BCF 403 Fundamentals of Production and Operations MGT - Module 1 PDF

Production and Operations Management
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Unit-1: Production Operations Management Notes
Definitions, Concepts and Strategies
Structure
1.0 Introduction
1.1 Unit Objectives
1.2 Definition
1.3 Service as Part of Operations Management
1.4 Differences Between Service and Manufacturing
1.5 Decisions in Operations Management
1.6 Operations Strategy
1.7 Strategy Formulation Process
1.8 Strategic Options for Operations
1.8.1 Product Portfolio
1.8.2 Process
1.8.3 Technology
1.8.4 Capacity
1.8.5 Supply Chains
1.9 Summary
1.10 Exercises and Questions
1.11 Answers to Check Your Progress
1.12 Further Reading
1.0 Introduction
The unit will introduce the concept of production operations management (POM). It will
provide a definition of production operations management and enumerates the functions
of POM. The unit will highlight the difference between service and manufacturing and
describe the various decisions involved in POM. The unit will also describe the operations
strategy that organisations adopt to compete in the market.
1.1 Unit Objectives

Defining Production Operations Management
Describing the Functions of POM
Explaining the difference between service and manufacturing
Discussing the strategy options for operations
1.2 Definition of Production

Operations Management
Agriculture, manufacturing and services are the major economic activities of any
country. Agriculture constitutes the primary sector, while manufacturing constitutes the
secondary sector and service, the tertiary sector of the economy.
Manufacturing engages in converting inputs into products that are consumed by
individuals or organisations, whereas service organisations uses a service delivery
system to provide the required services to its customers.
Manufacturers of automobiles, machine tools, TVs, etc. fall in the manufacturing
category, while consultancy firms, legal firms, hospitals, banks, etc., figure in the service
category.
Amity Directorate of Distance & Online Education
6 Production and Operations Management
An operations system is defined as a set of different activities that are performed to

Notes transform a set of inputs into useful outputs. These inputs can be physical items such as
materials and or information. Outputs can be tangible or intangible. Both manufacturing
and service system can be classified as operations systems.
Feedback is taken from outputs, and controls are exercised on the resources — to
make the operations system efficient and effective.
Transformation activities can be divided into various functions of operations

management. These functions are:
• Product design and development
• Process design and analysis
• Forecasting
• Aggregate Planning
• Master Production Scheduling
• Materials Capacity Planning
• Production Planning and Control

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• Work Study
• Maintenance Notes
• Inventory Control
• Quality Control
• Cost Control
1.3 Service as Part of Operations Management

Services are identified separately from manufacturing but the system through which
products are manufactured and the service delivery systems function are called operations.
From the operations management perspective, pure product and pure services are the
two ends of a spectrum. Majority of operations combine both products and services.
An automobile manufacture can be 99% approximate to pure product while photocopy

manufacture is 50% product and 50% service oriented. A restaurant may be 70% service
and 30% product oriented, while a bank, or a consulting firm, can be 99% service
oriented.
1.4 Differences Between Service and Manufacturing

Intangibility
Service is differentiated from manufacturing, in terms of tangibility. Manufacturing
provides an object as output, whereas service output is the performance that is
experienced.
Heterogeneity
Another aspect of service that differentiate it from manufacturing is the element of
heterogeneity. The heterogeneity arises from the service providers, service receivers and
the service delivery system.
Instantaneous Production, delivery and consumption in services involve customers in
the production and consumption. An advocate and a client together produce and utilise
the service.
Perishability
Services can not be inventoried. Service capacity elapses with time. For example an
airline operates a flight from Delhi to Mumbai with 150 seats. During a flight if 100 seats
are only occupied, the remaining 50 seats cannot be kept to be utilised at a future point.
1.5 Decisions in Operations Management

There are three types of decisions involved in operations management. These are:
strategic, tactical and routine, or operational, decisions.
Strategic Decisions
These decisions will have long term impact and implications across divisions. Strategic
decisions should be in tine with corporate strategies. Strategic decisions include:
• Product and Process Selection
• Technology Selection
• Facility Location and Layout

Tactical Decisions
Notes These decisions will have medium term impact. These include:
• Purchasing new machine to add to capacity
• Employment level
• Funds requirement
Operational/Routine Decisions
These decisions effect the day-to-day activities. If an operator is an leave, who will
operate in his place is an operational decision.
1.6 Operations Strategy

Organisations constantly engage in value creation for their customers. Potential for
profit increases when more and more customers enjoy the product and services of the
organisation. The profit potential is directly related to the competitive advantage of the
organisation, compared to its competitors. An important challenge facing an organisation
is to identify ways and means of creating competitive advantage and sustaining it for a long
period. A strategic planning will help an organisation to develop competitive advantage. A
good strategy will help the organisation to generate profit and increase its market share.
Operations strategy is the process of making appropriate decisions in the operations
function, in line with the overall corporate strategy. These decisions include the extent of
capacity to be built, the type of process and manufacturing technology to be employed the
nature of products to be manufactured and the type of supply chain to configure. Thus,
strategic planning exercise enables an organisation to respond to the market needs in the
most effective manner by aligning its resources and various activities to deliver products
and services that are likely to succeed in the market place.
1.7 Strategy Formulation Process

Strategy formulation process consists of the following steps:
1. Scanning and understanding the market place
2. Identifying strategic options for creating and sustaining the competitive
advantage
3. Formulating the overall corporate strategy
4. Develop operations strategy in line with the corporate strategy
Customer expectations change with time due to several reasons like improvement in
technology, entry of a foreign supplier, more information about the product, etc. Hence, it
is important for organisations to identify the alternatives to create a greater impact in the
market. Customer expectations and competitive priorities can be better understood by
using order qualifying and order winning attributes.
Order qualifying attributes are the set of features that customers expect in the product
or service they intent to purchase. For example, a customer is planning to purchase a
printer that can print on an A3 size paper. A3 size printing is the order qualifier. Those
printers that doesn’t have the A3 size printing capability will not be considered for
purchase.
Order winning attributes are those factors that can motivate the customer to buy the
product. Order winning attribute enables a customer to identify a product from among its
competition. The more the number of such attributes in a product, the more is the chance
that the customer will buy it.
1.8 Strategic Options for Operations

Strategic options for operations relate to the design and control of the operations
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systems. Various strategic options for operations are: product portfolio, process,
technology and capacity and supply chains. Notes
1.8.1 Product Portfolio
The product portfolio consists of the products that an organisation wants to produce,
the number of variations in each product and the extent of customisation that can be
offered to customers.
1.8.2 Process
Process design provides another strategic option to create the competitive advantage.
Process choice influences the material and information flow in an organisation. Choice
is to be made from continuous flow, intermittent flow and jumbled flow. Product portfolio
decisions influence process choices. Where the volume of product is very high, the choice
of process is continuous process. An organisation that wants to provide a wide range of
products to its customers will have an intermittent process choice.
1.8.3 Technology
Technological advancements gives an opportunity to create a competitive advantage.
Some of the technological options for creating competitive advantage are:
• Increased machine utilisation
• Scheduling flexibility
• Engineering design flexibility
• Ease of expansion
• Reduced manufacturing lead time
• Reduction in process inventory
1.8.4 Capacity
Capacity is the maximum number of goods that can be produced per unit time for
manufacturing, or the maximum number of service offerings that can be made per unit
time. Capacity decisions influence the cost of goods sold. Economies of scale lower total
costs from large capacities. Investment in large capacities will help also to procure other
factors of production. A large production base gives leverage for bargaining.
1.8.5 Supply Chains

A supply chain refers to the network of entities supplying components and raw materials
to an organisation, as well as those distributing the finished goods of an organization
to customers through alternate channels. The appropriate choice of a supply chain is
a strategic decision. There are two types of supply chains: efficient supply chain and
responsive supply chain. An supply chain focuses on cost optimisation through maximum
utilisation of supply chain resources. A responsive supply chain can respond to market
requirements very quickly. An appropriate supply chain depends on product profiles. For
example, Atta or salt require an efficient supply chain. Products like Tanishq watches
require a responsive supply chains.
Flexibility and cost are competing dimensions in operations strategy. As the flexibility
increases the cost is also likely to increase.
1.9 Check Your Progress

1. Define production operations management.
2. Explain the product process continuum.
3. What are strategic decisions?
4. What is meant by perishability of service?
5. What is a supply chain?
1.10 Summary
Notes The unit discussed the concept of production operations management, explained
difference between service and manufacturing and explained the operations, decisions
and the strategic options for operations management.

Short Answer Questions
1. Explain production and operations management.
2. Enumerate the functions of operations management.
3. What are the types of decisions in operations management?
Long Answer Questions

1. Differentiate between service and manufacturing.
2. Explain the options for operational strategy for competitive success.
1.12 Answers To Check Your Progress

1. Production operations management is that function of an organisation that is
concerned with the designing, planning and control of resources for the production
of goods and the provision of services satisfy customer requirements.
2. Services, such as management consulting, heath and education, have dominant
service attributes and form one end of the spectrum. Manufactured products like
machine tools, automobiles, etc., dominate the other end of the spectrum.
3. Strategic decisions cut across the different departments and affect the whole
organisation. For example, the decision regarding what product is to be offered
in the market place is a strategic one.
4. Perishability of service means that it cannot be inventoried. The vacant seats in
an airline service perish, once the flight takes off.
5. Supply chain is a set of entities that forward materials. It is a network of firms
that supplies raw materials and components to an organisation, as well as those
distributing finished goods to customers through various channels.

Production Operations Management, 3rd edition by S N Chary, Tata McGraw Hill
Operations Management, Theory and Practice, by Mahadevan, Pearson Education
Operations Management for competitive advantage 11th edition, by Richard B Chase, F
Robert Jacobs, Nicholas J Aquilano, Nitin K Agarwal, Tata McGraw Hill

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Unit-2: Product Design and Development Notes
Structure
2.0 Introduction
2.1 Unit Objectives
2.2 Concept of Product Design
2.3 Stages of Product Design
2.3.1 Conceptualisation
2.3.3 Design
2.3.3.1 Product Life Cycle and Life Cycle Costs
`2.3.3.2 Value Engineering
2.3.4 Development
2.3.5 Production
2.4 Techniques for Product Design
2.4.1 Design for Manufacturability
2.4.2 Concurrent Engineering
2.4.3 Quality Function Deployment
2.4.4 Reverse Engineering
2.6 Summary
2.9 Further Reading
2.0 Introduction
The unit will introduce the stages of product design. It will explain the product life cycle
and the techniques of product design.
2.1 Unit Objectives

• Understanding the need for Product Design
• Understanding the Stages of Product Design
• Explaining the Concept of Product Life Cycle
• Explaining the various techniques of product design
2.2 Concept of Product Design

Product design is the starting point of all operations processes in an organisation.
Design affects the manufacturability, reliability, serviceability and even logistics of
products.
Product design moves through different stages during product development. The
different stages in a product development are: Conceptualisation, Design, Development
and Production.
2.3 Stages of Product Design

2.3.1 Conceptualisation
Product development process starts with the generation of concepts R&D, competition,
Govt. Regulation, suppliers, customers are some of the enablers of concept generation.

Various alternatives are generated and a feasibility study carried out, to identify the
Notes suitable one Feasibility study includes technical feasibility, marketing feasibility and
economic feasibility.
2.3.2 Design
The second stage in the product development process is the design. The feasibility
study narrows down various alternatives to a few. At this stage, the size, shape,
aesthetics, material for construction, etc., are identified: Product specifications and
process specifications are also drawn.
Westinghouse curve says that 75% of the product cost is fixed and committed at the
design stage itself.
Product life cycle costs and Value Engineering are two important tools to create an
effective design.
2.3.2.1 Product Life Cycle and Life Cycle Costs

Product Life Cycle (PLC) depicts the demand for a product throughout the life of a
product. Low demand during the introduction and progress during the growth stage, due
to marketing efforts gets matured due to entry of other players and finally start declining.
The stages of a PLC are: Introduction, Growth, Maturity and Decline.
Introduction
At his stage, the product is just introduced into the market. Here, this are very few
customers and the organisation concentrates on creating awareness about the
product.
Growth
At this stage, due to marketing efforts, the demand for the product grows. The market
share remains stable.
Maturity
The sales of the product stabilise and producers try to differentiate their products.
Market reaches the saturation point and competition intensifies and results in price
wars.
Decline
The demand for the product registers a downward trend. Producers start withdrawing
the item from the market.
2.3.2.2 Value Engineering

Value Engineering is a function undertaken at the time of design of components for a
product with a view to reduce cost and, at the same time, increase value to the customer,
by improving functionalities and performance.
Several questions are answered in a VE exercise Is there any excess tolerance or
design in certain components?
• Can certain features be eliminated?
• Does the design leads to easy and low manufacturing cost?
• Is it possible to use more and more universal parts and offer unique features?
VE is, thus, a multi function team effort.
2.3.3 Development
The next stage of product development is the physical development of the product.
During this stage, the product is transferred from the drawing board to a physical product.
A prototype is developed and detailed specifications are drawn. Testing and refinement of
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the design are also carried out.
Notes
2.3.4 Production
The final stage of product development transfers the knowhow for commercial
production. Design and specifications are freezed and an efficient and effective
manufacturing process is put in place.
2.4 Techniques for Product Design

Different design techniques are available for designing products that can create value
for customers. Some of the important tools are: Design for Manufacturability, Quality
Function Deployment, Reverse Engineering, Concurrent Engineering and Robust Design.
2.4.1 Design for Manufacturability (DFM)
A design should lead to improved productivity, reduced costs and speedy production
process. DFM is a structured approach that ensures manufacturing requirements are met
at the early stages of product design. DFM guidelines has three sets of requirements,
namely reducing variety, and reducing cost and increading operational convenienu.
■ Reduction in variety is achieved through:
• Minimising the number of parts and subassemblies.
• Avoiding separate fasteners.
• Standardising parts, wherever possible
• Modular design
• Using a repeatable and proven process
■ Reduction in cost is achieved through:
• Failure analysis
• Assessing value
■ Operational convenience entails:
• Simplified operations
• Eliminating the need for making adjustments
• Minimum handling
• Efficient and adequate testing
2.4.2 Concurrent Engineering

Conventional product design takes a longer time. In a competitive market, faster
product development creates an advantage. Concurrent engineering is a cross functional
team approach that reduces product development time considerably. In the concurrent
engineering approach, all those who are involved in product development get together
at the design stage itself and sort out all issues that can come up in the later stages of
product development.
2.4.3 Quality Function Development (QFD)

QFD is a product design technique that identifies customer requirements and creates
a design that satisfies the customer requirements. QFD is a Japanese technique that
collects qualitative customer requirements and transform these into qualitative design
targets.
QFD is also known as house of quality. Seven types of data are used in the house of
quality.

Notes
The first data that is collected pertains to customer requirements. Then, the relative
importance of each one of them is identified. The customer requirements are then related
to product characteristics. The product requirement/specification is benchmarked with
that of the competition. The analysis of the above data leads to the design values.
2.4.4 Reverse Engineering
This is also known as screw driver technology. An existing product is dismantled to
its component level and studied in detail. A design that eliminates the shortcomings in
the existing design is developed. This design technique is very good for a product in the
growing stage.

1. What do you mean by product design?
2. What are the stages of product design and development?
3. What do you mean by PLC?
4. What is value engineering?
2.6 Summary
The unit discussed the concept of product design and development, its need and the
various techniques used in the design and development of products.

1. Explain the need for product design and development.
2. Define product development.
3. What do you under by the term design for manufactur ability.

1. Define the concept of product life cycle. Describe various stages of PLC.
2. What is Quality function deployment? Explain its various stages.
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3. What is reverse engineering? When is this technique useful?
Notes
1. Product design is the process of transforming an idea or concept into product
specifications that meet certain customer requirements. Product design involves
creating drawings, developing specifications deciding size, shape, and materials
to be used.
2. The various stages of product design and development are: conceptualisation,
design, development, and production. An idea for a product is conceived and
converted into specifications through design and a pilot unit is developed and
tested. If this is accepted by customers, commercial production initiated.
3. Product life cycle (PLC) consists of Introduction stage, Growth stage, Maturity
stage and Decline stage. When a new product is introduced and growing the
demand is more and supply is less. The company can command a high price
abut it gradually reduces when more and more produces enter the market and
the market get saturated.
4. Value engineering is an exercise adopted at the design stage of a product to
ensure that the design is optimum and it can deliver value to the customer. Value
engineering is a cross-functional team effort to eliminate features that do not add
value to the customer.
2.9 Further Reading

Production Operations Management, 3rd edition by S N Chary, Tata McGraw Hill
Operations Management, theory and Practice, by Mahadevan, Pearson Education

Notes Unit-3: Process Design and SelectioN

Structure
3.0 Introduction
3.1 Unit Objectives
3.2 Concept of Process Design
3.3 Determinants of Process Characteristics
3.4 Types of Processes
I. Continuous Flow System
Ii. Intermittent Flow System
1. Batch Production
2. Job Production
3.5 Process-Product Mix
3.6 Planning Premises And Process Design
3.6.1 Make to-Stock
3.6.2 Make-to-Order
3.6.3 Assemble-to-Order
3.7 Check You Progress
3.8 Summary
3.0 Introduction
This unit will introduce the process design concept and the determinants of process
characteristics. It will unit identify the types of processes and the product process mix.
The unit will also help in understanding the planning premises and process design.
3.1 Unit Objectives

• Understanding the Concept of Process Design and Determinants of Processes
• Describing Various Processes
• Explaining the Concept of Product Process Mix
• Explaining the Planning Premises and Process Design
3.2 Concept of Process Design

After the product design is completed, the next function is to produce it. The production
process can be defined as a set of activities that converts the inputs into outputs that
satisfy customer requirements. The conversion process adds value by changing the
shape, characteristics, etc. of the inputs. Design of processes means making a choice
with respect to the flow of parts in a production system.
Design of processes is an important and early step in the operations management
function. The design of processes indicates how the production resources are organised
in the operations system so that flow patterns are optimised and operations controlled
effectively.

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3.3 Determinants of Process
Notes
Characteristics
The characteristics that influence the process design are: volume, variety and flow.
Volume indicates the average quantity of the products produced in a production
system.
Variety refers to the number of alternative products and variants of each product that
are produced in a production system. The increase in the variety of products is likely to
introduce variety in various processes.
Flow indicates how components and materials in a conversion process get transformed
from raw material stage to the finished product stage. A flow provides useful information
about the complexities of production processes.
The three characteristics are linked to each other. Volume and variety have an inverse
relationship. When the volume production is very high, varieties of products are very few.
Volume and variety influence the flow patterns in a production system. Process design
choices are understood by analysing alternate flow patterns.
3.4 Types of Processes

Process characteristics are determined by the flow of products in an operating system.
Three types of flows continuous, intermittent and jumbled can be found in operating
systems.
3.4.1 Continuous Flow System

A continuous flow system is characterised by a streamlined flow of products in the
operating system. In such systems, the conversion process begins with input of raw
materials at one end. It progresses through the system in an orderly fashion to finally yield
furnished goods at the other end. The production process is sequential and resources
are added in stages. Process industries are examples of a continuous flow production
system. Mass production system is another example of continuous and streamlined flow
in the manufacturing system. In a mass production system, volume of production is very
high and the variations in the final product are low.
3.4.2 Intermittent Flow System

When variety increases, the volume of production for each variation will be less,
compared to that of a mass production system. Dedication of manufacturing resources
for each variant may not be a feasible option. Manufacturing resources will be shared by
a group of products.
Two types of intermittent production system are: batch production and job production.
3.4.2.1 Batch Production

Batch production is deployed in cases where it is desirable to produce in batches.
Production is carried out in lots, and in planned quantities. This is employed where
products are required in limited numbers, at periodic intervals. Paint manufacturing and
pharmaceutical industries are examples of batch production.
3.4.2.2 Job Production

Job production is characterised by varieties of products, but in small volumes.
Products are more or less customised. Labour is generally skilled, but supervision should
invariably be highly skilled.

3.4.3 Jumbled Production System

Notes Jumbled production is also known as project production. Project production is
characterised by a set of activities to produce a single product. The product is stationed
at one point, whereas different agencies with different skill sets are deployed to complete
the project. Examples of this type of production are: construction activities, ship and
aircraft production, plant and machinery fabrication and installation.
3.5 Process Product Mix

The relationship between process choices and flow patterns in a production system
is depicted by the process-product mix: One dimension of the matrix shows the product
characteristics and the other the process characteristics. Product characteristics
essentially indicate the level of customisation and the volume of production. On the other
hand, process characteristics indicate the complexity and divergence in the process,
when the variety in high flow cannot be continuous.
3.6 Planning Premises and Process Design

Alternative planning premises are linked to the process design. Three generic planning
premises are: Make to Stock, Make to Order and Assemble to Order.
3.6.1 Make to Stock (MTS)

The basic approach to planning in this system is to schedule production for the purpose
of replenishing the stock to some predetermined level. Planning starts with estimating the

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demand for the product during the planning period. Based on the estimated demand and
available inventory of products, production quantity for the planning period is finalised. Notes
3.6.2 Make to Order (MTO)
Under this system planning and production are scheduled against specific orders
only.
3.6.3 Assemble to Order (ATO)

When the variety is not very high, as in the case of a jumbled flow process, it must be
possible to work with a planning methodology that is intermediate to MTS and MTO that
is known as ATO. ATO uses a hybrid system wherein MTS is used for the early stages of
production and MTO, towards the final stage of production.

1. What do you mean by process design?
2. Explain the determinants of processes
3. Describe continuous production system
4. What is job production?
5. What is batch production?
3.8 Summary
The unit discussed the concept of product design and development, its need and the
various techniques used in the design and development of products.

1. What is process design?
2. What is intermittent production system?
3. What is process – product mix?

1. What are the various production systems?
2. Explain the planning premises used in process design?

1. Design of process means making a choice with respect to the flow of parts in
a production system. The design of processes indicates how the production
resources are organised in the operations system, so that flow patterns are
optimised and operations are controlled effectively.
2. The determinants that influence process design are: volume, variety and flow.
Volume represents the quantity of production, while variety indicates the variants
of the products. Flow indicates the conversions process through which inputs
and components are converted into the final product.
3. A continuous flow system indicates an operating system, wherein the raw
materials enter at one point and the finished products comes out at the other end
continuously. Petroleum refining and chemical plants are examples of continuous
flow systems.
4. Job production is a system, where the volume of production is less, but the variety
is high. Products are more or less customised.

5. A batch production is where the products are produced in lots or batches. This
Notes system of production is used, where specific quantities of products are required
at definite intervals.

Production Operations Management, 3rd edition by S N Chary, Tata Mc Graw Hill

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Unit-4: Facility Location Notes
Structure
4.0 Introduction
4.1 Unit Objectives
4.2 Concept of Facility Location
4.3 Factors Affecting Location Analysis
4.4 Location Analysis Techniques
4.4.1 Locating a Single Facility
4.4.2 Dimensional Analysis
4.4.3 Brown & Gibson Model
4.4.4 Factor Rating Method
4.4.5 Centre of Gravity Method
4.4.6 Load-Distance Method
4.4.7 Breakeven Analysis
4.4.8 Transportation Model
4.6 Summary
4.9 Further Reading
4.0 Introduction
This unit will look into the factors that affect facility location and also introduce the
techniques that can be used for selecting a facility for operation.
4.1 Unit Objectives

• Understanding the Concept of Facility Location
• Identifying the Factors that Affect Facility Location
• Understanding the Location Analysis Techniques
4.2 Concept of Facility Location

According to R. Dan Reid and Nada R. Sanders, “facility location is the process of
identifying the best geographical location for a service or production facility”.
There are two alternatives in facility location. These are:
1) Single location that meets the needs of the entire market
2) Multiple facility taking care of the needs of the market that the organisation wants
to serve.
4.3 Factors Affecting Location Analysis

The various factors that affect the facility location include the following:
i) Proximity to Markets : Location of facility is to be made very close to the market,
when the finished goods are bulky and heavy. When the outbound logistics are
very high, locations are selected very close to the market.
ii) Proximity to Suppliers and Resources : When the inbound logistics are high
and the raw materials are perishable the facility shall be located close to the
supply market.
Notes iii) Infrastructure : Power – intensive industries are located close to places where
power is available at a cheaper cost. Similarly, water – intensive industries are
located close to places where water is available in plenty.
iv) Availability of Labour : Industries that are labour – intensive and industries that
require skilled labour should be located in places, where these are available in
plenty.
v) Regulatory Policies : Govt. policies related to licence, labour laws and building
structure affect the location decision. Taxes and levies charged by the State Govt.
affect product on cost.
vi) Climate : Climatic conditions affect facility location. Textile mills are located in
places having high humidity.
vii) Community Attitude : Community attitude towards an industry can influence
the selection of location of a plant.
viii) Safety Considerations : For example, nuclear power plants are located in
remote locations far away from populated places, on safety considerations.
ix) Quality of Life : Social infrastructure, like accommodation communication,
education and medical facilities, high cost of living and crime rate, etc. affect site
locations.
x) Supporting Industries : Proximity of supporting industries and services is
another important factor that affects site location.
xi) Availability of Land : Enough space to accommodate the present production
infracture and future expansion at a low cost.
4.4 Location Analysis Techniques

4.4.1 Locating a single facility
Once the region for a facility is identified, the next step is to select the best plant site
from a number of available set of sites. Selection of a site depends both on tangible
and intangible factors. There are different techniques for selecting a site from different
alternatives.
4.4.2 Dimensional Analysis

This method is used when all costs are tangible and quantifiable. Intangible costs are
expressed in relative terms. Factors like education facilities and altitude of the community
are evaluated on relative terms. Bridgeman’s dimensional analysis is used for selecting a
site from two alternatives, M and N.
If
C1M, C2M, C3M … CzM are different costs associated with the site M on different z
cost items
C1N, C2N, … CzN are the different costs associated with the site N
W1, W2 …. Wg are the weightages given to these cost items
The relative merit of site M and site N is given by

If this is >1, it means site N is superior to site M.
4.4.3 Brown and Gibson Model for site location.

This model is based on three categories of factors

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(i) Critical……. eg., water for the refinery
(ii) Objective…… eg., raw material costs Notes
(iii) Subjective…… eg., recreational facilities, union activities
For each site ‘i’ a location measure, LMi, is defined by:
LMi = CFMi x [D x OFMi + (I-D) x SFMi]
CFMi = Critical factor measure for site i (CFMi = 0 and 1)
OFMi = Objective factor measure for site i
(O ≤OFMi ≤1 and ∑i OFMi = 1)
SFMi = Subjective factor measure for site i
O ≤SFMi ≤1 and ∑i SFMi = 1
D = objective factor decision weight
Sites with higher location measures are preferred to sites with lower location
measures.
4.4.4 Factor Rating Method

In the factor rating method, various relevant factors that affect site location are
identified. This is a four step method consisting of identification of relevant factors,
establishing relative importance, assessing the performance of each location and finally,
ranking the locations.
Example :
A manufacturing firm for garments is actively considering five alternative locations for
setting up factory. The locations vary in terms of their advantages to the firm. Hence,
the firm requires a method of identifying the most appropriate location. The firm has
arrived at six factors to be considered for the final site location. The ratings of each
factor on a scale of 1 to 100 provide this information.
Rating of each location against each factor
Proximity to the port

Solution
Notes The first step is to extablish the relative importance through normalisation
Computing the performance of each location
Location 5 is the best
4.4.5 Centre of Gravity Method

This method uses distance as a measure to evaluate the suitability on a proposed
location. This approach is used when the critical factor is the distance of the location to
customers or suppliers.
In the centre of gravity method, all the demand/supply points are represented in the
Cartesian coordinate system. Each demand/supply point will have weights that indicate
demand/supply per unit time. Centre of gravity of the various demand/supply is located
using the formula.
4.4.6 Load-Distance Method

The load distance method evaluates two or more potential candidates for location vis-
àvis demand or supply points. The load distance method is an objective measure of the
total load-distance for each potential location. Following gives the location and steps.
25
• The number of existing demand/supply points = n
• Index used for existing demand/supply points = i Notes
• Coordinates of existing demand/supply points = (xi, yi)
• Quantity of shipment between existing demand/supply point i and proposed
facility = Wi
• Number alternatives to be evaluated = m
• Index used for the alternatives for the location = j
• Coordinate of location j in the map = (xj, yj)
The distance measure (Dij) in the Cartesian coordinates between an existing demand/
supply point i and a proposed location j is given by:

The load distance for a proposed facility j is given by:
4.4.7 Breakeven Analysis

Breakeven analysis is the graphical representation that shows the relationship between
the cost and revenue. The cost and revenue increases with the volume of output. Cost is
divided into two categories, fixed and variable costs. The Breakeven Analysis specifies
the level of output that must be reached in order to recover all cost of operations through
revenues. The breakeven point depends on the selling price of the product and the
operating cost structure.
4.4.8 Transportation Model

Sometimes organisation face the challenge of selecting multiple locations, instead of
just one. When selection factors are on the basis of transportation cost, transportation
model is used. The choice to be made is which location will be served from which origins,
so that the total transportation cost is the minimum.

1. What do you mean by facility location?
2. What are the problems faced in locating a facility?
3. Explain Dimensional analysis as a technique of facility location?
4. Discuss the advantages of factor rating method.
4.6 Summary
This unit introduced the concept of facility location and analysed the factors that
affect facility location. The unit also described various techniques of locating a facility in
a region.

Notes
1. Why is facility location important for an organisation?
2. Evaluate the advantages and disadvantages of locating a facility in the urban and
rural areas.
3. How transportation issues can affect the facility location?

1. Discuss Brown & Gibson model for facility location.
2. Elaborate on the factor rating method.
3. Discuss the Gravity method of site selection.
4. Elaborate on the load distance method.

1. Facility location is the function of determining the location for plant for optimal
operation and effectiveness. Facility location is the most challenging task that an
entrepreneur faces, as there is no universally acceptable model for site location. A
good location supports the operations, while a poor location may be detrimental to
the enterprise.
2. A site location requires evaluation of both tangible and intangible factors. Tangible
factors can be easily quantified and a decision arrived at, whereas intangible factors
are qualitative and require a rating scale to arrive at a decision. The rating is based
on relative merit of one site over the other. Subjectivity creeps into such decisions.
3. Dimensional Analysis for site location is used, when all the factors are tangible and
quantifiable. Qualitative factors, like attitude of community, education and facilities
are evaluated on relative terms. Bridgeman’s dimensional analysis helps to take a
decision between two sites.
4. Factor Rating method helps managers to bring in a number of locations in the
evaluation process. The advantages of this method are:
a) It simplifies the process of selection of one location over another.
b) There is consistency in judging location alternatives
c) Variable factors can be brought into the evaluation process.
4.8 Further Reading

Operations Management, Theory and Practice, by Mahadevan, Pearson Education

27
Unit-5: Facility Layout Notes
Structure
5.0 Introduction
5.1 Unit Objectives
5.2 Concept of Facility Lay Out
5.3 Objectives of Plant Layout
5.4 Determinants of Facility Layout
5.5 Classification of Layouts
5.5.1 Process Layout
5.5.2 Product Layout
5.5.3 Fixed Position Layout
5.5.4 Group Technology Layout
5.6 Line Balancing
5.8 Summary
5.0 Introduction
The objectives of a layout are elaborated in this unit. Various layouts used are
explained clearly indicating the advantages and disadvantages of each one of them.
5.1 Unit Objectives

• Understanding the Concept of Facility Layout
• Describing Various Types of Layouts
• Understanding the Advantages and Disadvantages of Various Layouts
5.2 Concept of Facility Layout

Layout planning in manufacturing and service organisations deals with the physical
arrangement of various resources that are available with the objective to improve the
performance of the operating system, thereby providing better customer service. Based
on volume-variety-flow layouts can be classified as: Process Layout, Product Layout,
Fixed position layout and cellular layout.
5.3 Objectives of Facility Layout

Layout of a facility is designed to ensure smooth flow of production at optimal cost. A
good layout results in improved employee morale and enhanced production and utilisation
of resources. A good layout results in following objectives:
• Economical handling of materials and finished products:
• Better supervision for faster production and good quality
• Better utilisation of the available space
• Flexibility in change of plant design
• Improvement in work conditions
• Unidirectional flow of production operations

Notes
5.4 Determinants of Facility Layout
Volume-variety-flow implications for layout planning.
5.5 Classification of Layouts

5.5.1 Process Layout
A process layout is an arrangement of resources on the basis of the process
characteristics of the resources available. Each department in a functional layout is
organised into functional groups. Thus, in a machine shop, all the lathes will be organised
into a turning department, all drilling machines into a drilling dept: all milling machines
into milling dept, etc. Each component fabricated in the shop needs to go through the
particular machine the machine in the sequence of its processing.
Advantages
• Low capital investment
• Maximum utilisation of available space
• Flexibility in the allocation of resources
• Breakdown of equipment, absenteeism of workmen do not affect production
• Workmen expertise on a machine improves
• Problems in one section doesn’t affect other sections
• Less work monotony
Disadvantages
• Increase in space requirement, due to increase in volume
• Material handling is high
• High work in process inventory
• Difficulty in scheduling
• Set-up cost and inspection cost increases.

29
5.5.2 Product Layout
The layout in which the equipments are placed in the order in which they are used for Notes
producing the product is called the product layout. This layout is also called line layout
as the materials and machineries required are placed in a sequence. Raw materials and
components enters at one end of the process of the layout and the finished products are
obtained from the other end of the layout.
Advantages
• Work in process reduces, as the manufacturing cycle is small.
• Minimises material handling, as the process is automatic.
• Labour cost decreases, as the work is simple.
• Quality control is effective
• Scheduling is easier
• Production control and accounting are simple.
Disadvantages
• When the nature of work changes, the entire layout requires change
• Machines may not be fully utilised
• Manufacturing cost increases, if the volume increases
• Machine breakdown delays work
• Addition of a machine in between is complicated
5.5.3 Fixed Position Layout (Project Layout)

Fixed position layouts are used in situations, in which the product manufactured is
very bulky, difficult to move and often made in one or two quantities. Examples are ship
and aircraft building, complex machine tool and equipment manufacture. The finished
product is located at a fixed position, whereas men, machine, materials and tools move
around the fixed position.
Advantages
• Reduced movement of machineries and equipment
• Minimises cost of moving
• More continuity of the assigned work force, since there is no movement of raw
materials
Disadvantages
• Multi skilled and versatile workers are required
• Movement of people and material to and fro may be expensive
• Equipment utilisation is low, as the equipment may be left at a location anticipating
utilisation in the near future
5.5.4 Group Technology layout / Cellular layout

Cellular layout is used for mid volume, mid variety product portfolios. Cellular layout
seeks to exploit commonality in manufacturing and uses this as the basis for grouping
components and resources. Components are grouped into part families. Similarity
in manufacturing is used to identify part families. Corresponding to each part family,
machines groups are identified and the layout is formed.
Advantages
• Each cell has only a certain number of components to be processed
• Cells are more manageable and independent units of production

• Production planning becomes much simpler

Notes • Material handling reduces
• Traceability improves
• Facilitates introduction of Just-In-Time practices
• Very little in process inventory
• Rush orders can be scheduled without any delay
• Quality improves
• More job satisfaction
Disadvantages
• Cell formation is very difficult
• Improper cell formation will not yield required results
• Identification of part families is complex
• Requires employee education and training
5.6 Line Balancing

The technique employed for design of the product layout is known as line balancing.
This is a technique, wherein the tasks are optimally combined without violating precedence
constraints and a certain number of work stations are designed to complete the tasks.
Cycle time could be considered as the reciprocal of production rate. Cycle time could be
actual or the one desired. If the cycle time is computed on the basis of actual production,
it is called actual cycle time.

Line balancing counterbalances the trade-off between increased production and better
utilisation of resources.
The production rate, cycle time and the number of work stations are inter-related.
Example:
A computer manufacturer needs to design assembly stations in the factory where
the cabinet housing, hard disk, mother-board and other accessories are to be made.
The factory currently works for an 8 hour shift. The tasks, their duration and their
precedence relationships are given below.

31
Notes
Assemble and position the base unit
Install the hard disk
Install the motherboard
Install the speaker
Connect modules to the motherboard and the disk
Install the controller
Visually inspect and close with a coverplate
Precedence relationship among tasks
a) If the cycle time is 80 seconds, what will the daily production of cabinets be?
b) If the desired production rate is 320 cabinets per day, what is the maximum
permissible cycle time?
c) What is the maximum and minimum number of workstations required to maintain
this daily production rate?
d) Design an assembly setup with 5 work stations.
Total available time per day = 8 x 60 x 60 = 28800 seconds
Since the desired production rate is only 320 cabinets, the maximum permissible
cycle time for the assembly stations is given by:
= 90 seconds
Workstations can be designed for a cycle time of upto 90 seconds, without falling short
Notes of the desired daily production. Once the cycle time crosses 90 seconds, the manufacturer
may not be able to produce 320 cabinets every day.

Design of assembly shop with 5 workstations
The workstation times should not exceed the maximum permissible cycle time of 90
seconds. The precedence relationships among the tasks need to be honoured.

1. Define capacity planning
2. What are the measures of capacity?
3. What is capacity utilization?
4. What is decision tree analysis?
5. Enumerate the steps involved in capacity planning process.
5.8 Summary
The unit discussed the significance of facility layout. It, then described the commonly
used types of layouts with their advantages and disadvantages. Thereafter, the unit
discussed concept of line balancing.

1. What is plant layout?
2. What are the objectives of a good plant layout?
3. What are the advantages and disadvantages of product layout?
1. What are the advantages and disadvantages of process layout?

1. What are the various types of layout? Explain in detail.
2. What is meant by Group Technology layout? Enumerate the advantages and
33
disadvantages of this type of layout.
3. Explain, in detail, the fixed position, or project, layout. Notes
5.10 Answers To Check Your Progress

1. Facility layout is the positioning of machineries and workstations of a plant to ensure
flow production. Facility layout begins with the selection of the site and deploying of
machines, equipment and material handling devices and also the location of storage
facilities, to ensure a continuous flow of production.
2. The determinants of a facility layout are: volume of production, variety of products
and flow pattern.
3. Various types of layout are
a) Product layout
b) Process layout
c) Fixed position layout
d) Group technology layout
4. Line balancing is a technique used to design a product layout, wherein the tasks are
optimally combined without violating precedence relationship, to configure optimal
number of workstations to complete the tasks.

Operations Management for Competitive Advantage 11th edition, by Richard B Chase, F

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Production and Operations Management

1.1 Unit Objectives

1.2 Definition of Production

An operations system is defined as a set of different activities that are performed to

Transformation activities can be divided into various functions of operations

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1.3 Service as Part of Operations Management

An automobile manufacture can be 99% approximate to pure product while photocopy

1.4 Differences Between Service and Manufacturing

1.5 Decisions in Operations Management

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1.6 Operations Strategy

1.7 Strategy Formulation Process

1.8 Strategic Options for Operations

1.8.5 Supply Chains

1.9 Check Your Progress

1.11 Exercises and Questions

Long Answer Questions

1.12 Answers To Check Your Progress

1.13 Further Reading

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2.1 Unit Objectives

2.2 Concept of Product Design

2.3 Stages of Product Design

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2.3.2.1 Product Life Cycle and Life Cycle Costs

2.3.2.2 Value Engineering

2.4 Techniques for Product Design

2.4.2 Concurrent Engineering

2.4.3 Quality Function Development (QFD)

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2.5 Check Your Progress

2.7 Exercises and Questions

Long Answer Questions

2.9 Further Reading

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Notes Unit-3: Process Design and SelectioN

3.1 Unit Objectives

3.2 Concept of Process Design

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3.4 Types of Processes

3.4.1 Continuous Flow System

3.4.2 Intermittent Flow System

3.4.2.1 Batch Production

3.4.2.2 Job Production

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3.4.3 Jumbled Production System

3.5 Process Product Mix

3.6 Planning Premises and Process Design

3.6.1 Make to Stock (MTS)

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3.6.3 Assemble to Order (ATO)

3.7 Check Your Progress

3.9 Exercises and Questions

Long Answer Questions

3.9 Answers to Check Your Progress

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3.10 Further Reading

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4.1 Unit Objectives

4.2 Concept of Facility Location

4.3 Factors Affecting Location Analysis