Production Management All Chapters 2022-23

2022-23
Production Management, S.Y. BBA – Sem 4, VNSG University, Surat
Dr. Zakir A. Patel, Prof, Naran Lala College of Commerce & Management 1
Mobile: 9586075954
2022-23
UNIT - 1
INTRODUCTION TO PRODUCTION MANAGEMENT
INTRODUCTION
 There are three primary activities of an organisation – Production, Finance and Marketing.
Production function tries to convert raw material and other inputs into products/services.
 Finance function provides capital to production. Marketing function sells the goods/services
produced by the production function.
 The word ‘manufacturing’ was originally derived from two Latin words ‘manus’ (hand) and
‘factus’ (make), so that the combination means ‘make by hand’. In this way manufacturing
word first appeared in English around 1567 A.D. Commercial goods of those times were made
by hand. The methods were handicraft, done in small shops and the goods were simple. As
many years passed, the products have now become more complex along with processes. Thus
factories were developed with many workers and machines.
 Modern manufacturing, therefore, requires a proper management of production activities.
DEFINITION AND MEANING OF PRODUCTION

According to Buffa, “Production is a process by which goods and services are created.”
From the above definition, we can say that;
 Production is a transformation process. It transforms inputs into outputs.
 Inputs can be material, labour, information, technology etc.
 Outputs can be goods/services.
 Example: Goods – Car, TV, Laptops etc.
Services – Ticket Reservation service at Railway station
Following figure shows Production as a function. It transforms (converts) inputs into outputs.
Mobile: 9586075954
2022-23
DEFINITION OF OPERATIONS MANAGEMENT & PRODUCTION

MANAGEMENT
PRODUCTION MANAGEMENT:
“Production management is the process of planning, implementing and controlling the activities of
Production function.” Production function is the conversion of inputs into final goods.
OPERATIONS MANAGEMENT:
“Operations management is the process of planning, implementing and controlling the activities of
Operations function.” Operation function is the conversion of inputs into goods and services.
Following are the important differences between production management and operation management;
DIFFERENCE BETWEEN PRODUCTION & OPERATIONS

MANAGEMENT
Production deals with only physical goods and Operations deals with physical goods and services.
Hence, the difference between production and operations is only about physical goods and services.
Following are the differences between physical goods and services;
1. INTANGIBILITY: When a service product is purchased, something is acquired that cannot be
seen or touched. This is known as intangibility. E.g. Travel, Entertainment, Advice, Education
etc.
2. VARIABILITY / HETEROGENEITY: Service industries are more labour intensive whereas
manufacturing is more capital intensive. As a result, services are less standardized than
products. Hence services are often dependent more on labour and less on technology. As a
result of this, services are more variable in nature since humans cannot produce the same result
every time.
3. INSEPARABILITY: Products are generally produced and then sold and consumed. Service
are usually sold first, then produced and consumed at the same time. Hence often services are
produced and consumed at the same time. E.g. A consumer buys a plane ticket first. The
service is produced as the plane takes off and consumption occurs because the consumer is in
the plane.
4. PERISHABILITY: Since services are produced and consumed at the same time, it cannot be
stored as inventory. Hence, service should be consumed at the same time when produced. If
services are not consumed when offered, they go waste. For e.g. an empty airline or theatre seat
represents lost revenue.
5. OUTPUT: Production management deals with manufacturing of products like (computer, car,
etc) while operations management cover both products and services.
6. USAGE OF OUTPUT: Products like computer/car are utilized over a period of time whereas
services need to be consumed immediately.
7. LABOUR OR CAPITAL INTENSIVE: To produce products like computer/car more of
capital equipment and less labour are required while services require more labour and lesser
capital equipment.
8. STORAGE: Physical goods can be stored but it is not possible to store services.
Mobile: 9586075954
2022-23
Hence, we can say that it is appropriate to use the term “OPERATIONS MANAGEMENT” instead of
“PRODUCTION MANAGEMENT” because Operations management involves both physical goods
and services.
SCOPE OF OPERATIONS / PRODUCTION MANAGEMENT
Following are the important functions / scope of production management;
Mobile: 9586075954
2022-23
The objective of production management is to satisfy the needs of the customers through offering
quality products/services. The decisions in Production management can be divided into long term
(Strategic decisions) and short term (Tactical/Operational) nature.
STRATEGIC DECISIONS (Long Term Decisions)

1. New Product Identification and Design:
 The success of any organisation depends upon the product mix that it offers to the customer.
 Products will be demanded more if they are acceptable by the consumers in market.
 Hence, the products should be designed in such way as to meet the expectations of customers.
 The tools like value analysis should be applied at the design stage to reduce the unnecessary
cost of the product.
2. Process Design and Planning:
 This involves the appropriate technology for conversion of raw materials into products.
 The choice of technology depends upon many factors such as demand, investment capability,
labour availability and degree of automation required.
 The company has to design and plan the technology in order to convert raw materials into
finished goods.
3. Facilities Location and Layout Planning:
 Here the company has to decide the place and site for producing goods/services.
 The facilities location is a strategic decision (long term) and facilities once located will not be
changed in near feature. Hence, it is very important to consider all the factors that affect the
location decision of the manufacturing/service organisation.
 After this, the company has to decide the actual arrangement of its machines and other
resources so that smooth flow of production happens. The arrangement of machines and
resources is known as Plant Layout.
 Plant layout helps in smooth flow of work, reduced internal transportation cost etc.
4. Capacity Planning:
 This decision is concerned with the acquiring of fixed assets like plant and machineries.
 Capacity means the amount of goods to be produced in a given period of time (usually one
year).
 Deciding capacity of plant is a long term decision and hence must be taken carefully.
5. Design of Material Handling System:
 Minimum material handling is required in order to avoid the cost of breakage of the goods. It is
not possible to totally avoid material handling. It must be handled properly to avoid increase in
cost.
 The selection of particular material handling equipment is dependent on the distance between
the workstations, intensity of flow or traffic and size, shape and nature of materials to be
handled.
 Material handling can be manual or mechanical (automation).
 A company can decide to do manual or mechanical material handling on the basis of resources
availability. Manual material handling increases the chance of mishandling and hence increases
the chances of rise in cost. Hence, it is better to handle material mechanically with the help of
machines.
 The decision regarding the size of the plant, output etc. are decided at this stage. The capacity
planning activity depends on the volume of demand.
Mobile: 9586075954
2022-23
TACTICAL / OPERATIONAL DECISIONS (Short Term Decisions):

1. Production planning:
 Before producing goods/services, the company has to plan it.
 Production planning helps in avoiding the problems of production before they arise.
 Production planning helps in determining the goals/targets of production department.
 There are many tools of production planning like MRP (material requirement planning), CRP
(capacity requirement planning), MPS (master production schedule) etc.
 Better production planning will help in better services to the customer.
2. Production control:
 It is a management technique, which aims to see that the activities are carried out as per the
production plan.
 Production control activity is concerned with comparing actual output with standard (planned)
output and to take corrective action if there is any deviation between actual and standard.
 Production control is necessary to achieve the targets set by production planning.
3. Inventory Management:
 Inventory management means managing raw materials, work in progress and finished goods.
 Inventory has a cost. Hence, Inventory management is necessary in order to minimise the cost
of inventory.
 If proper management of inventory is not done, it may increase the cost of surplus inventory or
cost of shortage of inventory.
 The tools available for better inventory management are EOQ (Economic order quantity), ERL
(Economic run length), ABC analysis etc.
4. Quality Control:
 The success of any organisation depends upon the quality of its activities. Production
department has to worry about the quality of the products/services produced.
 The quality of products includes shape, size, colour, taste etc. If these are not maintained, then
the organisation does not remain competitive in the market.
 Companies first decide the standards in designing a product. These standards are to be met in
order to make sure that quality is maintained.
 Quality control is necessary at every stage of production – from raw material to semi-finished
to finished goods.
 Quality control helps the organisation in producing RIGHT goods as per the specifications of
the customers.
5. Maintenance Management:
 Production department also has to maintain its activities so as the achieved the desired results.
 Maintenance of Production planning and control department, materials department, stock and
purchase department becomes necessary in order to perform production function smoothly.
 Maintenance of machines, spares, tools etc is an important part of production department. This
helps in proper functioning of resources and reduction in overall cost of production.
Hence, to conclude, we can say that Production function has many decisions to make. These decisions
could be of long term and short term nature.
******************************************************************************************
Mobile: 9586075954
2022-23
IMPORTANCE / SIGNIFICANCE OF OPERATIONS MANAGEMENT
Operations Management is an important primary function of any organisation. The importance of

operations management can be understood with the help of following points;
 CUSTOMER SERVICE
 The first objective of the production department is the customer service. The main objective of
any organisation is to the satisfy customer wants. Therefore, customer service is an important
objective of operations management.
 Production department tries to satisfy customers through;
o Providing product at the right time
o Providing product at the right cost
o Providing the product with right specifications
 Hence, the importance of production department is in providing the product to customer at the
right time and cost and as per the specifications of the customer.
 Thus, primary objective can be satisfied by providing the ‘right thing at a right price at the right
time’.
 Generally an organization will aim to achieve certain standards and operations manager will
attempt to achieve these standards. Hence, this objective will influence the operations
manager’s decisions to achieve the required customer service.
 RESOURCE UTILISATION
 Another major objective of operations department is to utilise resources for the satisfaction of
customers, i.e., customer service must be provided through efficient use of resources.
 Inefficient use of resources or inadequate customer service leads to commercial failure of a
company.
 Operations management is hence concerned with the utilisation of resources, i.e., obtaining
maximum effect from resources or minimising their loss, under utilisation or waste.
 The extent of the utilisation of the resources’ potential might be expressed in terms of the
proportion of available time used or occupied, space utilisation etc. Each measure indicates the
extent to which the capacity of such resources is utilised. This is referred as the objective of
resource utilisation.
 COST REDUCTION
 The job of production department is to carefully estimate the cost and make efforts to maintain
or reduce the cost continuously. The production department makes effort to ;
o Reduction in variable costs
o Reduction in fixed costs
o Increase in volume of production so that the fixed cost may be spread over more
production which shall result into reduction in price per unit of production.
 PRODUCT QUALITY
 It is the job of the production department to produce goods as per the standards specified by the
customers. The importance of production department is to maintain the specification standards
in order to produce quality products for customer satisfaction.
Mobile: 9586075954
2022-23
 It must be remembered that product quality and cost reduction do not go together. This is
because if product quality is improved, it may increase the cost and if cost is reduced, product
quality may decline.
 Therefore the job of the company is to maintain the right balance between product quality and
cost.
 Thus production department is an important part of any organisation.
 COMPETITIVE ADVANTAGE
 Production department is important for any organisation because it tries to reduce cost and
improve quality of products. This helps in delivering value to the customers.
 Better value to customer helps in creating competitive advantage in market. Competitive
advantage means doing something better than the competitors.
 Production department can help the company in creating competitive advantage against
competitors by cost reduction and quality improvement.
 KEY SUCCESS FACTOR

 Key success factors are those factors that help in achieving success for any organisation.
 Different organisations have different key success factors depending upon the type of
organisation.
 Production department can act as a key success factor for many types of organisations.
PRODUCTION SYSTEM
Definition: “A production system is a collection of people, equipment, and procedures organized to

perform the manufacturing operations of a company (or other organization)”.
Types of Production System: Production system can be basically classified into following categories;
TYPES OF PRODUCTION SYSTEM
Manufacturing System Service system
Continuous System Intermittent System
Mass Production Assembly-line Production Job Shop Batch
Mobile: 9586075954
2022-23
A. CONTINUOUS / FLOW PRODUCTION SYSTEM
 Continuous means something that operates continuously without any irregularities or stops.
 In the continuous production system, goods are produced constantly as per demand forecast.
 They are not produced on customer's orders.
 Goods are produced on a large scale for stocking and selling.
 Here, the inputs and outputs are standardized along with the production process and sequence.
 Continuous production system involves a continuous physical flow of materials. It makes use
of special purpose machines and produces standardized products in large quantities. Some
industries that use Continuous Production System are - Petrochemical, Cement, Steel, Sugar
and Fertilizer industries, etc.
Examples:
 The production system of a food industry is purely based on the demand forecast. Here, a large-
scale production of food takes place. It is also a continuous production.
 The production and processing system of a fuel industry is also purely based on, demand
forecast. CRUDE OIL and other raw sources are processed continuously on a large scale to
obtain useful products like petrol, diesel, kerosene etc.
Types:
 Following are the types of continuous production system;
Mass Production Process Production Assembly Line Production
1. MASS PRODUCTION
 Manufacture of parts or assemblies using a continuous process are called mass production.
 This production system is justified by very large volume of production. The machines are
arranged in a line or product layout. There is a standardisation of product and process and
hence all outputs follow the same path.
Characteristics:
Mass production is used under the following circumstances:
1. Standardisation of product and process sequence.
2. Dedicated machines having higher production capacities.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous.
8. Production planning and control is easy.
9. Material handling can be completely automatic.
Advantages:
Following are the advantages of mass production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilisation due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.
Limitations:
Following are the limitations of mass production:
1. Breakdown of one machine will stop an entire production line.
2. Layout needs major change with the changes in the product design.
3. High investment in production facilities.
Mobile: 9586075954
2022-23
2. ASSEMBLY LINE PRODUCTION

Production facilities are arranged as per the sequence of production operations from the first
operations to the finished product. The items are made to flow through the sequence of
operations through material handling devices such as conveyors, transfer devices, etc.
Characteristics:
Assembly line production is used under the following circumstances:
1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.
Advantages:
Following are the advantages of continuous production:
1. Standardisation of product and process sequence.
2. Higher rate of production with reduced cycle time.
3. Higher capacity utilisation
4. Manpower is not required for material handling as it is completely automatic.
5. Person with limited skills can be used on the production line.
6. Unit cost is lower due to high volume of production.
Limitations:
Following are the limitations of continuous production:
1. Flexibility to accommodate and process number of products does not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.
3. PROCESS PRODUCTION SYSTEM
 This system is used for the manufacture of those items whose demand is continuous and
high.
 Here, single raw material can be transformed into different kinds of products at different
stages of the production process e.g., processing of crude oil in refinery — we get kerosene,
gasoline, etc., at different stages of production.
B. INTERMITTENT PRODUCTION SYSTEM
 Intermittent means something that starts (initiates) and stops (halts) at irregular (unfixed)
intervals (time gaps).
 In the intermittent production system, goods are produced based on customer's orders.
 These goods are produced on a small scale.
 The flow of production is not continuous.
 In this system, large varieties of products are produced. These products are of different sizes.
 The design of these products goes on changing according to the design and size of the product.
Therefore, this system is very flexible.
Examples:
 The work of a goldsmith is purely based on the frequency of his customer's orders. The
goldsmith makes goods (ornaments) on a small-scale basis as per his customer's requirements.
Here, ornaments are not done on a continuous basis.
Mobile: 9586075954
2022-23
 Similarly, the work of a tailor is also based on the number of orders he gets from his customers.
The clothes are stitched for every customer independently by the tailor as per one's
measurement and size.
1. JOB SHOP PRODUCTION

Job shop production includes manufacturing of one or few quantity of products designed and
produced as per the specification of customers within prefixed time and cost. The important
feature of this is low volume and high variety of products. A job shop consists of general
purpose machines. Each job demands unique demands processing on machines in a certain
sequence.
Characteristics:
The Job-shop production system is followed when there is:
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product, capacities
for each work centre and order priorities.
Advantages:
Following are the advantages of job shop production:
1. Because of general purpose machines and facilities variety of products can be produced.
2. Operators will become more skilled and competent, as each job gives them learning
opportunities.
3. Full potential of operators can be utilised.
4. Opportunity exists for creative methods and innovative ideas.
Limitations:
Following are the limitations of job shop production:
1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.
2. BATCH PRODUCTION
Batch production is defined by American Production and Inventory Control Society (APICS)
as a form of manufacturing in which the job passes through the functional departments in lots
or batches and each lot may have a different routing.” It is characterised by the manufacture of
limited number of products produced at regular intervals and stocked awaiting sales.
Characteristics:
Batch production system is used under the following circumstances:
1. When there is shorter production runs.
2. When plant and machinery are flexible.
3. When plant and machinery set up is used for the production of item in a batch and change of
set up is required for processing the next batch.
4. When manufacturing lead time and cost are lower as compared to job order production.
Advantages:
Following are the advantages of batch production:
1. Better utilisation of plant and machinery.
2. Promotes functional specialisation.
3. Cost per unit is lower as compared to job order production.
4. Lower investment in plant and machinery.
Mobile: 9586075954
2022-23
5. Flexibility to accommodate and process number of products.

6. Job satisfaction exists for operators.
Limitations:
Following are the limitations of batch production:
1. Material handling is complex because of irregular and longer flows.
2. Production planning and control is complex.
3. Work in process inventory is higher compared to continuous production.
4. Higher set up costs due to frequent changes in set up.
******************************************************************************************
Difference between Intermittent and Continuous Production System
1. Nature of product :
 In intermittent production system, goods are produced based on customer orders and
not for stocking the goods in inventory.
 In continuous production system, goods are produced based on demand forecast and for
stocking in inventory.
2. Flexibility of process :
 In intermittent production system, production process is flexible. The product design
goes on changing.
 In continuous production system, production process is not flexible. It is standardized.
The same product is manufactured continuously.
3. Scale of production :
 In intermittent production system, goods are produced on a small scale, so there is no
economies of scale.
 In continuous Production System, goods are produced on a large scale, so there are
economies of large-scale production.
Mobile: 9586075954
2022-23
4. Per unit cost :

 In intermittent production system, cost per unit may be higher because production is
done on a small-scale.
 In continuous production system, cost per unit may be lower because production is done
on large-scale.
5. Range of products :
 In intermittent production system, wide ranges of products are manufactured.
 In continuous production system, normally one particular type of product is
manufactured.
6. Instructions :
 In an intermittent production system, many detailed instructions must be provided
depending upon the customer's specification.
 In continuous production system, single set of instructions is sufficient for operation.
Here, there is no need to repeat the instructions.
7. Staff :
 Intermittent production system requires staff with high technical skills and abilities.
Since, variety of goods is produced, it is important to have staff with proper technical
abilities.
 Continuous production system requires more managerial skills and less technical skills.
Same type of goods are continuously produced and as a result, lesser skilled worker can
also be used for production. Managerial skills is required to manage large amount of
production.
8. Storage of final products :

 In an intermittent production system, there is no need to store and stock the final
products, because items are produced as per customer's orders.
 In a continuous production system, there is a need to store and stock the final products
until they are demanded in the market.
9. Location change :
 In an intermittent production system, change in location is easy. Since large capacity is
not installed, it is easy to move from one location to another.
 In a continuous production system, change in location is difficult. Since large capacity
is installed for continuous production, it is not easy to move from one location to
another.
10. Capital invested :

 In an Intermittent production system, capital invested is small. Less number of
machines are used as the volume of production if lower and variety has to be produced.
 In a continuous production system, capital invested is very huge. More number of
machines are arranged in order to perform large volume of continuous production.
******************************************************************************************
Mobile: 9586075954
PRODUCTION MANAGEMENT – I, SY BBA (Sem 4), VNSGU-Surat
UNIT 2
PLANT LAYOUT & MATERIAL HANDLING
MEANING & DEFINITION:
The efficiency of production depends on how well the various machines; equipments, departments,
production facilities etc. are located in a plant. Good arrangement of all these things will help in smooth
and rapid movement of material, from the raw material stage to the end product stage. Hence the
arrangement (layout) is an important factor for efficient production in a company.
DEFINITION:
“Plant layout refers to the arrangement of physical facilities such as machinery, equipment, furniture
etc. within the factory building in such a manner so as to have quickest flow of material at the lowest
cost and with the least amount of handling in processing the product from the receipt of material to the
shipment of the finished product.”
According to J. L. Zundi, “Plant layout ideally involves allocation of space and arrangement of
equipment in such a manner that overall operating costs are minimized.”
An efficient plant layout is one that tries to achieve the following objectives:
 Proper and efficient utilization of available floor space
 To ensure that work proceeds from one point to another point without any delay
 Reduce material handling costs
 Reduce accidents / Reduce hazards to labour
 Utilise labour efficiently
 Provide for volume and product flexibility
 Provide ease of supervision and control
 Allow ease of maintenance
 Improve productivity
TYPES OF LAYOUT
Plant layout may be of four types:
(a) Product or line layout
(b) Process or functional layout
(c) Fixed position or location layout
(d) Cellular layout
(e) Combined or group layout
1 Page
Dr. Zakir A. Patel, Prof, Naran Lala College of Commerce & Management, Navsari
Mobile: 9586075954
PRODUCT LAYOUT
Features:
 Machines and equipment are arranged in one line according to the sequence of operations
required for the production of product.
 Product layout is also called as line layout
 The materials move from one workstation to another in a sequence without any back-tracking.
 Machines are arranged in one sequence. Same product will be produced continuously.
 The output of one machine becoming input of the next
 The raw material moves very fast from one workstation to other stations with a minimum work
in progress storage and material handling.
Advantages:
 Low cost of material handling, due to straight and short route and absence of backtracking
 Smooth and uninterrupted operations
 Continuous flow of work
 Lesser investment in inventory and work in progress
 Best possible use of floor space
 Shorter processing time or quicker output
 Less congestion of work in the process
 Simple and effective inspection of work and simplified production control
 Lower cost of manufacturing per unit
Disadvantages:
 High initial capital investment in special purpose machine
 Breakdown of one machine will stop the whole production process
 Lesser flexibility as it is specially made for particular product.
Suitability:
 Mass production of standardized products
 Simple and repetitive manufacturing process
 Operation time for different process is more or less equal
2
 Reasonably stable demand for the product

Page
 Continuous supply of materials
Mobile: 9586075954
PROCESS LAYOUT
Features:
 Machines of a similar type are arranged together at one place (department). machines
Example: Performing drilling function is fixed in Drilling department.
 Process layout is also called function layout, or Batch production layout.
 Departments are created and jobs are processed in each department. Raw material does not
pass from one machine to another. It passes through different departments.
 Process layout is designed to process materials that require different types of processing. The
timing of processing for each material might be different. Hence continuous flow of material is
not possible in process layout.
Figure: Process Layout

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

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

 Products are not standardized
 Quantity produced is small
 There are frequent changes in design and style of product
3
 Job shop type of work is done

Page
Mobile: 9586075954
FIXED POSITION OR LOCATION LAYOUT
Features:
 The major product being produced is fixed at one location. Product remains at one location
because cost of moving the product is very high. Equipment labour and components are moved
to that location.
 Sometimes weight, size and other factors of the product is such that it becomes very difficult to
move the product. Hence, the product will remain static at a place.
Example: Ship-building. Ship is very large. Hence, it remains static at one place when it is built.
 Construction of building is of fixed position layout. Building remains at a fixed place and labour
and equipments are moved towards the building.
 In service industry, Patients in a hospital remain at one place. Doctors, nurses, medical
equipments etc. move towards the patient.
Figure: Fixed position layout

Advantages:
 It saves time and cost involved on the movement of work from one workstation to another.
 The layout is flexible as change in job design and operation sequence can be easily done.
 It is more economical when many orders in different stages of progress are being executed
simultaneously (at the same time).
 Adjustments can be made to meet shortage of materials or absence of workers by changing the
sequence of operations.
Disadvantages:
 Production period being very long, capital investment is very heavy
 Very large space is required for storage of material and equipment near the product.
 As several operations are often carried out simultaneously, there is possibility of confusion and
conflicts among different workgroups.
Suitability:
 Manufacture of bulky and heavy products such as locomotives, ships, boilers, generators,
wagon building, aircraft manufacturing, etc.
 Construction of building, flyovers, dams.
 Hospital, the medicines, doctors and nurses are taken to the patient (product).
4 Page
Mobile: 9586075954
CELLULAR LAYOUT
Features:
 Cellular layout is made up of different Cells. Therefore it is called Cellular layout.
 Each cell contains a machine which produces a component / part. The components or parts
from each cell are then assembled (combined) to produce a final product.
 Each cell may contain group of machines which produces family of parts (few parts with some
common characteristics).
 Finally the parts produced in different cells are assembled together to produce the final
product.
Advantages:
 Lower work-in-process inventory.
 Reduced material handling cost
 Improved visual supervision and control
 Simple production planning
Disadvantages:
 Reduced manufacturing flexibility
COMBINED / HYBRID LAYOUT

Features:
 In many industries, different types of layouts are used within the same production department.
A single type of layout is not always possible.
 Certain manufacturing units may require both the types of production - intermittent process
(job shops), the continuous process (mass production shops)
 Example:
o Some parts which are manufactured by product layout might be faulty. In such a case,
the faulty product may be reproduced using process layout.
o In service sector, Hospital is a good example of combined layout. Process layout is used
5
in hospitals. But in case of patient operation, fixed type of layout is used.

Page
o In soap industry, all inputs are manufactured in different units. For example, glycerin,
water treatment, fragrance etc.
Mobile: 9586075954
SERVICE LAYOUT
 The major factors considered for service providers, is an impact of location on sales and
customer satisfaction.
 Customers usually would look to get the service at some convenient location.
 Hence, service facility layouts should provide for easy entrance to these facilities from the
freeways.
 Well-organized packing areas, easily accessible facilities, well designed walkways and parking
areas are some of the requirements of service facility layout.
Service facility Design and Layout

 Service facility layout will be designed based on degree of customer contact and the service
needed by a customer. These service layouts follow conventional layouts as required.
 For example, for car service station, product layout is adopted, where the activities for
servicing a car follows a sequence of operation irrespective of the type of car.
 Hospital service is the best example for adaptation of process layout. Here, the service required
for a customer will follow an independent path. The layout of car servicing and hospital is
shown in Figs.
Service layout for car servicing
6 Page
Mobile: 9586075954
Layout for hospitality service
PRINICIPLES OF GOOD PLANT LAYOUT:
1. Overall integration of factors:

 A good layout is one that integrates men, materials, machines and supporting activities
and others in a way that the best compromise is obtained.
 No layout can satisfy each and every principle of a good layout. Some criterion may
conflict with some other criterion and as a result no layout can be ideal it has to integrate
all factors into the best possible compromise.
2. Minimum movement:
 A good layout is one that permits the minimum movement between the operations. The
plant and machinery in case of product layout and departments in case of process layout
should be arranged as per sequence of operations of most of the products.
 Since straight line is the shortest distance between any two points, men and materials as
far as possible should be made to move along the straight path. A door may be made in a
wall or a hole may be drilled in a ceiling if that eliminates or reduces material handling
in place of stairs or a distant door.
3. Uni-direction flow:
 A good layout is one that makes the materials move only in the forward direction,
towards the stage of completion, with any back-tracking.
 Since straight line is the shortest distance between any two, points, materials as far as
possible should be made to move on the principle of straight-line flow. And when
straight line flow is not possible, other flows like U-shaped flow, circular flow or zig zag
flow may be adopted, but the layout may ensure that materials move in the forward
direction.
4. Effective use of available space:

 A good layout is one that makes effective use of available space both horizontal and
7 Page
vertical.
 Backtracking and duplicated movements consume more time, involve un-necessary
materials handling, add to cost and lead to inefficiency.
Mobile: 9586075954
 Raw materials, work-in-progress and finished goods should be piled vertically one above
another rather than being strewn on the floor.
 Area below the work-tables or in the cupboards built into the wall is welcome since they
reduce requirement of space.
5. Maximum visibility:
 A good layout is one that makes men, machines and materials ready observable at all
times.
 All departments should be smoothly integrated, convenient to service and easy to
supervise.
 Every piece of positioning or screening or partitioning should be scrutinized and
carefully planned.
 Special cupboards, enclosures, offices, partitions etc. should be avoided except when
their utility is established beyond doubt.
6. Maximum accessibility:
 A good layout is one that makes all servicing and maintenance point readily accessible.
 Machines should be kept sufficiently apart and with reasonable clearance from the wall
so that lubrication, adjustment and replacement of belts, removal of parts at the time of
repairs etc. can be done conveniently by the maintenance staff.
 Area in front of electrical panels and fire extinguishers should be kept free from
obstructions.
7. Maximum flexibility –
 The plant layout should not be rigid and permanent. If the need arises, the plant layout
should be able to change itself without being expensive. The layout of plant also depends
upon the type of product mix produced. When an organization changes its product mix,
there might be a requirement to change plant layout. Hence, a good plant layout must be
flexible in nature.
8. Maximum coordination –
 The layout of the plant should be such that all of its resources and workforce can be
observed and evaluated at all points in time. This helps in better supervision of work and
helps in increasing both effectiveness and safety.
9. Maximum visibility-
 The layout should visible to all the workers in the organization. Visibility helps in saving
time often. For example, a production worker may find it easy to locate different tools,
machines easily in order to perform his or her operations.
10. Minimum Discomfort-

 The layout should improve the comfortability of the workers in the organization. Any
layout that increases the discomfort for workers then it would be difficult for the worker
to be efficient and effective in his work.
8
11. Minimum Handling –

Page
 The ineffective handling of materials leads to a rise in cost. Materials should be handled
as much less as possible. Handling of a material twice in the same direction must be
Mobile: 9586075954
avoided. There are various principles of material handling which must be taken care of in
order to perform work efficiently.
12. Safety Aspects –

 The environment of the plant should be safe for the workers as well as the machines.
There should be fire extinguishers placed strategically. There should be minimum contact
of the labour to toxic chemicals and environment.
13. Efficient Process Flow-

 A good layout is one that makes the materials to move in forward direction towards the
completion stage i.e. there should not be any backtracking.
FACTORS AFFECTING PLANT LAYOUT
1. Plant Location:
• Plant layout and location are interrelated with one another. Location with larger area has more
flexibility to be used for preparing the layout.
• The nature and size of the building determines the floor space available for layout. While
designing, special requirements, e.g. air conditioning, dust control, humidity control etc. must be
kept in mind.
2. Nature of Product:
• Product layout is suitable for uniform products whereas process layout is more appropriate for
custom-made products.
• Depending upon the sequence of operation and the nature of the product, plant layout is decided.
• If the product requires more varieties, then process type of layout becomes more suitable.
3. Type of Industry:
• Product layout is suitable for continuous production type of industry.
• Process layout is suitable for intermittent production type of industry.
4. Plant Environment:
• Heat, light, noise, ventilation and other aspects should be considered while deciding the plant
layout. Example: paint shops and plating section should be located in another hall so that
dangerous fumes (gas) can be removed through proper ventilation etc.
• Adequate safety arrangement should also be made to avoid health problems to workers.
5. Repairs and Maintenance:

• Machines should be so arranged in such a way that there is enough space available between
machines so that proper movement of labour, equipments etc. becomes possible.
• Repair and maintenance work is easier if machines are properly adjusted in a layout.
6. Labour requirements:
 Following factors must be considered while making plant layout decisions;
9
o If women workers are employed, then accordingly layout must be decided to take care of
Page
their requirements.
o The position of employees (stationary or moving) will decide the plant layout.
Mobile: 9586075954
o Facilities such as health, locker rooms, common room etc. influence plant layout decision.
7. Management Policies:
• The management has to consider the following points by formulating policy with regard to plant
layout.
 Size of the product  No. of equipment and facility
 Delivery schedule  Productivity
 Employee facility
DIFFERENCE BETWEEN PRODUCT LAYOUT AND PROCESS LAYOUT
1. PRODUCT
Standardised product is processed in Product layout. The output produced is in large quantity at a stable
rate. In process layout the product has many varieties. The output produced is in varying quantity at a
variable rate.
2. PROCESS
In product layout, Continuous production system is followed and mass production is done. In process
layout, intermittent production system is used.
3. WORK-FLOW
In product layout, same sequence of operations is followed to produce the output. In process layout,
production flow is variable. It may not remain fixed. Each order may require different sequence of
operations.
4. MATERIAL HANDLING
In product layout, minimum material handling is done. Hence, fixed path material handling equipments
may be used. In process layout, material flow is variable. It does not remain fixed. Hence material
handling is more in this case. Variable path material handling equipments are used here.
5. INVENTORY
In product layout, continuous supply of material is required. Hence more stock of raw material and
work in process will be required. In process layout, supply of material is not required in a continuous
flow. Hence lesser amount of raw material and work in process inventory is required.
6. LABOUR SKILLS
In product layout, workers should be able to perform routine tasks or repetitive task at fixed place. This
may result into boredom. It is difficult to motivate the workers. In process layout, workers may get
variable activities to be done routinely. Hence, it produces lesser boredom as compared to product
layout workers.
7. SPACE USAGE
In product layout, large output per unit space is needed. In process layout, lower output per unit space is
needed.
8. CAPITAL
In product layout, large amount of money is required for special purpose machines. In process layout,
lesser money is required because the machines are used for general purpose.
9. COST
In product layout, fixed cost is high. Per unit cost is low and low material and labour cost. In process
layout, there is comparatively lower fixed cost, per unit cost and direct labour and material cost.
10. FLEXIBILITY
10
In product layout, there is no flexibility in adjusting the machines. Once they are set-up, they must be
Page
used in the same sequence and set-up. In process layout, there is flexibility in adjusting the machines as
per the requirement. Machines can be re-adjusted if required.
Mobile: 9586075954
MATERIAL HANDLING
DEFINITION & MEANING

According to The American Material Handling Society, “Material handling is the movement and
storage of material at the lowest possible cost through the use of proper method and equipment”.
 Material handling means providing the RIGHT AMOUNT of the RIGHT MATERIAL in the
RIGHT CONDITION, at the RIGHT PLACE at the RIGHT TIME in the RIGHT POSITION and
for the RIGHT COST by using the RIGHT METHOD.
 In simple words, Material handling involves picking up the material, moving it and lying down
the materials during the entire manufacturing process.
PRINCIPLES OF MATERIAL HANDLING
1. PLANNING PRINCIPLE
 Proper planning is necessary for all material handling activities.
 Planning of material handling methods will help in reducing the cost of handling.
 Planning shall help in selection of proper material handling equipments in order to handling
materials effectively and efficiently.
 Material handing plan defines the material (what) and the moves (when and where); together
they define the method (how and who).
2. STANDARDIZATION PRINCIPLE
 Material handling methods, equipment, controls and software should be standardized so that
overall performance and objectives can be achieved.
 Standardisation means less variety in the methods and equipments used for handling materials.
 The planner should select methods and equipment that can perform a variety of tasks under a
variety of operating.
3. WORK PRINCIPLE
 Material handling work should be minimized in order to reduce the cost of handling of materials.
 Work must be reduced without sacrificing productivity or the level of service required.
 Work can be reduced by combining, shortening or removing unnecessary moves. There are
different types of moves in material handling – pickup of material, setting down, placing
material in and out of storage etc.
 Proper methods, sequence of operations, layouts etc. should be prepared so that work
minimization principle can be effectively used.
4. ERGONOMIC PRINCIPLE
 Human capabilities and limitations must be considered in the design of material handling tasks
and equipment in order to have safe and effective operations.
11
 Ergonomics is the science that tries to adapt work or working conditions to suit the abilities of
Page
the worker.
 Equipment should be selected that eliminates repetitive and strenuous manual labor and which
effectively interacts with human operators and users.
Mobile: 9586075954
 The material handling workplace and the equipment employed to assist in that work must be
designed so they are safe for people
5. UNIT LOAD PRINCIPLE

 A unit load is one that can be stored or moved as a single entity at one time, such as a pallet,
container or tote etc. Each single entity contains many units of the product.
 Many individual items can be packed as a single (unit) load so that it becomes easy to move with
less cost, wastages and efficiency.
 Less effort and work is required to collect and move many individual items as a single load as
compared to moving many items one at a time.
6. SPACE UTILIZATION PRINCIPLE

 Effective and efficient use must be made of all available space.
 In work areas, cluttered and unorganized spaces and blocked aisles should be eliminated. In
storage areas, the objective of maximizing storage density must be balanced against accessibility
and selectivity. When transporting loads within a facility the use of overhead space should be
considered as an option.
7. SYSTEM PRINCIPLE
 Material movement and storage activities should be fully integrated so that there is a greater
coordination of a system which shall include receiving, inspection, storage, production,
assembly, packaging, unitizing, order selection, shipping, transportation and the handling of
returns.
 A system is a collection of interdependent things that form a unified whole.
 Hence, material handling equipments should have a system that includes suppliers,
manufacturers, distributors and customers.
 With systems approach, the objective and performance is smoothly achieved.
8. ENVIRONMENTAL PRINCIPLE
 While designing material handling activities, the company must also consider its impact on the
environment.
 The company should also check the energy consumption during material handling activities and
systems.
 Environmental concern means not to waste natural resources and to check whether there are any
negative effects on the environment.
 Materials used must be bio-degradable so that it does not harm the environment.
 Reused or recycled materials must be given preference.
9. AUTOMATION PRINCIPLE
 Material handling operations should be automated.
 Automation will improve operational efficiency, increase responsiveness, improve consistency
and predictability.
10. L IFE CYCLE COST PRINCIPLE

 Life cycle costs include all cash flows that will occur between the times the first Rupee is spent
12
to plan or buy new equipment, or new method, until that method and/or equipment is totally
replaced.
Page
 A detailed economic analysis should be done for the entire life cycle of all material handling
equipments.
Mobile: 9586075954
TYPES OF MATERIAL HANDLING EQUIPMENTS
 According to dictionary.com, material handling is “the loading, unloading, and movement of

goods, as within a factory or warehouse, especially by the aid of mechanical devices.” Thus
material handling equipment means devices that help a warehouse function by moving and
storing goods.
Type 1: Storage and Handling Equipment

 This is the simplest type, something so basic you might not even think of it as equipment. These
are shelves and racks where you store your material in between receiving it and shipping it.
 They are often designed to utilize vertical space so the warehouse can hold more items. Bins,
drawers, stacking frames, flow racks, cantilever racks, and mezzanines are also included in this
category.
Type 2: Bulk Material Handling Equipment

 According to Thomas Network, this is, “the storing, transportation and control of materials in
loose bulk form.” If there’s a lot of material, bulk material handling equipment is used. An
example would be a silo, a large cylinder that can hold materials like grain.
Other examples include:
 Stackers and reclaimers: Large machines that are used to dump things into piles or to pick
them back up again. They can be hard to visualize, so here’s an animation of one working.
 Hoppers: Picture a large metal funnel. It stores material and can release an exact quantity out
the bottom.
 Grain elevators: Buildings used to store grain. They include a series of buckets on a track that
automatically transport grain to the top of the building where it can be funneled into different
silos.
 Bucket elevators: Similar to a grain elevator, this device features buckets that transport large
amounts of material.
 Conveyor Belts: Moving belts that transport material. They can be combined into more
complicated conveyor systems which are considered engineered systems. If you want a
conveyor system for your business, contact DCS.
 Dump Trucks: Also a type of industrial material transport vehicle.
 Screw Conveyor: A screw-shaped device inside a tube that turns to move material.
 Rotary car dumper: A device that turns a rail car to dump out its contents.
Type 3: Industrial Trucks

 These are vehicles or equipment that moves materials. Sometimes workers run them, and
sometimes they are automatic. Automated Guided Vehicles (AGVs) fall under both engineered
systems and industrial trucks.
13
 Other examples are:

Page
Mobile: 9586075954
 Hand trucks: These are also called dollies. They are simple, L-shaped devices that let you carry
material at a tilt.
 Side-loaders: These are used to load materials in narrow aisles where other trucks may be too
wide.
 Pallet trucks: Hand-operated or electric devices that slide into pallets to move them.
 Walkie stackers: Thomas Network explains that these “transport and lift pallets like a forklift,
though they don’t include a place for the operator to ride in. They come in both powered and
manual versions.”
 Order pickers: These vehicles lift a worker off the ground so they can grab high packages.
 Platform trucks: Like a dolly but with a wider platform.
 Forklifts: Operational vehicle used to lift and transport heavy items.
Type 4: Engineered Systems

 This type of material handling equipment involves more complicated systems with multiple
components, usually automated.
 Examples would be conveyor belt or robotic delivery systems (complicated systems that come in
different shapes and sizes), or Automated Storage and Retrieval System (AS/RS), which are
automated systems often incorporating AGVs which make warehouses more efficient—basically
anything that moves materials around the warehouse so workers don’t have to.
 This category of equipment is the most complicated and expensive, often incorporating elements
from the other categories into wider more expansive systems. These systems require a lot of time
and research before making an investment.
Following are the basic classification of material handling equipments;

 Industrial Vehicles/Trucks.
 Conveyors.
 Hoisting Equipment.
 Bulk Handling Equipment/System.
 Robotic handling system.
14
 Containers and Supports.

 Auxiliary Equipment.
Page
Mobile: 9586075954
Conveyors
 These are gravity or powered equipment commonly used for moving bulk or unit load
continuously or intermittently, uni-directionally (in one direction) from one point to another over
fixed path.
 The main function is conveying of the material by the help of movement of some
parts/components of the equipment. The equipment as a whole does not move.
Hoisting Equipment
 These equipments are generally used to lift and move unit and varying (changing) loads. The
main function is to transfer load from one place to another.
 Hoisting equipment may also be mounted on a powered vehicle for the movement of the lifted
load.
Bulk Handling Equipment/System

 In the large process industries and construction projects, a wide range of heavy equipments are
used for handling and storage of large amount of bulk things. These are called bulk handling
equipments.
Robotic Handling System

 Robots are newly designed machines that work like a man. Specially designed robots are used
for loading and unloading of jobs to and from the machine.
Containers and Supports

 These equipments generally include all types of secondary devices which are used for storing,
unitizing and movement of materials.
 Different types of pressure, tight, loose, closed and open-top containers; platforms and coil
supports and strapping, cinches (chain, rope, cables with tighteners), bulkheads, dunnage etc. are
examples of secondary devices and aids.
Auxiliary Equipment
 A large number of equipment and attachments which cannot be classified under above heads,
but are frequently used independently or in connection with some other materials handling
equipment are called auxiliary equipments.
************************************************************************************
15 Page
Mobile: 9586075954
Production Management, SY BBA (Sem 4), VNSGU
UNIT 3
INVENTORY CONTROL
DEFINITION OF INVENTORY
According to Joseph Monks, “Inventories are idle resources that possess economic value”.
 The term inventory includes – raw material, work-in-process, finished goods and maintenance,
stores and repair items.
 Inventory Control / Management is an approach for keeping track of the flow of inventory. It
starts from the procurement of goods and its warehousing and continues to the outflow of the raw
material or stock to reach the manufacturing units or to the market.
 When the goods arrive at the Company, inventory management starts with receiving, counting,
sorting, arrangement, storage and maintenance of these items, i.e. stock, raw material,
components, tools, etc.
 To see how this whole system functions, we should first understand the flow of inventory in an
organization in the following diagram -
Inventory Control / Inventory Management

“Inventory Control is defined as planning, ordering and scheduling of materials used in the
manufacturing process.”
Some of the primary objectives of Inventory Control / Management are;
 Preventing Dead Stock: If inventory is properly managed then there are less chances of spoilage
of goods or dead stock.
 Optimizing Storage Cost: It reduces the chances of maintaining more stock. The requirements are
known in advance. This helps in cutting done the unnecessary warehousing costs.
 Maintaining Sufficient Stock: Because of inventory management, the production department need
not worry about the shortage of raw material or goods. Goods are supplied constantly.
 Enhancing Cash Flow: Inventory has a high impact on the cash flow of the company. With
effective inventory management, the organization can ensure sufficient liquid cash to improve its
operational efficiency.
 Reducing the Inventories’ Cost Value: When there is a constant purchase of goods or stock, the
organization can ask for discounts and other benefits to decrease the purchase price.
1
Dr. Zakir Patel, Prof, NLCCM, Navsari 2017-18
TYPES OF INVENTORY
1. Production Inventories:
Production inventories include raw materials and components. These types of inventories enter into the
product that is being produced by the company. For example: Compressor is a component in refrigerator,
Processor in a Computer, Iron ore is a raw material used to produce Steel products.
2. MRO Inventories:
MRO means Maintenance, Repair and Operating supplies. These types of inventories are required during
the production process but they do not become part of the finished goods. For example: Lubricating Oil is
used for the maintenance of Machines. These machines are required to produce the product efficiently.
3. In-Process Inventories:
In-Process inventories are semi-finished goods. They are in between raw material and finished goods.
When some process is done on the raw material, then it becomes work-in-process till it gets converted
into finished goods.
4. Finished goods Inventories:

Finished goods inventories are completed products. These goods are ready to be shipped to the customer.
For example: Car, Laptops, Steel etc.
CLASSIFICATION OF INVENTORY CONTROL
Inventories can be classified by various methods;

1. ABC Analysis
2. VED Analysis
3. FSN Analysis
ABC Analysis
Definition:
“ABC Inventory control technique divides inventory into three categories – A (very important), B
(moderately important) and C (least important) on the basis of their annual consumption value.”
Concept:
 ABC Analysis is also called Always Better Control.
 ABC analysis is widely used method for controlling/classifying the inventory.
 ABC analysis tells us how to arrange inventory according to their importance.
 ABC analysis is used to have proper control over inventory because when an inventory is
classified, it becomes easy for the manager to decide the importance and focus more where
attention is required.
 ABC analysis is based on the principle of Pareto. Pareto gave the rule of 80:20. Pareto gave an
idea of separating “Vital few” from “Trivial many” on the basis of the 80:20 rule.
Classification of Inventory:
 A group of items require more focus by managers. This is because, A group of items have more
consumption value. Out of the total inventory, A group of items are only 15 to 25%. The annual
consumption value of A group of items is about 65 to 75%. Therefore A categories of items must
receive close attention and high supervision and control by the managers. The manager must
frequently review the amount of material in hand. The manager must also have control over the
withdrawal of materials also.
2
 B group of items require moderate (medium) focus by managers. B group of items have moderate
consumption value.
 C group of items require minimum focus by managers. C group of items have least consumption
value. Out of the total inventory, C group of items are only 65 to 75%. The annual consumption
value of A group of items is about 15 to 25%. C categories of items receive loose control. Less
amount of attention and lesser supervision and control is required by the managers. The manager
does not need to make frequent review about the material in hand.
Example:
Inventory Annual Usage % of total inventory usage Category of
Item No. (annual usage/1320) x 100 inventory
1 20 1.50% [(20/1320) x 100 ] C
2 300 22.7% A
3 10 0.75% C
4 500 37.9% A
5 30 2.27% B
6 20 1.50% C
7 40 3.00% B
8 400 30.3% A
TOTAL 1320 100%
Advantages of ABC Analysis:
1. Control: It helps in stocking a better mix of right inventory. This helps the company to control
over-supply and under-supply of important materials.
2. Cost: Once a company has determined A, B, and C group of materials, it can set up the cost
reduction steps for different types of materials.
3. Improved Service: ABC analysis helps in improving customer service levels and order
fulfilment. ABC Analysis provides a company with information to stock the right mix of
inventory.
4. Warehousing: ABC analysis helps in giving priority to faster moving inventory (A items) as
compared to slow moving inventory (C items).
5. Reduction in investment: under ABC analysis, the materials from group 'A' are purchase in
lower quantities as much as possible. With this, the effort to reduce the delivery period is also
made. These in turn help to reduce the investment in material.
6. Saving in time: since a signification effort is made for management of the material from group
'A', it helps to save time as well.
3
7. Economy: this method is economical, since equal time and labour is not needed for all types of
materials.
Disadvantage of ABC analysis

1. ABC analysis will not be effective if the materials are not classified into the groups properly.
2. It is not suitable for the organization where the costs of materials do not very significantly.
3. There is no any scientific base for the classification of material under ABC analysis.
4. The classification of the materials into different groups may lead to extra cost. Hence, it may not
be suitable for small organization.
VED Analysis
The materials may be classified depending upon their criticality that is on functional basis.
• The degree of criticality can be stated as whether the material is vital to the process of production,
or essential to the process of production or desirable for the process of production.
• This classification is known as VED analysis, V stands for vital, E stands for essential and D
stands for desirable items.
V = VITAL
If the inventory is very vital (important), it is termed as ‘V’ type of inventory. These items can cause
stoppage of production if not available. And large amount of stock is kept for such items. Spare parts
supplied by foreign supplier may also be called as Vital items because the lead time to procure them may
be very long.
E = ESSENTIAL
If the inventory is essential (necessary), it is termed as ‘E’ type of inventory. If these types of inventories
are not available, then it can badly affect the production process. These materials are normally available
throughout the country. The procurement (buying) lead time may be very long. For this type of inventory,
very low amount of stock is required.
D = DESIRABLE
If the inventory is desirable, it is termed as ‘D’ type of inventory. If these inventories are not available, it
can be manufactured in-house (within the company) or it can be ordered from the local supplier. Hence,
usually, no stocks of such items are carried as inventory.
Example:
4
Advantages:
• It is useful for monitoring and control of stores and spares inventory by classifying them into three
categories.
• Determine the criticality of an item and its effect on production and other services.
• It is useful for controlling and maintains the stock of various types.
FSN Analysis
• In FSN analysis, F = Fast moving items, S = Slow moving items, N = Non-moving items.
• Items which are frequently required from the stores are classified as Fast moving items.
• Items which are required only once, twice or thrice in an year are classified as Slow moving items.
• Items which are not required for more than a year or two are classified as Non-moving items.
• This type of classification is useful for raw materials, components and spare-parts.
************************************************************************
COSTS OF INVENTORY / INVENTORY CONTROL COSTS

There are mainly 3 costs which are associated with Inventory Control
1. Carrying costs / Holding Costs
2. Ordering Costs
3. Stock-Out Costs
1. CARRYING COSTS / HOLDING COSTS
 Carrying Costs are costs to carry an item in inventory for a length of time, usually a year.
 Carrying Costs are costs related to physically putting items in storage.
 Carrying Cost is denoted by Cc
 These Costs include;
o Interest cost o Spoilage
o Insurance o Pilferage
o Taxes o Breakage
o Depreciation o Warehousing costs (Electricity,
o Obsolescence Rent, Watchmen salary etc)
o Deterioration
 Carrying costs also include the opportunity costs of funds blocked which could have been invested
somewhere else which are blocked in inventory.
 Carrying cost depends on the total quantity of inventory. It increases with the amount of inventory.
2. ORDERING COST:
 Ordering Costs are the cost of Ordering and Receiving inventory. Ordering costs are denoted by Co
 Ordering Cost change with the actual placement of an order.
 Ordering Cost does not depend upon the quantity of inventory.
 Following are the costs associated with Ordering cost;
o Inviting quotations o Courier charges
o Comparing quotations o Receiving inventory
o Negotiation with the supplier o Inspection of inventory (quality
o Shipment cost testing) etc.
o Transportation cost
 When company itself produces raw materials, a machine set-up cost becomes Ordering cost.
5
STOCK OUT COST / SHORTAGE COST:

 Stock out cost is also known as Shortage cost
 Shortage costs arise when demand is more than supply of inventory.
 These costs include opportunity cost of not making a sale, loss of customer goodwill, late charges
etc.
***********************************************************************************
IMPORTANT TERMS IN INVENTORY CONTROL

 Reorder Level
 Safety stock
 Maximum stock
 Minimum stock
 Lead time
Reorder Level / Reorder Point
 EOQ answers the question of “How much to order”; Reorder Level answers the question of
“When to reorder”.
 Reorder point occurs when the quantity of inventory drops below a particular level which is
predetermined.
 Reorder level of inventory generally includes expected demand / units to be used during lead time
and sometimes extra cushion of stock which becomes necessary if there is a stock-out situation
during the lead time.
 Reorder level = Annual usage X Lead time (AU x LT)
 Reorder Level (when lead time and demand are both constant) = d x LT
Safety Stock
 Sometimes it is difficult to know Lead time in advance. It may not be predicted.
 Lead time may vary (change) in certain circumstances. During such situation, a firm may face the
problem of stock-out.
 To avoid the stock-out situation, the firm may require maintaining SAFETY stock.
Maximum Level
 Maximum Level of stock is that level beyond which a firm does not need to maintain the stock.
 If the firm keeps the stock above the maximum level, then it is called over-stocking.
 If the firm maintain the stock beyond the maximum level, then it may have to incur extra storage
cost, carrying cost, obsolescence cost etc.
Minimum Level
 Minimum Level of stock is that level which must be maintained always for smooth production.
 Minimum Level of stock is determined after considering lead time, consumption rate, nature of
material etc.
Lead time
 Lead time is the time gap between place of order with the supplier AND receiving it by the
customer.
 Lead time may remain constant or it may vary (change).
 It is difficult to manage inventory if lead time keeps changing. Inventory management is easy if
lead time remains constant.
6
BASIC EOQ MODEL – CONCEPT, ASSUMPTIONS AND DERIVATION
Introduction
 In 1913, Ford W. Harris developed the formula for EOQ whereas R. H. Wilson is given credit for
the application and in-depth analysis on this model.
 Economic order quantity (EOQ) model is the method that tells the company about the order
quantity that must be purchased in one order.
 This order quantity is where the carrying costs and ordering costs are minimum.
 By using this model, the companies can minimize the costs associated with the ordering and
carrying inventory.
Costs:
EOQ model assumes two types of costs associated with inventory;
1. Ordering Cost: Ordering cost is the cost associated with placing and receiving the order with the
supplier. (Details given in previous theory)
2. Carrying Cost: Carrying cost is the cost associated with holding the inventory within the
company. (Details given in previous theory).
Definition:
The economic order quantity (EOQ) is a model that is used to calculate the optimal quantity that can be
purchased or produced to minimize the cost of both the carrying inventory and the processing of
purchase orders.
Assumptions:
1. Constant or uniform demand– EOQ model assumes that the demand for goods shall remain constant
/ uniform throughout the year. For example, if 100 units of material is required per day, then
everyday 100 units of material will only be required. It will not change.
2. Constant unit price– EOQ model assumes that the purchase price per unit of material will remain
same throughout the year. The price can only be changed if the supplier gives discount for bulk
orders.
3. Constant carrying costs– Carrying cost per unit increases with the increase in the size of inventory.
It is high, if inventory is increased and low when inventory is reduced.
4. Constant ordering cost– EOQ model assumes constant order cost throughout the year. Order cost
does not change in a year.
5. Instantaneous delivery– Instantaneous deliver means the order is received with known lead time.
This means that lead time of ordering the material remains fixed. If lead time does not remain fixed,
then slight change is required to be made in EOQ model which will include safety stock. The order
is delivered in the quantity that was demanded, i.e. in whole batch.
6. Annual demand: The total annual requirement of material remains fixed. It does not vary.
Graphical explanation:
 Following figure gives the detail idea about the EOQ model.
 The graph shows the following curves;
o Carrying cost curve
o Ordering cost curve
o Total cost curve
 X- axis represents ‘order quantity’ and Y-axis represents ‘annual cost’
7
 Annual carrying cost increases with the increase in the order quantity. This can be seen in the
above figure where carrying cost keeps increasing with the order quantity.
 Ordering cost decreases with the increase in per order quantity as shown in the figure above.
 The above figure also shows the Total Cost curve (Ordering cost + Carrying cost)
 The point at which ordering cost and carrying cost coincide is called EOQ –Economic Order
Quantity.
 EOQ is the order quantity at which the total cost becomes minimum as shown in the above figure.
 Hence, we can say that the company must place an order equal to EOQ in one order. This will
keep the total cost of inventory minimum.
Derivation of EOQ formula
There are two methods of deriving EOQ formula

1. Simple Method
2. Differentiation Method
1. Simple Method of EOQ derivation:

 Annual Carrying costs are always calculated on Average Inventory Level.
So, Annual Carrying cost = Q x Cc
2
 Annual Ordering costs are calculated on number of orders placed in a year.
So, Ordering Cost = D x Co
Q
 Now, Total Cost (TC) = Annual Carrying cost + Annual Ordering cost
TC = Q x Cc + D x Co
2 Q
 Now, we know that at EOQ order quantity, Carrying costs and Ordering costs are equal.
So, Q x Cc = D x Co
2 Q
Q2 Cc = 2DCo
Q= 2DCo
Cc
The quantity ‘Q’ in the above formula is EOQ.
8
2. Differentiation Method of EOQ derivation:

TC = Q x Cc + D x Co
2 Q
Differentiating TC (Total cost) with respect to Q (Quantity)
dTC = Cc - D x Co
dQ 2 Q2
Now, TC is minimum at EOQ. Hence, to minimise TC at EOQ, we can put dTC = 0
dQ
Therefore,
Cc - D x Co = 0
2 Q2
Cc = D x Co
2 Q2
Q2 Cc – 2DCo = 0
2Q2
Q2 Cc – 2DCo = 0
Q2 Cc = 2DCo
Q= 2DCo
Cc
==========================================================================
ECONOMIC RUN LENGTH QUANTITY (ERL) MODEL

Concept:
 It is also called EPQ model (Economic Production Quantity).
 In EOQ model, we had an assumption that order quantity is received instantaneously
(immediately) in one lot. This situation is not preferred by organisations. Organisations do not
require all the materials at a time. So they require it uniformly in small lots regularly. Hence,
companies do not require buying EOQ in one lot. They would prefer to get material in lesser
quantity regularly.
 ERL model is useful for the following situations;
o When production is done in batches
o When company itself produces raw material. Company does not buy it from the supplier.
 Sometimes, the capacity to produce raw material is more than the usage rate (demand rate).
Hence, the company must always produce in batches / lots. Hence, Company should not produce
continuously.
Assumptions:
 Only one item (material) is involved.
 Annual Demand is known.
 Usage rate/Demand rate (d) is constant.
 Production rate (p) is constant.
 Usage is continuous but Production is in batches/lots.
 Lead time does not change.
9
Figure:
 The above figure shows that company produces raw material at production rate (constant) and
uses the material at usage rate (constant).
 Usage rate is less than the production rate.
 Hence, the company has to stop production after Q quantity is reached. This Q quantity is called
Economic Run Length quantity or Economic Production Quantity.
 Production starts once again after the inventory gets completely used up.
Explanation:
 As long as the production continuous, inventory level will continue to grow at the rate of
difference between the production rate and usage rate (p-d)
o Example: If daily production rate (p) is 20 units and daily usage (demand rate d) is 5 units,
then inventory will grow at the rate of 20 – 5 = 15 units per day.
 Inventory level will continue to grow till production continues. Inventory level will decrease once
the production stops.
 After the production stops, the amount of inventory in hand will start getting used up.
 Once, the inventory becomes zero, production again starts. Hence, production is in batches/lots.
 In this model, set-up cost of machines is considered as ordering cost.
 In ERL model, Maximum inventory = (Total production in one run) – (Amount used during
production run).
Derivation of ERLQ
Maximum Inventory Level = (Total production in one run) – (Amount used during production run)
= (pt) – (dt) ; where p = production rate daily; d = usage rate; t = time (length
of one production run)
Here pt can also be said as Q (Therefore pt = Q)
pt = Q;
t=Q
p
Now, Maximum Inventory Level = (pt) – (dt)
= p (Q/p) – d (Q/p)
= Q – dQ/p
= Q (1 – d/p)
Therefore, Average Inventory level = Q/2 (1 – d/p)
Total Cost (TC) = Annual Carrying cost + Annual Ordering cost
= TC = Q (1-d/p) x Cc + D x Co
2 Q
10
Differentiating TC (Total cost) with respect to Q (Quantity)

dTC = Cc(1-d/p) - D x Co
dQ 2 Q2
Now, TC is minimum at EOQ. Hence, to minimise TC at EOQ, we can put dTC = 0
dQ
Therefore,
Cc (1-d/p) - D x Co = 0
2 Q2
Cc (1-d/p) = D x Co
2 Q2
Simplifying the above equation,
Q2 Cc – 2DCo = 0
Q2 Cc = 2DCo
Q= 2DCo Here, Q = ERLQ (ERL quantity)

Cc
************************************************************************************
11
Unit 4
PRODUCTION PLANNING & QUALITY CONTROL
Topics to be covered:
 Production Planning: Definition and Concept

 Concept of Aggregate Production Planning
 Master Production Schedule: Definition, Flow Chart, General Explanation, Functions,
Process
 Material Requirement Planning: Definitions, Flowchart, Inputs and Outputs,
 Capacity Requirement Planning: Definition, Flow Chart, General Understanding, Inputs
and Outputs, Methods of Capacity Adjustments
 Scheduling: Backward and Forward, Priority Sequencing Rules, Strategies, Assignment
Problems (With Numerical), Johnson’s Rule (With Numerical)
 Quality Control: Definitions and Methods (Statistical Quality Control, Quality Circles,
Genichi Taguchi’s Quality Loss Function, TQM, Zero Defect Approach)
******************************************************************************************
DEFINITION OF PRODUCTION PLANNING
“Production Planning is that function of management , which decides about the resources that will be required
for future manufacturing, operations & allocating these resources to produce desired output at right time, in
right amount, at right place and at least cost”
LEVELS OF PRODUCTION PLANNING
Levels of Production
Planning
Strategic Tactical Operational

Planning Planning Planning
DR. ZAKIR PATEL, PROF, NARAN LALA COLLEGE, NAVSARI (Mob – 9586075954) Page 1
Strategic Planning
 Strategic Planning is a process of linking production planning with mission.
 The time horizon of Strategic Planning is of 4 to 5 years.
 It includes various decisions on production capacity, locations of manufacturing units, types of
machines & material handling system and technology forecasting.
 These are long term decisions i.e. once taken then difficult to change. E.g. Once the location of
production plant is selected, it is difficult to change.
 These decisions require less mathematical skills. They are more unstructured and hence require high
degree of skills, experience and creativity.
Tactical Planning
 It is medium term planning.
 Time horizon for this is usually 6 to 8 months or up to 1 year.
 It is concerned with the best utilisation of existing facilities rather than creating new facilities.
 It includes costing & value analysis, make or buy decisions design of inventory policies.
 E.g. For paint industry, it can be prepared for total quantity of paint to be manufactured during this
year.
 For refrigerator manufacturer, it can be prepared for number of units of refrigerator to be
manufactured during the year.
Operational Planning
 It is known as Shop Floor Planning.
 The time horizon of operational planning is 1 to 3 months.
 In other words it is a short range planning.
 The immediate sales forecast, availability of material and capacity, stock of finished products, pending
purchase orders, requirement of fresh raw material etc. are the scope of operational planning.
 MPS, MRP and CRP are prepared for the Operational Planning purpose.
MASTER PRODUCTION SCHEDULE
Definitions of MPS
 “Master Production Schedule (also known as Master Schedule or MPS) formalizes the aggregate
production plan and converts it into specific material requirement and capacity requirement plan.”
 “MPS is a process of deciding amount & timing of all the items (end items) to be produced over a
specific planning horizon.”
General Idea of MPS

 Master Schedule is completely prepared from Aggregate Production Plan. Here a production manager
decides monthly or weekly production of units of end products.
 MPS is prepared for immediate planning i.e. next coming month, coming quarter etc.
 MPS is the next step after Aggregate Production Planning.
 The major difference between Aggregate Production Planning is that Aggregate Planning determines
the total output in units to be produced over a specific time (6 months to 18 months) whereas MPS
determines the unit of each end items to be produced over a specific planning period.
Example: Aggregate planning determines what total quantity of paint is going to be produced during next year.
Whereas, MPS reveal that what quantity of Yellow Oil paint is to be manufactured + what quantity of white
exterior paint is to be manufactured?
Objectives of MPS
To schedule end items to be completed as promised to the customers
To avoid overloading & under loading of production facility
Flow Chart of MPS
Procedure for Developing MPS
Step 1: Consider the sale projections and probable demand

 The total demand for the end items (to be produced) is gathered from APP and Demand forecast.
 For Standardized products, MPS should be made for ‘Few Outputs’ produced from ‘many Inputs’. And
for Intermittent production system, MPS should be made for ‘few inputs’ which will produce ‘many
outputs’
Few Output
Prepare Many Outputs
MPS here
Few Output
Many Raw Materials Prepare

MPS here
Step 2: Prepare tentative Master Schedule (Rough Cut Capacity Planning)
 After gathering the information related to the demand and sale projections, next step is that orders
are now assigned to various production slots (Work centres /Machines) and delivery promises are
made to customers tentatively.
 As orders are slotted in the MPS, the effect of the production work centres is checked. This process of
preliminary checking of MPS is called as Rough Cut Capacity Planning (RCCP).
 The main purpose of RCCP is to identify any week in the MPS where under loading or overloading of
the production capacity occurs & then to revise MPS if required.
Step 3: Check tentative MPS (RCCP) for material availability by MRP and capacity adequacy by CRP
 The prime purpose of MPS is to prepare MRP and CRP. Tentative MPS will check whether adequate
material are available or not and adequate capacity is available or not by comparing tentative MPS
with material and capacity requirements.
Step 4: If material and capacity requirements are not adequate, again MPS shall be revised and try to
prepare modified MPS.
Step 5: When both material and capacity requirements are adequate enough, MPS will be finalised at this
stage.
SPECIMEN OF MASTER PRODUCTION SCHEDULE
Week Number
End Item
1 2 3 4 5 6 7 8 9 10
A 200 200
C 300 300
Functions of MPS
Translate Aggregate Plans

 The master schedule translates APP into specific number of end items to be produced during specific
time periods. In short it means conversion of aggregate plan into specific end items plan.
Evaluate alternative Master Schedules
 Master Scheduling is a trial and error, work and rework activity. Nowadays there are many
computerised software are available in the form of simulation capabilities that provide many
alternative Master Schedules and help production managers to “trial-fit” the schedule. So, it is
advisable for a production manager to evaluate as many as possible MPSs.
Generate Material Requirements
 MPS is the first input for MRP. MPS shows end items to be produced and this becomes signal for MRP
to generate further dependent items requirements of purchasing and producing them on or before
the due dates.
Generate Capacity Requirements
 MPS becomes prime requirement for capacity requirement planning. It reflects the determination of
labour and equipments requirement. If capacity requirements are inappropriate, MPS needs to be
revised.
Facilitate Information Processing
 MPS also determines when deliveries are to be made both for make-to-order & for make-to-stock
items.
Maintain valid priorities
 Priorities reflect absolute priorities or relative (ranking i.e. J4, J3, J1 & J2) priorities. This means that
due date specifies the actual time when the order is to be delivered. But, sometimes it so happens that
customers may change their orders, customers may change their time, raw material is not available at
last moments etc. In all such cases revision of MPS will be helpful in determining the new & valid
priorities.
Effective utilisation of Capacity
 By specifying the end items requirements, the master schedule also establishes the load and utilisation
parameters for labour and equipments.
MATERIAL REQUIREMENT PLANNING

 Before going to study the concept of MRP, let us first understand the concept of Dependent Demand
Items and Independent Demand Items.
Dependent Demand Items
Dependent Demand Inventory consists of raw material, components and subassemblies that are used in the
production of parent item/finished product. E.g. Demand for computer keyboards, mouse, and mother boards
depend on the demand of the parent item computer. The demand for dependent demand item can be
calculated.
Independent Demand Items
Independent Demand Items are those finished goods, service parts and other end items whose demand arises
more directly from uncertain market environment. Independent demand items need careful forecasting for
demand estimation. For example, demand for computers is independent demand.
Definition of Material Requirement Planning (MRP)

“Material Requirement Planning (MRP) is a technique for determining the quantity and timing for dependent
demand items that are needed to satisfy master production schedule (MPS) requirements.”
 MRP is a computer based information system that translates the finished product requirements of
MPS into time phased requirements of subassemblies, components parts & other information to
determine when to order and how much to order.
 Hence requirements of end items generate requirements of further lower level components, which
are broken down by planning periods. E.g. Requirements of ‘n’ units of Wheelbarrows (end-item)
generates the lower level requirements of Handle Assembly, Wheel Assembly, Box and Paints.
Objectives of MRP
 To improve customers service by meeting delivery schedule on or before promised dates.
 To reduce inventory costs by reducing inventory levels
 To improve operating efficiency and capability of productive resources (man and machines)
Inputs & Outputs of MRP System
Inputs to MRP Outputs to MRP

Modifcation in MPS
MPS
(if needed)
Product Structure File / BOM Order Relaeses Information
Order Relaeases & Planned Order

Inventory Status File
Releases
INPUTS TO MRP:
Mainly there are 3 inputs of MRP.
Master Production Schedule -

 MPS specifies what end items are to be produced (quantity) and when (timing). Remember, MPS is a
production plan.
 MRP system accepts whatever the MPS requirements are and translates MPS end items into specific
component and parts requirements.
Product Structure File / Bill of Material

 To plan for the production of an end item, an MRP system must plan for all the dependent demand
items i.e. materials, parts, components, subcomponents and parts that will go into manufacturing final
product.
 The bill of material is the computer system that provides this information of all sub-products. The BOM
file identifies each part and sub-part by a unique number and facilitates further explosion of end-item
requirements. There are mainly two types of Bill of Materials: Single Level BOM and Multi Level or
Indented BOM.
Product structure tree (specimen)
Filing Cabinet
Drawer
Case Assembly Lock
Assembly
(1) (1)
(3)
Inventory Status File
Week Number 0 1 2 3 4 5 6 7 8
Items:
Gross Requirements
Scheduled Receipts
Projected On Hand
Net Requirements
Planned Order Receipts
Planned Order Releases
The inventory status file

 It gives complete information regarding on-hand inventory, gross requirements, scheduled receipts,
and planned order releases for the item.
 Moreover, inventory status file also includes information such as lot sizes, lead times, safety stock
levels and scrap allowances.
 Inventory status file should be updated on regular bases i.e. as & when changes occur.
 Let us first understand the each and every particular which is mentioned in inventory status file.
1. Gross Requirements: The total quantity of an item needed at the end of a period to meet the planned
output levels. Remember, it will not consider any availability of the item in on-hand inventory or
scheduled receipts.
2. Scheduled Receipts: The quantity of an item that will be received at the beginning of the time period
to meet the net requirement for that time period.
3. On-Hand Inventory: The quantity of a material, physically held in inventory at a point of time. It may
include safety stock.
On hand Inventory for ‘n’ period = (On hand inventory for the period ‘n-1’) + (Scheduled Receipts for
‘n’ period) – (Gross Requirements for ‘n’ period)
4. Planned Order Release: Number in planned order release row when (in which week) the order should
be placed to meet the requirements for the item. Time period at which the order should be placed can
be found out by subtracting the lead time from the time of ‘net requirement’.
5. Net Requirements: The amount of net requirements in any period can be found out by subtracting the
gross requirements for that period and any scheduled receipts for that period and any quantity of on-
hand-inventory.
Net Requirements for period ‘n’ = (Gross Requirement for period ‘n’) – (Scheduled receipts for period
‘n’) – (On hand inventory at the end of period ‘n-1’)
OUTPUTS TO MRP:
 Planned Orders: It is the schedule indicating the amount & timing of future orders.
 Order Releases: It shows implementation of planned orders.
 Performance Control Reports: It is report showing evaluation of system operation, including deviations
from the plan and cost information
 Exception Reports: Shows attention to major discrepancies like late and overdue orders, excessive
scrap rates, reporting errors and requirements of non-existence parts.
 It facilitates modification in MPS if needed.
BILL OF MATERIAL
Definition of BOM
 A Bill of Material contains a listing of all the assemblies, sub-assemblies, parts and raw materials that
are needed to produce one unit of a finished product. Thus each end-item has its own Bill of Material.
Meaning
 The listing in the bill of material is hierarchical; it shows the quantity of each item needed to complete
one unit of the following level of assembly. Bill of material shows visual depiction in the form of A
Product Structure Tree. The BOM file defines product in very precise and unambiguous way so that
component requirements are clearly determined.
SPECIMEN OF BILL OF MATERIAL
B
C
(2)
D E F
E
(3) (2) (2)
E
(4)
The BOM are of 2 types:
Single Level BOM
Multi-Level / Indented BOM
1. Single Level Bill of Material
 A single level Bill of Material specifies the requirements for only the immediate or next level
components that are needed to assemble a parent / end item.
 E.g. A firm produced wheelbarrows that are produced from a box, a handlebar assembly and a wheel
assembly and some paint.
 The single level BOM will contain only one level under the parent item as depicted in the following
diagram.
 Numbers inside the boxes represent the quantity of that particular part or sub-part to be
manufactured. And number outside the box represents the unique identity of that particular part or
assembly.
 By giving the unique identity number to components and parts; it will be advantageous in the case
when the subcomponents are repeatedly used. At that time a computer will identify the part or sub
part from its unique identity number, if at all it is repeated.
Wheel
Barrow
Handle Wheel
Box Paint
Assembly Assembly
(1) (1)
(1) (1)
BILL OF MATERIAL
Part No. W099: Wheel Barrow
Part No. Description Quantity Units
1011 Box: Deep Size, Aluminium 1 Each
1020 Handle Assembly 1 Each
1030 Wheel Assembly 1 Each
1042 Paint: Blue 1 Pint
2. Indented / Multilevel Bill of Material / Explosion of Bill of Material

 Many finished items/end-items are too complicated that it cannot be properly described with single
level Bill of Materials and in such cases Multi level or Indented Bill of Materials are used. There may be
hundreds of raw materials and parts are needed sometimes to manufacture an end item and at such
times it is advisable to prepare Multilevel Bill of Material.
 Indented BOM are structured to show the manufacturing sequence of the parent item.
 In Indented BOM, parent item stays at zero level and all that parts and components that go into
manufacturing zero level item, are assigned to Level 1, all that parts and components that go into
manufacturing Level 1 items, are assigned to Level 2, all that parts and components that go into
manufacturing Level 2 items, are assigned to Level 3 and so on. Suppose, if one component is such
which is required at more than one level (i.e. level 2 and level 3), then it would be assigned at lower
level i.e. Level 3.
Wheel
Barrow
Wheel
Box Handle Paint
Assembly
(1) Assembly (1)
(1)
(1)
Bearings
Bars (1) Grips (2) Axle (1) Wheel (1)
(2)
Tyre
(1)
Part No: W099 Wheel Barrow
Part No. Description Quantity Level
1011 Box: Deep Size, Aluminium 1 1
1020 Handle Assembly 1 1
2022 Aluminium Bars 2 2
2025 Grips: Neoprene 2 2
1030 Wheel Assembly 1 1
2031 Axle 1 2
2032 Bearing 2 2
2035 Wheel 1 2
3026 Tyre: Size A 1 3
1042 Paint: Blue 1 1
W hy BOM is known as The Heart of MRP?

Bil l of Material shows the full manufacturing sequence of the product. One can easily identify what
components are needed to manufacture parent items or item at level 1 or at any level; and in what quantity
th ey are needed by just seeing at the bill of material. Hence, it is known as the Heart of MRP.
CA
APACITY REQUIREMENT PLANNING
Def
finition of Capacity
“C apacity is a measure of the productive capacity of a facility per unit of time”.
Deffinition of Capacity Requirement Planning (CRP)

CRPis technique for determining what personnel and equipment capacities are needed to meet theduction
proobjectives mentioned in Master Schedule and Material Requirement Plan.
Overview of the CRP Process
 End-items requirements are known from APP (aggregate production plan) and MPS.
 The CRP system (computer system) will then convert orders to be released and processed into
standard Labour Hours and Machine Hours of load. This information is given in work centre status and
shop routing file. In short CRP system will convert orders into standard time of load on Work Centre.
 It should be remembered that, when the orders are initially converted into the loads, it will consider
Infinite Loading for the initial loading process. The process of loading work centres with all the loads
when they are required without seeing the actual capacity is known as infinite loading. Infinite loading
is important for planners because it provides idea for capacity adjustments like using overtime,
delaying selected orders etc.
 The output will be a Load Projection Report by a work centre. If work centre capacities are adequate
then planned order releases are verified by MRP system and released orders become purchase or shop
orders (Remember: Purchase Order from vendor and shop order for in-house production).
 Workload Reports are also made for use in Capacity Control. (In case of Finite Loadings)
 If Load Projection Reports reveal inadequate capacities, either capacity must be adjusted or MPS
should be revised.
Inputs of CRP
 Planned orders and Planned order releases from MRP system.
 Loading information from work centre status file.
 Routing information from Shop Routing File
 Changes which will modify the capacity either by adjusting capacity or by making changes in MPS.
Outputs of CRP
 Major output of CRP system is the verification that....
 They are complete i.e. they have both planned and released orders
 They are based on valid priorities
 They facilitate for future planning
METHODS FOR CAPACITY ADJUSTMENTS
 Managing capacity involves changes in different components of the resources of a firm like people,
facilities, equipments, time etc.
 By making changes in these components you can achieve a better match between demand and
capacity.
DEMAND TOO HIGH ADJUST CAPACITY DEMAND TOO LOW
• Stretch time, labour, facilities 1. Perform maintenance, renovations

and equipment.
• Cross-train employees. 2. Schedule vacations
• Hire part-time employees.
• Request overtime work from 3. Schedule employee training
employees.
• Rent or share facilities. 4. Lay off employees
• Rent or share equipment.
• Subcontract or outsource activities.
Following are some of the actions to be taken in order to manage capacity;

1) Using Part-time Employees:
During periods of peak demand, service firm may hire additional part-time employees. This helps in
increasing capacity as well as reducing costs. However, issues like attitude of part time employees,
training concerns, higher turnover etc. have to be properly addressed.
2) Employees Working Overtime:

Some of the concerns raised above regarding part time employees can be eliminated by having
employees work over time. However, working for longer hours may have adverse impact on service
quality and also involves higher costs as overtime charges are generally at higher rates.
3) Cross Training Employees:

Cross training of employees results in a flexible capacity, where employees can perform several
different jobs. Southwest Airlines strongly believes in this philosophy. The same employee may move
from ticketing to gate counters. This helps in avoiding underutilization of resources and also increasing
the efficiency of the employees.
4) Scheduling:
During peak demand periods people, facilities, and equipments are used at full capacity. However,
facilities and equipments also require proper maintenance. This can be scheduled during periods of
low demand. Similarly, for human resources, off-peak periods can be used for training purposes as
well as for giving vacations to employees.
Methods to Reduce Capacity

i. Temporary reassigning the staff
ii. Reducing the length of shifts of workers
iii. Removing the shifts
Methods to increase capacity by;

i. Release orders early
ii. Increasing lot sizes
iii. Making items that were outsourced up till now.
==========================================================================================
SCHEDULING
========================================================================
DEFINITION OF SCHEDULING
“Scheduling is a process of organising a production line to produce products by using least time and maximum
utilisation of resources.”
Objectives of Scheduling
1. To prevent unbalanced use of time among departments and work centres or to evenly load all machines
in the production line.
2. To utilise machines and labour in such a way that output is produced within established lead time.
3. To reduce idle time of labour and machines.
4. To fix up delivery dates for various manufacturing activities and for finished products.
5. To increase the efficiency of production or productivity.
SCHEDULING STRATEGIES
Detailed Scheduling
 Detailed scheduling involves determination of start times, finish times and work assignments for all jobs
at each work centre.
 However, detailed scheduling is usually impractical (near to impossible) in a manufacturing environment.
Cumulative Scheduling
 Cumulative scheduling is the scheduling of total workload.
Forward Scheduling
 Forward scheduling means scheduling starting from today.
 Forward scheduling is commonly used when customers place their order on “needed as soon as possible”
basis.
 Forward scheduling determines the start time and finish time for waiting jobs by assigning them to the
earliest available time slots at the machine / work centre.
 The purpose of forward scheduling is to complete the assigned jobs in shortest lead time.
 Forward scheduling deals with – what is the shortest time a job can be completed?
Backward Scheduling
 Backward scheduling is mainly used where the manager commits to complete the job on specific due date
to the customers.
 Backward scheduling means to start scheduling from backwards i.e. from due date.
 Backward scheduling deals with what latest job can be started and still can be completed on due date.
PRIORITY SEQUENCING RULES
1. FCFS (First Come First Serve)

Jobs are scheduled for work in the same sequence in which they arrive at the facility or work centre.
2. SPT (Shortest Processing Time)

The job which has the shortest processing time / operation time on the machine is given first priority to
be loaded as the next job for processing. This rule minimizes in-process-inventory (Work-in-process).
3. LPT (Longest Processing Time)

The job which has the longest processing time / operation time on the machine is given first priority to be
loaded as the next job for processing.
4. LS (Least Slack)
The job which has the least slack period is given first priority to be processed.
SLACK = Available Time – Processing Time
5. EDD (Earliest Due Date)

This rule sequences the jobs waiting in the queue at the work centre or machine according to their due
dates and the jobs are processed according their due dates i.e. the job having earliest due date is given
highest priority while loading the job on the machine.
6. PCO (Preferred Customer Order)

Jobs belonging to a preferred customer are given a higher priority than other jobs.
7. RS (Random Selection)
Job is selected at random for the process.
******************************************************************************************
Mob: 9586075954
Unit 5
WORK STUDY
===========================================================================================
DEFINITION OF WORK STUDY

 “Work study is the analysis of a job for the purpose of finding the preferred method of doing it and also
determining the standard time to perform it by the preferred method.”
 Hence, Work study, consists of two areas of study: method study (motion study) and time study (work
measurement).
IMPORTANCE OF WORK STUDY

1. Work study helps in increasing the productivity of an organisation by studying the method of the work and
time taken for performing it. Work study is a method that normally involves little or no capital expenditure
on facilities and equipment.
2. It is systematic. This makes sure that each and every factor affecting the efficiency of an operation is
considered in the study of work.
3. It is the most accurate means of setting standards of performance. Based on this standard, the effective
planning and control of production is done.
4. It can contribute to the improvement of safety and working conditions at work by exposing hazardous
operations and developing safe methods of performing operations.
5. The savings resulting from properly applied work study start at once and continue as long as the operation
continues in the improved form.
6. It is a “tool” which can be applied everywhere. It can be use with success wherever work is done or plant is
operated, not only in manufacturing shops but also in offices, stores, laboratories and service industries
such as wholesale and retail distribution and restaurants and on farms.
7. Work-study is relatively cheap and easy to apply.
8. It is an excellent weapon for removing inefficiency in any organization.
PRODUCTION MANAGEMENT – II SEM 4 NOTES - DR ZAKIR PATEL, PROF, NLCCM, NAVSARI Page 1
Mob: 9586075954
METHOD STUDY
Definition of Method Study:

Method study is the technique of systematic recording and critical examination of existing and proposed ways of
doing work and developing an easier and economical method.
Objectives of Method Study:

1. Improvement of manufacturing processes and procedures.
2. Improvement of working conditions.
3. Improvement of plant layout and work place layout.
4. Reducing the human effort and fatigue.
5. Reducing material handling
6. Improvement of plant and equipment design.
7. Improvement in the utility of material, machines and manpower.
8. Standardization of method.
9. Improvement in safety standard.
Basic Procedure for Work Study / Method Study:

1. SELECT
 Firstly, select the job or process or operation to be studied.
 The basic objective behind selecting the job / process / operation for the study is to get maximum economic
advantage, scope for work improvement through reduction of excessive material handling & fatigue of
workmen, scope for improving the working conditions and improving the utilisation of resources.
 Before selecting the job for the study, following factors should be taken into consideration:
(a) Economic Factors

Work study will be useful only if the money saved by studying and improving the method is more. Generally job
is selected on the bases of following factors.
 Operation having bottlenecks (which affect other production activity badly)
 Operations which are done repetitively
 Operations having more manual work
 Operations where materials are moved for a long distance
(b) Human Factors

Work study will be successful only with the cooperation of all people concerned like workers, supervisors, trade
unions etc. If they do not accept work to be studied, it cannot be successful. They may resist this because of –
 The fear of unemployment
 The fear of reduction in wages
 The fear of increased work load
(c) Other factors which induce work study are –

 High operation cost in an operation or job
 High wastage and scrap in an operation or job
 Excessive movements of workers and materials
 Excessive rejections and rework
 Complaints about quality
 Complaints about poor working conditions
 Increasing number of accidents
 Excessive use of overtime
Mob: 9586075954
2. RECORD
 Once the job under study is selected, all the details about the existing method are recorded. This is done by
directly observing the work.
 To record the work, one can prepare various charts and various diagrams. These charts and diagrams are as
follows:
a. Operations Process Chart: Records operations and inspection
b. Flow Process Chart:
i. Man Type: Activities of men are recorded
ii. Material Type: Activities of material are recorded
iii. Equipment Type: Activities of equipment or machine is recorded
c. Two Handed Process Chart: Motions of both hands are recorded
d. Multiple Activity Chart: Simultaneous activities of workers and machines are recorded
e. Flow Diagram: Path / Flow of material is recorded
f. String Diagram: Movements of workers is recorded
3. EXAMINE
 In this stage, the recorded facts and data are examined critically by putting and analysing number of questions.
This is also known as questioning technique. The following sequence of questions may be used:
a. Purpose – What is actually been done? d. d. Person – Who is doing it
Why it is done? Why does that person do it?
What else could have been done? Who else can do it?
What should be done finally? Who should do it?
b. Place – Where is it being done? e. Means – How is it done?
Why it is done here? Why is it done that way?
Where else could it be done? How else could it be done?
Where should it be done? How should it be done?
c. Sequence – When it should be done? By doing this questioning
Why is it done then?  Unwanted activities can be eliminated
When could it be done?  Number of activities can be combined
When should it be done?  Method can be simplified
 Time can be reduced to perform work
4. DEVELOP
 Once critical examination of activities is done, next step is to develop the most economic and improved method
by generating several alternatives out of all circumstances, various production techniques and contributions of
managers, supervisors, workers and other specialists and selecting the best alternative.
 Following factors are to be considered while developing the method.
 Cost of implementation  Acceptance to design, production planning and
 Expected savings in time and cost marketing department
 Feasibility  Reaction of employees
 Producible
5. INSTALL
 The next step after developing the method is installing the selected method. In this step, acceptance is taken
from various parties. Install stage consists of –
 Getting acceptance of the change by supervisor
 Getting approval of management
 Getting acceptance from workers and trade unions
 Giving training to operators who are involved in this new method
6. MAINTAIN
The last step in the process is to maintain new method to ensure that it functions well; by monitoring the
results, by periodic checks, and verifications at regular intervals and by proper controlling techniques. Any
defect or difficulty should be corrected by the work study man. Suggestions from workers and supervisors
should be taken.
Mob: 9586075954
SYMBOLS USED IN WORK STUDY

The recording of the facts about the job in a process chart is done by using standard symbols as shown in the
figure below:
Operation - ⃝
 A large circle indicates operation. An operation takes place when there is some amount of work done on
anything. For example, an assembly or disassembly is an operation. When information is given or received or
when planning or calculating takes place it is also called operation.
o Example - Reducing the diameter of an object in a lathe.
 Inspection - □
 A square indicates inspection. Inspection is checking an object for its quality, quantity or identifications.
 Example - Checking the diameter of a rod. Counting the number of products produced.
Transport - →
 An arrow indicates transport. This refers to the movement of an object or operator or equipment from one
place to another. When the movement takes place during an operation, it is not called transport.
 Example - Moving the material by a trolley; Operator going to the stores to get some tool.
 Delay or temporary storage - D

 A large capital letter D indicates delay. This is also called as temporary storage. Delay occurs when an object or
operator is waiting for the next activity.
 Example - An operator waiting to get a tool in the stores. Work pieces stocked near the machine before the next
operation.
Permanent storage -
 An equilateral triangle standing on its vertex represents storage. Storage takes place when an object is stored
and protected against unauthorized removal.
 Example - Raw material in the store room.
Mob: 9586075954
RECORDING TECHNIQUES USED IN METHOD STUDY
Charts
• Operation Process Chart
• Outline Process Chart
• Man Type Flow Process Chart
• Material Type Flow Process Chart
• Man Machine Chart
• Travel Chart
• SIMO Chart
Diagrams
• Flow Diagram
• String Diagram
Photographic Techniques
• Cyclograph
• Chrono-Cyclograph
• Still Photography
• Micro-Motion Photography
1. VARIOUS CHARTS USED IN RECORDING TECHNIQUES
[A] Operation Process Chart:
 "An operations Process Chart is a graphic representation of the sequence of all the operations and inspections
involved in a process or procedure"
 An operation process chart provides an overview of the whole process or activity.
 In an operations process chart all the operations and inspections involved are recorded.
 The chart does not indicate where the work takes place or who performs it.
 The delays transport and storages are not indicated. But the entry points of materials are indicated.
 Where the process is long and complicated, this chart provides an overall picture and gives enough information
for critical examination.
 This chart is especially useful for recording maintenance and other indirect type of work. Often operation
process chart is known as Outline process chart.
[B] Outline process chart:
 Sometimes operation process chart is considered same as outline process chart.

 “Outline process chart is an overall view of the job under study that can be obtained by recording only the
important operations and inspections without going into all the other activities like delays, movements and
storages."
 Such a chart is known as an Outline Process Chart. This chart is particularly useful for large projects for getting a
broad outline.
Mob: 9586075954
[C] The Flow Process Chart (Material Type)
 A flow process chart (material) is a detailed chart, showing all the activities involved in a process.
 "A flow process chart (material)), is a process chart setting out the sequence of the flow of a product or a
procedure by recording all events under review in terms of the material being processed, using the
appropriate symbols”
 In a flow process chart (material), the subject of the chart is material. Since all the activities, operations,
inspections, movements, delays and storages are recorded; all the five symbols are used.
 A flow process chart (material) is more detailed than the operation process chart.
 All the factors in the process must' be recorded. The distance and time values are also recorded whenever
appropriate. Since all the movements are recorded very clearly, the flow process chart is a very useful chart for
analyzing and improving layout and handling problems.
 This chart is also useful for presenting new proposals to the management. Figure below gives an example of be
flow process chart (material).
Mob: 9586075954
[D] The Flow Process Chart (Man-Type)
 The flow process chart (man) is one of the basic charts to record the method of work. It is used to record the
work of Individual operators/worker.
 It gives a graphic representation of all the activities performed by the operators in the sequence in which they
occur.
 "A flow process chart (man) is a chart setting out the sequence of the flow of a product or a procedure by
recording all events in terms of the worker by using the appropriate process chart symbols."
 Flow process chart (man) is a useful recording technique to chart the method of performance rather than the
process. Once the process has been examined and all possible improvements have been made, then the analysis
and improvements in methods would be necessary.
 Existing methods when clearly recorded through this chart would be helpful in developing new methods.
 This chart can also be used as an operating instruction for use by supervisors and workers. An example of the
flow process chart (man) is shown in Fig below.
Mob: 9586075954
[E] The Multiple Activity Chart / Man-Machine Chart

 This kind of process chart records the activities of the operator as well as the machine on the same chart against
a common time scale.
 Separate vertical columns (in the form of bars) are used for both; workers and machines.
 The chart clearly indicates the IDLENESS (or UTILISATION) of operator as well as the machine.
 On the basis of the recorded events in the chart, one can rearrange the process so that IDLE-TIME is reduced, or
BETTER UTILISATION of the operator/machine is achieved.
 It is used for balancing the work between man and machine; proper utilization of maintenance staff etc.
 EXAMPLE: following chart shows chart representing 3 workers and 1 machine performing activities;
Mob: 9586075954
[F] The Two-Handed Process Chart
 Jobs that are completed at a single work place often consist of number of activities of the worker's two hands.
 The two-handed process chart records the sequence of manual activities in such jobs in a graphical manner.
 "The two-handed process chart is a process chart recording the work of the operator's hands (limbs) in
relation to another.”
 A two-handed process chart is made up of two columns in which the activities of the left hand and right hand
and the appropriate symbols are respectively recorded in sequence.
 The activities of the two hands are inter-related by aligning the symbols on the chart so that simultaneous
movements by both hands appear opposite to each other.
 Additional columns can be designed to record the activities of the other parts of the body whenever necessary.
 The two-handed process chart generally uses the same symbols as the other process charts.
 In practice only four of the five symbols are used to any extent. "Inspection" is rarely used since "inspection" is a
combination of hand movements and operations.
 The storage symbol implies "hold" instead of storage.
 The transport symbol represents movements of hands, the operation symbol, pick up, positioning, etc., and the
delay symbol denotes the waiting of one hand for the completion of work by the other.
 There is no time scale on this· chart and the exact duration of various activities is usually unknown.
 This chart is usually applicable only to the individual workplace and after, the broad methods have been decided
and thus most suitable at the later stages of methods improvement.
 Work of a short duration is suitable for recording on this type of chart. The following example shows the
movements of two hands of a worker recorded in a chart.
[G] Simultaneous Motion Cycle Chart (SIMO Chart)
 The SIMO Chart is an improvement of the two-handed process chart.

 SIMO chart is a two handed process chart in which simultaneous micro motions, called as ‘Therbligs’ or group of
Therbligs of different body parts (usually hands or legs), of one worker or more than one worker are recorded.
 When the movements are so fast that they cannot be measured or recorded with naked eyes, a cine film is
prepared and then studied by slow projection and finally a chart is prepared for the body movements.
 The activities recorded are in terms of "Therbligs"; which are very fine basic human motions.
 Such a chart can be prepared only with the help of photographic aids. Short cycle and highly repetitive jobs are
suited for this type of recording.
 By an analysis it will be possible to identify and remove the idleness and increase the utilization of both the
hands.
Mob: 9586075954
Mob: 9586075954
TIME STUDY / WORK MEASUREMENT
Meaning of Work Measurement

Once the method study reduces the work by eliminating repetitive elements on the part of material or
operatives and substituting improved methods for poor ones, now work measurement starts investigating and
eliminating ineffective time in the improved method and measures time taken in performance of the same
identifying and then eliminating ineffective time.
Definition of Work Measurement given by ILO (International Labour Organisation)

“Work Measurement is the application of techniques designed to establish the time for a qualified worker to
carry out a specific job at a defined level of performance.”
TIME STUDY PROCEDURE / PROCEDURE FOR CONDUCTING STOP WATCH TIME STUDY
STEP 1: SELECTING THE JOB
 First step in the process is to select the work / job to be studied.
 A job / work are selected for the time study under following circumstances.
o A new job which is recently introduced
o Change in the material or method
o Appearance of bottleneck in a particular operation
o Need for preparation of an incentive scheme for the job
o Any equipment involved in production process having excessive idle time
o Excessive cost associated with the job
o When new standard time is required
o To check correctness of existing standard time
DIRECT METHODS OF TIME STUDY

o When two methods are to be compared
 Any one or more of above listed criteria make(s) one job eligible for selection as a job to be studied.
STEP 2: RECORDING THE INFORMATION

 After selecting the job, next step is to obtain and record all the available information about the job, operator
and the surrounding conditions. The following groups of information need to be recorded:
a. Information about the study: Study number, Sheet number, Number of sheets, Name and initials of the
work study man, Date of study, Name of persons who approves the study (Head of Work study dept.,
Production department or other appropriate executive)
b. Information about the product: Name of product, Materials used, Quality requirements
c. Information related to process, method, plant and machine
d. Information of workers
e. Duration of Study: Start time, finish time, elapsed time (Finish time – Start time)
f. Working Conditions: Temperature, Humidity, Adequacy of Lighting
STEP 3: BREAKING DOWN JOB INTO ITS ELEMENTS

 An element means a distinct part (activity) of a specified job selected for time study.
 In this step each operation is divided into a number of different elements. This is done for easy observation and
accurate measurement.
The various elements are as follows:
i. Repetitive Element
It is an element which occurs in every work cycle of the job. E.g. Loading and unloading the machine, picking up
Mob: 9586075954
a material from a tray, keeping aside a finished part etc.
ii. Occasional Element
It is an element which does not occur in every work cycle but takes place at regular interval or irregular interval.
E.g. adjusting or resetting the machine, sharpening of a tool
iii. Constant Element
It is an element for which basic or normal time remains constant whenever it is performed. It may be occasional
or repetitive. E.g. Switch-on and switch-off the machine, measuring the dimension, screw on and tighten the nut
etc.
iv. Variable Element
It is an element for which the basic time varies depending upon the characteristics of the product, equipment or
process. E.g. Sawing (Cutting) the log of wood [here time varies with hardness and diameter of wood], pushing
the trolley [time varies with distance of weight] etc.
v. Foreign Element
It is an element, observed during the study, which after analysis not found to be an essential part of the job. E.g.
breakage of tool
vi. Manual Element
It is performed by worker.
vii. Machine Element
It is performed automatically by a machine and that does not require the influence of a worker. E.g. pressing a
part, cutting, throwing waste material etc.
viii. Governing Element
It is an element which occupies longer time than that of any other element during a cycle.
STEP 4: DETERMINATION OF SAMPLE SIZE

Here, the sample size of observations i.e. the number of observations required for each element is determined
by statistical formula or traditional method.
STEP 5: MEASURING TIME (TIMING ELEMENTS BY STOP WATCH)

Time taken by each element is measured by a stop watch. Time can be measured by either of two principal
methods.
 Cumulative Method
 Fly Back Method
In Cumulative Method, stop watch runs continuously throughout the study. It is started at the beginning of the
first element of a cycle and is stopped only after the study is completed. Here, total time of study is recorded.
In fly back method, stop watch is started at the beginning of the first element. Once the element is completed,
time for that element is noted in the sheet, and at the same time, the stop watch hand is back to zero. This is
done by pressing down the knob. This method measures the time for each element.
STEP 6: ASSESSMENT OF RATING FACTOR

 Rating is the measure of efficiency (usually speed) of a worker.
 The worker’s rating is found out by comparing his actual speed of work with standard performance.
 The standard rating is taken as 100. If the actual rating is less than 100, worker seems to be slow and if it is more
than 100, worker seems to be fast.
STEP 7: CALCULATING THE BASIC TIME

 Basic time is calculated as follows by applying the rating factor.
Basic Time = Observed Time X Actual Rating / Standard Rating
STEP 8: DETERMINE THE ALLOWANCES

 A worker cannot work all the day continuously. He will require time for rest, going to drink water, going to toilet
etc. Also unavoidable delay also may occur because of tool breakage or any such incident. So always extra time
should be added to basic time. This extra time is known as allowances. There are various types allowances which
are as follows:
o Rest and Personal Allowances
Mob: 9586075954
o Process Allowances
o Contingency Allowances
o Special Allowances
o Policy Allowances
STEP 9: COMPILE THE STANDARD TIME

The standard time is the sum total of basic time and allowances. It is also known as allowed time.
TYPES OF ALLOWANCES
1. Relaxation Allowances
 Relaxation allowances are addition to the basic time intended to provide the worker with the opportunity to
recover from the psychological and physiological effects of carrying out work under specified conditions. It
allows the worker to attend his personal needs.
 Relaxation allowances are usually 10% of normal time.
2. Contingency Allowances
 Contingency allowances are the extra time given to meet legitimate (genuine / valid) and expected items of
work delay which cannot be measured precisely because of infrequent or irregular occurrence.
 Such allowances are very infrequent and irregular so precise measurement of these become very difficult.
 They are usually 5% of normal time.
3. Process Allowances
 Process allowances are the extra time to compensate for enforced idleness of operator due to nature of process
or operation. This means worker is not able to work because process or machine takes its own part of cycle. E.g.
Worker working on automatic machine.
4. Interference Allowances
 They are extra time for a worker attending two or more machines and the worker is busy on one of the
machines resulting in idleness of other machines. E.g. if a worker is handling two or more machines, so when he
is working on a particular machine, other machine(s) may remain idle at that time.
 It is actually to compensate for the loss of earnings by a worker due to interference.
5. Start up Allowances
 They are extra time given to compensate for time taken for starting a job.
6. Cleaning Allowances
 They are extra time given to clean a machine or a workplace.
7. Set-up Allowances
 They are extra time for preparing a machine or process for production.
8. Policy Allowances
 They are the extra time given by MANAGEMENT. They are used to provide satisfactory earnings by worker by
enhancing performance.
===========================================================================================

Production Management All Chapters 2022-23

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Production Management All Chapters 2022-23

Uploaded by

Copyright:

Available Formats

2022-23

Production Management, S.Y. BBA – Sem 4, VNSG University, Surat

INTRODUCTION TO PRODUCTION MANAGEMENT

DEFINITION AND MEANING OF PRODUCTION

DEFINITION OF OPERATIONS MANAGEMENT & PRODUCTION

DIFFERENCE BETWEEN PRODUCTION & OPERATIONS

SCOPE OF OPERATIONS / PRODUCTION MANAGEMENT

Following are the important functions / scope of production management;

STRATEGIC DECISIONS (Long Term Decisions)

TACTICAL / OPERATIONAL DECISIONS (Short Term Decisions):

IMPORTANCE / SIGNIFICANCE OF OPERATIONS MANAGEMENT

Operations Management is an important primary function of any organisation. The importance of

 KEY SUCCESS FACTOR

Definition: “A production system is a collection of people, equipment, and procedures organized to

TYPES OF PRODUCTION SYSTEM

Manufacturing System Service system

Continuous System Intermittent System

Mass Production Assembly-line Production Job Shop Batch

A. CONTINUOUS / FLOW PRODUCTION SYSTEM

2. ASSEMBLY LINE PRODUCTION

3. PROCESS PRODUCTION SYSTEM

B. INTERMITTENT PRODUCTION SYSTEM

1. JOB SHOP PRODUCTION

5. Flexibility to accommodate and process number of products.

Difference between Intermittent and Continuous Production System

4. Per unit cost :

8. Storage of final products :

10. Capital invested :

PLANT LAYOUT & MATERIAL HANDLING

MEANING & DEFINITION:

 Reasonably stable demand for the product

 Continuous supply of materials

Figure: Process Layout

Disadvantages: Product layout suffers from following drawbacks

Suitability: Process layout is adopted when

 Job shop type of work is done

FIXED POSITION OR LOCATION LAYOUT

Figure: Fixed position layout

COMBINED / HYBRID LAYOUT

in hospitals. But in case of patient operation, fixed type of layout is used.

Service facility Design and Layout

Layout for hospitality service

PRINICIPLES OF GOOD PLANT LAYOUT:

1. Overall integration of factors:

4. Effective use of available space:

10. Minimum Discomfort-

11. Minimum Handling –

12. Safety Aspects –

13. Efficient Process Flow-

FACTORS AFFECTING PLANT LAYOUT

5. Repairs and Maintenance:

DIFFERENCE BETWEEN PRODUCT LAYOUT AND PROCESS LAYOUT

DEFINITION & MEANING

PRINCIPLES OF MATERIAL HANDLING

5. UNIT LOAD PRINCIPLE

6. SPACE UTILIZATION PRINCIPLE

10. L IFE CYCLE COST PRINCIPLE

TYPES OF MATERIAL HANDLING EQUIPMENTS

 According to dictionary.com, material handling is “the loading, unloading, and movement of

Type 1: Storage and Handling Equipment

Type 2: Bulk Material Handling Equipment

Type 3: Industrial Trucks

 Other examples are: