Qualification of Intangibles:
The whole process of value analysis is an exercise of converting the intangibles to tangible
for decision making purpose. It is really difficult to make decisions on the issues where the
things are (variables) not quantifiable.
However, value analysis does it. The decision makers are provided with qualified data and
on the basis of decisions are made. Such decisions are bound to be sound.
9. Wide Spectrum of Application:
The principles and techniques of value analysis can be applied to all areas-man be
purchasing, hardware, products, systems, procedures and so on.
10. Building and Improving Company Image:
The company’s status or image or personality is built up or improved to a great extent.
Improvement in quality and reduction in cost means competitive product and good name
in product market; it is a good pay master as sales and profits higher and labour market it
enjoys reputation; it capital market, nobody hesitates to invest as it is a quality company.
Limitations:
Like any other cost reduction technique, value analysis has its own limitations. The most
common limitations are that the man made excuses are the blocks in implementing these
plans of value analysis.
The most common excuses given are:

(a) Lack of motivation
(b) Resistive to change
(c) Inertia
(d) Lack of knowledge and patience
(e) Attitude of ‘It will not work in India
(f) We are very small or very big
(g) This has been tried earlier and failed
(h) The change is too big
(i) ‘Let competitors try before we try’
(j) Difficulty of teams meeting or team meeting for getting consensus.
These limitations are man-made and can be over-come one the company divides to
implement. However, they should be educated of the plus and minus points and the main
beneficiaries are those that are to be told and they are to be taken into confidence.
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JIT:
What is Just in Time?
Just in Time (JIT), as the name suggests, is a management philosophy that calls for the
production of what the customer wants, when they want it, in the quantities requested,
where they want it, without it being delayed in inventory.
So instead of building large stocks of what you think the customer might want you only
make exactly what the customer actually asks for when they ask for it. This allows you to
concentrate your resources on only fulfilling what you are going to be paid for rather than
building for stock.
Within a Just in Time manufacturing system, each process will only produce what the next
process in sequence is calling for.
The Origins and History of JIT
JIT is generally accepted as being a concept invented by Taiichi Ohno of Toyota; after World
War2 resources were very scarce in Japan so using them to create something that the
customer did not actually want right now was not a good idea.
On a visit to the US the management team of Toyota were inspired by, of all things, how
they saw a supermarket (Piggly Wiggly) handle their inventory. Only what was removed
from the shelves by the customers was actually replenished and ordered from suppliers. In
this way shelves never became empty, nor did they end up overflowing with excessive
inventory.
Taiichi Ohno was tasked by Eiji Toyoda to make production more efficient through
implementing these ideas and pull production with just in time concepts was developed. It
took more than 15 years for Toyota to perfect their ideas and it was not introduced into
western manufacturing until the end of the 1970’s.
With a JIT system each process pulls from the preceding process’ “supermarket” and that
process will then work to replenish those shelves.
How does JIT differ from traditional manufacturing?
In traditional manufacturing we try to predict what the customer will want and we will
create a forecast (or guess) against which we will produce our products. We will also try to
produce those products in large batches as the belief is that will make machines and
processes more efficient, especially if those machines require a long time to setup. This will
typically result in long lead times through our processes, huge amounts of Work In Process
(WIP) stocks and also large quantities of finished goods stocks that have not yet been
ordered by our customers. This is what many now call “Just in Case” manufacturing.
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If the customer does order something that is not in our current stocks they will either have
to wait many weeks or even months for the product to be manufactured or work will be
hurried through the system by progress chasers causing a huge amount of disruption to the
production schedule.
These systems are often run by Manufacturing Resource Planning (MRP2) programs that
will try to schedule each and every process within the facility. These software packages will
seek to control every step and everything requires careful and often complex planning.
A Just in Time system on the other hand will seek to use simple visual tools known as
Kanbans to pull production through the processes according to what the customer actually
takes. It massively reduces the amount of stock held and will reduce lead times by a
significant amount, often from weeks to just a few hours or days.
The benefits of a JIT system

1. Reduction in the order to payment timeline; cash, as they say is king in business.
Many businesses will suffer with cash flow problems as they will often have to
purchase large amounts of raw materials prior to manufacturing and subsequent
payment by the customer. Often this gap is many months. Through implementing JIT
you are able to considerably reduce that time period.
2. Reduction in Inventory costs; one of the main aims with any JIT implementation is
to improve stock turns and the amount of stock being held. Personal experience has
seen reductions of more than 90% stock in some industries. Along with the
reduction in the stock come many other associated benefits.
3. Reduction in space required; by removing large amounts of stock from the system
and moving processes closer together we will often see a significant reduction in the
amount of floor space being used. Results from 100’s of projects run within
companies in the UK through the Manufacturing Advisory Service saw average
reductions of 33% for simple 5 day implementation projects.
4. Reduction in handling equipment and other costs; if you don’t have to move
large batches there is less need for complex machinery to move them and all of the
associated labor and training.
5. Lead time reductions; one of the most significantly impacted areas is that of the
time it takes for products to flow through the process. Instead of weeks or months
most JIT implementations result in lead times of hours or a few days.
6. Reduced planning complexity; the use of simple pull systems such as Kanban,
even with your suppliers, can significantly reduce the need for any form of complex
planning. With many implementations the only planning is the final shipping
process.
7. Improved Quality; the removal of large batch manufacturing and reduction in
handling often results in significant quality improvements; often in the region of
25% or more.
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8. Productivity increases; to achieve JIT there are many hurdles that must be
overcome with regards to how the process will flow. These will often result in
productivity improvements of 25% upwards.
9. Problems are highlighted quicker; often this is cited as being a negative aspect of
JIT in that any problems will often have an immediate impact on your whole
production process. However this is the perfect way to ensure that problems are
highlighted and solved immediately when they occur.
10. Employee empowerment; one requirement of JIT as with most other aspects of
Lean manufacturing is that employees are heavily involved in the design and
application of your system.
Six Sigma;
Six Sigma is an approach to data-driven management that seeks to improve quality by

measuring how many defects there are in a process and systematically eliminating them
until there are as close to zero defects as possible. In 1984, a Motorola engineer named Bill
Smith developed the Six Sigma management system to reduce the variations in Motorola’s
electronic manufacturing processes that were causing product defects. Since then, the
strategies, tools and cultural norms that support the management system have been
adopted by companies in a wide variety of industries and the meaning of the word “defect”
has broadened to include any deficiency that prevents a company from meeting its
customer’s needs.
In statistics, the Greek letter sigma is used to denote standard deviation from the mean. In
the 1920s, statistical quality control pioneer Walter Shewhart proposed that in
manufacturing, three sigma from the mean is the tipping point that indicates a process has
too many defects and requires correction. This was the accepted norm for many years, until
Bill Smith proposed gathering and analyzing data at a more granular level and making six
sigma the point at which a process has to be corrected. Because it is almost impossible to
achieve zero defects, a concept known as infinity sigma, six sigma allows for 3.4 defects per
million opportunities for a defect to occur. In contrast, three sigma allows for 66,807
defects per million opportunities.
Once the necessary data has been gathered, a company that is managed with Six Sigma
methodologies uses statistics to create a baseline sigma. The baseline illustrates how close
– or how far – the company is from achieving six sigma and serves as a measuring stick for
assessing future improvement. Six Sigma proponents claim its benefits include up to 50%
process cost reduction, cycle-time improvement, less waste of materials, a better
understanding of customer requirements, increased customer satisfaction, and more
reliable products and services. Motorola hold the federal trademark for Six Sigma and it is
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generally acknowledged that Six Sigma can be costly to implement and can take several
years before a company begins to see bottom-line results. In 1995, General Electric Chief
Executive Officer (CEO) Jack Welch’s very public endorsement of Six Sigma helped
businesses outside of manufacturing understand how Six Sigma methodologies can be used
to improve customer satisfaction in any industry.
There are two very important methodologies for executing a Six Sigma initiative: Six Sigma
DMAIC and Six Sigma DMADV. Each term’s name is derived from the major steps in its
process, but each has its own use. DMAIC (define, measure, analyze, improve, control) is
used to correct a process that already exists. DMADV (define, measure, analyze, design,
validate) is used to create a new process.
Six Sigma DMAIC

Here is a step-by-step breakdown of Six Sigma DMAIC:
Define: Identify the project goals and all customer deliverables.

Measure: Understand current performance.
Analyze: Determine root causes of any defects.
Improve: Establish ways to eliminate defects and correct the process.
Control: Manage future process performance.
DMAIC: Define, measure, analyze, improve, control
Six Sigma DMADV
Here is a step-by-step breakdown of Sigma DMADV. The first three steps of this
methodology are identical to DMAIC. Because the two acronyms are so similar, some
companies use the acronym DFSS (Design For Six Sigma) in place of DMADV.
TQM;
Total Quality Management (TQM) describes a management approach to long-term success
through customer satisfaction. In a TQM effort, all members of an organization participate
in improving processes, products, services, and the culture in which they work.
Total Quality Management Principles: The 8 Primary Elements of TQM
Total quality management can be summarized as a management system for a customer-
focused organization that involves all employees in continual improvement. It uses
strategy, data, and effective communications to integrate the quality discipline into the
culture and activities of the organization. Many of these concepts are present in
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modern Quality Management Systems, the successor to TQM. Here are the 8 principles of
total quality management:
1. Customer-focused
The customer ultimately determines the level of quality. No matter what an organization
does to foster quality improvement—training employees, integrating quality into the
design process, upgrading computers or software, or buying new measuring tools—the
customer determines whether the efforts were worthwhile.
2. Total employee involvement
All employees participate in working toward common goals. Total employee commitment
can only be obtained after fear has been driven from the workplace, when empowerment
has occurred, and management has provided the proper environment. High-performance
work systems integrate continuous improvement efforts with normal business operations.
Self-managed work teams are one form of empowerment.
3. Process-centered
A fundamental part of TQM is a focus on process thinking. A process is a series of steps that
take inputs from suppliers (internal or external) and transforms them into outputs that are
delivered to customers (again, either internal or external). The steps required to carry out
the process are defined, and performance measures are continuously monitored in order to
detect unexpected variation.
4. Integrated system
Although an organization may consist of many different functional specialties often
organized into vertically structured departments, it is the horizontal processes
interconnecting these functions that are the focus of TQM.
• Micro-processes add up to larger processes, and all processes aggregate into the business
processes required for defining and implementing strategy. Everyone must understand the
vision, mission, and guiding principles as well as the quality policies, objectives, and critical
processes of the organization. Business performance must be monitored and
communicated continuously.
• An integrated business system may be modeled after the Baldrige National Quality
Program criteria and/or incorporate the ISO 9000 standards. Every organization has a
unique work culture, and it is virtually impossible to achieve excellence in its products and
services unless a good quality culture has been fostered. Thus, an integrated system
connects business improvement elements in an attempt to continually improve and exceed
the expectations of customers, employees, and other stakeholders.
5. Strategic and systematic approach
A critical part of the management of quality is the strategic and systematic approach to
achieving an organization’s vision, mission, and goals. This process, called strategic
planning or strategic management, includes the formulation of a strategic plan that
integrates quality as a core component.
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6. Continual improvement
A major thrust of TQM is continual process improvement. Continual improvement drives
an organization to be both analytical and creative in finding ways to become more
competitive and more effective at meeting stakeholder expectations.
7. Fact-based decision making
In order to know how well an organization is performing, data on performance measures
are necessary. TQM requires that an organization continually collect and analyze data in
order to improve decision making accuracy, achieve consensus, and allow prediction based
on past history.
8. Communications
During times of organizational change, as well as part of day-to-day operation, effective
communications plays a large part in maintaining morale and in motivating employees at
all levels. Communications involve strategies, method, and timeliness.
Supply chain management;
Supply chain management (SCM) is the broad range of activities required to plan, control
and execute a product's flow, from acquiring raw materials and production through
distribution to the final customer, in the most streamlined and cost-effective way possible.
SCM encompasses the integrated planning and execution of processes required to optimize
the flow of materials, information and financial capital in the areas that broadly include
demand planning, sourcing, production, inventory management and storage,
transportation -- or logistics -- and return for excess or defective products. Both business
strategy and specialized software are used in these endeavors to create a competitive
advantage.
Supply chain management is an expansive, complex undertaking that relies on each partner
-- from suppliers to manufacturers and beyond -- to run well. Because of this, effective
supply chain management also requires change management, collaboration and risk
management to create alignment and communication between all the entities.
In addition, supply chain sustainability -- which covers environmental, social and legal
issues, in addition to sustainable procurement -- and the closely related concept of
corporate social responsibility -- which evaluates a company's effect on the environment
and social well-being -- are areas of major concern for today's companies.
Logistics vs. supply chain management
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The terms supply chain management and logistics are often confused or used
synonymously. However, logistics is a component of supply chain management. It focuses
on moving a product or material in the most efficient way so it arrives at the right place at
the right time. It manages activities such as packaging, transportation, distribution,
warehousing and delivery.
In contrast, SCM involves a more expansive range of activities, such as strategic sourcing of
raw materials, procuring the best prices on goods and materials, and coordinating supply
chain visibility efforts across the supply chain network of partners, to name just a few.
Benefits of supply chain management

Supply chain management creates efficiencies, raises profits, lowers costs, boosts
collaboration and more. SCM enables companies to better manage demand, carry the right
amount of inventory, deal with disruptions, keep costs to a minimum and meet customer
demand in the most effective way possible. These SCM benefits are achieved through the
appropriate strategies and software to help manage the growing complexity of today's
supply chains.
Stores management and stores records.

Store is an important component of material management since it is a place that keeps the
materials in a way by which the materials are well accounted for, are maintained safe, and
are available at the time of requirement. Storage is an essential and most vital part of the
economic cycle and store management is a specialized function, which can contribute
significantly to the overall efficiency and effectiveness of the materials function. Literally
store refers to the place where materials are kept under custody.
Typically a store has a few processes and a space for storage. The main processes (Fig 1) of
store are (i) to receive the incoming materials (receiving), (ii) to keep the materials as long
as they are required for use (keeping in custody), and (iii) to move them out of store for
use (issuing). The auxiliary process of store is the stock control also known as inventory
control. In a manufacturing organization, this process of receiving, keeping in custody, and
issuing forms a cyclic process which runs on a continuous basis. The organizational set up
of the store depends upon the requirements of the organization and is to be tailor made to
meet the specific needs of the organization.
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Store is to follow certain activities which are managed through use of various resources.
Store management is concerned with ensuring that all the activities involved in
storekeeping and stock control are carried out efficiently and economically by the store
personnel. In many cases this also encompasses the recruitment, selection, induction and
the training of store personnel, and much more.
The basic responsibilities of store are to act as custodian and controlling agent for the
materials to be stored, and to provide service to users of these materials. Proper
management of store systems provide flexibility to absorb the shock variation in demand,
and enable purchasing to plan ahead.
Objectives of store management
An efficient stores management has normally the following main objectives.
• To ensure uninterrupted supply of materials without delay to various users of the
organization.
• To prevent overstocking and under stocking of the materials
• To ensure safe handling of materials and prevent their damage.
• To protect materials from pilferage, theft, fire and other risks
• To minimize the cost of storage
• To ensure proper and continuous control over the materials.
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• To ensure most effective utilization of available storage space

• To optimize the efficiency of the personnel engaged in the store
Classification of stores
Store can be of temporary nature which means that it has a limited life. Store can also be of
permanent nature. Stores are classified basically in the following broad categories.
• Functional stores – Functional stores are named based on the function of the materials
stored. Examples are fuels store, chemicals store, tools store, raw materials store, spare
parts store, equipment store, refractories store, electric store, explosives store, and
finished goods store etc.
• Physical stores – Physically stores can be centralized stores or decentralized stores.
These stores are named based on the size and location of the store. Examples are central
store, sub store, department store, site store, transit stores, receipt store, intermediate
store, open yard store, and covered store etc.
• Stores are also classified by naming them after the departments to which they serve.
Examples are construction stores, operation stores, rolling mill stores, blast furnace
stores, and steel melting shop stores etc.
• Stores are sometimes classified based on the nature of materials stored in them.
Examples are general store, bonded store, perishable store, inflammable store, salvage
store, reject store, and quarantine store etc.
Centralized storage of materials in a central store has advantages as well as certain
disadvantages. The following are the advantages.
• Centralized store can cater to a wider range of materials which is not possible in a
smaller store. Hence user department is to look for the material of its need only at one
place.
• It contributes to the inventory control in the entire organization since the requirement
of all the departments gets clubbed up.
• It makes better control feasible.
• It provides economy in storage space as materials when stored in larger quantities,
occupy less specific space.
• Large stores can be provided with better and modern handling facilities. The operation
can also be automated.
• Delivery at a single point decreases cost of delivery.
• Receipt and inspection of the materials can be organized more efficiently.
• Improved opportunities are available for the standardization of inventory.
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• The turnover of materials is increased because of the maintenance of lower inventory

and the probability of deterioration of materials during storage is correspondingly
decreased.
• Manpower requirement for managing of stores get reduced. Also the duplication of
records which takes place in decentralized store system is avoided.
The disadvantages of a centralized store is as follows.
Distance from the store and the user department gets increased which requires higher
transportation needs from the store to the user department.
• If there are slippages or system not being well organized then there can be shortages of
the materials which may results into unnecessary interruptions in production.
• There may be necessity of additional internal documentation in the store.
• The risks due to the fire and thefts are higher since the entire stock of the materials are
concentrated at one place.
• The variety of materials to be stored can be large and it can create complications in the
systematic storage as well as in storage procedures
Functions of a store
Store personnel are responsible for carrying out the following functions.
• Receipt of incoming materials
• Supervision of unloading of materials and tallying of materials
• Checking for damages or shortages and preparation of the report
• Filling of ‘goods inward’, ‘day book’, or ‘daily collection’ register
• Completion of vendors consignment note (challan)
• Making arrangement for inspection and getting the inspection completed
• Preparation of ‘goods receipt note’ (GRN)
• Preparation of ‘goods rejection memo’ (in case of rejection of materials)
• Sending of materials to the respective stores
• Sending of the relevant documents to the respective departments
• Ensuring all storage and material handling facilities are in proper working order
• Ensuring good housekeeping and cleanliness in the storage space
• Checking, counting and tallying of materials before issue
• Making prompt entries in ‘Bin card’ or stock card
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• Ensuring correct documentation of material receipts and material issues

• Ensuring safe and proper handling of materials so as not to damage them
• Ensuring proper record keeping and correct accounting of materials
• Ensuring regular stock verification
• Ensuring that rules and regulations relating to physical custody and preservation of
materials are followed
• Ensuring safety of materials and personnel
In the long drawn process of preserving the materials till its use ,some materials might get
obsolete and unserviceable and may require removal from stores for clearing space for
other incoming goods. This activity is known as disposal of materials for which auction etc
is done.
The materials , lying unused but have future economic value are said to form inventory,
which needs professional handling. Inventory management thus is an important aspect of
the stores function. One of the basic functions of store is to account for every
material received in the store by maintaining proper records of all the incoming, stored and
outgoing materials so that proper accounting and audit trail is maintained.
Hence , record keeping is a vital function of store . Of course , it also goes along the various
other activities. With the development in the information technology, the record keeping in
store is also these days through electronic medium making the whole process smooth and
efficient.
Store is to operate in the close relationship with the purchase department. In addition to
the day to day coordination with the purchase department, there are other important
activities which can best be done by close cooperation between stores and purchase. These
are as follows.
• Identification or coding of the materials
• Variety reduction
• Inventory control value analysis
• Disposal of materials no more needed in the sore, or the salvaging operations etc.
• Procurement of automatic procurement items (API) where the procurement is to be
done based on minimum stock levels. Store sends indents to purchase based on
inventory levels determined in accordance with usage and delivery lead times
• Coordination with respect to the material specification
• Coordination regarding ‘lot sizes’ of the materials for purchase which should suit
production requirements, transport, handling and storage space
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• Close communication between purchase and stores with respect to order placement,
receipt of materials, rejections, shortages, breakages, theft and loss of materials , if any.
Also information is to flow with regard to changing production trends, slow or non
moving stock, obsolete or surplus stock, scrap, etc.
Marketing mix, and marketing strategies based on product life

cycle;
The marketing mix (also known as the 4 Ps) is a foundation model in marketing. The
marketing mix has been defined as the "set of marketing tools that the firm uses to pursue
its marketing objectives in the target".[1] Thus the marketing mix refers to four broad
levels of marketing decision, namely: product, price, promotion, and place.[2] Marketing
practice has been occurring for millennia, but marketing theory emerged in the early
twentieth century. The contemporary marketing mix, or the 4 Ps, which has become the
dominant framework for marketing management decisions, was first published in 1960.[3]
In services marketing, an extended marketing mix is used, typically comprising 7 Ps, made
up of the original 4 Ps extended by process, people, and physical evidence.[4] Occasionally
service marketers will refer to 8 Ps, comprising these 7 Ps plus performance
Product passes through four stages of its life cycle. Every stage poses different
opportunities and challenges to the marketer. Each of stages demands the unique or
distinguished set of marketing strategies. A marketer should watch on its sales and market
situations to identify the stage in which the product is passing through, and accordingly, he
should design appropriate marketing strategies. Here, strategy basically involves four
elements – product, price, promotion, and distribution.
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By appropriate combination of these four elements, the strategy can be formulated for each
stage of the PLC. Every stage gives varying importance to these elements of marketing mix.
Let us analyze basic strategies used in each of the stages of the PLC, as described by Philip
Kotler.
Marketing Strategies for Introduction Stage:

Introduction stage is marked with slow growth in sales and a very little or no profit. Note
that product has been newly introduced, and a sales volume is limited; product and
distribution are not given more emphasis. Basic constituents of marketing strategies for the
stage include price and promotion. Price, promotion or both may be kept high or low
depending upon market situation and management approach.
1. Rapid Skimming Strategy:
This strategy consists of introducing a new product at high price and high promotional
expenses. The purpose of high price is to recover profit per unit as much as possible. The
high promotional expenses are aimed at convincing the market the product merits even at
a high price. High promotion accelerates the rate of market penetration, in all; the strategy
is preferred to skim the cream (high profits) from market.
This strategy makes a sense in following assumptions:
(a) Major part of market is not aware of the product.
(b) Customers are ready to pay the asking price.
(c) There possibility of competition and the firm wants to build up the brand preference.
(d) Market is limited in size.
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2. Slow Skimming Strategy:
This strategy involves launching a product at a high price and low promotion. The purpose
of high price is to recover as much as gross profit as possible. And, low promotion keeps
marketing expenses low. This combination enables to skim the maximum profit from the
market.
This strategy can be used under following assumptions:
(a) Market is limited in size.
(b) Most of consumers are aware of product.
(c) Consumers are ready to pay high price.
(d) There is less possibility of competition.
3. Rapid Penetration:
The strategy consists of launching the product at a low price and high promotion. The
purpose is the faster market penetration to get larger market share. Marketer tries to
expand market by increasing the number of buyers.
It is based on following assumptions:
(a) Market is large.
(b) Most buyers are price-sensitive. They prefer the low-priced products.
(c) There is strong potential for competition.
(d) Market is not much aware of the product. They need to be informed and convinced.
(e) Per unit cost can be reduced due to more production, and possibly more profits at low
price.
4. Slow Penetration:
The strategy consists of introducing a product with low price and low-level promotion. Low
price will encourage product acceptance, and low promotion can help realization of more
profits, even at a low price.
Assumptions of this strategy:
(a) Market is large.
42 | P a g e
(b) Market is aware of product.
(c) Possibility of competition is low.
(d) Buyers are price-sensitive or price-elastic, and not promotion-elastic.
Marketing Strategies for Growth Stage:
This is the stage of rapid market acceptance. The strategies are aimed at sustaining market
growth as long as possible. Here, the aim is not to increases awareness, but to get trial of
the product. Company tries to enter the new segments. Competitors have entered the
market. The company tries to strengthen competitive position in the market. It may forgo
maximum current profits to earn still greater profits in the future.
Several possible strategies for the stage are as under:
1. Product qualities and features improvement
2. Adding new models and improving styling
3. Entering new market segments
4. Designing, improving and widening distribution network
5. Shifting advertising and other promotional efforts from increasing product awareness to
product conviction
6. Reducing price at the right time to attract price-sensitive consumers
7. Preventing competitors to enter the market by low price and high promotional efforts
Marketing Strategies for Maturity Stage:
In this stage, competitors have entered the market. There is severe fight among them for
more market share. The company adopts offensive/aggressive marketing strategies to
defeat the competitors.
Following possible strategies are followed:
1. To Do Nothing:
To do nothing can be an effective marketing strategy in the maturity stage. New strategies
are not formulated. Company believes it is advisable to do nothing. Earlier or later, the
decline in the sales is certain. Marketer tries to conserve money, which can be later on
43 | P a g e
invested in new profitable products. It continues only routine efforts, and starts planning
for new products.
2. Market Modification:
This strategy is aimed at increasing sales by raising the number of brand users and the
usage rate per user. Sales volume is the product (or outcome) of number of users and usage
rate per users. So, sales can be increased either by increasing the number of users or by
increasing the usage rate per user or by both. Number of users can be increased by variety
of ways.
There are three ways to expand the number of users:
i. Convert non-users into users by convincing them regarding uses of products
ii. Entering new market segments
iii. Winning competitors’ consumers
Sales volume can also be increased by increasing the usage rate per user.
This is possible by following ways:
i. More frequent use of product
ii. More usage per occasion
iii. New and more varied uses of product
3. Product Modification:
Product modification involves improving product qualities and modifying product

characteristics to attract new users and/or more usage rate per user.
Product modification can take several forms:
i. Strategy for Quality Improvement:
Quality improvement includes improving safety, efficiency, reliability, durability, speed,

taste, and other qualities. Quality improvement can offer more satisfaction.
ii. Strategy for Feature Improvement:
This includes improving features, such as size, colour, weight, accessories, form, get-up,
materials, and so forth. Feature improvement leads to convenience, versatility, and
attractiveness. Many firms opt for product improvement to sustain maturity stage.
44 | P a g e
Product improvement is beneficial in several ways like:
(1) It builds company’s image as progressiveness, dynamic, and leadership,
(2) Product modification can be made at very little expense,
(3) It can win loyalty of certain segments of the market,
(4) It is also a source of free publicity, and
(5) It encourages sales force and distributors.
4. Marketing Mix Modification:
This is the last optional strategy for the maturity stage. Modification of marketing mix
involves changing the elements of marketing mix. This may stimulate sales. Company
should reasonably modify one or more elements of marketing mix (4P’s) to attract buyers
and to fight with competitors. Marketing mix modification should be made carefully as it is
easily imitated.
Marketing Strategies for Decline Stage:
Company formulates various strategies to manage the decline stage. The first important
task is to detect the poor products. After detecting the poor products, a company should
decide whether poor products should be dropped. Some companies formulate a special
committee for the task known as Product Review Committee. The committee collects data
from internal and external sources and evaluates products. On the basis the report
submitted by the committee, suitable decisions are taken.
Company may follow any of the following strategies:
1. Continue with the Original Products:
This strategy is followed with the expectations that competitors will leave the market.
Selling and promotional costs are reduced. Many times, a company continues its products
only in effective segments and from remaining segments they are dropped. Such products
are continued as long as they are profitable.
2. Continue Products with Improvements:
Qualities and features are improved to accelerate sales. Products undergo minor changes to
attract buyers.
45 | P a g e
3. Drop the Product:
When it is not possible to continue the products either in original form or with
improvement, the company finally decides to drop the products.
Product may be dropped in following ways:
i. Sell the production and sales to other companies
ii. Stop production gradually to divert resources to other products
iii. Drop product immediately.

Channels of distribution.
A distribution channel in marketing refers to the path or route through which goods and
services travel to get from the place of production or manufacture to the final users. It has
at its center transportation and logistical considerations.
FACTORS EFFECTING THE CHOICE OF CHANNELS:

1.Type ,size and nature of customers demand.
2. The nature of company business.
3. The type of product sold.
4.The price of unit of sale
5.Availability of Facilities
6. Economic Condition of Country
7.Degree of competition
Different types of channel of distribution are as follows:

Manufacturers and consumers are two major components of the market. Intermediaries
perform the duty of eliminating the distance between the two. There is no standardised
level which proves that the distance between the two is eliminated.
TYPES:
1.Manufactures - consumers
2. Manufactures – wholesaler - consumers
3. Manufactures – retailer - consumers
4. Manufactures – wholesalers – retailer – consumer
1.Manufacturer to Customer
Manufacturer makes the goods and sells them to the consumer directly with no
intermediary, such as a wholesaler, agent or retailer. Goods come from the manufacturer to
46 | P a g e
the user without an intermediary. For example, a farmer may sell some produce directly to
customers. For example, a bakery may sell cakes and pies directly to customers.
2. Manufacturer to Retailer to Consumer
Purchases are made by the retailer from the manufacturer and then the retailer sells the
merchandise to the consumer. This channel is used by manufacturers that specialize in
producing shopping goods. For example, clothes, shoes, furniture and fine china. This
merchandise may not be needed immediately and the consumer may take her time and try
on the items before making a buying decision. Manufacturers that specialize in producing
shopping goods prefer this method of distribution.
3.Manufacturer to Wholesaler to Customer
Consumer’s can buy directly from the wholesaler. The wholesaler breaks down bulk
packages for resale to the consumer. The wholesaler reduces some of the cost to the
consumer such as service cost or sales force cost, which makes the purchase price cheaper
for the consumer. For example, shopping at some of the warehouse clubs, the customer
may have to buy a membership in order to buy directly from the wholesalers.
4.Manufacturer to Wholesaler to Retailer to Customer

Distribution that involves more than one intermediary involves an agent called in to be the
middleman and assist with the sale of the goods. An agent receives a commission from the
producer. Agents are useful when goods need to move quickly into the market soon after
the order is placed. For example, a fishery makes a large catch of seafood; since fish is
perishable it must be disposed of quickly. It is time consuming for the fishery to contact
many wholesalers all over the country so he contacts an agent. The agent distributes the
fish to the wholesalers. The wholesalers sell to retailers and then retailers sell to
consumers.
***
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Chapter-4: Operations, Material and Maketing Management: Definition & Importance of Operational Management

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Chapter-4: Operations, Material and Maketing Management: Definition & Importance of Operational Management

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Management Science Notes by N.Aruna Kumari, Asst. Prof.

Humanities & Sciences

CHAPTER-4: OPERATIONS, MATERIAL AND MAKETING

Marketing: Functions of marketing; Marketing mix, and marketing strategies based on

Definition & importance of Operational Management:

Operational strategy is essential to achieve operational goals set by organization in

In any organization 3 types of operations have concluded under operations management:

1. Plant location and layout:

Need for Enterprise Location

Importance of Enterprise Location

Steps in Enterprise Location

Location, Localisation and Planned Location of Industries

Factors Influencing the selection of the Location of an Enterprise or Plant or Project

(c) Supply of Manpower: Every enterprise requires an adequate supply of manpower

(g) Regional Development: In our country, government is pursuing the policy of

(h) External Economies: In some cases, an enterprise prefers to be located in those

like transportation, warehousing, banking, insurance, communication and factoring

(i) Personal Factors: Personal preferences and prejudices of an entrepreneur also

Considerations of Plant Layout

· Maximum use of the available space.

Advantages of Proper Plant Layout

(a) Product or Line Layout:

Advantages: Product layout provides the following benefits:

Disadvantages: Product layout suffers from following drawbacks:

Suitability: Product layout is useful under following conditions:

Therefore, the manufacturing units involving continuous manufacturing process, producing

(b) Process Layout:

Advantages: Process layout provides the following benefits:

Disadvantages: Process layout suffers from following drawbacks:

(v) More frequent inspection is needed which results in costly supervision.

Suitability: Process layout is adopted when

(c) Fixed Position or Location Layout:

Advantages: Fixed position layout provides the following benefits:

Disadvantages: Fixed position layout has the following drawbacks:

Suitability: The fixed position layout is followed in following conditions:

(d) Combined Layout:

There are three kinds of layouts in retail operations today.

3. Services Centers and Establishment

Applicability of Plant Layout

In case of the manufacturing of ‘detergent powder’, a multi-storey building is specially

perfect coordination of all departments and machinery or equipments, as materials must

3. Methods of production – job, batch, and mass production;

- Concentrate skills (specialisation)

The aims of flow methods are:

- Improved work & material flow

(1) There must be substantially constant demand

(2) The product and/or production tasks must be standardised

(3) Materials used in production must be to specification and delivered on time

The achievement of a successful production flow line requires considerable planning,

4. Work study-basic procedure involved in method study and

Value for Money to Customers (VFM)

Work Study is defined as the systematic examination of the methods of carrying on

Objectives of Work Measurement

Some Techniques of Work Measurement

Conceptual Framework for Carrying Out Work Measurement

Materials management: Objectives; Need for inventory control

PURPOSE OF MATERIAL MANAGEMENT

• To provide reasonable level of client services

1. Meet variation in Production Demand

2. Cater to Cyclical and Seasonal Demand

3. Economies of Scale in Procurement

Functional areas of material management