ME 404

Industrial Engineering
Module II
MR. SANTHU VARGHESE THOMAS
ASST. PROFESSOR, MECHANICAL DEPARTMENT
MANGALAM COLLEGE OF ENGINEERING
Overview 2

 Plant layout and Material handling

 principles of material handling
 Types of material handling equipment
 Selection and application
 Preventive and break- down maintenance
 Replacement policy-- Methods of replacement analysis
 Method of providing for depreciation
 Determination of economic life - Simple problems.
Material Handling 3

 In Production, as, the material is more widely moved rather than the men or machines, hence the
name ‘material handling’.
 Material handling can be defined as ‘material handling embraces the basic operations in
connection with the movement of bulk, packaged and individual products in a semi-solid or solid
state by means of gravity, manually or power-actuated equipment and within the limits of
individual producing, fabricating, processing or service establishment’.
 Material handling includes all movement and packing of materials, component parts, assemblies
and products.
 Handling of goods between plants normally called transportation is a subdivision of material
handling.
 It includes all movement of materials form the receipt of the raw materials to the shipment of
product.
Objectives of material handling 4

 Minimize cost of material handling.

 Minimize delays and interruptions by making available the materials at the point of use at right
quantity and at right time.
 Safety in material handling through improvement in working condition.
 Maximum utilization of material handling equipment.
 Prevention of damages to materials.
 Lower investment in process inventory.
Functions of material handling 5

 In a manufacturing organization, the material handling activities consists of :

 Transportation and handling at suppliers end,
 Material handling at manufacturing plant,
 Transportation and handling from warehouse to customer.
 The material handling activity in the plant starts with the unloading of the material after
receipt from suppliers, and extends throughout the processing from raw material stage till it
is manufactured and stored in the warehouse to be dispatched to the customer.
Elements of material handling 6

 Motion – Move in most economic, safe and efficient manner.

 Time – Provide materials on time.
 Quantity – Ensure supply of correct quantity continuously.
 Space – Ensure optimum use of space.
Symptoms of bad material handling 7

 Frequent interruption in production due to delay in handling and supplying

materials to the point of use.
 Skilled labour performing duties like storing, and handling of materials.
 Accumulation of work-in-process and materials in different locations.
 Reworking and rejections due to handling defects.
 Crowded floor space with scrap and materials.
 Long waiting for material handling equipment to pick up and deliver materials.
Unit load concept 8

 The basic concept of material handling is to move maximum load at a time so that the number of
moves for a definite quantity of load to be moved is minimum and so is the cost of handling.
 Material handling efficiency is proportional to the size of the load handled, i.e., number of units
handled per unit time.
 There are many materials which by virtue of their size and weight need to be moved individually.
 Also, there are many materials whose individual size and weight is small, but are required to be
moved in large quantities.
 Such materials, and also bulk materials which are needed in specific quantities, are generally grouped
together to form a load of a definite weight called as unit load, and then moved them individually.
 Unit load can be defined as a number of items, or bulk material, so arranged such
that the mass can be picked up and moved as a single object and which upon being
released will retain its initial arrangement for subsequent movement.
 Examples of unit load are small castings put in a container, a stack of bricks on a pallet, trailer full of
sand, etc.
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Advantages of unit load Disadvantages of unit load 10

 It permits handling of larger loads at a time  There is cost of unitization and de-
and thereby reduces handling and unitization.
transportation costs.
 Unitization generally involves additional
 Loading and unloading time of unit load is support and material for restraining the
substantially less than when handled as loose articles. These unitization medium
loose/individual material.
increase weight of the final load.
 Unit loads are less susceptible to damage and
loss during movement.
 Containers are often used for unitization.
Movement of the empty containers results
 It offers safer handling and transportation in additional handling cost and problem.
compared to those of loose materials.
 Unit load even made of irregular shaped
items, generally become stable and well
shaped.
 For unitized load, individual item labelling
may be avoided.
 Unitization generally provides a basis for
standardization of handling system.
 Types of unit load 11

 Unit load on a platform – This type of unit load is used When the
load is arranged on a platform which can be lifted and carried. eg.
pallet (pallet is the structural foundation of a unit load which
allows handling and storage).
 Unit load in a container – This type of unit load is used when
small sized articles are put inside a box like container, which can
be carried easily by trucks, cranes etc.
 Unit load on a rack – In this type, specially designed racks are
used to hold different types of parts.
 Unit load on a sheet – Flat sheets like cardboard/plywood may be
used for unitization of load. In these sheets, provisions are kept for
fork entry of lift trucks.
Principles of material handling 12

 Planning principle – All handling activities should be planned.

 Systems principle – Plan a system integrating as many handling activities as possible, covering operations
such as receiving, storage, production, inspection, packing, warehousing, supply and transportation.
 Space utilization principle – Make optimum use of cubic space.
 Unit load principle –The size unit load/unitized load should be optimum so that it can be efficiently handled
by the handling equipment
 Gravity principle – Utilize gravity to move a material wherever practicable.
 Material flow principle – Plan an operation sequence and equipment arrangement to optimize material flow.
 Simplification principle – Reduce combine or eliminate unnecessary movement and/or equipment.
 Safety principle – Provide for safe handling methods and equipment.
 Mechanization principle – Use automated material handling equipment.
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 Standardization principle- Standardize method, types, size of material handling equipment.
 Flexibility principle – Use methods and equipment that can perform a variety of task and applications.
 Equipment selection principle – Consider all aspect of material, move and method to be utilized.
 Motion principle – Equipment designed to transport material in motion.
 Idle time principle – Reduce idle time/unproductive time of both MH equipment and man power.
 Maintenance principle – Plan for preventive maintenance or scheduled repair of all handling equipment.
 Obsolescence principle – Replace obsolete handling methods/equipment when more efficient
method/equipment will improve operation.
 Capacity principle – Use handling equipment to help achieve its full capacity.
 Control principle – Use material handling equipment to improve production control, inventory control and
other handling.
 Performance principle – Determine efficiency of handling performance in terms of cost per unit handled
which is the primary criterion.
 Dead weight principle – The ratio of dead weight (weight of the material to be handled) to pay load
(weight carrying capacity of the material handling equipment) should be reduced.
Selection of material handling 14

equipment
 Nature of operations – Selection of equipment also depends on nature of operations like whether handling is temporary or
permanent, whether the flow is continuous or intermittent and material flow pattern-vertical or horizontal.
 Properties of the material – Whether it is solid, liquid or gas, and in what size, shape and weight it is to be moved, are important
considerations and can already lead to a preliminary elimination from the range of available equipment under review. Similarly, if
a material is fragile, corrosive or toxic this will imply that certain handling methods and containers will be preferable to others.
 Layout and characteristics of the building – Another restricting factor is the availability of space for handling. Layout will
indicate the type of production operation (continuous, intermittent, fixed position or group) and can indicate some items of
equipment that will be more suitable than others.
 Production flow – If the flow is fairly constant between two fixed positions that are not likely to change, fixed equipment such as
conveyors can be successfully used. If, on the other hand, the flow is not constant and the direction changes occasionally from one
point to another, because several products are being produced, moving equipment such as trucks would be preferable.
 Cost considerations –comparisons are made between various items of equipment that are all capable of handling the same load.
Initial investment and operating and maintenance costs are the major cost to be considered.
 Engineering factors – Selection of equipment also depends on engineering factors like door and ceiling dimensions, floor space,
floor conditions and structural strength.
 Equipment reliability – Reliability of the equipment and supplier reputation and the after sale service also plays an important role
in selecting material handling equipment.
 Types of material handling equipment 15

 Fork lift truck – In fork lift truck, the forks are

attached to a column on the truck. Forks can be
lifted to desired height along with the material on
them and the material can be stacked at the proper
place, even very close to the roof. Fork lift trucks
can be used move materials between various
points and are not permanently fixed in one place.
They are, therefore, most suitable for intermittent
production and for handling various sizes and
shapes of material.
 Cranes – Cranes are employed for lifting and
lowering bulky items and packages or cases. They
find in heavy engineering and generally in
intermittent type of production. They provide
overhead movements. The crane hook can move in
a rectangular area or a circular area. A jib crane is
preferred where lifting of the jobs is required in
few locations only or where bridge crane cannot
 Hoist – Hosting equipment are usually powered equipment
used for lifting and lowering unit and varying loads. 16
equipment can be stationary, portable or travelling type.
Often hoisting equipment are mounted on powered vehicles
like truck, rail Hoist or ship, when the movement of the
lifted load is not limited to a fixed area of operation.
 Monorail – It is an I section beam attached to the ceiling
and having either a trolley or carrier moving along it. The
material can be transferred from one place to another along
the beam. It is employed for intermittent type of material
handling in machine shop and other shops.
 Conveyors –They are employed to transport material over a fixed path which may be
horizontal or inclined (up or down), todifferent locations in the factory. They prove
economical, if the flow of material is continuous. In a belt conveyor, the belt may be 17
flat or trough shape to hold (granular) materials which may tend to fall from the flat
belt. The belt material may be rubber covered canvas, steel, plain fabric or woven wire.
A fixed conveyor is used on mass production shop floor whereas portable conveyors
are preferred for intermittent job.
 Roller conveyors may be gravity aided or powered and are employed for transporting
products having flat bottoms. Bigger jobs can be handled using roller conveyors.
Small items are put in boxes, before being transferred. Roller conveyors can move the
material along straight or curved path. Bucket conveyors consist of overhead endless
chain. It is supported from the ceiling and has a fixed path to travel. A lifting
mechanism is used for loading and unloading the products. Pipe line conveyors are
used for transporting granular or pulverized materials through the pipes.
 Slides and chutes – They transfer small jobs which can slide down
under gravity. Vibrating slides transport materials up an incline also.
Chutes have sheet metal base for transporting components down the
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incline.
 Lifts – In multi-storied plants, materials are lifted up and transported
by lifts. It is fast and flexible equipment for floor to floor travel.
Buckets or trays can be mounted on the endless chain running from the
ground floor to the top floor.
 Tractors and trailers – Tractors, three wheeled or four wheeled
employ IC Engine drive and are generally used for outdoor application.
Material is loaded in the trailers which are attached to the tractor.
Maintenance 19

 Maintenance is a set of organized activities that are carried out in order to keep an
item un as best operational condition with minimum cost acquired.
 Activities of maintenance function could be either repair or replacement activities,
which are necessary for an item to reach its acceptable productivity condition and
these activities should be carried out with a minimum possible cost
Objectives of maintenance 20

1. Maximizing production or increasing facilities availability at the lowest cost and

at the highest quality and safety standards.
2. Reducing breakdowns and emergency shutdowns.
3. Optimizing resources utilization.
4. Improving equipment efficiency and reducing scrap rate.
5. Optimizing the useful life of equipment.
6. Reducing downtime
Various forms of maintenance 21

Planned maintenance

 Planned maintenance is a scheduled maintenance activity carried to ensure that an

item of equipment is operating correctly and to therefore avoid any unscheduled
breakdown and downtime.
 Good example of planned maintenance program is car maintenance in which after
so many kilometers, engine oil be changed, etc.
 It is further divided into preventive maintenance and predictive maintenance.
 Preventive maintenance 22
 It is a set of activities that are performed on plant equipment, machinery, and systems before the
occurrence of a failure in order to protect them and to prevent or eliminate any degradation in their
operating conditions.
 This method relies on the machine's condition to accurately schedule the repair interval. e.g.
cleaning, inspection, oiling, etc.
 Objective of PM is to retain the healthy condition of equipment and prevent failure through the
prevention of deterioration or by periodic inspection or equipment condition diagnosis.
 Preventive maintenance is further divided according to the nature of its activities viz., routine
maintenance and opportunity maintenance.
 Routine maintenance includes those maintenance activities that are repetitive and periodic in nature
such as lubrication, cleaning, etc.
 Opportunity maintenance which is a set of maintenance activities that are performed on a machine

when an unplanned opportunity exists during the period of performing planned maintenance activities.
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Advantage of preventive maintenance

 Cost effective in many capital intensive processes.
 Flexibility allows for the adjustment of maintenance periodicity
 Increased component life cycle.
 Energy savings
 Reduced equipment or process failure.
 Estimated 12% to 18% cost savings over reactive maintenance program.

Disadvantages of preventive maintenance

 Catastrophic failures still likely to occur.
 Labour intensive.
 Includes performance of unneeded maintenance.
 Potential for incidental damage to components in conducting unneeded maintenance,
Predictive maintenance 24
 Predictive maintenance is a method of predicting the failure before it occurs, identifying the root causes for
those failure symptoms and eliminating those causes before they results in extensive damage of equipment.
 Predictive maintenance depends on information collected and the interpretation of the information.
 It is classified into two kinds according to the methods of detecting the signs of failure viz., Condition-Based
Predictive Maintenance (CBM) .and Statistical-based predictive maintenance.
 Statistical-based predictive maintenance depends on statistical data from the recording of the failure time of the
system under consideration in order to develop models for predicting failures
 Condition-based predictive maintenance (CBM) depends on continuous or periodic condition monitoring equipment
such as sensors, audio gauge, vibration analyzer, amplitude meter, pressure, temperature and resistance strain gauges,
etc., to detect the signs of failure.
 Ultimate aim of CBM is to eliminate routine maintenance carryout maintenance only when the monitoring system
indicates maintenance is needed.
 A Condition Based Maintenance policy is most suited to high capital cost equipment and complex replaceable items
and also for permanent parts that deteriorate o time or due to prolonged use.
 For this purpose, a good knowledge of failure data is required for effective implementation of condition based
maintenance.
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Advantages of predictive maintenance

 Predictive maintenance reduces total work-load, total down time, unplanned work
and total maintenance cost.
 Decrease in costs for parts and labour.
 Cost savings over preventive maintenance program.

Disadvantages of predictive maintenance

 Increased investment in diagnostic equipment.
 Increased investment in staff training.
Unplanned maintenance 26

 Unplanned maintenance is subdivided into two types viz., emergency maintenance and breakdown maintenance.
 Emergency maintenance is carried out as fast as possible in order to bring a failed machine or facility to a safe and operationally efficient condition. 

Breakdown maintenance
 Breakdown maintenance is performed after the occurrence of a failure for which advanced provision has been made in the form of repair method.
spares, materials, labour and equipment.
 It means that people waits until equipment fails and repair it.
 Such a thing could be used when the equipment failure does not significantly affect the operation or production or generate any significant loss other
than repair cost, eg., an electric motor of a machine tool failed lo start, a belt is broken, etc.
 Thus, this activity may consist of repairing, restoration or replacement of components.

Advantages of breakdown maintenance

 Involves low cost investment for maintenance.
 Less staff is required.

Disadvantages of breakdown maintenance

 Breakdown occurs inappropriate times leading to poor and hurried maintenance.
 Breakdown maintenance concentrates on repair, not the root cause.
 Excessive delay in production and reduces output.
 increase chances of accidents and less safety for both workers and machines.
 Cannot be used for equipments regulated by statutory provisions eg. cranes, lift,
Replacement 27

 It is a common phenomenon that performance/efficiency of machines deteriorates time.

 The remedy is either to replace them with new machines or to restore their efficiency by some sort of maintenance or repairs.
 However, a stage comes when the maintenance machine becomes so expensive that it is more economical to replace them.
 Replacement analysis is concerned with the question when is time to replace an existing piece of equipment new one?

Reasons for replacement of equipment are mentioned below.

Technical factors
 Possibility of performing additional operations by new machine
 More reliable machine developed.
 Unavailability of spare parts.
 Obsolescence - Obsolescence is the state of a being which occurs when equipment or service is no longer wanted even though it may

still be in good working order

 Deterioration: Deterioration is the decline of performance of equipment compared to new equipment identical to present one.

Cost factors
 High maintenance and repair cost of existing equipment
 Reduction in scrap or spoiled work by a new machine.
 Lesser space required for new machine, Reduction in labour cost for the new machine.
 Methods for replacement studies 28
  
Payback period method
 Pay back method determines the period of time required for the return on an invest to repay the sum of the original investment.
 
 Let,
P= Payback period in years,
C= Original capital investment and
R = Net returns per annum
Then,
 

 In geneal payback period, is expressed as

 
 where,
R, is the income during the period i (i= 1,2,3,...,n)
D is the operating expenses during the period i,
C is the initial investment.

For uneven cash flow

E=no of years immediately preceding the year of payback

B= Balance to be recovered
C= Cash flow during the year of recovery
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Present worth method
 In this method, future cost are translated into today's value of money ie, the value of money spent now after 'n' years.
 For the purpose of comparison, future costs are translated in today's value of money. This is found using the expression given below.

P = F(1 + i)-n
 where,
P Present value of money,
F = Worth of money in future,
i= Interest rate and
n = Number of years.

 Present worth method is used in situations where a new machine is to be purchased and have more than one choice to be selected and to
decide whether to purchase a new machine or use the existing machine after repairs.
 In these above situations, the machine which has lesser present worth value would be preferred

Advantages of present worth method

1. It considers the time value of money.
2. This method can be used to compare the worth of one machine with another.

Disadvantages of present worth method

1. In practice, it is quite difficult to obtain the estimates of cash flows due to uncertainty and to precisely measure the interest rate.
2. This method may not give correct assessment of projects with different life span or with different amount of initial outlay.
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MAPI method 37
 The MAPI method (Machinery and allied products Institute of Washington), which is used mainly for replacement
investments, is based on the same principle as the net-present-value method adjusted for utilization.
 The MAPI method assumes that existing equipment (referred as defender) operating inferiority (may be because of
technological progress or due to deterioration) compared to the equipment available presently (referred as challenger).
 Thus with passage of time, operating inferiority cost (imperfection) of the defender increases and average capital cost
decreases, If new machine is installed, it will have less operating inferiority cost and average capital cost.
 In order to decide whether or not an existing piece of equipment should be replaced following steps are prescribed.
1. Identify all those parts of equipment which could replace the existing one, i.e., defender'. Select the one
which is the best in the present conditions, i.e. challenger
2 Calculate the present average capital cost and operating cost of the defender.
3. Calculate, by use of specially developed MAPI-charts, total cost of the challenger.
4. Replace the defender if the total cost of defender is higher than that of the challenger
 
Advantages of MAPI method
 It takes into account of depreciation and obsolescence for taking replacement decision
 It can be applied to single as well as combination of number of equipments replacement
 It helps in budgeting equipment expenditure
 This method is more accurate, reliable and easy to follow.
Depreciation 38

 The reduction in the value and efficiency of the plant, equipment or any fixed asset because of wear and tear,
due to passage of time, use, climatic conditions and obsolescence, is known as depreciation.
 The physical deterioration of the asset occurs due to wear and tear with all time.
 Obsolescence occurs to due to availability of new technology or new product market that i is still is superior to the old
one and the new one replaces the old even though the old analysis is the one is still in working condition.
 The tangible assets for which the depreciation a carried out are construction equipment, buildings, electronic products,
vehicles, machinery, etc.
 Depreciation amount for any asset is usually calculated on yearly basis.
 Depreciation is considered as expenditure in the cash flow of the asset, although there is physical cash outflow.
 Depreciation affects the income tax to be paid by an individual or a firm as it is no physical cash considered as an
allowable deduction in calculating the taxable income.
 Generally the income tax is paid on taxable income which is equal to gross income less the allowable deductions
expenditure.
 Depreciation reduces the taxable income and hence results in lowering the income tax to be paid.
 Depreciation in accounting point of view is the method for spreading the cost of a fixed asset over the life of the asset. 
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Depreciation can be classified as under

1. Depreciation due to physical condition - Causes of depreciation due to physical condition are listed
below
a) Wear and tear due to operating use.
b) Action of elements like rust, heat or decay.
c) Disasters like accidents, earthquakes,
d) Poor maintenance and neglection etc.
2. Depreciation due to economic factors - Causes of depreciation due to economic factors are mentioned
below:
a) Inadequacy - Inadequacy means reduction in efficiency of the asset.
b) Obsolescence - Certain assets become obsolete because change in customer taste, change in
demand and availability of a new equipment in market capable of producing more products of good
quality with less labour and processing time.
Terms used in depreciation analysis 41

 Initial cost- Initial cost is the total cost of acquiring the asset.
 Salvage value - Salvage value represents estimated market value of the asset at
the end of its useful life. It is the expected cash inflow that the owner of the asset
will receive by disposing it at the end of useful life.
 Book value - Book value is the value of asset recorded on the accounting books
of the firm at a given time period. It is generally calculated at the end of each year.
Book value at the end of a given year equals the initial cost less the total
depreciation amount till that year.
 Useful life - Useful life represents the expected number of years the asset is useful
in terms of generating revenue. The asset may still be in working condition after
the useful life but it may not be economical. Useful life is also known as
depreciable life. The asset is depreciated over its useful life.
Methods of calculating depreciation 42

  
Straight line method.
 Straight line method assumes that loss of value of machine is directly proportional to it age, i.e., the
scrap value has to be deducted from the original value and divided by the remaining value by the
number of useful life in years.
Annual depreciation charges, D =

 where,
C= Initial cost + installation cost + repair Cost
S = Scrap value in rupees and
N = Estimated life in years.
 This method of calculating depreciation fund is known as fixed installment method because every
year same amount is deducted and no consideration is made on maintenance an repair charges which
gradually increases as machine get older.
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  
Diminishing balance method
 Machines and equipments depreciate fast in the beginning of their life span
 The depreciation fund should also be more during the early years when repairs and renewals are not
costly.
 Under this method, depreciation is charged at a fixed rate every year, but on reducing bālance.
 The amount of depreciation reduces gradually, because it is charged on the diminishing value of the
asset every year.
 This method is so called 'percentage on book value or reduce balance

 The yearly depreciation factor X is given by the following expression. 

 where,
C = Initial cost,
S = Scrap value and
N = Estimated life.
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Merits of diminishing balance method

 It is easy to calculate the amount of depreciation in this method and increase or decrease

in value of asset creates no problem in its calculations

 Under this method the scrap value of an asset is never zero and there is some amount of

depreciation on asset till it is in use.

Limitations of diminishing balance method

 Under this method, interest on investment i.e., interest on amount invested to purchase

an asset is not taken into account.

 Under this method the scrap value of a waste asset can never be zero
 This method is mostly used for assets which have more wear-tears and require more

repairs in ending years such as plant and machinery, motor vehicles, etc.
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Sinking
   fund method
 In this method it is assumed that money is deposited in a sinking fund over the useful life that will enable to replace the
asset at the end of its useful life.
 For this purpose, a fixed amount is-set-aside every year from the revenue generated and this fixed sum is considered to
earn interest at an interest rate compounded annually over the useful life of the asset, so that the total amount
accumulated at the end of useful life is equal to the total depreciation amount i.e. initial cost less salvage value of the
asset.
 Thus the annual depreciation in any year has two components.
 The first component is the fixed sum that is deposited into the sinking fund and the second component is the interest
earned on the amount accumulated in sinking fund till the beginning of that year.
 The rate of depreciation 'D' will be constant though out the life of the machine.
 
The annual rate of depreciation,
 where,
i= Rate of interest on the accumulated fund,
C= Total cost of machine,
S = Scrap value and
N = No. of years of life of machine.
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 Sum of Years Digit method (SYD)-

 In this method, greater amount of depreciation is given in the early years and it goes on decreasing as
the life of machine decreases.
 For calculating depreciation, scrap value is deducted from the original cost and the remaining balance is
spread over the asset's life in decreasing proportion.
 The SYD is found by estimating an asset's useful life in years, then assessing consecutive numbers to
each year, and totaling these numbers.
 For 'n' years, SYD = 1 + 2 + 3 + 4 +.... + n.
 For example if the useful life of an asset is 5 years, the SYD would be 1 + 2 +3 +4 + 5 = 15.
 The yearly depreciation is then calculated by multiplying the total depreciable amount for the life of the
asset by a fraction whose numerator is the remaining useful life and whose denominator is the SYD.
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