Operations

Management
MBAZG526

Sajin John
2020HB58042
TABLE OF CONTENTS
MODULE 1 – OPERATIONS AND PRODUCTIVITY ................................................................................................................................3
OPERATIONS ............................................................................................................................................................................................................................. 3
COURIER SERVICE .................................................................................................................................................................................................................... 4
POPULATION CENSUS IN INDIA ........................................................................................................................................................................................... 5
OPERATIONS MANAGEMENT ................................................................................................................................................................................................. 5
GOODS AND SERVICES ............................................................................................................................................................................................................. 6
PRODUCTIVITY .......................................................................................................................................................................................................................... 6
NUMERICAL ............................................................................................................................................................................................................................... 7
HISTORICAL MILESTONES IN OPERATIONS MANAGEMENT ............................................................................................................................................ 8
METHOD STUDY IN A GARMENT FACTORY ......................................................................................................................................................................... 9
MODULE 2 – OPERATIONS STRATEGY IN A GLOBAL ENVIRONMENT ..................................................................................... 10
GLOBALISATION OF OPERATIONS ...................................................................................................................................................................................... 10
COMPETITIVE AND OPERATIONS STRATEGIES ................................................................................................................................................................ 10
OPERATION STRATEGIES – EXAMPLES.............................................................................................................................................................................. 11
PRODUCT LIFE CYCLE .......................................................................................................................................................................................................... 13
MODULE 5 – DESIGN OF GOODS AND SERVICES............................................................................................................................... 14
GENERATING NEW PRODUCTS ........................................................................................................................................................................................... 14
PRODUCT DEVELOPMENT CONTINUUM............................................................................................................................................................................ 15
ISSUES FOR PRODUCT DESIGN ............................................................................................................................................................................................ 15
DEFINING A PRODUCT .......................................................................................................................................................................................................... 17
DOCUMENTS FOR PRODUCTION ......................................................................................................................................................................................... 17
SERVICE DESIGN .................................................................................................................................................................................................................... 18
MODULE 7 – PROCESS STRATEGY ......................................................................................................................................................... 19
FOUR PROCESS STRATEGIES ............................................................................................................................................................................................... 19
SELECTION OF EQUIPMENT ................................................................................................................................................................................................. 20
PROCESS ANALYSIS AND DESIGN ....................................................................................................................................................................................... 21
PROCESS REDESIGN (PERFORMANCE OF A PROCESS) ................................................................................................................................................... 22
PRODUCTION TECHNOLOGY................................................................................................................................................................................................ 23
MODULE 7.1 – CAPACITY AND CONSTRAINT MANAGEMENT ..................................................................................................... 25
INTRODUCTION ...................................................................................................................................................................................................................... 25
MATCHING DEMAND AND CAPACITY ................................................................................................................................................................................ 26
BOTTLENECK ANALYSIS ....................................................................................................................................................................................................... 26
THEORY OF CONSTRAINTS (TOC)..................................................................................................................................................................................... 27
BREAKEVEN ANALYSIS ......................................................................................................................................................................................................... 27
OM IN PRACTICE ................................................................................................................................................................................................................... 28
MODULE 8 - LOCATION STRATEGIES ................................................................................................................................................... 29
IMPORTANCE OF FACILITY LOCATION............................................................................................................................................................................... 29
GIS FOR LOCATING FACILITIES .......................................................................................................................................................................................... 29
SERVICE LOCATION STRATEGY........................................................................................................................................................................................... 29
FACILITY LOCATION METHODS – 1 ................................................................................................................................................................................... 30
FACILITY LOCATION METHODS – 2 ................................................................................................................................................................................... 32
MODULE 9 – LAYOUT STRATEGIES ....................................................................................................................................................... 33
IMPORTANCE OF LAYOUTS .................................................................................................................................................................................................. 33
LAYOUTS 1 – SUPERMARKET LAYOUT AND OFFICE LAYOUT ....................................................................................................................................... 33
LAYOUTS 2 – FIXED POSITION LAYOUT, WAREHOUSING AND STORAGE LAYOUT................................................................................................... 34
LAYOUTS 3 – PROCESS LAYOUT ......................................................................................................................................................................................... 34
LAYOUTS 4 – REPETITIVE AND PRODUCT ORIENTED LAYOUT .................................................................................................................................... 35
LAYOUTS 5 – WORK CELLS................................................................................................................................................................................................. 37
MODULE 10 – HUMAN RESOURCES, JOB DESIGN, AND WORK MEASUREMENT .................................................................. 38
LABOR PLANNING AND JOB DESIGN .................................................................................................................................................................................. 38
LABOR STANDARDS .............................................................................................................................................................................................................. 39
WORK SAMPLING .................................................................................................................................................................................................................. 41
METHOD ANALYSIS............................................................................................................................................................................................................... 41
SAJIN JOHN 2
MODULE 1 – OPERATIONS AND PRODUCTIVITY

O PERATIONS

P RODUCTION T RANSFORMATION
Production is the creation of goods and services.

O PERATIONS
Operations is the management of systems that produce
products and services.
It’s the management of how we get the things done.
Operations/Production is one of the three functions
that every organization performs. (other two are
finance/accounting and marketing)
Transformation by:
- Fan, Windmill, Computer, Micro-processor, PCB,
Operations in Banking: Engine, Tree, Bacteria, y=f(x), companies, etc.

S UPPLY C HAIN
A network of organizations and activities that
transform inputs into outputs.

Operations in Airline:

O PERATIONS M ANAGEMENT (OM)

Operations management (OM) is the set of activities
that creates value in the form of good and services by
transforming inputs into outputs.
Operations Management includes Production
Management. OM Consists of:

Performance

Operations in Manufacturing:
Activities OM Resources

Management

Some of the current challenges for operations

managers include:
Global focus; international collaboration
Supply chain partnering; joint ventures; alliances
Sustainability; green products; recycle, reuse
Rapid product development; design collaboration
Mass customization; customized products
Lean operations; continuous improvement and
elimination of waste
C OURIER S ERVICE
Operations/Activities Here, OM Consists:
Collect, Weigh, Sort, Bag, Load, Transport, Unload, Activities
Data entry, Billing, Paste barcode, Scan barcode, Collection, Sorting, Transportation, Delivery,
Deliver … Funds flow….
Resources
Materials, Resources and Technology Delivery boys, aircraft, trucks, machines-
Manpower, Offices, Warehouses, Conveyors, Forklift, weighing, bar coding, sorting; funds….
Pallets, Weighing machines, Aircraft, Trucks, Barcode Performance
printers, RFID, Computers, Paper, Schedules, Work Delivery in 36 hours. (Loan in 2 days, 200
allocation… cars/day.)
Objective: Execute the operations with few
resources, fast, error free, few losses….
Management
Design, Plan, and Control….
P OPULATION C ENSUS IN INDIA
Preparatory Work
Enumeration
Data Processing
Evaluation of results
Analysis of results
Dissemination of results
First census- 1872. Geography: 35 States/Union
Territories, 640 Districts, 5,767 Sub-Districts,
7,742 Towns and 608,786 Villages, 240 million
Households individually visited. Manpower:
About 2.7 million functionaries.
Two phases- House listing and Housing Census
(April to September 2010) and Population
Enumeration (9th February to 28th February
2011 and a revision round 1-5 March 2011).
Questionnaire design- Census 2011: Unique
features like special quality paper created, bar
coding, unique form numbering, special drop-out
colors and pre-printing of certain data fields.
O PERATIONS M ANAGEMENT
Operations Management is a set of activities to
efficiently transform inputs into goods and services.
Efficiently means:
Using fewer inputs, Producing higher outputs, Doing
faster, Higher quality
Example:
In case of courier service: more packets, fewer
resources, cheaper resources, faster delivery, timely
delivery, avoid damages and losses, …
I MPORT ANCE OF O PERATIONS
Every organisation does operation; it may not do
marketing.
(Even celling fans, µP and PCBs do operations).
Employees engaged in operations- 40 to 90%.
Survival of several industries depends on
operations speed enabled by operations- Fire and
Ambulance service, Pizza delivery, Military.…
Profitability of several industries depends on low
cost enabled by operations- Low cost airlines,
Ordinary post.…
Profitability of several industries depends on
high-profit margins enabled by operations-
FedEx; Speed Post; iPhone .…
Canvassing Census Schedule in 18 languages,
Instruction Manuals in 16 languages.
Printing: Schedules (34 crores) printed in high-
end presses- state of the art equipment used for
digital variable printing with consistent quality
(for accurate image recognition). Other material
like Instruction manuals, training materials (54
lakhs) printed in Government and private presses
all over the country.
Distribution: Dispatch of material from printing
presses to 17,000 locations- it required accurate
database of the exact quantity of forms in different
languages, precise packing, labelling of the boxes,
correct addressing, loading and transportation.
Uniform standard of training to 2.7 million
functionaries; through 90 Trainers at the National
level, 725 Trainers at State level, 54,000 trainers
at District level.
Training aids: Instruction Manuals, Training
Guides, PowerPoint presentations, e-Learning
Modules, Role Plays and Practice sheets.
Detailed mapping of 33 Capital Cities using
Satellite.
Publicity campaign- Mass media, Public outreach
and use of Digital promotion.
W HY S TUDY OM?
To understand how people organize themselves
for productive enterprise
To understand what operation managers do
To know how goods and services are produced
OM is a costly part of an organization.
T EN S TRATEGIC OPERATIONS MANAGEMENT
D ECISIONS
An operations manager must successfully address the
10 decisions around which this text is organized.
1. Design of goods and services
2. Managing quality
3. Process and Capacity strategy
4. Location strategy
5. Layout strategy
6. Human resources and job design
7. Supply chain management
8. Inventory Management
9. Scheduling
10. Maintenance
G OODS AND S ERVICES
CHARACTERISTICS OF CHARACTERISTICS OF GOODS EXCEPTIONS
SERVICES

Intangible Tangible Services can be tangible

Insurance, Education…. Cars, Garments, Chemicals, Steel…. Construction, making portraits.…

Produced and consumed Product can usually be kept in Services are not produced and
simultaneously, no inventory inventory consumed simultaneously
Electricity, Theatre, Lectures…. Cars, Garments, Chemicals, Steel…. Repair, Dry cleaning….

Services are unique Similar products produced Services need not be unique
Eye care, Health, Consulting…. Cars, Garments, Chemicals, Steel…. Internet/TV, Classroom teaching….

High customer interaction Ltd customer involvement Zero customer interaction

Health, Education, Consulting.… Cars, Garments, Chemicals, Steel…. Radio/TV, Cinema….

P RODUCTIVITY
The ratio of outputs (goods and services) divided by one
or more inputs (such as labor, capital, or management)
The operations manager’s job is to enhance (improve)
this ration of outputs to inputs. Improving
productivity means improving efficiency.
𝑎𝑙𝑙 𝑜𝑢𝑡𝑝𝑢𝑡𝑠 𝑈𝑛𝑖𝑡𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑
𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = = workers report vary.
𝑎𝑙𝑙 𝑖𝑛𝑝𝑢𝑡𝑠 𝐼𝑛𝑝𝑢𝑡 𝑢𝑠𝑒𝑑
Single-factor Productivity
Indicates the ratio of goods and services produced
(outputs) to one resource (input).
Most productivity measures are single factor.
And labour productivity is used more often that
machine productivity.
Almost all financial ratios are single factor
productivity ratios.
Labour productivity measures
Painter – square ft/day.
Cleaning staff – square ft/hour.
Factory worker – assemblies/shift.
Call centre staff – calls handled/shift.
Data entry operator – forms/shift.
Programmer – no of lines/day.
Doctor – patients seen/hour.
Judge – cases heard/month.
When only one input is changed-
Every day same machines but the number of
Trained or untrained person- different method.
Different fertiliser- different input.
Calculator or Slide rule- different technology.
Single factor productivity is used more frequently
than Multi-factor productivity
Multi-factor Productivity
Indicates the ratio of goods and service produced
(outputs) to many or all resources (inputs).
Multifactor productivity is also known as total factor
productivity.
Inputs are expressed in monetary units (Rs, Dollars,
Yen, etc,) since Labour, Material Energy are measured
in different units.

𝑜𝑛𝑒 𝑜𝑢𝑡𝑝𝑢𝑡𝑠
𝑆𝑖𝑛𝑔𝑙𝑒 𝐹𝑎𝑐𝑡𝑜𝑟 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
𝑜𝑛𝑒 𝑖𝑛𝑝𝑢𝑡𝑠
Example:
Laptops produced/day/manpower
Trucks loaded/day/manpower 𝑀𝑢𝑙𝑡𝑖𝑓𝑎𝑐𝑡𝑜𝑟 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
Packets sorted/hour 𝑂𝑛𝑒 𝑚𝑎𝑗𝑜𝑟 𝑜𝑢𝑝𝑢𝑡
=
Road roller – kms/day 𝐿𝑎𝑏𝑜𝑟 + 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙 + 𝐸𝑛𝑒𝑟𝑔𝑦 + 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 + ⋯ 𝑖𝑛 𝑅𝑠
Land – tons of wheat/hectare
I MPROVING P RODUCTIVITY – M ETHODS SEED DRILL
Hard technology Seed drill was invented by Jehtro Tull in 1701.
Calculations by hand to Calculator, It planted seeds in a straight line and spaced them out.
Copying by hand to Photocopy.
Incandescent bulb to LED bulb. The crops were
Paper ballots to Electronic Voting Machine. planted in an
Flood irrigation to Drip irrigation. orderly fashion
Google maps, Payment by BHIM. and the seeds did
Soft technology (method) not have to
Hub-and-Spoke vs. Direct connections anymore fight
Collection & Distribution – milk run. over space to
Scheduling grow. No seeds
Example: were wasted. The seed drill is still used today.
THE FLYING SHUTTLE More seeds germinated so higher crops yield.
The flying shuttle invented
by John Kay in 1733 A.D.
Allowed thread to be woven
into cloth faster.
Doubled the amount of
cloth output per worker /
per day.

N UMERICAL
An example, comparison of methods/options (marketing, finance, OM) used to increase the contribution or
outcome of a simple firm:

PRODUCTIVITY CALCULATION OF A PUBLISHING FIRM USING OLD & NEW SYSTEM

System Output Overhead Cost Staff Payroll Cost
Old 8 tiles/day $400/day 4 no’s, 8 hrs/day $640/day
New 14 tiles/day $800/day 4 no’s, 8 hrs/day $640/day

Single Factor Productivity Multi Factor Productivity

8 8
𝑂𝑙𝑑 𝑙𝑎𝑏𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = 𝑂𝑙𝑑 𝑚𝑢𝑙𝑡𝑖𝑓𝑎𝑐𝑡𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
(4 × 8) 640 + 400
= 0.2500 𝑡𝑖𝑙𝑒𝑠⁄𝑙𝑎𝑏𝑜𝑟 ℎ𝑟 = 0.0077 𝑡𝑖𝑙𝑒𝑠⁄𝑑𝑜𝑙𝑙𝑎𝑟
14 14
𝑁𝑒𝑤 𝑙𝑎𝑏𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = 𝑁𝑒𝑤 𝑚𝑢𝑙𝑡𝑖𝑓𝑎𝑐𝑡𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
(4 × 8) 640 + 800
= 0.4375 𝑡𝑖𝑙𝑒𝑠⁄𝑙𝑎𝑏𝑜𝑟 ℎ𝑟 = 0.0097 𝑡𝑖𝑙𝑒𝑠⁄𝑑𝑜𝑙𝑙𝑎𝑟
𝑁𝑒𝑤 𝑚𝑢𝑙𝑡𝑖𝑓𝑎𝑐𝑡𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
𝑁𝑒𝑤 𝑙𝑎𝑏𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 > 𝑂𝑙𝑑 𝑙𝑎𝑏𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
> 𝑂𝑙𝑑 𝑚𝑢𝑙𝑡𝑖𝑓𝑎𝑐𝑡𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦

SAJIN JOHN 7
H ISTORICAL M ILESTONES IN O PERATIONS M ANAGEMENT
Significant events in modern OM can be classified into Eli Whitney introduced the idea of
six eras: interchangeable parts to the U.S.
1. Early concepts (1776–1880)—Labor Built ten guns and disassembled them before the
specialization (Smith, Babbage), standardized U.S. Congress. He placed the parts in a mixed pile
parts (Whitney) and was able to reassemble all of the guns back.
2. Scientific management (1880–1910)—Gantt Before, everything was made by hand, now parts
charts (Gantt), motion and time studies (Gilbreth), were made by machines.
process analysis (Taylor), queuing theory (Erlang) The parts could be used in any musket.
3. Mass production (1910–1980)—Assembly line
(Ford/Sorensen), statistical sampling (Shewhart),
Measuring Work
economic order quantity (Harris), linear
FW Taylor – 1890s
programming (Dantzig), PERT/CPM (DuPont),
Coal and Pig Iron Shovelling.
material requirements planning
Original daily output increased from 12.5 tons per
4. Lean production (1980–1995)—Just-in-time,
day to 47.5 tons per day, after studying the work
computer-aided design, electronic data
procedure and using redesigned tools and
interchange, total quality management, Baldrige
procedures. This required 140 workers, 500
Award, empowerment, kanbans
earlier.
5. Mass customization (1995–2005)—Internet/e-
commerce, enterprise resource planning, Taylor’s
international quality standards, finite scheduling, major
supply-chain management, mass customization, contribution
build-to-order, radio frequency identification Study the
(RFID) work-
6. Globalization era (2005–2020)—Global supply
chains, growth of transnational organizations,
instant communications, sustainability, ethics in a
global work force, logistics and shipping

management responsibility.
I DEAS AND P EOPLE
Design the procedure to do the work and train the
1. Division of Labour – Adam Smith(1776) and
worker.
Charles Babbage (1830s)
Matching employees to right job.
2. Standardisation of parts – Eli Whitney, early Measure the work
1800. Incentive system started based on work.
3. Work measurement – FW Taylor, 1890s.
4. Time and Motion Study – Frank and Lilian Time and Motion Study
Gilbreth, 1910s. Frank and Lilian Gilbreth – 1910s
5. Assembly lines – Henry Ford, 1910s. Bricklaying

Division of Labour
Adam Smith(1776) and Charles Babbage (1830s)
Manufacturing Pins – 1770s
Operations in manufacturing of pins- drawing,
straightening, pointing, twisting, cutting heads,
heading and tinning.
No. of motions
Division of labour – one worker does only one
reduced from 18 to 45.
specific operation – tremendously improves
Output increased from 120 bricks/hr to 350
productivity.
bricks/hr.

Standardisation of Parts
Assembly lines
Eli Whitney – early 1800
Henry Ford – 1910s
Parts of Musket
Slaughter house “disassembly” line – 1873
Assembly line at Ford, 1910s
o Moving assembly line to make Model T
o Unfinished product moved by conveyor
past work station.
M ETHOD S TUDY IN A G ARMENT F ACTORY
Improving Productivity using Method Study
Total manpower- 62. Operators-45, Supervisors 2,
Final checkers-2, Inline checkers-2, Roving QC-2,
and Helpers-9.
Time available for production/day, 58 x 8 x 60=
27,840 minutes. (Excluding supervisors and
Roving Q/C.). Output rate- Highest output in a day
in recent times- 333 pcs or 27,840/333 = 83.6
min/piece.
Of 133 pieces were inspected, 15 required
reworks.
Operators hardly had space to sit. Distance
between some machines less than 14’’; ideal
distance 22 to 24’’.
Workplace very hot.
Each completed garment gets passed to the next
operator, not in a batch. No control of the work
passing through the line.
Low WIP inventory on production line, but plenty
of WIP waits at the helping tables, indicating the
line is not balanced.
Big-size scissors used leads to inaccurate cutting,
requires trimming.
Baby overlock- 4 sides are done whereas only 3
sides are needed.
Frills are graded but all sizes are cut as one size.
Thus, requires trimming.
Wrong cuff pattern. Requires trimming, and extra
person.
To put stamp on the garment, the operator
removes the sticker on the panel which is
unnecessary.
Slow pace of the operators; operators have jerky
motions instead of smooth and steady bursts.
Helpers (9) do not work on the production line;
they do a lot of matching work. Each operator is
given a sequential workplace and matching
operation now assigned to the operators
The factory starts at 9.00 am, but the work starts
at 9.15 am. Senior staff also arrive late;
indiscipline, urgency of work missing.
Only 40, down from 52, workers required for same
output.
MODULE 2 – OPERATIONS STRATEGY IN A GLOBAL ENVIRONMENT

G LOBALISATION OF O PERATIONS

G LOBALISATION
Globalization means customers, talent, and suppliers
are worldwide.
The new standards of global competitiveness impact
quality, variety, customization, convenience,
timeliness, and
cost.
Globalization strategies contribute efficiency, adding Source, produce, assemble and sell locally
value to products and services, but they also o Local production: Since 1980s
complicate the operations manager’s job. Complexity, o Maruti-Suzuki, Hero-Honda, Eicher-
risk, and competition are intensified, forcing Mitsubishi, BPL-Sanyo, Coca Cola
companies to adjust for a shrinking world.
We have identified six reasons domestic business
operations decide to change to some form
of international operation. They are:
1. Improve the supply chain.
2. Reduce costs and exchange rate risk.
3. Improve operations.
4. Understand markets.
5. Improve products.
6. Attract and retain global talent.
Source from “j” countries, produce in “k”
countries, assemble in “m” countries and sell in “n”
T YPES OF G LOBAL M ANUFACTU RING AND countries
O PERATION o All activities global, including design and
Source raw material globally, produce and engineering
assemble in one country and sell globally o Toyota, hp, Ford, LG, Samsung
o Exporting goods. Till 1980s
o Ford-US, Toyota-Japan, Rolex-Switzerland,
VW-Germany, Cigars-Cuba

C OMPETITIVE AND O PERATIONS S TRATEGIES

M ISSION
The purpose or rationale for an organisation’s
existence.
Mission statements provide boundaries and focus for
organizations and the concept around which the firm
can rally.
Mission statement of PepsiCo: Our mission is to be
the world's premier consumer products company
focused on convenient foods and beverages. We seek
to produce financial rewards to investors as we
provide opportunities for growth and enrichment to
our employees, our business partners and the
communities in which we operate. And in everything
we do, we strive for honesty, fairness and integrity.
Mission statement of Arnold Palmer Hospital:
Arnold Palmer Hospital for Children provides state of
the art, family-centred healthcare focused on
restoring the joy of childhood in an environment of
compassion, healing, and hope.
Mission statement of Merck: The mission of Merck is
to provide society with superior products and
services—innovations and solutions that improve the
quality of life and satisfy customer needs—to provide
employees with meaningful work and advancement
opportunities and investors with a superior rate of
return.

SAJIN JOHN 10
S TRATEGY LOW-COST LEADERSHIP: Achieving maximum
Strategy is an organization’s action plan to achieve the value, as perceived by the customer
mission. RESPONSE: A set of values related to rapid, flexible,
Firms achieve missions in three conceptual ways: and reliable performance.
1. Differentiation (i.e., better, or at least different) Example: Competitive Strategies
2. Cost leadership (i.e., cheaper) Industry Differentiation Low Cost
3. Response (i.e., more responsive)
Courier DHL, FedEx, Speed Post Ordinary
Each of the three strategies provides an opportunity post
for operations managers to achieve competitive
Credit Diners, American SBI, ICICI
advantage.
cards Express
COMPETITIVE ADVANTAGE implies the creation of
Hotel Taj, Westin Ginger
a system that has a unique advantage over competitors.
Cars Mercedes, Rolls Royce, Nano, Alto
DIFFERENTIATION: Distinguishing the offerings of
an organization in a way that the customer perceives as Ciaz
adding value. Mobile GoldVish Le Million, Micromax
Differentiation through delivery speed, phones Vertu, iPhone
responsiveness, reliability, safety, quality, features, Watches Rolex Timex
positioning. Groceries ITC Patanjali
EXPERIENCE DIFFERENTIATION: Engaging a Cosmetics Lakme Patanjali
customer with a product through imaginative use of the
file senses, so the customer “experiences” the product.

O PERATION STRATEGIES – E XAMPLES

Differentiation and Cost leadership through
Operations with the aim of Profit (= Revenue – Cost)
C OMPETING ON P RODUCT D ESIGN
1. Competing on Product design
“Flat” packable furniture – IKEA
2. Competing on Mass customization
3. Completing on Quality Operational impact – Low storage and transport
4. Competing on Response cost, No assembly cost, Modular design- large variety
5. Competing on Cost of final products and also lower inventory and fewer
6. Competing on Project Management suppliers....
7. Competing on ……

SAJIN JOHN 11
C OMPETING ON M ASS C USTOMIZATION C OMPETING ON R ESPONSE
Pizza Hut
Fire and Ambulance service
Military- Surgical strikes
Rescue operations
AmEx credit cards
Responsive can be-
Responsive Product development
Responsive production
Responsive delivery
Responsive is achieved by – Process
optimization, excess capacity, high inventory,
faster machines, standard offerings – low
variety, less bureaucracy, empowerment,
extensive training…

C OMPETING ON C OST
Southwest Airlines

Assemble-to-order customised computers, Dell 1990s

to mid-2000s

Operational impact – Lower inventory, lower

Fly Hub and spoke,
obsolescence, larger delivery time, higher delivery
instead of connecting
cost, lower distribution cost, higher volume, higher
the cities directly.
price.…
Single type of aircraft.
No in-flight food.
C OMPETING ON Q UALITY No check-in baggage.
Use of cheaper airports, outside the city.
No boarding pass.

Operational impact – Lower scrap, lower capacity

requirement, lower rework, lower handling costs….

SAJIN JOHN 12
P RODUCT L IFE C YCLE

D IFFUSION OF P RODUCTS

Product Life Cycle has four stages as below:

SAJIN JOHN 13
MODULE 5 – DESIGN OF GOODS AND SERVICES

G ENERATING N EW P RODUCTS

P RODUCT D EVELOPMENT S TAGES Q UALITY F UNCTION D EPLOYMENT (QFD)

Determine what will satisfy the customer.
Translate those customer desires into the
target design.
QFD is NOT for improving quality.

1. Identify customer wants

2. Identify how the good/service will satisfy
customer wants
3. Relate customer wants to product hows
4. Identify relationships between the firm’s hows
5. Develop our importance ratings
6. Evaluate competing products
7. Compare performance to desirable technical
attributes

H OUSE OF QUALITY
A planning matrix to relate customer wants to
how the firm is going to meet those wants.
House of quality are NOT for improving
quality.

P RODUCT L IFE C OSTS

SAJIN JOHN 14
P RODUCT D EVELOPMENT C ONTINUUM
O RGANIZING FOR P RODUCT D EVELOPMENT –
A PPROACHES
Traditionally – distinct departments
o Duties and responsibilities are defined,
Difficult to foster forward thinking
A Champion
o Product manager drives the product through
the product development system and related
organizations
Team approach
o Cross functional representatives from all
functions, Product development teams, design
for manufacturability teams,
engineering teams
Japanese “whole organization” approach
o No organizational divisions
Product development teams
o Market requirements to product success,
Cross functional teams often involving
vendors, Open, highly participative
environment
Concurrent engineering
o Simultaneous performance of product
development stages
D ESIGN DRIVEN COMPANIES
Apple, Samsung
Google (205+ products), Microsoft
3M- over 60K products
Rubbermaid- ‘00s of products
Product life cycles are becoming shorter and the rate
of technological change is increasing.
Time-based competition from price-based
competition.
Developing new products faster can result in a
competitive advantage.
Shortening Product Life Cycle
New technology and changes in the tastes is
reducing product life cycle
o TV, Incandescent bulbs, Watches, Fans…
o Shoes, Garments, Jewelry…
Product life
value o Maruti- 800: 25+ yrs, Ambassador- 40+ yrs.
o Light vehicles, platforms introduced during
the 1980s lasted 8.6 years’ those introduced
1990s and 2000s existing for an average of 7.6
years.
Product development time
o The development of a new therapeutic
product 10 to 12 years from product
identification to commercialization.
External Development Strategies
- Alliances
- Join Ventures
- Purchase technology or expertise by acquiring
the developer
Internal Development Strategies
- Migrations of existing products
- Enhancements to existing products
- New internally developed products.

I SSUES FOR P RODUCT D ESIGN

M ODULAR D ESIGN R OBUST D ESIGN

A design in which parts or components of a product are A design that can be produced to requirements even
subdivided into modules that are easily interchanged or with unfavourable conditions in the production process.
replaced. • Robust design exploits
• Products designed in easily segmented non-linear
components. relationship between
• Adds flexibility to production and marketing input and output.
• A very large number of final products from few • Robust performance
components. to large variations-
• Operational benefits- lower inventory, fewer higher quality at lower
machines, high-capacity utilization, economics of cost. For example,
scale in production, fewer vendors, lower product higher precision can
also be achieved
by using materials of poor quality (large
variation).
Example: Pendulum
length to minimize
variation in the
period

𝐿
𝑇 = 2𝜋√
𝑔
development cost, shorter assembly time.
V ALUE A NALYSIS
A review of successful products that takes place during
the production process.
• Seeks improvements in product design that leads
to a better product which can be produced more
economically.
• Focuses on function of the product.
o Same function can be achieved from different
designs.
o Choose the design with lowest cost.
• Benefits of Value Analysis – Fewer components,
fewer processes, standard components…lower
material cost, lower manufacturing cost, lower
assembly cost.
Design for Manufacturability and Assembly
(DFMA)
Manufacturability at DESIGN stage – DFMA
Software that allows designers to look at the effect of
design on manufacturing of the product.
Benefits:
• Improve ease of manufacture.
• Improve ease of assembly.
• Reduced complexity of the product.
• Additional standardization of components.
• Improved job design and job safety.
• Improved maintainability (serviceability) of the
product.
Example:
C OMPUTER A IDED D ESIGN (CAD)
Using computers to design products and prepare
engineering documentation.
• Operational benefits – Shorter development cycle,
improved accuracy, can be used in CAM.
• Popular CAD software – AutoCAD, Alibre Design,
Geometric Design, CATIA, Femap, Fusion 360,
Kompas 3D, Key Creator, LightWave, Solidworks,
SketchUp, SolidFace…..
• Additional Example:
o 3D Object Modeling for heat, stress, vibration
analysis
SAJIN JOHN
o 3D printing – complex design, low volume,
remote/product anywhere
Standard for the exchange of product data
(STEP)
A standard that provides a format allowing the
electronic transmission of three-dimensional data.
The European Community (EU) has developed a
standard for the exchange of product data (STEP; ISO
10303)
STEP permits 3-D product information to be
expressed in a standard format so it can be exchanged
internationally.
C OMPUTER -A IDED M ANUFACTURING (CAM)
• Utilizing specialized computers and program to
control manufacturing equipment.
• Often driven by the CAD system (CAD/CAM).
Operational benefits -
o Shorter production time.
o Complex design
o Database availability.
o New range of capabilities.
V IRTUAL R EALITY T ECHNOLOGY
A visual form of communication in which images
substitute for reality and typically allow the user to
respond interactively.
• Computer technology used to develop an
interactive, 3-D model of a product from the basic
CAD data.
• Allows people to ‘see’ the finished design before a
physical model is built.
• Very effective in large-scale designs such as plant
layout.
S USTAINABILITY AND L IFE C YCLE A SSESSMENT
(LCA)
• Sustainability means meeting the needs of the
present without compromising the ability of
future generations to meet their needs.
• LCA is an evaluation of the environmental impact
of a product.
16
D EFINING A P RODUCT
Product documents
• Engineering drawing- manufacturing G ROUP T ECHNOLOGY
o Shows dimensions, tolerances, and materials. A product and component coding system that specifies
o Shows codes for Group Technology. the size, shape, and type of processing; it allows similar
• Engineering “drawing”- Other industries products to be grouped.
A drawing that shows the dimensions, tolerances, • Parts grouped into families with similar
materials, and finishes of a component. characteristics.
o Movies- scripts; Food- recipes. • Coding system describes processing and physical
o Chemicals- chemical formula, % of chemical characteristics.
mixture. • Part families can be produced in dedicated
• Bill of Material (BOM) manufacturing cells.
A list of the hierarchy of components, their
description, and the quantity of each required to
make one unit of a product
o Lists components, quantities and where used.
o Shows product structure.

D OCUMENTS FOR P RODUCTION

A SSEMBLY D RAWING W ORK O RDER

An explode view of the product. An instruction to make a given quantity of a particular
• Detail’s relative locations to item, usually to a schedule.
show how to assemble the
product.
• A 3-D drawing, known
as an isometric
drawing

A SSEMBLY C HART
A graphic means of E NGINEERING C HANGE N OTICES (ECN S )
identifying how A correction or modification (to a products definition)
components flow into of an engineering drawing or bill of material.
subassemblies and final Configuration Management
products.
• The need to manage ECNs has led to the
A schematic form how a development of configuration management
product is assembled. systems.
• A product’s planned and changing components
are accurately identified.
R OUTE S HEET • Control and accountability for change are
A listing of operations necessary to produce a identified and maintained.
component with the material specified in the bill of
material. P RODUCT L IFE -C YCLE M ANAGEMENT (PLM)
Software programs that tie together many phases of
product design and manufacture.
PLM is an umbrella of software programs that
attempts to bring together phases of product design
and manufacture, like Product design, CAD/CAM,
DFMA, Product routing, Materials, Layout, Assembly,
Maintenance, Environmental, etc.

SAJIN JOHN 17
S ERVICE D ESIGN
• A service typically includes direct interaction with
the customer.
• Process–Chain–Network (PCN) analysis focuses
on the ways in which processes can be designed to
optimize interaction between firms and their
customers.
P ROCESS -C HAIN -N ETWORK (PCN) A NALYSIS
1. Direct interaction region includes process steps
that involve interaction between participants.
2. The surrogate (substitute) interaction region
includes process steps in which one participant is
acting on another participant’s resources.
3. The independent processing region includes steps
in which the supplier and/or the customer is
acting on resources where each has maximum
control.
• All three regions have similar operating issues but
the appropriate way of handling the issues differs
across regions –service operations exist only
within the area of direct and surrogate interaction
• PCN analysis provides insight to aid in positioning
and designing processes that can achieve strategic
objectives
Adding Service Efficiency
Service Productivity is notoriously low partially
because of customer involvement in the design or
delivery of the service, or both
• Complicates product design
• Limit the options
o Improves efficiency and ability to meet
customer expectations.
o Delay customization
• Modularization
o Ease’s customization of a service
• Automation
o Reduces cost, increases customer service
• Moment of truth
o Critical moments between the customer and
the organization that determine customer
satisfaction
Documents for Services
• High levels of customer interaction necessitate
different documentation
• Often explicit job instructions
• Scripts and storyboards are other techniques
MODULE 7 – PROCESS STRATEGY

F OUR P ROCESS S TRATEGIES

A Process strategy is an organization’s approach to
transforming resources into goods and services.
The objective is to create a process that can produce
offerings that meet customer requirements within
cost and other managerial constraints.
Virtually every good or service is made by using some
variation on one of four process strategies:
3. PRODUCT FOCUS
A facility organized around products; a product-
oriented, high-volume, low-variety process.
• Facilities are organized by product.
• High volume but low variety of products
• Long, continuous production runs enable
efficient processes.
• Typically, high fixed cost but low variable cost
• Generally, less skilled labor
• High-volume, low-variety, continuous process
• Example: Coca cola, Juice, milk plants,
refineries, cement plants.

1. PROCESS FOCUS 4. MASS CUSTOMIZATION

A production facility organized around processes to Rapid, low-cost production that caters to constantly
facilitate low-volume, high-variety production changing unique customer desires.
• Facilities are organized around specific • The rapid, low-cost production of goods and
activities or processes service to satisfy increasingly unique
• General purpose equipment and skilled customer desires.
personnel • Combines the flexibility of a process focus
• High degree of product flexibility with the efficiency of a product focus.
• Typically, high cost and low equipment • Mass customisation – High volume, High
utilization. variety.
• Product flows mat vary considerably making • Example: Dell computers in 1990s
planning and scheduling a challenge
• Example: Hospitals
Process, Volume, and Variety
Process selected must fit with volume and variety.
2. REPETITIVE FOCUS
A product-oriented production process that uses
modules
• Facilities often organized as assembly lines.
• Characterized by modules with parts and
assemblies made previously.
• Modules may be combined for many output
options.
• Less flexibility than process-focused facilities
but more efficient.
• For high volume production.
• Example: Cars, Bikes, …
C OMPARISON OF P ROCESSES

Process Focus Repetitive Focus Product Focus Mass Customization

(Low-volume, High- (Modular) - Cars (High-volume, low (High-volume, high variety) –
variety) – Hospitals variety) – Coca cola Dell Computer on 1990s
Small quantity and large Long runs, a standardized Large quantity and small Large quantity and large
variety of products product from modules variety of products variety of products
Broadly skilled Moderately trained Less broadly skilled Flexible operators
operators employees operators
Instructions for each job Few changes in the Standardized job Custom orders requiring
instructions instructions many job instructions
High inventory Low inventory Low inventory Low inventory relative to the
value of the product
Finished goods are Finished goods are made Finished goods are made Finished goods are build-to-
made to order and not to frequent forecasts to a forecast and stored order (BTO)
stored
Scheduling ins complex Scheduling is routine Scheduling is routine Sophisticated scheduling
accommodates customer
orders
Fixed costs are low and Fixed costs are dependent Fixed costs are high and Fixed costs tend to be high
variable cost high on flexibility of the facility variable costs low and variable costs low

S ELECTION OF E QUIPMENT

C ROSSOVER C HARTS FOR P ROCESS S ELECTION

The comparison of processes can be further enhanced
by looking at the point where the total cost of the
process’s changes. For instance, below figure shows
three alternative processes compared on a single
chart, known as crossover chart.
𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 = 𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡 × 𝑈𝑛𝑖𝑡 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡
× 𝑉𝑜𝑙𝑢𝑚𝑒

Most economical process,

• If Volume < V1, Process A
• If Volume > V2, Process C
• If Moderate Volume, Process B
Flexibility is the ability to respond with little penalty
in time, cost, or customer value.

SAJIN JOHN 20
P ROCESS A NALYSIS AND D ESIGN
Business Processes • Reduce interaction between customer and
• Recruitment employee (single window)
• Order fulfilment
• Sanctioning loan T IME -F UNCTION M AP
• Credit card approval A flow chart with time added on the horizontal axis.
• Insurance claim processing
Manufacturing Processes
• Car production
• Tyre production
• Steel production
• Fertiliser production
• Footwear production

𝑃𝑟𝑜𝑐𝑒𝑠𝑠 = ∑ 𝑎𝑐𝑡𝑖𝑣𝑖𝑡𝑖𝑒𝑠
Activities
• Unload passengers P ROCESS C HART
• Unload bags Charts that use symbols to analyze the movement of
• Refuel people or material.
• Clean Mainly used for repetitive discrete manufacturing
• Restock catering supplies operations.
• Maintenance
• Change crew
• Reload bag
• Reload passengers
• Typical TAT (Turnaround Time) – 30 minutes.
Following tools helps us understand the complexities
of process design and redesign.
1. Flowchart – Sequence of activities.
2. Time-Function Mapping – Activities + Time +
Who does the activity.
3. Process chart – Five activities.
4. Value Stream Mapping – Activities of Suppliers +
Company + Customers.
5. Service Blueprinting – Customer and Service
provider interaction.

F LOWCHARTS
A drawing used to analyse movement of people or
material. Example: Clay Pot Making -
Used for Process
Improvement.
• Reduce time
• Reduce resources
• Merge activities
• Change sequence of
activities
• Eliminate redundant
activities
• Reduce number of stations/ persons who do the
work

SAJIN JOHN 21
V ALUE -S TREAM M APPING (VSM)
A process that helps managers understand how to add
value in the flow or material and information through
the entire production process.
- Where value is added in the entire production
process, including the supply chain.
- Extends from the customer back to the suppliers.
- Company + Suppliers + Customers
- Value-stream mapping extends beyond the
immediate organization to customers and
suppliers.
1. Begin with symbols for customer, supplier, and
production to ensure the big picture
2. Enter customer order requirements
3. Calculate the daily production requirements
4. Enter the outbound shipping requirements and
delivery frequency
5. Determine inbound shipping method and delivery
frequency
P ROCESS R EDESIGN (P ERFORMANCE OF A P ROCESS )
Managerial
Costs, Revenues
Technical
Process time, Resource requirement, Capacity
utilization, Backlog, Rework, Waste, No of stages, …
P ROCESS I MPROVEMENT
1. Reduce activity time.
2. Do the activities faster.
3. Activities in parallel.
4. Change location of the activity.
5. Split the activities
6. Merge activities.
7. Change the sequence of activities.
8. Eliminate redundant activities.
9. Reduce number of activities.
10. Reduce no. of stations/persons who do the work.
11. Change the layout.
SAJIN JOHN
6. Add the process steps (i.e., machine, assemble) in
sequence, left to right
7. Add communication methods, add their
frequency, and show the direction with arrows
8. Add inventory quantities between every step of
the entire flow
9. Determine total working time (value-added time)
and delay (non-value-added time)
S ERVICE B LUEPRINT
A process analysis technique that lends itself to a focus
on the customer and the provider’s interaction with the
customer.
Products with a high service content may warrant use
of this process technique.
Service blueprinting is designed to help us focus on the
customer interaction part of the process.
12. Create additional inspection stage.
13. Cheaper resource.
14. Automate.
15. Change tools.
16. Reduce changeover time.
17. Reduce interaction between customer – employee
S PECIAL C ONSIDERATION FOR S ERVICE P ROCESS
D ESIGN
• Some interaction with customer is necessary, but
this often affects performance adversely
• The better these interactions are accommodated
in the process design, the more efficient and
effective the process
• Find the right combination of cost and customer
interaction
22
S ERVICE P ROCESS M ATRIX Self- Service-service so Supermarkets
service customers and department
examine, compare, stores Internet
and evaluate at ordering
their own pace
Postpone Customizing at Customizing vans
ment delivery at delivery rather
than at
production
Focus Restricting the Limited-menu
offerings restaurant
Modules Modular selection Investment &
of service Modular insurance
production selection,
Prepacked food
modules.
Automati Separating Automatic teller
on services that may machines
lend themselves to
some type of
automation
Schedulin Precise personnel Scheduling ticket
T ECHNIQUES FOR I MPROVING S ERVICE g scheduling counter person at
P RODUCTIVITY 15-min internals
Strategy Technique Example Training Clarifying the Investment
Separatio Structuring customers go to a service options. counsellor,
n service so manager to open Explaining how to funeral directors,
customers must a new account, to avoid problems After-sale
go where the load officers for maintenance
service is offered loans, to tellers personnel
for deposits

P RODUCTION T ECHNOLOGY

1. A UTOMATIC I DENTIFICATION S YSTEMS 2. A UTOMATED S TORAGE AND R ETRIEVAL

(AIS S ) AND RFID S YSTEMS (ASRS S )
AIS is a system for transforming data into electronic • Automated placement
form, for example, bar codes. and withdrawal of parts
• Improved data acquisition and products
• Reduced data entry errors Reduced errors and labor.
• Increased speed Computer-controlled
• Increased scope of process warehouses that provide for
automation the automatic placement of
Radio frequency Identification (RFID) – A wireless parts into and form designated places in a warehouse.
system in which integrated circuits with antennas send
radio waves. 3. F LEXIBLE M ANUFACTURING S YSTEMS
(FMS)
A system that uses electronic signals from a centralized
computer to automate production and material flow.
Computer controls both the workstation and the
material handling equipment.

Visual systems – Systems that use video cameras and • Enhance flexibility and reduced waste.
computer technology in inspection roles. • Can economically produce low volume but high
variety.
Robot – A flexible machine with the ability to hold,
• Reduced changeover time & increased utilization.
move, or grab items. It functions through electronic
impulses that activate motors and switches.

SAJIN JOHN 23
• Stringent communication requirement between T ECHNOLOGY IN S ERVICES
components
SERVICE EXAMPLE
4. A UTOMATED G UIDED V EHICLE (AGV S ) INDUSTRY
Electronically guided and controlled carts used to
Financial Debit cards, electronic funds transfer,
move materials.
Services ATMs, Internet stock trading, online
banking via cell phone
5. C OMPUTER -I NTEGRATED M ANUF ACT URING Education Online newspapers and journals,
(CIM) interactive assignments via WebCT,
A manufacturing system in which CAD, FMS, inventory Blackboard, and smartphones
control, warehousing, and shipping are integrated.
Utilities and Automated one-person garbage trucks,
Extends flexible manufacturing government optical mail scanners, flood-warning
• Backward to engineering and inventory control systems, meters that allow homeowners
• Forward into warehousing and shipping to control energy usage and costs
• Can also include financial and customer service Restaurants and Wireless orders from waiters to kitchen,
areas foods robot butchering, transponders on cars
• Reducing the distinction between low- that track sales at drive-throughs
volume/high-variety, and high-volume/low-
variety production Communications Interactive TV, e-books via Kindle

Hotels Electronic check-in/check-out,

electronic key/lock systems, mobile
Web bookings
Wholesale/retail Point-of-sale (POS) terminals, e-
trade commerce, electronic communication
between store and supplier, bar-coded
data, RFID
Transportation Automatic toll booths, satellite-directed
navigation systems, Wi-Fi in
automobiles
Health care Online patient-monitoring systems,
online medical information systems,
robotic surgery
Airlines Ticketless travel, scheduling, Internet
purchases, boarding passes downloaded
as two-dimensional bar codes on smart
phones

SAJIN JOHN 24
MODULE 7.1 – CAPACITY AND CONSTRAINT MANAGEMENT

I NTRODUCTION

C APACITY Design capacity

The throughput, or the number of units a facility can The theoretical output of a system in a given period
hold, receive, store, or produce in a period of time. under ideal conditions.
Determines if demand will be satisfied. • Normally expressed as a rate. Nos/day,
Determines fixed costs. tons/month.
Three-time horizons- • Example: If machines at Frito-Lay are designed to
Long range (1-10 years). produce 1,000 bags of chips/hr., and the plant
Intermediate range (3 months to 2 years). operates 16 hrs./day.
Short range (1 week to 6 months). 𝐷𝑒𝑠𝑖𝑔𝑛 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 = 1000 𝑏𝑎𝑔𝑠⁄ℎ𝑟 × 16 ℎ𝑟𝑠
= 16,000 𝑏𝑎𝑔𝑠⁄𝑑𝑎𝑦
Time Horizons and Capacity Options
Time Options for adjusting capacity Effective capacity
horizon The capacity a firm can expect to achieve, given its
product mix, methods of scheduling, maintenance, and
Modify (+ or -) Use capacity
standards of quality.
capacity
• Capacity after considering current operating
Long-range Design new Difficult to constraints.
planning production adjust capacity • It accounts for lost output because of planned
processes as limited resource. unavailability (preventive maintenance,
Add (or sell existing) options exist machine setups/changeovers, scheduled breaks,
long-lead-time etc.).
equipment • It is lower
Acquire or sell than the design capacity.
facilities • Example: If Frito-Lay loses 3 hours of
Acquire competitors output per day (namely 0.5 hrs./day on preventive
Intermediate- Subcontract Build or use maintenance + 1 hr./day on employee breaks + 1.5
range Add or sell inventory hrs./day setting up machines for different
planning equipment Training products). On average, if machines at Frito-Lay are
(aggregate Add or reduce shifts Add or reduce not running 1 hr./day due to late parts and
planning) personnel machine breakdowns.
Short-range Difficult to adjust Schedule jobs 𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦
planning capacity as limited Schedule = (16 ℎ𝑟𝑠 − 3 ℎ𝑟𝑠) × 1000 𝑏𝑎𝑔𝑠⁄ℎ𝑟
(scheduling) options exist personnel = 13,000 𝑏𝑎𝑔𝑠⁄𝑑𝑎𝑦
Allocate 𝐴𝑐𝑡𝑢𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 = 13000 − 1000 = 12000 𝑏𝑎𝑔𝑠⁄𝑑𝑎𝑦
machinery
Utilization
Output capacity Actual output as a percent of design capacity.
• Units of output capacity- tons/day, cars/day, 𝑨𝒄𝒕𝒖𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕
litres/min. 𝑼𝒕𝒊𝒍𝒊𝒛𝒂𝒕𝒊𝒐𝒏 =
𝑫𝒆𝒔𝒊𝒈𝒏 𝒄𝒂𝒑𝒂𝒄𝒊𝒕𝒚
• Output capacity is used when the variety of
products produced is narrow. So, in above examples –
• Examples: Refineries, Cement factories, 12000 𝑏𝑎𝑔𝑠⁄𝑑𝑎𝑦
Automobile factories, Desktop printers, Bottling 𝑈𝑡𝑖𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 = = 0.75 = 75%
16000 𝑏𝑎𝑔𝑠⁄𝑑𝑎𝑦
plants.…
Efficiency
Input capacity Actual output as a percent of effective capacity.
• Units of input capacity- Standard time, in hours.
𝑨𝒄𝒕𝒖𝒂𝒍 𝒐𝒖𝒕𝒑𝒖𝒕
• Input capacity is used when a large variety of 𝑬𝒇𝒇𝒊𝒄𝒊𝒆𝒏𝒄𝒚 =
outputs is produced. 𝑬𝒇𝒇𝒆𝒄𝒕𝒊𝒗𝒆 𝒄𝒂𝒑𝒂𝒄𝒊𝒕𝒚
• Examples: Capacity of General purpose machine, So, in above examples –
Job shops, Printing shops, and Audit, Law, 12000 𝑏𝑎𝑔𝑠⁄𝑑𝑎𝑦
Consulting and Software companies…. 𝐸𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑐𝑦 = = 0.92 = 92%
13000 𝑏𝑎𝑔𝑠⁄𝑑𝑎𝑦

SAJIN JOHN 25
Example:
Design capacity = 1200 rolls per hour
Bakery operates 7 days/week, 3 shifts of 8 hour
Effective capacity = 175000 rolls/day
Actual production last week = 148000 rolls/day
Thus, Design capacity = (7 × 3 × 8) × 1200 = 201600
Utilization = 148000/201600 = 73.4%
Efficiency = 148000/175000 = 84.6%

M ATCHING D EMAND AND C APACITY

P RODUCTION RATE ( OR CAPACITY ) FOR FOLLOWING M ATCHING D EMAND TO C APACITY

DEMAND ? Demand exceeds capacity
• Curtail demand by raising prices, scheduling
longer lead times
• Long-term solution is to increase capacity
Capacity exceeds demand
• Stimulate market – promotion & pricing.
• Product changes
Adjusting to seasonal demands
• Produce products with complementary demand
M ATCHING C APACITY TO D EMAND patterns
1. Making staffing changes
2. Adjusting equipment R EDUCING RISK WITH I NCREMENTAL CHANGES
3. Purchasing additional machinery.
4. Selling or leasing out existing equipment.
5. Improving processes to increase throughput
6. Redesigning products to facilitate more
throughput
7. Closing facilities
Service-Sector Demand and Capacity Management
• Demand management: Appointment,
reservations, FCFS rule.
• Capacity management: Full time, temporary, part-
time staff.

B OTTLENECK A NALYSIS
Capacity analysis – A means of determining through- A, B, C each take 2, 4, 3 min/unit respectively.
put capacity of workstations or an entire production o Operation A, B, C process 30, 15, 20 units/hr
system o Throughput time = 2 + 4 + 3 = 9 min/unit
Bottleneck – The o Bottleneck: Operation B, minimum capacity
limiting factor or o Bottleneck time: 4 min
constraint in a system. o System capacity = 15 units/hr
The bottleneck has the
lowest effective capacity Example 2: Two identical sandwich assembly lines.
in a system/ Total 4 workers – one for order taking; two at
assembly lines, and one for wrap/delivery
Process time – The time to produce a unit (or specified
batch of units) at a workstation.
Bottleneck time – The process time of the longest
(slowest) process, i.e. the bottleneck.
Throughput time – The time it takes for a product to
go through the production process with no waiting. It is
the time of the longest path through the system.
o The two lines are identical, so parallel processing
Example 1: In a system can occur.
with three operations o At 40 seconds, the toaster has the longest
processing time and is the bottleneck for each line.

SAJIN JOHN 26
o At 40 seconds for two sandwiches, the bottleneck
time of the combined lines = 20 secs.
o At 37.5 seconds/sandwich, wrapping and delivery is
the bottleneck for the entire operation.
𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 = 1 𝑠𝑎𝑛𝑑𝑤𝑖𝑐ℎ 𝑖𝑛 37.5 𝑠𝑒𝑐𝑜𝑛𝑑𝑠
= 1⁄37.5 𝑠𝑎𝑛𝑑𝑤𝑖𝑐ℎ𝑒𝑠 ⁄𝑠𝑒𝑐𝑜𝑛𝑑
= 3600⁄37.5 𝑠𝑎𝑛𝑑𝑤𝑖𝑐ℎ𝑒𝑠 ⁄ℎ𝑜𝑢𝑟
= 96 𝑠𝑎𝑛𝑑𝑤𝑖𝑐ℎ𝑒𝑠⁄ℎ𝑜𝑢𝑟
𝑇ℎ𝑟𝑜𝑢𝑔ℎ𝑝𝑢𝑡 𝑡𝑖𝑚𝑒 = 30 + 15 + 20 + 40 + 37.5
= 142.5 𝑠𝑒𝑐𝑜𝑛𝑑𝑠
Example 3: Four persons - Receptionist (Check-in),
Technician (Takes X ray + Develops X ray), Hygienist
(Cleaning), Dentist (X Ray exam + Dentist advice),
Receptionist – same receptionist for Checkout).
Cleaning and examining of X-rays happen
simultaneously.

o Bottleneck: Wrap/Delivery
o Bottleneck Time: 37.5 seconds
o System capacity = 96 sandwiches/hour
o Bottle neck: Hygienist cleaning
o Bottleneck Time: 24 minutes/patients
o System capacity = 60/24 = 2.5 patients/hour
o Throughput time = max (path1, path2) =
2+2+4+24+8+6 = 46 minutes

T HEORY OF C ONSTRAINTS (TOC)

D RUM -B UF FER -R OPE T HEORY OF C ONSTRAINTS (TOC)

A body of knowledge that deals with anything that
limits an organization’s ability to achieve its goals.
Recognizing and managing these limitations through a
five-step process is the basis of TOC.
STEP 1: Identify the constraints.
STEP 2: Develop a plan for overcoming the identified
constraints.

1. Release work orders to the system at the pace of
set by the bottleneck’s capacity (Drum).
2. Lost time at the bottleneck represents lost
capacity for the whole system.
3. Increasing the capacity of a non-bottleneck station
is a mirage.
4. Increasing the capacity of a bottleneck increases
the capacity of the whole system.
STEP 3: Focus resources on accomplishing Step 2.
STEP 4: Reduce the effects of the constraints by off-
loading work or by expanding capability. Make sure
that the constraints are recognized by all those who
can have an impact on them.
STEP 5: When one set of constraints is overcome, go
back to Step 1 and identify new constraints.

B REAKEVEN A NALYSIS
A means of finding the point, in dollars and units, at
which costs equal revenues.
• A technique that can be used to choose equipment
alternatives based on the volume of demand.
• The objective is to find the volume of demand at
which the alternative becomes financially viable.

Breakeven analysis requires estimation of fixed costs,

variable costs, and revenue.
• Fixed costs – costs incurred even if no units are
produced
• Depreciation, taxes, debt, mortgage payments.
• Variable costs – costs that vary with the volume
of units produced
• Labor, materials, portion of utilities.

SAJIN JOHN 27
Thus, Breakeven happens when Total Cost is same as • Increasing selling price (UR)
that of Total Revenue. i.e., at Zero profit. • Decreasing variable cost (UVC)
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑜𝑟 𝑈𝑛𝑖𝑡 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 • Decreasing Fixed cost (TFC)
× 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 = 𝑈𝑅 × 𝑋 • Increasing Volume (X)
𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡, 𝑇𝐶 = 𝑇𝐹𝐶 + (𝑈𝑉𝐶 × 𝑋) Thus,
At breakeven, TC = TR 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
𝐵𝑟𝑒𝑎𝑘𝑒𝑣𝑒𝑛 𝑣𝑜𝑙𝑢𝑚𝑒 (𝑈𝑛𝑖𝑡𝑠) =
𝑈𝑅 × 𝑋 = 𝑇𝐹𝐶 + (𝑈𝑉𝐶 × 𝑋) 𝑈𝑛𝑖𝑡 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛
𝑻𝑭𝑪 𝐵𝑟𝑒𝑎𝑘𝑒𝑣𝑒𝑛 𝑣𝑜𝑙𝑢𝑚𝑒(𝑅𝑒𝑣𝑒𝑛𝑢𝑒)
𝑿= 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
𝑼𝑹 − 𝑼𝑽𝑪 =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑃𝑒𝑟𝑐𝑒𝑛𝑡
𝑻𝑭𝑪
𝒊. 𝒆. , 𝑸 = 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑃𝑒𝑟𝑐𝑒𝑛𝑡
𝑨𝑹 − 𝑨𝑽𝑪 = 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑎𝑠 𝑎 𝑝𝑒𝑟𝑐𝑒𝑛𝑡 𝑜𝑓 𝑟𝑒𝑣𝑒𝑛𝑢𝑒𝑠
From, Profit-graph the profit performance can be (𝑈𝑅 − 𝑈𝑉𝐶)
increased by =
𝑈𝑅

OM IN P RACTICE

P ROCESS FLOW – H OT DIP G ALVANIZING

Existing Process:

𝑃𝑟𝑜𝑐𝑒𝑠𝑠 (𝑡ℎ𝑟𝑜𝑢𝑔ℎ𝑝𝑢𝑡)𝑡𝑖𝑚𝑒 = 1 + 2 + 2 + 1 + 15 + 3 + 1 + 1 + 20 = 46 𝑚𝑖𝑛𝑢𝑡𝑒𝑠⁄𝑐𝑜𝑚𝑝𝑜𝑛𝑒𝑛𝑡

Thus, for 2 components = 46 x 2 = 92 minutes

New Process:

Process (throughput) time for 1 component remains 46 min.

For 2 components the throughput time is 46 min- earlier 92 min.- because of certain parallel operations.

SAJIN JOHN 28
MODULE 8 - LOCATION STRATEGIES

I MPORTANCE OF F ACILITY L OCATION

F ACILITIES
• Storage facilities
o Transhipment centres, Warehouses,
Distribution centres, Retail stores….
• Production facilities
o Manufacturing plant, Assembly plant, Repair
facility….
• Business processes- R&D centres, Call centres….
• Service firms- Bank branch, ATM, Hotel…...
• Police station, Hospital, Airport, Fire station…..
Closer to supply (Raw Material) points – Steel,
Cement and Power plants, Dams.
Closer to demand points – Post office, ATM, Hospital,
Retail stores, Restaurants.
Between supply points and demand points –
Warehouses.
Closer to competitors’ facilities – Auto plants,
Pharma plants, Pizza Hut/Subway.
Closer to complementary facility – Steel plans near
coal mines.
Within industry clusters – Automobile, IT, Pharma,
Semiconductor industry clusters.
I MPORTANCE OF FACILITY L OCATION
• May affect demand
• Service delivery time- Fire, Police, Pizza,
Hospitals, ATM.
• Costs- Facility cost (highly location specific) +
Transportation cost
• Significant impact on fixed and variable costs.
• Long-term decisions; made relatively infrequently
• Once committed, many resources and costs
difficult to change
• Increasingly global in nature
Location options include –
• Expanding capacity of existing facilities.
• Maintain existing and add sites.
• Closing existing and relocating.

GIS FOR L OCATING F ACILITIES

G EOGRAPHIC I NFORMATION S YSTEM (GIS)

• Used in location analysis
• Enables more complex demographic analysis
• Using databases like,
Census data.
Maps.
Location of utilities, services.
Geographic features.

GIS FOR LOCATING FACILITIES

How many facilities (e.g. Warehouses) are required to
service the market in X time period?
Location of the facilities?

S ERVICE L OCATION S TRATEGY

1. Purchasing power of customer drawing area 7. Operating policies of the firm
2. Service and image compatibility with 8. Quality of management
demographics of the customer drawing area
3. Competition in the area
4. Quality of the competition
5. Uniqueness of the firm’s and competitors’
locations
6. Physical qualities of facilities and neighbouring
businesses

SAJIN JOHN 29
S ERVICE V / S G OODS -P RODUCING O RGANIZATIONS - Costs are relatively - Low customer contact
Service / Retail / Goods Producing constant for a given allows focus on the
Professional area; therefore, the identifiable costs
revenue function is - Intangible costs can be
Techniques Techniques critical evaluated
- Regression models to - Transportation
determine importance method Revenue Focus Cost Focus
of various factors - Factor-rating method Volume/revenue Tangible costs
- Factor-rating method - Locational cost– - Drawing area; - Transportation cost of
- Traffic counts volume analysis purchasing power raw material
- Demographic analysis - Crossover charts Competition; - Shipment cost of
of drawing area advertising / pricing finished goods
- Purchasing power Physical quality - Energy and utility
analysis of area - Parking/access; cost; labor; raw
- Centre-of-gravity security/lighting; material; taxes, and so
method appearance/ image on
- Geographic Cost determinants Intangible and future
information systems - Rent costs
- Management calibre - Attitude toward union
Assumptions Assumptions - Operation policies - Quality of life
- Location is a major - Location is a major (hours, wage rates) - Education
determinant of determinant of cost expenditures by state
revenue/ service - Most major costs can - Quality of state and
- High customer be identified explicitly local government
contact issues are for each site
critical

F ACILITY L OCATION M ETHODS – 1

1. Factor-Rating method
Extensively used because a wide variety of
factors can be included in the analysis.
2. Cost-Volume analysis
Location alternatives based on volume of
material handled.
3. Centre-of-Gravity method
Finds location of distribution center that
minimizes distribution costs.
4. Transportation models
• Corporate desires
• Attractiveness of region
• Labor availability and costs
• Costs and availability of utilities
• Environmental regulations
• Government incentives and fiscal
policies
• Proximity to raw materials and customers
• Land/construction costs

Location selection process – Site Decision

Region Country State City/Town
L OCATION D ECISIONS
Country Decision
• Political risks, government rules,
incentives
• Exchange rates and currency risks
• Cultural and economic issues
• Location of markets – outputs
• Labor talent, attitudes, productivity,
costs – inputs
• Availability of supplies, energy – inputs
Region/Community Decision
Locality • Site size and cost
• Air, rail, highway, and waterway
systems
• Zoning restrictions
• Proximity of services/ supplies
needed
• Environmental impact issues
• Customer density and demographics
F ACTORS THAT A FFECT L OCATION D ECISIONS
Exchange rates and currency risks Country risks
• Can have a significant impact on costs
• Rates change over time
Political risk, values, and culture

SAJIN JOHN 30
 • National, state, local governments' attitudes C OST -V OLUME A NALYSIS
toward private and intellectual property, An economic comparison of location alternatives
zoning, pollution, employment stability may based on volume of material handled.
be in flux Steps-
• Worker attitudes toward turnover, unions, 1. Determine fixed and variable costs for each
absenteeism location.
• Globally cultures have different attitudes 2. Plot the cost for each location.
toward punctuality, legal, and ethical issues 3. Select location with lowest total cost for expected
Costs that affect location decisions production volume.
• Tangible costs– easily measured costs.
Utilities, labor, materials, taxes…
• Intangible costs– not as easy to quantify.
Education, public transportation, community,
quality-of-life, political risk, ease of doing
business, labor laws, unions, absenteeism, culture,
Proximity to markets
• Very important in certain services
• JIT systems or high transportation costs may
make it important to manufacturers
Proximity to suppliers
• Perishable goods, high transportation costs, Example:
bulky products
Three locations: Athens, Brussels and Lisbon.
Proximity to competitors (clustering) Selling price = $120.
• Often driven by resources such as natural, Expected volume = 2,000 units.
information, capital, talent.

F ACTOR -R ATING M ETHOD

Popular because a wide variety of factors can be
included in the analysis
Six steps in the method
1. Develop a list of relevant factors called key success
factors 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 = 𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡 + 𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡 × 𝑉𝑜𝑙𝑢𝑚𝑒
2. Assign a weight to each factor Crossover point: Athens/Brussels
3. Develop a scale for each factor
4. Score each location for each factor 30000 + 75(𝑥) = 60000 + 45(𝑥)
5. Multiply score by weights for each factor and total 30(𝑥) = 30000
the score for each location 𝑥 = 1000
6. Make a recommendation based on the highest Crossover point: Brussels/Lisbon
point score 60000 + 45(𝑥) = 110000 + 25(𝑥)
Example: Factor-RATING 20(𝑥) = 50000
𝑥 = 2500

SAJIN JOHN 31
F ACILITY L OCATION M ETHODS – 2
Atlanta, Q4 =2,000 containers/month
C ENTRE OF G RAVITY M ETHOD
Finds location of distribution or production center
that minimizes distribution costs.
This method considers-
Location of markets.
Volume of goods shipped to those markets.
Shipping cost (or distance).

Where to locate the new production facility?

• Place existing locations on a coordinate grid
• Calculate x and y coordinates, ‘center of gravity’.
• Assume cost is directly proportional to the
distance and volume shipped.
Centre of gravity is calculated as below:
∑ 𝒙𝒊 𝑸𝒊
𝒙 − 𝒄𝒐𝒐𝒓𝒅𝒊𝒏𝒂𝒕𝒆 𝒐𝒇 𝑪𝑶𝑮 =
∑ 𝑸𝒊
∑ 𝒚𝒊 𝑸𝒊
𝒚 − 𝒄𝒐𝒐𝒓𝒅𝒊𝒏𝒂𝒕𝒆 𝒐𝒇 𝑪𝑶𝑮 =
∑ 𝑸𝒊
Where xi = x-coordinate of location i
yi = y-coordinate of location i
Qi = Quantity of goods moved to or from
location i.
Example:
Chicago, Q1=2,000 containers/month
Pittsburgh, Q2=1,000 containers/month
New York, Q3=1,000 containers/month
𝑥 − 𝑐𝑜𝑜𝑟𝑑𝑖𝑛𝑎𝑡𝑒
(30)(2000) + (90)(1000) + (130)(1000) + (60)(2000)
=
2000 + 1000 + 1000 + 2000
= 66.7
𝑦 − 𝑐𝑜𝑜𝑟𝑑𝑖𝑛𝑎𝑡𝑒
(120)(2000) + (110)(1000) + (130)(1000) + (40)(2000)
=
2000 + 1000 + 1000 + 2000
= 93.3
T RANSPORTATION M ODELS
• Find amount to be shipped from several points of
supply to several points of demand.
• Minimize total production and shipping costs.
• A special class of linear programming problems.
MODULE 9 – LAYOUT STRATEGIES

I MPORTANCE OF L AYOUTS
• Revenue
o Sales- Retail shops, Airports. T YPES OF L AYOUT AND ITS L AYOUT OBJECTIVES
o Customer interaction.
• Costs Layout Objectives
o Requirement and utilization of material
handling equipment, space and people-
Office Locate workers requiring frequent
flow of materials and people.
contact close to one another-
o Flexibility in making the changes.
proximity, privacy.
o Safer working conditions.
Retail Maximize profitability per sq-ft
area expose customer to high-
margin items.
Warehouse Balance storage with material
(Storage) handling costs.
Project Ease of movement of material to the
(Fixed position) limited storage around the site.
Job Shop Manage varied material flow for
(Process oriented) each product.
Work Cell Identify a product family, build
(Product families) teams, cross-train team members.
Repetitive/ Equalize the task time at each
Continuous workstation.
(Product oriented)

L AYOUTS 1 – S UPERMARKET L AYOUT AND O FFICE L AYOUT

F IVE IDEAS USED IN SUPERMARKET LAYOUT O FFICE L AYOUT – R ELATIONSHIP C HART

1. Locate high-draw items around the periphery of
the store.
2. Use prominent locations for high-impulse and
high-margin items.
3. Distribute power items to both sides of an aisle
and disperse them to increase viewing of other
items.
4. Use end-aisle locations because they have a very
high exposure rate.
5. Convey the mission of store by carefully selecting
the position of the lead-off department.
Office layout – The grouping of workers, their
equipment, and spaces/offices to provide for comfort,
safety, and movement of information.
Relationship Chart (using tool) – also known as
Muther Grid - indicates that operations must e near
accounting and marketing, but it does not need to be
near graphic arts staff.

Workspace can inspire informal and productive

encounters if it balances three physical and social
aspects:
Proximity: Spaces should naturally bring people
together.
Privacy: People must be able to control access to their
conversations.
Permission: The culture should signal that nonwork
interactions are encouraged.

SAJIN JOHN 33
L AYOUTS 2 – F IXED P OSITION L AYOUT , W AREHOUSING AND S TORAGE L AYOUT

F IXED -P OSITION L AYOUT

• The product remains in one place- workers and
equipment come to the site.
• Complicating factors-
Limited space at site,
different materials and
machines required at
Random Stocking
different stages of the
project. • Typically requires automatic identification
systems (AISs) and effective information systems.
• Thus, as much of the
Customizing
project as possible is completed off-site in a
product-oriented facility. • Value-added activities performed at the
warehouse- assembly of components, loading
software, repairs, customized labeling and
W AREHOUSE AND S TORAGE L AYOUTS packaging. Enable low cost and rapid response
• Objective is to find the strategies.
optimum trade-offs Cross-Docking
between handling costs • The incoming material is moved directly from
and costs associated receiving to shipping and are not placed in
with warehouse space. storage.
• Maximize the total • It requires tight scheduling and accurate
"cube" of the shipments, bar code or RFID identification and
warehouse– utilize its advanced shipment notification as materials are
full volume while maintaining low material unloaded.
handling costs.

L AYOUTS 3 – P ROCESS L AYOUT

• Process layout – Similar activities done at one Example:
place. Arrange the six department in a factory to minimize
• Machinery and workers are flexible and grouped material handling costs, Each department is 20 x 20
according to function. feet and building is 60 feet
• Routings of jobs are not fixed, depends on the long and 40 feet wide.
order (or patient).
Steps
• Process layout is used when volumes are low
volume and there are many variations in product 1. Construct a material
design, process requirements, order quantities, flow "from-to matrix.”
such as in job shops, furniture, garments, printing. 2. Develop an initial
• Flow of work is varied; schematic diagram.
Workflow not 3. Determine the cost of
balanced; Capacity this layout.
required depends on 4. Try to improve the
product mix; layout.
Throughput times are
long; Production Activity Control is a major and
complex activity.
• Need to arrange work centers so as to minimize
the costs of material handling.
• Graphical approach only works for small
problems; else computer programs are available.
𝒏 𝒏

𝑴𝒊𝒏𝒊𝒎𝒊𝒛𝒆 𝒄𝒐𝒔𝒕 = ∑ ∑ 𝑿𝒊𝒋 𝑪𝒊𝒋

𝒊=𝟏 𝒋=𝟏

n=total number of work centers or departments

i, j=individual departments
Xij=no. of loads moved from department i to j
Cij=cost to move a load between department i & j
Cost for adjacent transfer= $ 1/load
Cost for diagonal transfer= $ 2/load
𝐶𝑜𝑠𝑡 = 50 × 1 + 100 × 2 + 20 × 2 + 30 × 1 + 50 × 1
+ 10 × 1 + 20 × 2 + 100 × 1
+ 50 × 1 = $570/𝑤𝑒𝑒𝑘

Revised Interdepartmental Flow Graph

(Painting and Assembly interchanged)

𝑅𝑒𝑣𝑖𝑠𝑒𝑑 𝐶𝑜𝑠𝑡 = 50 × 1 + 100 × 1 + 20 × 1 + 30 × 2

+ 50 × 1 + 10 × 1 + 20 × 2
+ 100 × 1 + 50 × 1 = $480/𝑤𝑒𝑒𝑘
Thus, rearranging the departments has reduced the
cost.

L AYOUTS 4 – R EPETITIVE AND P RODUCT O RIENTED L AYOUT

• Repetitive and Product-Oriented Layouts are • Starts with the precedence relationships
organized around products. • Determine cycle
• Special purpose machines are used; machines are time.
arranged in the sequence of operation. • Calculate theoretical
• Product layout is used when volumes are high and minimum number of
variety of outputs is low such as in the workstations.
manufacturing of automobiles, home appliances, • Balance the line by
cement, bottled milk. assigning specific
• Flow of work is smooth; Throughput times are tasks to
short; Production Activity Control is simple. workstations.
• Need to balance the production line.
Advantages S TAFFING
• Low variable cost per unit Takt Time: Time between successive units.
• Low material handling costs 𝑻𝒐𝒕𝒂𝒍 𝒘𝒐𝒓𝒌 𝒕𝒊𝒎𝒆 𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆
• Reduced work-in-process inventories 𝑻𝒂𝒌𝒕 𝒕𝒊𝒎𝒆 =
𝑼𝒏𝒊𝒕𝒔 𝒓𝒆𝒒𝒖𝒊𝒓𝒆𝒅 𝒕𝒐 𝒔𝒂𝒕𝒊𝒔𝒇𝒚 𝒅𝒆𝒎𝒂𝒏𝒅
• Easier training and supervision
• Rapid throughput 𝑾𝒐𝒓𝒌𝒆𝒓𝒔 𝒓𝒆𝒒𝒖𝒊𝒓𝒆𝒅
Disadvantages 𝑻𝒐𝒕𝒂𝒍 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒐𝒏 𝒕𝒊𝒎𝒆 𝒓𝒆𝒒𝒖𝒊𝒓𝒆𝒅
• High volume is required =
𝑻𝒂𝒌𝒕 𝒕𝒊𝒎𝒆
• Work stoppage at any point ties up the whole Mirror production
operation operations
• Lack of flexibility in product or production rates 1. Assemble- 50 secs
2. Paint- 45 secs
A SSEMBLY -L INE B ALANCING 3. Test- 10 secs
The objective is to minimize work imbalance on the 4. Label- 20 secs
assembly line while meeting required output. 5. Pack- 15 secs
McDonald’s Assembly Line – (work not balanced): Mirror production
scheduled for 8 hours per
day.
Mirrors required per day – 600 mirrors

𝑇𝑜𝑡𝑎𝑙 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 𝑡𝑖𝑚𝑒 = 50 + 45 + 10 + 20 + 15

= 140 𝑠𝑒𝑐𝑜𝑛𝑑𝑠
8 × 60
𝑇𝑎𝑘𝑡 𝑇𝑖𝑚𝑒 = = 0.8 𝑚𝑖𝑛 = 48 𝑠𝑒𝑐𝑠
600
140
𝑊𝑜𝑟𝑘𝑒𝑟𝑠 𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 = = 2.92 ≈ 3
48

SAJIN JOHN 35
W ING C OMPONENT E XAMPLE Several useful approaches to assign task to
𝑪𝒚𝒄𝒍𝒆 𝑻𝒊𝒎𝒆 workstation
𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒕𝒊𝒎𝒆 𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆 𝒑𝒆𝒓 𝒅𝒂𝒚
=
𝑼𝒏𝒊𝒕𝒔 𝒓𝒆𝒒𝒖𝒊𝒓𝒆𝒅 𝒑𝒆𝒓 𝒅𝒂𝒚

𝑴𝒊𝒏𝒊𝒎𝒖𝒎 𝒏𝒐. 𝒐𝒇 𝒘𝒐𝒓𝒌𝒔𝒕𝒂𝒕𝒊𝒐𝒏

∑𝒏𝒊=𝟏 𝒕𝒊𝒎𝒆 𝒇𝒐𝒓 𝒕𝒂𝒔𝒌 𝒊
=
𝑪𝒚𝒄𝒍𝒆 𝒕𝒊𝒎𝒆
• Output required- 40 units/day.
• Each day- 8 hours x 60 = 480 min.
• The assembly line has 9 tasks.
• Assembly time of each task is given in the table.
• Precedence relationships of the tasks are given in
the table.

Longest Task Time: 11 B, E, H

Task Assembly No. Of Can the Share
Time following task be task
tasks shared with
A 10 5 N
B 11 4 N
C 5 3 Y C, D, F
D 4 3
E 11 2 N
Try to create network/process diagram using F 3 2
relationship table (do note that certain task are G 7 1 Y G, I
dependent on other or multiple tasks) H 11 1 N
I 3 0 N

So, 6 stations required to fulfil the requirement.

480
𝐶𝑦𝑐𝑙𝑒 𝑡𝑖𝑚𝑒 = = 12 𝑚𝑖𝑛𝑢𝑡𝑒𝑠 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
40
65
𝑚𝑖𝑚. 𝑛𝑜. 𝑜𝑓 𝑤𝑜𝑟𝑘𝑠𝑡𝑎𝑡𝑖𝑜𝑛 = = 5.42 ≈ 6 𝑠𝑡𝑎𝑡𝑖𝑜𝑛𝑠
12

SAJIN JOHN 36
L AYOUTS 5 – W ORK C ELLS
An arrangement of machines and personnel that focuses IMPROVING LAYOUTS USING WORK CELLS
on making a single product or family of related
products.
• Organizes people and machines into groups to
focus on single products or product groups.
• Group technology identifies products that have
similar characteristics for particular cells.
• Volume must justify cells. Current layout – straight lines make it hard to balance
• Cells can be reconfigured as designs or volume tasks because work may not be divided evenly.
changes.

Improved layout - in U shape, workers have better

access. Four cross-
trained workers
were reduced to
three.

U-shaped line may reduce employee movement and

space requirements while enhancing communication,
reducing the number of workers, and facilitating
inspection.

SAJIN JOHN 37
MODULE 10 – HUMAN RESOURCES, JOB DESIGN, AND WORK MEASUREMENT

L ABOR P LANNING AND J OB D ESIGN

The objective of a human resource strategy is to manage
labor and design jobs so people are effectively and
efficiently utilized.
J OB D ESIGN
As we focus on a human resource strategy, we want to
Job design is specifying the tasks that constitute a job for
ensure that people:
an individual or a group.
1. Are efficiently utilized within the constraints of
Job design involves
other operations management decisions.
1. Job specialization – The division of labor into
2. Have a reasonable quality of work life in an
unique “special” task
atmosphere of mutual commitment and trust.
2. Job expansion
o Job enlargement – The grouping of a
L ABOR P LANNING – E MPLOYMENT S TABILITY variety of tasks about the same skill level;
P OLICIES horizontal enlargement.
Labor Planning – A means of determining staffing o Job enrichment – A method of giving an
policies dealing with employment stability, work employee more responsibility that includes
schedules and work rules. some of the planning and control necessary
1. Follow demand exactly – Direct labor always for job accomplishment, vertical expansion
matches requirements 3. Job rotation – A system in which an employee
o Incurs costs in hiring and termination, is moved from one specialized job to another.
unemployment 4. Employee empowerment – Enlarging
insurance, and employee jobs so that the added responsibility
premium wages. and authority are moved to the lowest level
o Labor is treated as a possible.
variable cost. 5. Psychological components – Human
resource strategy requires consideration of the
2. Hold employment constant – Maintain constant psychological components of job design.
workforce 6. Self-directed teams – A group of empowered
o Minimizes hiring, layoff, and unemployment individuals working together to reach a
costs. common goal.
o Employees may be 7. Motivation and incentive systems.
underutilized during
slack periods or
overworked during
busy periods.
o Labor is treated as a fixed cost.

M OTIVATION AND I NCENTIVE S YSTEMS

• Bonuses – cash or stock options.
• Profit-sharing – profits for distribution to
employees.
• Gain sharing – rewards for improvements.
• Incentive systems – typically based on production
rates.
• Knowledge-based systems – reward for knowledge
or skills.

SAJIN JOHN 38
L ABOR S TANDARDS
Labor standards – amount of time required to perform
a job or part of a job. T IME S TUDY P ROCEDURE
Started in early 20th century. 1. Define the task to be studied.
Uses of Labor standards - 2. Divide the task into precise elements.
1. Staffing needs/ Manpower planning. 3. Decide how many times to measure the task.
2. Forecast expected production. 4. Time and record element times and rating of
3. Make cost and time estimates. performance.
4. Estimate crew size. 5. Compute average observed time.
5. Work balance. 6. Determine performance rating and normal time.
6. Fair work. 7. Add the normal times for each element to develop
7. Basis of wage-incentive plans. total normal time for the task.
8. Measure efficiency of employees. 8. Compute the standard time.
Labor Standards may be set in four ways:
1. Time studies R EST A LLOWANCES
2. Work sampling • Personal time allowances
3. Historical experience o Around 5% of total time for use of restroom,
4. Predetermined time standards. water fountain, etc.
• Fatigue allowance
T IME S TUDY o Based on human energy expenditure.
Time study involves timing a sample of a worker's • Delay allowance
performance and using it to set a standard. o Based upon actual delays that occur.
Allowance Factors
Observed Time Normal Time (adjusted for speed) Class of Work %
Standard Time (adjusted for allowance) 1. Constant allowances:
(A) Personal allowance 5
(B) Basic fatigue allowance 4
• Involves timing a sample of a worker's
performance and using it to set a standard 2. Variable allowances:
• Requires trained and experienced observers (A) Standing allowance 2
• Cannot be set before the work is performed (B) Abnormal position
(i) Awkward (bending) 2
(ii) Very awkward (lying, stretching) 7
Average Observed time – The arithmetic means of the
(C) Use of force or muscular energy in lifting,
times for each element measured, adjusted for unusual
influence for each element. pulling, pushing Weight lifted
20 pounds 3
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒐𝒃𝒔𝒆𝒓𝒗𝒆𝒅 𝒕𝒊𝒎𝒆
𝑺𝒖𝒎 𝒐𝒇 𝒕𝒉𝒆 𝒕𝒊𝒎𝒆𝒔 𝒓𝒆𝒄𝒐𝒓𝒅𝒆𝒅 40 pounds 9
𝒕𝒐 𝒑𝒆𝒓𝒇𝒐𝒓𝒎 𝒆𝒂𝒄𝒉 𝒆𝒍𝒆𝒎𝒆𝒏𝒕 60 pounds 17
= (D) Bad light:
𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒐𝒃𝒔𝒆𝒓𝒗𝒂𝒕𝒊𝒐𝒏𝒔
(i) Well below recommended 2
(ii) Quite inadequate 5
Normal Time – The average observed time adjusted for
(E) Noise level:
pace
(i) Intermittent–loud 2
𝑵𝒐𝒓𝒎𝒂𝒍 𝒕𝒊𝒎𝒆 = 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒐𝒃𝒔𝒆𝒓𝒗𝒆𝒅 𝒕𝒊𝒎𝒆
(ii) Intermittent–very loud or high pitched 5
× 𝑷𝒆𝒓𝒇𝒐𝒓𝒎𝒂𝒏𝒄𝒆 𝒓𝒂𝒕𝒊𝒏𝒈 𝒇𝒂𝒄𝒕𝒐𝒓

Standard Time – An adjustment to the total normal

time; the adjustment provides allowances for personal
needs, unavoidable work delays, and fatigue.
𝑻𝒐𝒕𝒂𝒍 𝒏𝒐𝒓𝒎𝒂𝒍 𝒕𝒊𝒎𝒆
𝑺𝒕𝒂𝒏𝒓𝒅𝒂𝒓𝒅 𝒕𝒊𝒎𝒆 =
𝟏 − 𝑨𝒍𝒍𝒐𝒘𝒂𝒏𝒄𝒆 𝒇𝒂𝒄𝒕𝒐𝒓

SAJIN JOHN 39
Example 1: Example 2:
Average observed time = 4.0 minutes.
Worker rating = 85% (slow worker).
OBSERVATIONS (MIN)
Allowance factor = 13%.
𝑁𝑜𝑟𝑚𝑎𝑙 𝑇𝑖𝑚𝑒 = 𝐴𝑣𝑔 𝑜𝑏𝑠𝑒𝑟𝑣𝑒𝑑 𝑡𝑖𝑚𝑒 Perf
× 𝑅𝑎𝑐𝑡𝑖𝑛𝑔 𝑓𝑎𝑐𝑡𝑜𝑟 = 4.0 × 0.85 RAT-
JOB ELEMENT 1 2 3 4 5 ING
= 3.4 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
𝑁𝑜𝑟𝑚𝑎𝑙 𝑇𝑖𝑚𝑒 3.4
𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑇𝑖𝑚𝑒 = =
1 − 𝐴𝑙𝑙𝑜𝑤𝑎𝑛𝑐𝑒 𝑓𝑎𝑐𝑡𝑜𝑟 1 − 0.13 (A) Compose 8 10 9 21* 11 120%
3.4 and type letter
= = 3.9 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
0.87
(B) Type 2 3 2 1 3 105%
envelope
address

(C) Stuff, stamp, 2 1 5* 2 1 110%

seal, and sort
envelopes
Allowance factor = 15%
1. Delete unusual high or low observations (marked
with *)
2. Compute average time for each element
8 + 10 + 9 + 11
𝐴𝑣𝑔. 𝑡𝑖𝑚𝑒 𝑓𝑜𝑟 𝐴 = = 9.5 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
4
2+3+2+1+3
𝐴𝑣𝑔. 𝑡𝑖𝑚𝑒 𝑓𝑜𝑟 𝐵 = = 2.2 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
5
2+1+2+1
𝐴𝑣𝑔. 𝑡𝑖𝑚𝑒 𝑓𝑜𝑟 𝐶 = = 1.5 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
4
3. Compute the normal time for each element
𝑁𝑜𝑟𝑚𝑎𝑙 𝑡𝑖𝑚𝑒 = 𝑎𝑣𝑔. 𝑜𝑏𝑠𝑒𝑟𝑣𝑎𝑡𝑖𝑜𝑛 𝑡𝑖𝑚𝑒 × 𝑟𝑎𝑡𝑖𝑛𝑔
𝑁𝑜𝑟𝑚𝑎𝑙 𝑡𝑖𝑚𝑒 𝑓𝑜𝑟 𝐴 = 9.5 × 1.20 = 11.4 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
𝑁𝑜𝑟𝑚𝑎𝑙 𝑡𝑖𝑚𝑒 𝑓𝑜𝑟 𝐵 = 2.2 × 1.05 = 2.31 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
𝑁𝑜𝑟𝑚𝑎𝑙 𝑡𝑖𝑚𝑒 𝑓𝑜𝑟 𝐶 = 1.5 × 1.10 = 1.65 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
4. Add the normal times to find the total normal time
𝑇𝑜𝑡𝑎𝑙 𝑁𝑜𝑟𝑚𝑎𝑙 𝑇𝑖𝑚𝑒 = 11.4 + 2.31 + 1.65
= 15.36 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
5. Compute the standard time for the job
𝑇𝑜𝑡𝑎𝑙 𝑛𝑜𝑟𝑚𝑎𝑙 𝑡𝑖𝑚𝑒 15.36
𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑇𝑖𝑚𝑒 = =
1 − 𝐴𝑙𝑙𝑜𝑤𝑎𝑛𝑐𝑒 𝑓𝑎𝑐𝑡𝑜𝑟 1 − 0.15
15.36
= = 18.07 𝑚𝑖𝑛𝑢𝑡𝑒𝑠
0.85

SAJIN JOHN 40
W ORK S AMPLING
• Estimates percent of time a worker spends on
various tasks.
• Requires random observations to record worker P REDETERMINED T IME S TANDARDS ARE
activity. AVAILABLE
• Determines how employees allocate their time.
• Divide manual work into small basic elements that
• Can be used to set staffing levels, reassign duties, have established times.
estimate costs, and set delay allowances.
• Can be done in a laboratory away from the actual
production operation.
• Can be set before the work is actually performed.
• No performance ratings are necessary.

M ETHOD A NALYSIS
Methods Analysis – A system that involves developing
work procedures that are safe and produce quality
products efficiently
How the task is performed.
Used to analyze
1. Movement of individuals or material
o Flow diagrams and Process charts
2. Activities of human and machine and crew activity
o Activity charts
3. Body movement
o Operations charts

Activity Chart: Man (Crew) – Machine activities

A way of improving utilization of an operator and a
machine of some combination of operators (a crew) and
machines.

Operations Chart – LEFT- AND RIGHT-HAND

motions
A chart depicting right- and left- hand motions.

SAJIN JOHN 41
Flow Diagram Process Chart
A drawing used to analyse movement of people or Graphic representations that depict a sequence of steps
material. for a process.

SAJIN JOHN 42