MBA – I Semester – II

PRODUCTION AND OPERATIONS MANAGEMENT

Refer following page of Ruseel & Taylor for some concepts:

Concept Pg No:
Balance scorecard 21
Types of processes - Table 6.1 (IMP) 181
AON( Activity on node) & AOA( Activity on 285
arrow)- concept only

1. Define Operations management. Where OM stands inthe organization

today?
Operations management:

OM is the process in which resources/inputs are converted into the more useful products. OM is
defined as the design, operation and improvement of the system that creates and delivers the
firm‘s primary products/services.

Operations and supply management (OMS) is defined as the design, operation, and improvement
of the system that create and deliver the firm‘s primary product and services.

Operations Management deals with the design and management of products, processes, services
and supply chains. It considers the acquisition, development, and utilization of resources that
firms need to deliver the goods and services their clients want.

The Survey of OM ranges from strategic to tactical and operational levels. Representative
strategic issues include determining the size and location of manufacturing plants, deciding the
structure of service or telecommunications networks, and designing technology supply chains.

Tactical issues include plant layout and structure, project management methods, and equipment
selection and replacement. Operational issues include production scheduling and control,
inventory management, quality control and inspection, traffic and materials handling, and
equipment maintenance policies.

1.1. Importance of operations management:

1.1.1. It provides a systematic way of working at organizational processes.
1.1.2. It presents interesting career opportunities.
1.1.3. The tools of OM help in managing functions of business.
 1.1.4. Improve productivity
1.1.5. It helps organization to meet customer‘s needs.

1.2. Importance of Operations management in organization:

1.2.1. Engineering: Engineers are notoriously great with numbers and focus. That doesn‘t
always translate to being great with operations. Operations analysis is both
 quantitative and intuitive, and engineers without operations training can — and do!
— waste millions of dollars when tasked to oversee operations.
1.2.2. Finance: Corporate finance folks exercise oversight over budgets, so having some
operations knowledge can help this team make good decisions. For instance, when
an operations leader asks for money to de-bottleneck a process, knowing what this
means tells you the intent is to increase the capacity of an existing operation.
1.2.3. Information technology (IT): A big part of IT within some companies is to
automate operations. Knowing the core principles of operations can help these folks
build an operations superhighway instead of paving a cow path. Companies tend to
easily accept the traditional way of doing things without question.
1.2.4. Marketing: When the marketing folks come up with a new product idea or
promotions concept, they need to talk to operations to find out whether it can be
produced profitably. If the answer is no — operations managers are sometimes a
grumpy lot — persuading them to find a solution may be easier if marketing can
speak the language of operations and understand their concerns.

2. As a plant manager of ceramics products, how will you select a

appropriate location of plant? Discuss consideration of various factors
affecting it.

Factors affecting facility location planning of ceramic tiles

 Markets

Power Raw
supply material

labour Transpor-
force faciity tation
location
planning

cheap
Govt.
cost of
policies
land

skillful basic
labour amenities

1. Proximity to customer – The transportation and other overheads are likely to decrease
with no distance between plant and market.When the customers are located near the
plant, product can be easily supplied to them. This can reduce cost of product so plant
will be near the Ahmadabad, Surat, Rajkot, Bhavnagar etc like big markets. Proximity to
market allows companies to meet any sudden spurt in demand, thus providing an
advantage over competitors located at far off places.

2. Proximity to raw material – It will ensure regular supply of the raw material and reduce
transportation cost.Most ceramic industries are in Morbi & Rajasthan because these are
the suppliers of good quality Raw material .Row materials are cheaper because of negligible
transportation cost. Also, it becomes easier to control quality.

3. Good transport facility – The region well connected with Rail, Road, Water and Air
transport system is considered to be more appropriate for the location of the
facilities.Regions near metro city have the advantages of good transportation facilities, as
they have good rail, water, and road transportation networks.
 4. Availability of power supply – The regular supply of the power ensures no stoppage in
work.Uninterrupted power supply is a basic requirement of ceramic tiles. And water is an
essential requirement. So the location should contain sufficient water & continuous
power supply.

5. Basic facilities – Basic facilities ensures quality of work life and attract the good labour.
The area for location of plant should have water supply because in this business water
requirement is more. Roads up to the factory premises are always desirable.
6. Government Policies – Favourable government policies creates favourable atmosphere
for the purpose of the establishment of industries.The governments of states such a
Maharashtra, Gujarat, and Karnataka have been very successful in inducing big business
houses to set up their plants in these states. Local taxation policies and various
promotional efforts will help in increasing the industrial activity in the region.
Pondicherry, Daman and Diu are example of ‗no sales tax region‘.

7. Environmental considerations – Good climate and natural resources is important for the
industries.

8. Easy availability of cheap land - Land is a basic necessity for the construction of new
plant. Regions as in Rajasthan, UP, Bihar etc… may be lucrative for company
because of cheap cost of land.

9. Less construction cost

10. Availability of cheap, skilful and efficient labour - Skillful labor is needed in every
manufacturing firm who can finish work on time and as per the requirements.Here the
case is given for the ceramic industry where plant manager wants to establish a new
factory.

3. ―Operation management is a transformation processǁ. Support this

statement with examples if you agree with it.
Transformation processes are used in all type of business. A transformation processes uses
resources to convert inputs into some desired output. Input may be raw material, a customer, or a
finished product from another system. In general, transformation processes can be categorized as
follows:

 Physical (as in manufacturing):-

EX:- 
System Input Resources Transformation Output
 Automobile Sheet Tools, Fabrication and High
Factory steel, Equipment, assembly of cars quality cars
Engine Workers
parts

 Location (as in
transportation):-EX:- 
System Input Resources Transformation Output
Airline Travelers Airlines, crews, Move to On-time,
scheduling/ticketing destination safe delivery
systems to
destination

 Exchange (as in
retailing):-EX:- 
System Input Resources Transformation Output
Department Shopper Displays, Attract shoppers, Sales to
store stocks of promote satisfied
good, sales products, fill customer
clerks order

 Storage (as in
warehousing):-EX:- 
System Input Resources Transformation Output
Distribution Stock Storage bines Storage and Fast delivery,
center keeping unit redistribution availability of
stock

 Physiological (as in health care):-

EX:- 
System Input Resources Transformation Output
Hospital Patients MDs, nurses, Health care Healthy
medical individuals
supplies,
equipment

 Informational (as in
telecommunication):-EX:- 
System Input Resources Transformation Output
College or High school, Teacher, Imparting Education
 University graduates books, knowledge and individuals
classrooms skills

Transformation process is any activities or group of activities that takes one or more inputs.
Transforms and add values to them and provide output for transformers.

Transformation process includes:

1). Input 2). Processing 3). Output

Input Involves:

1. Planning
2. Manpower
3. Materials
4. Machinery
5. Money
6. Technology

Process Includes:

1. Product mix
2. Plant
3. Labor cost
4. Production cost
5. Material handling equipment
6. Material cost
Output includes:
Output is the final product or service rendered to the customers
Factors affecting outputs are:

 Price 
 Quality 
 Delivering 
 Profitability 

Feedback Analysis:
Controls:

 Cost control 

 Quality control 

Project control 
 Inventory control 

Thus managing all the operations involved is known as Operation management.Thus I agree
Operation Management is a transformation process.

EXAMPLE:
A manpower firm includesvarious operations like:Cutting, Forming, Joining,
Mixing etc. Managing all these operations properly is operations management.

4. Explain the competitive dimensions in operations management.

Customers are always having choice dilemma, how do they decide which product or service to
buy? Different customers are attracted by different attributes. Some customers are interested
primarily in the cost of a product or service and, correspondingly, some companies attempt to
position themselves to offer the lowest prices. Competitive dimensions are differentiating factors
which can help companies to decide their positioning

COMPETITIVE DIMENSIONS

1)Cost or Price
2)Quality
3)Delivery speed
4)Delivery Reliability
5) Coping with changes in demand
6) Flexibility and new-product Introduction speed
 1. Cost or Price
―Make the product or deliver the service cheapǁ

Within every industry, there is usually a segment of the market that buys solely on the basis of
low cost. To successfully compete in this niche, a firm must be the low-cost producer, but even
this does not always guarantee profitability and success.

For example, the Tata Nano car, which is a low cost small family car, and has the potential to
become a preferred choice of middle income group buyers. It is mainly due to its low price tag,
which is close to Rs.1 lakh (about USD 2500).Price, however, is not the only basis on which a
firm can compete. Other companies, such as BMW, seek to attract those who want higher
quality-in term of performance, appearance, or features-than that available in competing products
and services, even though accompanied by a higher price.
2. Quality
―Make a Great Product or Deliver a Great serviceǁ

There are two characteristics of a product or service that define quality design quality and
process quality. Design quality relates to the set of future the product or service contains. This
relates directly to the design of the product or service contain. This relates directly to the design
of the product or service.
3. Delivery speed:―Make the product or deliver the service Quicklyǁ

In some markets, a firm‘s ability to deliver more quickly than its competitors is critical. A
company that can offer an on-site repair service in only 1 or 2hours has a significant advantage
over a competing firm that guarantees service only within 24 hours.
4. Delivery Reliability: ―Deliver it when promisedǁ
This dimension relates to the firm‗s ability to supply the product or service on or before a
promised delivery due date. For an automobile manufacturer, it is very important that its supplier
of tires provide the needed quantity and types for each day‗s car production.
5. Coping with changes in demand:―change its volumeǁ

In many markets, a company‗s ability to respond to change in demand is important to its ability
to compete. It is well known that a company with increasing demand can do little wrong. When
demand is strong and increasing, costs are continuously reduced due to economies of scale, and
investments in new technologies can be easily justified.
6. Flexibility and new-product Introduction speed: ―change itǁ

Flexibility, from a strategic perspective, refers to the ability of a company to offer a wide variety
of products to its customers. An important element of this ability to offer different products is the
time required for a company to develop a new product and to convert its process to offer the new
product.
 5. Explain Factors Affecting Retail Service Layout.

Service layouts are designed in much the same way as process layout but the objectives may
different for ex. Instead of minimizing the flow of materials through the system, service may
seek to minimize the flow of pair, work or to maximize customer exposure to as many goods as
possible.The objective of Retail Service layout is to maximize net profit per square feet of store
space.

All Apple stores features a genius bar, where customers can receive technical advice or set up
service and repairs for their products.

The term ambient conditions refers to background characteristics such as the noise level, music,
lightening, temperature, and scent that can affect employee performance and morale as well as
customers‘ perceptions of the service, how long they stay, and how much money they spend.

Two aspects of the spatial layout and functionality are especially important: planning the
circulation path of the customers and grouping the merchandise. The goal of circulation planning
is to provide a path for the customers that exposes them to as much of the merchandise as
possible while placing any needed services along this path in the sequence they will be needed.

There are various factors which are affecting retail service layout.

1. Allocation of space
2. Location of Special displays
3. Efficiency of checkout procedures

1) Allocation of Space:-

Space allocation is determined by evaluating the sales per square feet of a product or product
line versus the willingness of a vendor to pay for product placement.

2) Location of Special displays:-

Industry specific recommendations are available for layout and display decisions. Computerized
versions, such as SLIM (Store Labor and Inventory management) and Cosmos (computerized,
optimization and simulation models for operating supermarket), consider shelf space, demand
rates, profitability and stock out probabilities in layout design.

3) The efficiency of checkout Procedure:-

Service may have both a back office (Invisible to the customer) and front office Component.
Back offices can be organized for efficiency and functionality. While front office layouts must
be aesthetically pleasing as well as functional layout.For that reason, service- layouts are often
considered part of the service design process.
 6. Explain the manufacturing process in detail.

Manufacturing
Types

Continous Intermittent
Production Production

Mass Production Process production Assembly Project Job Shop Batch

Production Production Production Production

A. Continuous production

Continuous production has been defined as a method of organization such that the task is
worked on continuously or alternatively as a system where by theprocessing of material
is continuous and progressive. At the work on a task as a particular stage is complete , it
must be passed to the next step for processing without waiting for the remaining taste in
the batch, when it arrive to next stage immediately it go to the next stage.
For ex- manufacturing of chemicals are included under the continuous production.
 

Types of continuous production
 Mass production: 
It refers to the manufacture of standardized parts of components on a
large scale it is a basic feature of mass production the greater the volume of mass
production the more would the reduction in direct labor cost mass production
system is carried out where production is done without interruption.
For ex- automobiles plant &electronic industry.

 Process production: 
 In this process inter linked and production is carried on continuously
through a uniform and standardized sequence of operations. This type of
production is used in bulk processing of crude oil into petroleum, kerosene, diesel
etc.
For ex- oil manufacturing, crude oil.

 Assembly production: 
In assembly production two or more components are combined to
manufacture a finish product assembly line production particularly useful when a
limited variety similar product is to be produced on a mass scale or in fairly large
batch on a continuous basis.
For ex- automobile industry

B. Intermittent production

Intermittent production situations are those where the facilities must be flexible enough to
handle a variety of products and sizes or here the basic nature of the activity impose change
of important characteristics of input, these is not a single procedure and the productions
usually is not uniform and the basic product design changes from time to time.
 
Type of intermittent production

 Project production: 
It deals with one of kind products that are tailor to the unique
requirements of each customer. A general construction company with is many
kinds and sizes of projects is an example of project technology. Project can be a
small, large, medium depending upon the numberof tasks involved.

 Job shop production: 

Job one off or make complete are description given to the organization,
where by the complete task is handled by the single worker or workers.

 Batch production: 
As companies grow and volume increase it is not unusually to see the
conversion process organized so that batch method can be used. Such method
requires that the work task is divided into parts or operations, and that each
operation is completed throughout the whole batch before the next operation is
undertaken.
For ex- productions of electronics instruments
It can also classify based upon stages and the patterns of order

1. Single stage process:This type of production process has only one stage to Finish
the production
2. Multiple stage process:This type of production process contains more than two
processes to finish the production.
Further production process can be divided into two categories
1. Make to order
2. Make to stock

Make to order:For the entire make to order production process manufacture has
to depend upon order of customer. So first, customer gives an order after an order
has been taken manufacturing of the product will begin. E.g. dominos

Make to stock:

According to this principle, manufacturer will prepare same amount of product and
stock it. As and when customer arrives, they can deliver Stocked products.

7. Difference between intermittent production and continuous production?

Ans-

Points Intermittent Production Continuous Production

Types of plant layout Process layout is most Product layout design
suitable. according to a process
separate line for each
product considered.
Type of machine As it necessitates frequent As production flow
changes in the machine permanently in the form of
setup required by the product line automatic
specification of each order, special purpose machines
also they have good used .in flow production
flexibility. specialized machines are
used.
Types of labor It required highly skilled Unskilled or semi
labor, because repair skilledlabor is require
&maintenance of machines because the repair &
are to be done by these maintenance is handled by
labors. staff.
Number of product and Wide ranges of products Few standard products
 product design. aremanufactured in small aremanufactured in large
quantities. The product quantities. Usually the
design changes from lot to product line is designed to
lot as per product one or two product of
specification. standard specification.
Investment on inventories Here the operating cycle The bulk purchase material
takes more time and it is are done at periodic
necessary to have standard intervals due to continuous
materials for long period process , less in processing
hence inventory cost per inventory exists hence
product is considerably material cost per product is
large. less.
Material handling cost Material handling product is Due to mechanized material
costlier because of long handling, material handling
distance handling and back cost per product is less.
tracking.
Plant maintenance and It is desirable to have a It is essential to have good
service maintenance department to plant maintenance
avoid losses due to break department to avoid
down of machinery. stoppage of production due
to break down of machines.
Balancing or production Due to different products The chance of imbalance to
capacity and different types of plant capacity is very much
machines with different less.
capacity blocks possibility
of imbalance in plant
capacity occurs.

8. Define the various types of plant layout in brief with example?


A layout essentially refers to the arranging and grouping of machines which are meant to

 produce goods.
 
 The following are the types of plant layout
1) Product layout
2) Process layout
3) Fixed position layout
4) Cellular layout

A. PRODUCT LAYOUT :-
 Product layout is suitable when products having standard features production
process involves repetitive task to be perform, specialized machines and equipments are
arranged one after other in the order of sequence this production of and call assembly line .

Figure1

 Advantages :- 

1 Less supervision 

2 High output so low cost of item per unit
3 High efficiency oflabor and equipment 

4 No need of routing of scheduling one the line is
operation 5 Easier material handling 

 Disadvantages :- 

1 Repetitive take lease to frustration 

2 Break down of a machine to half in the production 

3 Maintenance of an assembly line required hightechnical skills 

4 scheduling of assembly line required high skill 

5 inflexibility in design because change in line use very expensive 
Example:
A car is arranged in on the conveyers one after another at equal distances in figure 1, the
conveyer has brought car in front of the work station from 1 to 3 like head light, tail light,
steering wheel and then comes as a finish product.

 U-shape assembly layout :- 

U-shaped assembly lines are useful particularly when there is a single worker in the line
taking care of all the work stations. The U-shape of the line reduces the walking distance
of the worker almost half.

Figure 2

B. Process layout :-

General purpose machine are arranged in no particulars sequence as the processing

requirement are different type of product.
 Figure 3

Required machines:

1 Drilling machine
2 Grinding machine
3 Mixture machine
4 Milling machine
5Mixer

C. Fixed position layout :-

 Fixed position layout involves the movement of men and machines to the product
 which remains stationary. 

 In this type of layout the material or major component remains in a fixed location
and tools, machinery and men as well as other pieces of material are brought to
 this location. 
 It is a layout where products is very bulk heavy or large products 
Example 
1] Construction of building
2] Construction of clan
3] Drilling of a refinery oil
 4] Power plant
5] Construction of aircraft
6] Ship broker
7] Aircraft

D. CELLULAR LAYOUT OR GROUP TECHNIQUES

 Cellular layout uses advantages of both product layout and process layout.Cellular
manufacturing machines are grouped into cells and the cells function somewhat
 like a product layout within a larger shop or process layout. 
 Each cell in the cellular manufacturing layout is formed to produce a single parts
family a few parts all with common characteristics which usually means that they
 require the same machines and have similar machine settings. 
 Cellular layouts allocate dissimilar machines into cell to work on products that
 have similar shapes and processing requirements. 

 Manufacturing cell layouts are now widely used in metal fabricating, computer
 chip manufacture and assembly work. 

 The overall objective is to gain the benefits to product layout in job shop kinds of
production. 

Advantages:

1) Better Human Relations:Cells consist of a few workers who form a small work team a
team turns out complete units of works.
2) Improved Operator Expertise:Workers see only a limited numbers of different parts in a
finite production cycle, so repetition means quick learning.

3) Less in Process Inventory and Material Handling:A cell combines several production
stages so fewer parts travel through the shop.

4) Faster Production Setup:Fewer jobs mean reduced tooling and hence faster tooling
changes.

5) Less in Process Inventory and Material Handling:A cell combines several production
stages so fewer parts travel through the shop.

6) Faster Production Setup:Fewer jobs mean reduced tooling and hence faster tooling
changes.
Group Technology Useful in Cellular Layout

 ―Group Technology is the realization that many problems are similar and that by


grouping similar problem, a single solution can be found to a set of problems, thus
saving time and effortsǁ 

 The Principle of group technology is to divide the manufacturing facility into
small groups or cell of machines. 

Figure : Cellular Layout

 
Different between process layout and cellular layout

Factors Process Layout Cellular Layout

Products Diversified products using common Diversified products varying volumes.
operations varying volumes varying
rate of output.
Process Job or Small batch Small to Medium batch
Cost of Layout Often high Fixed Path
Arrangement of Grouped by specialty by function Similar parts are grouped in part
Facilities family one machines cell is farmed
which contains all facilities needed by
corresponding part family
Inventory Low Turnover of raw material and High turnover of raw material and
work in process high raw material lower work in process.
inventory
Material Flow variable handling often Flow variable can be reasonably high.
Handling duplicated.
Utilization of General Purpose High
facilities
Operating Skilled Special Purpose
facilities
Product Cost Relatively low fixed cost, high Reasonable level of fixed costs,
relatively.
Factors Process Layout Cellular Layout
Products Diversified products using common Diversified products varying volumes.
operations varying volumes varying
rate of output.
Process Job or Small batch Small to Medium batch
Cost of Layout Often high Fixed Path
Arrangement of Grouped by specialty by function Similar parts are grouped in part
Facilities family one machines cell is farmed
which contains all facilities needed by
corresponding part family
Inventory Low Turnover of raw material and High turnover of raw material and
work in process high raw material lower work in process.
inventory
Material Flow variable handling often Flow variable can be reasonably high.
Handling duplicated.
Utilization of General Purpose High
facilities
Operating Skilled Special Purpose
facilities
Product Cost Relatively low fixed cost, high Reasonable level of fixed costs,
relatively.

9. Different between Make- to- order and Make- to- Stock

MAKE TO
ORDER MAKE TO STOCK

 Make-to-order is used for manufacturing the  Make-to-stockthecompanywill

material based on customer manufacture the product & keep it in
requirement/order. stock.

 Make to order goods will not be kept in  Make to stock goods will be kept in
stock for longer duration. stock for longer duration.

 In the make to order scenario the product  In the make to stock scenario the
will be produced based on the customer product will produced irrespective of
requirement/order. the customer requirement.

 Only activated in response to an actual order.  Process activated to meet expected or

forecast demand.
 Ex. Restaurants
 Ex. Hyundai Cars (Automobile)

ASSEMBLE-TO-ORDER:

It is a business production strategy where products are produced according to order

placed by customers, quickly.The assemble-to-order strategy requires that the basic parts for the
product are already manufactured but not yet assembled. Once an order is received, the parts are
assembled quickly and sent to the customer. Advantages: fewer inventories, faster service.
Disadvantage: some WIP inventory. Key performance measures: speed of service, inventory
levels, quality of product and service.
E.g. assembled desktop computers
 10.What is meant by aggregate production planning? Why it is required?
Discuss the strategies in aggregate planning to manage demand &
supply. Distinguish between pure and mixed strategies. What are the
four major costs associated with these strategies?


 Purpose:

―The main purpose of the aggregate plan is to specify the optimal combination of

 production rate, work force level and inventory on hand.ǁ
 
 Definition:

 ―The aggregate production plan it is concerned with setting base production with high to
intermediate proceeds in to 18 month which use demand forecast each time & periods of

time and production rate to meet the demand.ǁ

The form of the aggregate plan varies from company to company in sum firms,it is a
formalized report containing planning objectives and the planning premises on which it
based .if other companies particularly smaller ones ,the owner may make simple

calculations of workforce needs that reflect a general staffing strategy.


 Requirement of Aggregate Production Planning:
  
 Achieving financial goals by reducing overall variable cost.
 
 Maximum utilization of the available production facility.

Provide customer a benefit by matching demand and reducing waiting time for

 them.
 
 Reduce investment in inventory stock.
 
Able to meet scheduling goals there by creating a happy and satisfied work force

 
Important factor:

  Production rate 
  Workforce 
  Inventory on time 
  Forecast demand 

  Market condition  
Current capacity 
By considering all six factor company consider upon to their production plan which differ from
company to company approach develop aggregate plant is by simulating various master
production schedule.

market
demand

market economic
competitor condition

Production
plan

current requirment
capacity labour
force
inventory
labour

 
 Production planning strategies :
There are essentially three production planning strategies this strategies involve trade-offs

among the work for size,work hours, inventory and backlogs.
A. Chase strategy :

Match the production rate to the older rate by hiring and layingoff employees as order
rate varies. The success of this strategy depends on having a pool of easily trained applicants to
draw on as order volumes increases.There are obvious motivational impacts. When order
backlogs are alone employees may feel compelled to slow down or fear of being laidoff as soon
as existing orders are completed.
B. Stable work force or variable work hours :

Vary the output by varying the number of hours worked through flexible work schedules
or hour time .by varying the number of work hours you can match production quantity to
existing order. This strategy provides work force continuity and avoids many of the emotional
and tangible costs of hiring and firing, associated with the chase Strategy.
C. Level strategy :

Maintain a stable work force working at a constant output rates. Shortages and surpluses
are absorbed by fluctuating inventory level, order backlogs, and lost sales .Employees benefit
from stable work hours at the cost of potentially decrease customer service levels and increase
inventory cost. Another concern is the possibility of inventory product becoming obsolete.

Pure strategy: when just one of these variables is used to absorb demand fluctuations, it is
termed a pure strategy.
Mixed strategy: two or more used in combination constitutes a mixed strategy, as might
suspect mixed strategy are more widely applied in industry.
Sub-contracting:in addition to these strategies, manager also may choose to sub contract
some portion of production. This strategy is similar to the chase strategy, but hiring and
laying of are translated in subcontracting and not subcontracting some level of subcontracting
can be desirable to accommodate demand fluctuation.
 
Relevant cost :

Four costs are relevant to the aggregate production plan.These relate to the production
cost itself as well as the cost to hold inventory and to have unfilled orders. More


Specifically, these are

1) Basic production cost: these are the fixed and variable cost incurred in producing a
given production type in given time period. Included is direct and indirect labor cost and
regular as well as overtime compensation.
2) Costs associated with change in the production rate:typical costs in this category
are those involved in hiring, training, and laying off personal. Hiring temporary help is a
way of avoiding these costs.
3) Inventory holding cost:a major component is the cost of capital tied up in
inventory. Other components are storing, insurance, taxes, spoilage, and obsolescence.
4)backordering costs; usually these are very hard to measure and include costs of
expediting , loss of customer goodwill, and loss of sales revenues resulting from
back ordering.

11. Briefly discuss Safety Management.

Introduction:-
Safety management is an integral part of an organization‘s responsibilities, as it displays the company‘s
commitment to the welfare of its employees. The approach an organization takes to
implement safety management strategies vary depending on the industry and types of work being
performed.

Meaning:-

―It is a function that enhances company performance by predicting operational, procedural, or

environmental risk and threats before they occur.ǁ

Elements of an effective safety management system:-

1. Safety plan:-

A safety plan is a strategic action plan that forms part of the business plan. It analyses the
current and prospective risk for a company and charts how the risks will be eradicated and
controlled over a calendar period. This plan will ensure that there is a governance structure
within your company that ensures every worker clearly understands their safety obligations and
is accountable to carry out those obligations.

2. Policies, procedures and processes:-

Policies, procedures and processes include all safety paper infrastructures within your
company. This paperwork will describe all safety behavior, expectations, record-keeping,
incident reporting, and incident notification documentation.

3. Training and induction:-

Depending on the nature of your workplace, everyone who enters your workplace should
receive training on: 1)- the rules of your company; 2)- the rules of the site; 3) the rules of the
location they are visiting.

4. Monitoring:-

Your obligations to monitor your workplace depend on circumstances and need. Always
consider the level of risk. The higher the risk, the more frequent and detailed the monitoring
needs to be. Other times when monitoring will be necessary include:

1) To ensure that all risk has been covered by a new risk assessment that has been carried
out due to a change in process, e.g. the installation of new workstations; and

2) When an investigation takes place following an incident.

5. Supervision:-
 The only way to ensure your workers are carrying out their safety obligations is to have
adequate supervision. The level of supervision required in your workplace will increase if the
level of safety control put in place to reduce a risk is low, i.e. the less effective the control
measure used, the higher the level of supervision necessary.

6. Reporting:-

The governance structure of your company needs safety reporting at all levels, not just at the
board level. Your workers need to know what safety looks like – what‘s going right and what‘s
going wrong. This can only occur when they receive safety feedback from you, e.g. how
many hazards were identified, the risk levels associated with those hazards and what control
measures were implemented.

Safety Equipment:

Organizations should provide below mentioned safety equipmentto maintain and promote
workers‘ health and their working capacity.

  Rainwear 
  Head protection-hard hats 
  Hearing protection-earplugs and muffs 
  Face protection - visors 
  Safety glasses – goggles 
  Portable and semi-portable extinguishers 
  Fire hose, reels and nozzles 
  Fire fighting chemicals 
  First aid kits 
  Safety signs and tape 
 Gloves 




12. Define inventory and inventory management. What different cost
components to be considered while controlling the inventory?

Definition of inventory:
―Inventory is the stock of any item or resource in an organization. An inventory system is the set
of policies and control that monitor levels of inventory and determine what levels should
be maintained, when stock should be replenished, and how large orders should be.ǁ
Definition of inventory management:
―The investment in inventory is very high in most of the undertaking engaged manufacturing,
whole- sale and retail trade. The amount of investment of sometime more in inventory then in
other assets about of 90% part of working capital invested in inventory. It is necessary for every
management give a proper attention to inventory management. A proper planning of purchasing,
handling, storing and accounting should firm a part of inventory management. An efficient
system of inventory management will determined (a) what to purchase (b) how much to purchase
(c) from where to purchase where to store.
Inventory costs:
In making any decision that affects inventory size, the following costs must be considered.

1. Holding or carrying costs.

This broad category includes the costs for storage facilities, handing, insurance, pilferage,
breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital. Obviously, high
holding costs tend to favor low inventory levels and frequently replenishment.
2. Setup or production change cost:

To make each different product involves obtaining the necessary material arranging specific
equipment setup, filling out the required papers, appropriately charging time and materials,
moving out the previous stock of material.
3. Ordering cost :
This cost refers to the managerial and clerical cost to prepare the purchase and production order
.Ordering cost includes to all the details, such as counting items and calculating order quantities.
The cost associates the maintaining the system need to track order are also including in ordering
costs.
4. Shortage costs:

When the stock of items is depleted, and order for that item must either wait until the stock is
replenished or be canceled. There is a track of between carrying stock to satisfy demand and the
cost resulting from stock out. This balance is some time difficult to obtain, because it may not be
possible to estimate lost profits, the effect of lost customers, lateness penalties. Frequently, the
assumed shortage cost is little more than a guess, although it is usually possible to specify a
range of such costs.
Establishing the correct quantity to order from vendor or size of lost submitted to the
firm‘s productive facilities involves a search for the minimum total cost resulting from the
combined effect of four individual cost: holding cost, setup cost, ordering cost, and shortage
costs. Of course, the timing of these orders is critical factor that may impact inventory cost.
 13. Difference between P & Q Model
Feature Q-Model P-Model
Fixed order quantity Model Fixed time period Model
Order quantity Q-constant(the same amount order q-variable(varies each time order
each time) is placed)
When to place order R-when inventory position drops T-when the review period arrives
to the reorder level
Recordkeeping Each time of withdrawal or Counted only at review period
addition is made
Size of inventory Less than fixed- time period model Large than fixed order quantity
model
Time to maintain Higher due to perpetual
recordkeeping

14. Explain ISO Standards.

Definition:

International Organization for Standardization adopted ISO standards in 1987 for internal quality
assurance and management. ISO is recognized by more than 160 countries. ISO 9000 is an
international reference for quality management. ISO 14000 is concerned with environmental
management. Goal of standards is that defects can be prevented through planning and application
of best practices at every stage of business. Companies document and implement quality
management and verification takes place by audit conducted by independent third party.
Certification is not required but essential for competing in the global market.

Certification:

1. First Party : a firm audits itself against ISO 9000 standards

2. Second Party : a customer audits its supplier
3. Third Party: a qualified national or international standards or certifying agency serves as
an auditor. The best certification is through a third party.

Various ISO standards:

1. ISO 9000:Basic ISO 9000 standards were revised in 2000. Standards are based on 8
quality management principles:
  Customer focus 
  Leadership 

  Involvement of people  
Process approach 
  System approach to mgmt. 
  Continual improvement 
  Factual approach to decision making 
 Mutually beneficial supplier relationships 


2. ISO 14000:Addresses the need to be environmentally responsible. Standards defines
three-pronged approach:
  350 international standards for quality of air, water, and soil 
  Strategic approach implemented using monitoring tools 

 Include environmental aspects in product design and development of

environment-friendly products and services 


3. QS-9000: Quality mgmt. system developed by Daimler-Chrysler, Ford and GM
for suppliers of production parts, materials and services to the automotive industry.

4. ISO/TS 16949: Developed by the International Automotive Task Force, aligns

existing American, German, French, and Italian automotive quality standards
within global automotive industry.

5. ISO 14001:Environmental standards applied by automobile suppliers as requirement

from Ford and GM.

6. TL 9000: Telecommunications quality system requirements for design,

development, production, delivery, etc in telecommunication industry.

15. What do you mean by JIT? Explain the basic element of JIT. Briefly
explain the seven elements to achieve waste elimination in JIT.

During the 1970s and 1980s, Japan became an international economic power. Its
manufacturing companies, especially in the automotive and electronics industries, become the
leaders in world markets and they set the standards for Product quality and cost against which
firms of other countries were compared. This success attributes to the Japanese development and
use of Just in Time production systems.

JIT is defined as ―a philosophy of manufacturing based on planned elimination of all

waste and continuous improvement of productivity. It encompasses the successful execution of
all manufacturing activities required to produce a final product, from design engineering to
delivery and including all stages of conversion from raw materials onward. The primary
elements of JIT are to have only the required inventory when needed, to improve quality zero
defects to reduce lead times by reducing setup times queue lengths and lot sizes to incrementally
revise the operations themselves and to accomplish these things at minimum cost.

Basic elements of JIT

1. Eliminating waste
2. Enforced problem solving
3. Continuous improvement
4. Involvement of people
5. TQM
6. Parallel processing

Eliminating waste
Eliminating Waste of all kinds is the deep-seated technology behind JIT Waste is any
activity or action that adversely affects the value equation for the customer. Waste is a negative
to be avoided or eliminated. Rather then increasing or enhancing value, waste reduces value.
For example: if a company wants to complete on quality, flexibility and performance, than
anything that reduces quality, decreases flexibility or adversely affects performance is waste.

Enforced Problem solving

JIT is really a system of enforced problem solving. There are few safety factors in JIT.
Every material is expected to meet quality standards, every part is expected to arrive exactly at
the time promised and precisely at the place it is supposed to be, every worker is expected to
work productively and every machine is expected function as intended without Break-downs.
Behind JIT is the continuous drive to improve production process and method.

Continuous improvement
Japanese manufacturers have long practiced what is called as kaizen, the goal of
continuous improvement in every phase of manufacturing. Managers may encourage workers to
reduce in-process inventories a step further to see if any production problem occur, thus
identifying a target for the workers to eliminate.

People involvement and employee empowerment

Success or failure of any business organization is because of the people belonging to that
the organization. Likewise, success or failure of JIT depends on people who work for it. Because
JIT is a system of enforced problem solving, it is essential to have a dedicate work force
committed to working together to solve production problems.
Total quality management
For JIT manufacturing to be implemented, it requires a total quality management system
in place. Successful JICT manufacturing goes hand in hand with an organization wide TQM
culture. Like in JIT, Everyone must be involved in total quality management.

Parallel Processing
Parallel processing or synchronous operations wherever possible is an important part of
JIT operations which can be performed in parallel and if performed in series, it takes more
manufacturing lead time. This concept is similar to that of simultaneous engineering or
concurrent engineering.

The seven elements to achieve waste elimination in JIT

(1)Waste of over production

This waste occurs when the firm produces more goods than the market demands ―Make
only what is needed now to eliminate the waste over the productionǁ is Potential shortcut
towards this end.

(2)Waste of waiting time

This Waste occurs when flows of materials and information become stalled. Co-ordinate
flows between operations and balance load imbalances by flexible workers and equipment to
eliminate waste of waiting time.

(3)Waste of transportation
This waste involves excessive handling or movement of goods as a result of such factors
as poor lay-out, lack of co-ordination of processes, poor house keeping or inadequate methods of
transportation

(4)Processing waste
Excessive or unnecessary operations or actions also produce waste. Rework of correcting
processing problems outside the normal process flows falls into this category. Eliminate all
irrelevant production steps to eliminate processing waste.

(5)Inventory Waste
This waste occurs when a process builds more than the firm needs to protect the systems
against problems such as excessively high scrap, shortage in vendors delivering and late arrival
of material.

(6)Waste of Motion and effort

 Some waste results from unnecessary human activity. Efficiency requires reducing any
unnecessary motion or efforts in the processing steps. Improving Productivity and quality by
eliminating unnecessary human motions, make necessary motions more efficient, mechanize,
and then automate to eliminate waste of motion or effort.

(7)Waste from product defect

Creating defective products, consumer resources and correcting the defects consume
some more resources. It also increases lead time by adding to processing steps eliminate defects
and inspection. Make defects free product to eliminate waste due to defective products.

16. What do you mean by six-sigma? Explain the various analytical tools
associate with six-sigma.

Definition: - ―It is a highly discipline process that helps to focus on developing and delivering
near perfect products and services."

Meaning of sigma:-It is a statistical term used for checking the deviation from the perfection.
Sigma can help to identify how many defects are there inproducts
Six sigma:-
Concepts: -Six sigma refers to the philosophies and methods companies such as generalelectric
and Motorola used to eliminate defects in their products as well as processes. A defect is simply
any component that does not fall within the customers‘ specification limit six sigma program
seek to reduce the variances in the processes that lead to defects. It is based upon ‗zero defect
policy‘ -a process that produced not more than 3.4 defects per million opportunities.

Process of six sigma:-

Six sigma methodologies are called DMAIC which means that (Define Measure Analyze,
Improve Control).It is developed by General Electric as a means of focusing effort on quality
using a methodological approach. Overall focus of the methodology is to understand and achieve
what the customer wants. A 6-sigma program seeks to reduce the variation in the processes that
lead to these defects. This methodologies is based upon principles of continues improvement also
called Kaizen means (Improvement in an every stage in terms of machinery, material, labor,
utilization and production method).
 Customers and their
1. Define (D) priorities

2
. Measure (M) Process and its performance

3. Analyze (A) Causes of defects

4
. Improve (I) Remove causes of defects

5
. Control (C)
Maintain quality

Analytical tools for six sigma:-

The analytical tools of six sigma have been used for many years in traditional elective
contribution of its components. They are based on the common empirical finding that a large
percentage of causes listed.

 Causes and effect diagrams:- 

They are also called fishbone diagrams. They show hypothecated relationships between
potential causes and the problem under study once the c & e diagrams is constructed the analysis
would proceed to find out which quality improvement programs what makes their application to
sigma unique is the interpretation of those in a corporate wide management system.
 Check sheets:- 
These are basic forms that help standardize data collection. They are used to create
hitrograms such as shown on the pareto chart.

 Flow charts :- 
These are many types of flow charts. The one sown in deceits the process steps as part of a
SIPOC(supplier,input,process,output,customers) analysis SIPOC in essence is toinput- output
model used in the define stage of a project.

 Raw chart :-
 They depict treads in data overtime and thereby help to understand the magnitude of
a problem of the define stage typically they plot the median of a process.

 Control chart:- 
These are time sequenced charts showing plotted value of a statistic values are in
statistical control.

 Opportunity flow diagram:- 

This is used to separate value – added from non-value added from non-value
added steps in a process.

 Pareto chart :- 
This chart helps to break down of problem into the relative contribution. they are based on
common empirical findings that a large percentage of problems are due to small percentage of
causes.

17. Material handling principles and equipment.

Material Handling refers to the movements of materials and handling there in store. Handling of
materials is an integral part of the production process. Handling can be manual or mechanical.
The movement can be horizontal, vertical or the combination of these two.

Usually a large part of indirect labour is engaged in material handling. Also, the average material
handling cost in nearly 25-30% of the total production cost. It has become clear that total or net
cost of the production process can be lowered by making a saving in material handling cost.

Following are the most important functions of material handling:

(i) Transportation of materials from stores to shops.

(ii) Proper positioning of purchased material for the purpose of storage.

(iii) Transportation during process from one machine to other.

(iv) Unloading the imported materials from trucks or trolley.

(v) To make the economical use of floor space.

(vi) To maintain suitable flexibility of arrangements and layouts.

Material handling puts emphasis on the need of the installing efficient and economical methods
for material handling. Material handling equipment is not considered production machinery. A
material handling system should be able to move and store the material effectively with
minimum effort, maximum safety and in the shortest time.
Following are some of the important principles of economical handling:
(i) Using the principles of containerization, unitload , materials to be moved should be
aggregated into a larger unit size and the unit size should also be same for all the materials. The
materials and typically carried on a pallet for convenience in handling.

(ii) Transport the full unit load whenever possible instead of practical loads. Load the material
handling equipment to its maximum safe limit loading.

(iii) Minimize the distance travelled by adopting shorter distances possible.

(iv) Follow the straight line flow rule i.e. the material handling path should be a straight line this
rule is also consistent with principle of shortest distance.

(v) Utilize the gravity principle for assisting the movement of materials wherever it is possible
with due consideration to safety and risk of product damage.

(vi) Minimize the non-move of terminal times. The total time required for the movement of
material is sum of the actual move time and time taken in loading, unloading and other allied
activities which do not involve the actual transport of materials.

(vii) Follow the mechanization principle. Employ mechanical aids in place of manual labour in
order to speed up material movement, increase the efficiency and economy of the system where
possible.

(viii) The handling equipment‘s should not interfere with the production lines.

(ix) Run conveyors overhead and stack load on top of each other or in racks as high as safety
permits.

(x) Provide right equipment at right time.

The usual production cycle consist more in moving the materials than converting them into final
product. Hence, sufficient attention must be given in fitting the internal transport system in the
manufacturing plant so as to constitute a single unit. If it is insufficient it may cause delays and
decrease efficiency of the production systems, which results in the increased cost of production.

Hence this problem should be given dire consideration and material handling equipment should
be utilized unless it is quite sure that will be cheaper than manual means of handling.

The various requisites of material handling equipment‘s are as follows:

(i) It must be able to perform the basic function of material handling like storage and
transportation.

(ii) It must facilitate production planning, inspection and process control activities.
(iii) It should be able to reduce the work cycle time i.e. minimizing the unproductive material
handling time.

(iv) It should improve the capacity utilization of plant.

(v) It should minimize the work in process or the total inventory requirements.

(vi) It should be able to reduce the workers mutual and physical fatigue. This factor will
ultimately improve satisfaction and safety level of workers.

(1) Material handling equipment

- There are many different kinds of material handling equipment. These equipment can be
classified into the following categories:
- Conveyors such as belt, trolley, and feeders (screw, vibrating and pneumatic),
- Monorails and cranes (bridge, gantry, tower, and stacker)
- Industrial trucks and forklifts, both hand-lift and powered,
- AGVs such as carrier, pallet trucks and fork trucks
- Automated storage and retrieval systems
- The choice to such equipment depends on a number of factors such as the amount of
materials to move, the type of materials, the cost and etc. As shown in Figure 2, conveyor
and fork truck are two types of material handling equipment. The former provides maximum
capacity but no flexibility. On the other hand, the later provide limited capability but very
good flexibility.

Conveyor Monorail Crane AGV Fork truck

Continuous production Single parts production

High volume production Discrete production

Limited batches Low volume production

Fig. 2: The spectrum of material handling equipment

(2) The analysis or design of a material handling system begins with capacity planning, by which
we can determine what kind of material handling equipment will be used.

(1) The selection of material handling equipment starts with an analysis of the materials to be
moved. The analysis includes
18. What do you mean by Quality & Quality management & its
Dimensions for products and service?
Quality is ;

_ conformance to specification.

_ conformance to requirement.

_what the customer think it is.

_ measure of the conformance of the product/service to the customer‘s needs.

_combination of aesthetics, features& design.

_ value for money.

_ The ability of a product to meet customer‘s needs.

_ Meeting or exceeding customer requirements now & in the future.

EIGHT DIMENSIONS OF PRODUCT QUALITY

1. Performance;-performance refers to a products primary operating characteristics. It

involves measurable attributes.
2. Features:- features are additional characteristics that enhance the appeal of the product pr
service to the user.
3. Reliability:- Reliability is the likelihood that a product will not fail within a specific time
period.
4. Serviceability;-serviceability is the speed with which the product can be put into service
when it breaks down, as well as the competence & the behavior of the serviceperson.
5. Aesthetics;- it represent the individual‘s personal preference.
6. Durability:-Durability measures the length of a product‘s life.
7. Customer service
8. Safety

TEN DIMENSIONS OF SERVICE QUALITY

1. Reliability :- its depends on handling customer service problem, performing

service right the first time.
2. Responsiveness:- responsiveness defined as the willingness or readiness of
employees to provide service
3. Competence:-caring & individual attention the firm provides its customers.
 4. Access
5. Courtesy
6. Communication
7. Credibility
8. Understanding;-understand the customer need & problems
9. Safety
10. Tangibles:-tangibility as the appearance of physical facilities,equipment,
personnel,& written materials.

QUALITY MANAGEMENT MEANS;

_top management commitment to quality

_customer involvement & focus _employee
involvement & focus _leadership &
strategic planning for quality _company-
wide quality culture
_ continuous improvement
_customer satisfaction & delight.

19. Select any service industry of your choice. Discuss in detail the various
quality dimensions of the chosen service.

Ans:A Hospital is an institution of health care providing treatment with specialized staff and
equipment, but not always providing for long term patient stay.Hospital service are the rare
service that people need but do not necessarily want but,remarkably healthcare is the fastest
growing servicein both developed and developing countries.Service quality has been revealed as
key factor.

As I take hospitalservice,i will judge overall quality dimensions as mention:1)tangible

2)reliability 3)assurance 4)responsiveness 5) empathy

Detail of dimensions:

1)TANGIBLE:The dimension assesses the patient perception of quality with regard to the
physical facilities in the hospital. Some of the tangible facets of service facility are equipment,
machinery, employee appearance etc.

2)RELIABLITY:Ability to perform the promised service dependably and accurately.The

reliability is measured by the sense of wellbeing patient feel and influences his confidence on the
hospital or ability to provide service.
 3)ASSURANCE:Knowledge and courtesy of employees and their ability to convey trust and
confidence.The experience of patient with clinical process in the hospital is enclosed in this
dimension.

4)RESPONSIVENESS:Willingness to help customer and provide service.

5)EMPATHY: Caring and providing individual attention tothe customers.

20. Define the following terms:

1. EOQ:(Economic Order Quantity)
• The most widely used and traditional means for determining how much to order in a
continuous system is the Economic Order Quantity.
• It is also known as economic lot-size model.
• The function of EOQ model is to determine the optimal order size that minimizes total
inventory costs.

2. PRODUCTIVITY:
• Productivity is a measure of the effective use of resources, usually expressed as the ratio of
output to input

Productivity = Output
----------------
Input

• Productivity is a common measure of how well a country, industry or business unit is using
its resources.

3. ANDONS:
• Each worker is given access to a switch that can be used to activate call lights or to halt production.
The call lights are called ANDONS.
• Greene lights – Normal operation
• Yellow lights – call for help
• Red lights – line stoppage
• To showcase any emergency

4. ISO :( International Organization for Standardization)

• Series of standards agreed upon by the International Organization for Standardization (ISO)
• Adopted in 1987
• More than 100 countries are members
• ISO 9000 directs you to "document what you do and then do as you documented."
 • Procedures and policies for international quality certification

5. BREAK EVEN POINT:

• Break-even analysis computes the amount of goods required to be sold to just cover costs
• Break-even analysis includes fixed and variable costs
• Break-even analysis can be used for location analysis especially when the costs of each
location are known as.

6. TQM:Total Quality Management (TQM)

• Total quality management is defined as managing the entire organization so that it excels on
all dimensions of products and services that are important to the customer.
• Customer-oriented, leadership, strategic planning, employee responsibility, continuous
improvement, cooperation, statistical methods, and training and education

7. KAIZEN:
• Kaizen is a combination of two Japanese words ―KAIǁ and ―ZENǁ
• Kai – to change or modify
• Zen – to improve or make better
• Kaizen- improvement
• Kaizen is a management supported, employee driven process,where employees seek
development of their own capabilities by challenging existing system and finding
improvement in them

8. ERP: Enterprise Resources Planning :

• Enterprise resourcing planning is software that organizes and manages a company‘s
business process by sharing information across functional areas.
• It transforms transactional data like sales into useful information tat support business
decisions in other parts of the company, such as a manufacturing , inventory, procurement,
invoicing, distribution and accounting
• ERP serve as the back born for organization information needs as well as it‘s e –
business initiatives.

9. Flexible Manufacturing System :

• Flexible manufacturing system consists of numerous programmable machine tools connected
by an automated material handling system and control by common computer network.
• It is different from traditional automation, which is fixed or ―hardwireǁ for a specific task.

10. Lean Manufacturing :

 • Mass production did not ―fitǁ that type of environment. Using concept known as just in time,
Japanese manufacturers changed the rules of production from mass production to lean
production.
• Lean production prices flexibility (rather than efficiency) and quality (rather than quantity).

11. Poka-Yoke Method :(A Proactive Approach)

• Visual control of quality of then leads to what the Japanese call poka –yoke.
• A poka –yoke is any foolproof device or mechanism that prevents defects from occurring.
• For example, a dial on which desired range are make in a different colors is a example of
visual control. This is a dial that shuts of a machine whenever the instruments needle falls
above or below. The desired range is poka-yoke.
• Machine set to up after certain amount of production are poka-yokes.

12. Project Management: A Project may be defined as a series of related jobs usually directed
towards some major output and requiring a significant period of time to perform.Project
Management can be defined as planning, directing, and controlling resources to meet the
technical, cost, and time constraints of the project.

3 types of project:

1. Pure Project
2. Functional Project
3. Matrix Project.