Ba7201 Notes

BA7201 Dept of MBA
BA7201 OPERATIONS MANAGEMENT LT P C

3003
UNIT – I INTRODUCTION TO PRODUCTION AND OPERATIONS

MANAGEMENT 9
Production Systems – Nature, Importance and organizational function. Characteristics of Modern

Production and Operations function. Organisation of Production function. Recent Trends in
Production and Operations Management. Role of Operations in Strategic Management.
Production and Operations strategy – Elements and Competitive Priorities. Nature of
International Operations Management.
UNIT – II FORECASTING, CAPACITY AND AGGREGATE PLANNING

9
Demand Forecasting – Need, Types, Objectives and Steps. Overview of Qualitative and
Quantitative methods. Capacity Planning – Long range, Types, Rough cut plan, Capacity
Requirements Planning (CRP), Developing capacity alternatives. Aggregate Planning –
Approaches, costs, relationship to Master Production schedule. Overview of MRP, MRP II and
ERP
UNIT – III DESIGN OF PRODUCT, SERVICE AND WORK SYSTEMS 9
Product Design – Influencing factors, Approaches, Legal, Ethical and Environmental issues.
Process – Planning, Selection, Strategy, Major Decisions. Service Operations – Types,
Strategies, Scheduling (Multiple resources and cyclical scheduling). Work Study – Objectives,
Procedure. Method Study and Motion Study. Work Measurement and Productivity – Measuring
Productivity and Methods to improve productivity.
UNIT – IV MATERIALS MANAGEMENT 9
Materials Management – Objectives, Planning, Budgeting and Control. Overview of Materials

Management Information Systems (MMIS). Purchasing – Objectives, Functions, Policies,
Vendor rating and Value Analysis. Stores Management – Nature, Layout, Classification and
Coding. Inventory – Objectives, Costs and control techniques. Overview of JIT.
UNIT – V PROJECT AND FACILITY PLANNING

9
Project Management – Scheduling Techniques, PERT, CPM, Crashing CPM networks – Simple
Problems. Facility Location – Theories, Steps in Selection, Location Models – Simple Problems.
Facility Layout – Principles, Types, Planning tools and techniques.
Total: 45
TEXT BOOKS
http://www.francisxavier.ac.in 1
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1. Aswathappa K and Shridhara Bhat K, Production and Operations Management,

Himalaya Publishing House, Revised Second Edition, 2008.
2. Pannerselvam R, Production and Operations Management, Prentice Hall India,
Second Edition, 2008.
3. Norman Gaither and Gregory Frazier, Operations Management, South Western
Cengage Learning, 2002.
REFERENCES
1. Kanishka Bedi, Production and Operations Management, Oxford University Press,

2004.
2. Russel and Taylor, Operations Management, Wiley, Fifth Edition, 2006.
3. Chary S. N, Production and Operations Management, Tata McGraw Hill, Third
Edition, 2008.
4. Chase Jacobs, Aquilano & Agarwal., Operations Management, Tata McGraw Hill, 2006.
5. Mahadevan B, Operations Management Theory and practice, Pearson Education, 2007.
BA7201 Dept of MBA
UNIT – I INTRODUCTION TO PRODUCTION AND OPERATIONS

MANAGEMENT
Production Systems – Nature, Importance and organizational function. Characteristics of Modern
Production and Operations function. Organisation of Production function. Recent Trends in
Production and Operations Management. Role of Operations in Strategic Management.
Production and Operations strategy – Elements and Competitive Priorities. Nature of
International Operations Management.
Production Systems – Nature

Production is regarded as one of the most crucial functions of management in modern
organizations. Obviously, to sell a product and earn profits, organizations need to firstly have a
product which carters to an unsatisfied need of the consumers. A product which is efficiently
produced helps the organization to reap more advantages in terms of cost saving, resource
utilization leading to reduced inventory costs and delay times and enhanced customer loyalty.
Production becomes the most important function in organizations implementing Just in Time
techniques (JIT). Production is sometimes confused with manufacturing. The definition of both
is same though, the only difference is that production can be used to describe the process of
producing both tangible as well as intangible product, i.e. both goods and services whereas
manufacturing is referred to the process of producing tangible products i.e. goods.
The nature of production can be explained under three heads:
➢ Production as a system
➢ Production as an organizational function
➢ Decision making in production
1. Production as a system: A system can be understood as a group of independent but

interrelated elements comprising a unified whole; "a vast system of production and distribution
and consumption keep the country going". We can thus identify three systems namely
a. Production System: The basic function of a production system is to convert a set of
inputs into a set of desired outputs. Inputs are resources such as materials, personnel, capital,
utilities and information. The objective of an enterprise is to provide goods or services, and to
earn profits. These days, many firms are focusing on continuous improvement and customer
delight. A continuous search for areas of improvement in the production system is needed. For
this, a clear understanding of recent developments in production system, industrial engineering
and management is necessary. To achieve these objectives, the firms need to convert some inputs
like men, material, money, energy, information, etc, into useful outputs like finished products
and services in required quantity and quality. The transformation of the inputs into pre specified
outputs is achieved through production process.
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b. Conversion Sub-system: It is a sub-system of the larger production system where the

inputs are converted into outputs. The resources taken in as the inputs are processed to obtain the
desired outputs known as the final product.
c. Control Sub-system: It is a sub-system of the larger production system where a portion

of the output is monitored for feedback signals to provide corrective action if required. This sub-
system is responsible for maintaining the acceptable standards of cost, quality and quantity. If the
produced output varies from what is required, corrective actions are taken to meet the standards.
Thus, the control sub-system ensures a uniform level of system performance by providing
feedback information so that corrective action can be triggered by managers in case of deviation
from set standards.
 Production system model comprises:
2. Production as an organizational function: As an organizational function the conversion

process of inputs into final goods and services is at the heart of the production function. This
makes the conversion subsystem the core of production system, where labor, materials and
machines are used to
convert inputs into products and services. Thus, it becomes clear that every organization,
irrespective of its nature and purpose has a production function where departments and personnel
play a central role in achieving the objectives of the organization.
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3. Decision making in Production: Operation managers have to make crucial decisions

related to the planning, organizing, staffing, directing and controlling the process of conversion
of the inputs into desired outputs. They are expected to make decisions at each level and
implement them too. The decisions made by operation managers can be categorized as:
Importance of Production Function:

Production function can offer competitive advantage to a firm in the following areas:
• Shorter new-product-lead time
• More inventory turns
• Shorter manufacturing lead time
• Higher quality
• Greater flexibility
• Better customer service
• Reduced wastage
Characteristics of Modern Production and Operations function:
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1. Manufacturing as Competitive Advantage

2. Services Orientation
3. Disappearance of Smokestacks
4. Small has Become Beautiful
Organisation of Production function:

Operations management is a mission-critical managerial function in all kinds of organizations –
from private manufacturing sectors to public service sectors, where OM impacts each step in the
process of providing a product or service. The importance of operations management has
increased dramatically in recent years due to the intensified global competition, shorter
product/service lifecycles, increasingly demanding consumers, and significant advancement of
information and process technology. These trends have driven business organizations to focus on
their operations function to improve efficiency and productivity while providing a wider variety
of high-quality products and services. As a result, OM is situated at the core of business and its
interaction with other business functions has become increasingly important. The OM discipline
is historically dominated by design, planning and control issues. While this focus is still
important to the field today, there is also a need to adopt a multidisciplinary approach an
incorporate perspectives of other business functions.
The POM department is headed by a senior vice president of operations who organizes the
department with the help of plant manager as well as staff heads, who are reporting to him.
Duties and Responsibilities of Production Managers in Manufacturing

OM line of direct responsibility
 Planning the geographical location of the factory.
 Purchasing production equipments.
 Layout of equipments within the factory.
 Designing production processes and equipments.
 Product Design.
 Designing production work and establishing work standards.
 Capacity planning.
 Production planning and scheduling.
 Production control.
 Inventory management.
 Supply chain management.
 Quality Control.
 Production equipment maintenance and repair.
 Measurement and monitoring of productivity.
 Industrial relations.
 Health and safety.
 Staff selection and liaisoning.
 Budgeting and capacity planning.
Emerging Role of the Production and Operations Manager
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After the economic reforms of 1991 and the advent of LPG in the Indian economy, major
changes have been observed in the business environment. It becomes inevitable for organizations
to change with the changing business environment if it wishes to stay back in the market and
reap profits. Indian industries now face fierce competition from MNCs and if managers of our
industries want to win this competition, they need to accept new responsibilities and reframe
their roles. The same applies for production and operations managers in India. Following are the
responsibilities of production and operation managers in India.
· Participate in strategic decision making of the company.

· Participate in the implementation and use of Enterprise Resource Planning in the
company.
· Automate processes as per the requirements of the company.
· Enhance the research and development effort in developing self-reliant new technologies.
· Reduce lag in implementation of projects [new products/services launching; expansion of
facilities] due to increased competition.
· Protect the environment by implementing environment and pollution norms established
by the government from time to time.
· Act as a member of the concurrent engineering teams in new product design ad old
product development.
· Develop long-term strategic relationship with supplies by acting as supply chain
managers.
· Give more attention to technology management, in view of joint ventures of
multinational companies with domestic companies.
· Be an internal quality auditor in quality certification programming such as ISO 9000
series and ISO 14000.
Recent Trends in Production and Operations Management:

1. Global Market Place: Globalization of business is the reason why many manufacturing
firms felt the need of operations in many countries where they have certain economic
advantage. This has increased the level of competition among manufacturing firms
throughout the world.
2. Production/Operations Strategy: An operations strategy becomes important for overall

success of business and the necessity for relating it to their overall business strategy.
3. Total Quality Management: This approach has been adopted by firms to achieve
customer satisfaction by a never-ending quest for improving the quality of goods and
services.
4. Flexibility: The ability to adapt quickly to changes in volume of demand, in the product
mix demanded, and in product design or in delivery schedules, has become a major
competitive advantage to the firms.
5. Time Reduction: Reduction of manufacturing cycle time and speed to market for a new
product provides competitive edge to the firm over other firms. When companies can
provide products at the same price and quality, quicker delivery (short lead times)
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provide one firm competitive edge over the other.
6. Technology: Advances in technology have led to a vast array of new products, new
processes and new materials and components. Automation, computerization, information
and communication technologies have revolutionized the way companies operate.
Technological changes in products and processes can have great impact on
competitiveness and quality, if the advanced technology is carefully integrated into the
existing system.
7. Worker Involvement: The recent trend is to assign responsibility for decision making and
problem solving to the lower levels in the organization. This is known as employee
involvement and empowerment, for example quality circles and quality improvement
teams.
8. Re-engineering: This involves drastic measures or break through improvements to

improve the performance of a firm. It involves the concept of clean-slate approach or
starting from scratch in redesigning the business processes.
9. Environmental Issues: There is increasing emphasis on reducing waste, recycling waste,

using less-toxic chemicals and using biodegradable materials for packaging.
10. Corporate Downsizing (Right Sizing): Companies are forced for downsizing or right
sizing due to competition, lowering productivity, need for improved profit and for higher
dividend payment to shareholders.
11. Supply Chain Management: Management of supply chain, from suppliers to final
customers reduces the cost of transportation, warehousing and distribution throughout the
supply chain.
12. Lean Production: Lean production systems use minimal resources to produce high
volume of high quality goods with some variety. These systems use flexible
manufacturing systems and multi-skilled work force to have advantages of both mass
production and job production (or craft production).
Role of Operations in Strategic Management:

"The role of the operations function means something beyond its obvious responsibilities and
tasks – it means the underlying rationale of the function, the very reason that the function exists."
The idea of role is important. As individuals we all play roles in our everyday life. Sometimes
we are colleagues of other people on our course. At other times we are friends of the people we
grew up with. At other times the children of our parents. Each is a different role. The important
point is that we behave differently depending on which role we are in at any time. It is the same
for the operations function. Depending on its role, it will behave differently. The chapter
identifies three roles for operations management. They are not exclusive in the sense that an
operation has to be one of them, but they all contribute to making up the way an operation
behaves. The three roles are:
 The implementer of business strategy.
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 The supporter of business strategy.

 The driver of business strategy.
Two things are important in understanding these roles. First, they are stated in order of difficulty
and in order of importance. Implementing business strategy is a very basic responsibility for
operations, supporting business strategy is what most operations should aspire to, but driving
business strategy is only possible if the operation really does have unique capabilities. Second,
they are cumulative in the sense that an operation cannot be a supporter of business strategy
unless it has skills as an implementer, and cannot drive business strategy unless it has the skills
to support the business strategy.
Judging the operations contribution
The model used in the book to describe the contribution of operations to competitiveness is one
which has been well known for many years and was originally devised by Professor Hayes and
Wheelwright at Harvard University. It is useful here because it can be adapted to incorporate the
three roles of the operations function. Moving from Stage 1 to Stage 2 requires the ability to
implement strategy. Moving from Stage 2 to Stage 3 requires the ability to support strategy.
Moving from Stage 3 to Stage 4 requires the operation to drive strategy through its unique
capabilities. Remember a number of points though when using this model.
 It is a conceptual model which allows organisations to think about how good their
operations are. It is not a precise instrument for measuring operations excellence.
 Some parts of the business could be at different stages to other parts. So for example, an
airport could have Stage 4 check-in facilities which use the most advanced information
systems and have the most dedicated staff, while its baggage handling system is at Stage
2. The overall customer experience therefore might be very mixed (depending on whether
their bags were lost or not).
 The real objective of this model is to show operations managers that they can be better
(very few operations are at Stage 4) and to go some way in defining what really
excellence in operations is (Stage 4).
Operations performance objectives
This first point made in this section of the chapter is that operations objectives are very broad.
Operations management has an impact on the five broad categories of stakeholders in any
organisation. Stakeholders is a broad term but is generally used to mean anybody who could
have an interest in, or is affected by, the operation. The five groups are:
 Customers – These are the most obvious people who will be affected by any business.
What the chapter goes on to call the five operations performance objectives apply
primarily to this group of people.
 Suppliers – Operations can have a major impact on suppliers, both on how they prosper
themselves, and on how effective they are at supplying the operation.
 Shareholders – Clearly, the better an operation is at producing goods and services, the
more likely the whole business is to prosper and shareholders will be one of the major
beneficiaries of this.
 Employees – Similarly, employees will be generally better off if the company is
prosperous; if only because they are more likely to be employed in the future. However
operations responsibilities to employees go far beyond this. It includes the general
working conditions which are determined by the way the operation has been designed.
 Society – Although often having no direct economic connection with the company,
individuals and groups in society at large can be impacted by the way its operations
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managers behave. The most obvious example is in the environmental responsibility

exhibited by operations managers.
After making this general point about operations objectives, the rest of the chapter goes on to
look at the five performance objectives of quality, speed, dependability, flexibility, and cost.
Quality
Quality is placed first in our list of performance objectives because many authorities believe it to
be the most important. Certainly more has been written about it than almost any other operations
performance objective over the last twenty years. Later in the book we devote two whole
chapters (Chapter 17 and Chapter 20) which look at different aspects of quality. As far as this
introduction to the topic is concerned, quality is discussed largely in terms of it meaning
‗conformance‘. That is, the most basic definition of quality is that a product or service is as it is
supposed to be. In other words, it conforms to its specifications.
There are two important points to remember when reading the section on quality as a
performance objective.
 The external affect of good quality within in operations is that the customers who
‗consume‘ the operations products and services will have less (or nothing) to complain
about. And if they have nothing to complain about they will (presumably) be happy with
their products and services and are more likely to consume them again. This brings in
more revenue for the company (or clients satisfaction in a not-for-profit organisation).
 Inside the operation quality has a different affect. If conformance quality is high in all the
operations processes and activities very few mistakes will be being made. This generally
means that cost is saved, dependability increases and (although it is not mentioned
explicitly in the chapter) speed of response increases. This is because, if an operation is
continually correcting mistakes, it finds it difficult to respond quickly to customers
requests. See the figure below.
Speed
Speed is a shorthand way of saying ‗Speed of response‘. It means the time between an external
or internal customer requesting a product or service, and them getting it. Again, there are internal
and external affects.
 Externally speed is important because it helps to respond quickly to customers. Again,
this is usually viewed positively by customers who will be more likely to return with
more business. Sometimes also it is possible to charge higher prices when service is fast.
The postal service in most countries and most transportation and delivery services charge
more for faster delivery, for example.
 The internal affects of speed have much to do with cost reduction. The chapter identifies
two areas where speed reduces cost (reducing inventories and reducing risks). The
examples used are from manufacturing but the same thing applies to service operations.
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Usually, faster throughput of information (or customers) will mean reduced costs. So, for
example, processing passengers quickly through the terminal gate at an airport can reduce
the turn round time of the aircraft, thereby increasing its utilisation. What is not stressed
in the chapter is the affect the fast throughput can have on dependability. This is best
thought of the other way round, ‗how is it possible to be on time when the speed of
internal throughput within an operation is slow?‘ When materials, or information, or
customers ‗hangs around‘ in a system for long periods (slow throughput speed) there is
more chance of them getting lost or damaged with a knock-on effect on dependability.
Dependability
Dependability means ‗being on time‘. In other words, customers receive their products or
services on time. In practice, although this definition sounds simple, it can be difficult to
measure. What exactly is on time? Is it when the customer needed delivery of the product or
service? Is it when they expected delivery? Is it when they were promised delivery? Is it when
they were promised delivery the second time after it failed to be delivered the first time? Again,
it has external and internal affects.
 Externally (no matter how it is defined) dependability is generally regarded by customers
as a good thing. Certainly being late with delivery of goods and services can be a
considerable irritation to customers. Especially with business customers, dependability is
a particularly important criterion used to determine whether suppliers have their contracts
renewed. So, again, the external affects of this performance objective are to increase the
chances of customers returning with more business.
 Internally dependability has an affect on cost. The chapter identifies three ways in which
costs are affected – by saving time (and therefore money), by saving money directly, and
by giving an organisation the stability which allows it to improve its efficiencies. What
the chapter does not stress is that highly dependable systems can help increase speed
performance. Once more, think about it the other way round – ‗how can an operation
which is not dependable ever promise its customers fast response?‘
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Flexibility
This is a more complex objective because we use the word ‗flexibility‘ to mean so many
different things. The important point to remember is that flexibility always means ‗being able to
change the operation in some way‘. The chapter identifies some of the different types of
flexibility (product/service flexibility, mix flexibility, volume flexibility, and delivery
flexibility). It is important to understand the difference between these different types of
flexibility, but it is more important to understand the affect flexibility can have on the operation.
Guess what! There are external and internal affects.
 Externally the different types of flexibility allow an operation to fit its products and
services to its customers in some way. Mix flexibility allows an operation to produce a
wide variety of products and services for its customers to choose from. Product/service
flexibility allows it develop new products and services incorporating new ideas which
customers may find attractive. Volume and delivery flexibility allow the operation to
adjust its output levels and its delivery procedures in order to cope with unexpected
changes in how many products and services customers want, or when they want them, or
where they want them.
 Once again, there are several internal affects associated with this performance objective.
The chapter deals with the three most important, namely flexibility speeds up response,
flexibility saves time (and therefore money), and flexibility helps maintain dependability.
Cost
The chapter makes two important points here. The first is that the cost structure of different
organisations can vary greatly. Note how the different categories of cost vary in the four
examples given in the chapter. Second, and most importantly, the other four performance
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objectives all contribute, internally, to reducing cost. This has been one of the major revelations
within operations management over the last twenty years.
"If managed properly, high quality, high speed, high dependability and high flexibility can not
only bring their own external rewards, they can also save the operation cost."
The polar representation of performance objectives

The chapter finishes with a useful way of illustrating the relative importance of the five
performance objectives – the polar diagram. It is particularly useful for illustrating the difference
between different products or services. The chapter illustrates a taxi service and a bus service to
show the differences between them. Of course, this is an extreme example, but within a single
business different products and services can have very different profiles. In the study guide for
the previous chapter we fully described the company Stagepoint. One of its founders, Richard
Carleton, described how the company had two types of service,
 Hiring services - managed by the ‗Technical Services operation‘.
 Producing production sets – produced by ‗Production Services‘.
The polar diagram below illustrates the relative importance of each of the performance
objectives for these two services. Technical Services which hires out equipment is, for some of
its equipment, in a relatively competitive market and must keep its prices competitive, therefore
cost is relatively important to it. So is dependability, failure to deliver a piece of equipment
would have serious consequences for the customer. Occasionally also speed can be important.
Quality means making sure that the equipment is in good working order every time it is sent out.
Flexibility is relatively unimportant because customers know exactly what it required and if the
equipment is not available there is nothing much that Stagepoint can do about it. Production
Services, on the other hand, is in a less price sensitive market. Customers give Stagepoint the
business primarily because of the high quality and flexibility they show in devising imaginative
high quality sets. Speed is not always a major issue unless the clients are themselves late in their
planning. Dependability, of course, has to be high because if the set was not finished on time the
stage production or exhibition could not go ahead as planned.
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The main point here is that the two types of service offered by the company have very different
characteristics in terms of which performance objectives are important. Any company must
understand how its different products and services require different objectives.
Types of Production system:
Manufacturing System Service System
Continuous Production Intermittent Production
Batch Production Job Production
Mass production( Flow) Processing Production
Job-Shop Production
Job-shop production are characterised by manufacturing one or few quantity of products
designed and produced as per the specification of customers within prefixed time and cost. The
distinguishing feature of this is low volume and high variety of products.
Batch Production
American Production and Inventory Control Society (APICS) defines Batch Production as a
form of manufacturing in which the job pass through the functional departments in lots or
batches and each lot may have a different routing.
Mass Production
Manufacture of discrete parts or assemblies using a continuous process are called Mass
Production. This production system is justified by very large volume of production. The
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machines are arranged in a line or product layout. Product and process standardisation exists and
all outputs follow the same path.
Continuous 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.
Production and Operations strategy – Elements of operation strategy

Operations strategy comprises six components:
1. Positioning the production system,- It involves selecting the product design, the production
system and the inventory policy for the finished goods for each product line
A). Product Focused- Generally employed in mass production organizations, where there are
groups of machine, tools and workers arranged according to their respective tasks in order to put
together a product.
B).Process Focused-It is designed to support production departments that perform a single task
like painting or packing. These system are highly flexible and can easily be modified to support
other product design.
2. Focus of factories and service facilities,
3. Product/Service design and development.
4. Technology selection and process development,- Thorough analysis and planning of the
production processes and facilities. Every step in the process of production is planned in
detail. The technology to be used in the production process is selected from range of options
5. Allocation of resources to strategic alternatives- Production companies have to
continuously deal with the problem of scarce resources like capital, machine and materials
and so on. As these resource inputs are vital to production activities, their shortages can
influence production performance significantly. Hence the operation manger have to plan the
optimal use of resources, both in terms of minimizing wastage, and in terms of their
allocation to the best strategic use.
6. Facility planning.
 The location of the production facilities is one of the key decisions an operation manager
has to make since it is critical to the competitiveness of the organization.
 Setting up production facilities with adequate capacity involves massive initial
investment.
 Strategically right options should be carefully weighted against all available alternatives.
These decisions also influence the future decisions on probable capacity expansions
plans.
 Operation managers also make decisions, i.e. decision on internal arrangement of workers
and department within the facility
Operations Competitive Priorities
1. Product and service design
2. Cost
3. Location
4. Quality
5. Quick response
6. Flexibility
7. Inventory management
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8. Supply chain management

9. Service
Nature of International Operations Management:

 International operations management is the set of activities used by an
international business to transform different kinds of resource inputs (material, labor,
and so forth) into final goods and services.
 A properly designed and managed operating system plays a major role in determining
product and service quality, and productivity. In addition, operations management
plays a role in determining how quickly a firm can respond to changes or new
developments in technology, consumer tastes and preferences, pricing levels,
competitive threats, and so forth.
The Strategic Context of International Operations Management
 International operations management must be closely aligned with a firm‘s strategy.
In fact, the way in which a firm structures and manages its operations function
influences and is influenced by its strategy.
 A firm‘s strategy drives several operations management activities including location,
facility design, and how logistics are managed. The text illustrates this concept with
an example of Hong Kong‘s Roly International Holdings strategy.
Complexities of International Operations Management
 International operations management is a far more complex task than domestic
operations management. At the international level, managers must contend with
suppliers from different countries, different government regulations wherever the firm
does business, a heterogeneous market, disparate transportation facilities and
networks, and relatively long distances.
 Several sets of decisions must be made regarding where and how to produce goods
and services. For example, a firm must decide where and how it will obtain
necessary resources for the operations management function. Furthermore, the firm
must make a number of location-related decisions such as where to build a plant or
sales office. In addition, a firm must make decisions regarding transportation choices
and inventory levels.
level
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UNIT – II FORECASTING, CAPACITY AND AGGREGATE PLANNING
Demand Forecasting – Need, Types, Objectives and Steps. Overview of Qualitative and
Quantitative methods. Capacity Planning – Long range, Types, Rough cut plan, Capacity
Requirements Planning (CRP), Developing capacity alternatives. Aggregate Planning –
Approaches, costs, relationship to Master Production schedule. Overview of MRP, MRP II and
ERP
Demand Forecasting:
Forecasting Defined : Forecasting is the first step in planning. It is defined as estimating the
future demand for products and services and the resources necessary to produce these outputs.
Demand forecasting is needed for:

• New facility Planning
• Production Planning
• Work force scheduling
• Financial planning
Types of Forecasts
• Technological forecasts: Concerned with rates of technological progress
• Economic forecasts: Statements of expected future business conditions.
• Demand forecasts: Projections of demand for a company's products or services
throughout some future period.
Objectives of Demand Forecasting

Short range objectives of demand forecasting:
i. Formulation of production strategy and policy
ii. Formulation of pricing policy
iii. Planning and control of sales
iv. Financial planning
Medium or Long-Range Objectives:
i. Long-range planning for production capacity
ii. Labour requirements (Employment levels)
iii. Restructuring the capital structure
Steps in the Forecasting Process

The seven basic steps
i. Determine the purpose (objectives) of the forecast
ii. Select the items for which forecasts are needed
iii. Determine the time horizon for the forecast
iv. Select the forecasting model (method or technique)
v. Gather and analyse the data needed for the forecast
vi. Prepare the forecast
vii. Monitor the forecast
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Overview of Qualitative and Quantitative methods:
(i) Qualitative methods consist mainly of subjective inputs, often of non-numerical

description.
 Jury of executive opinion method involves taking opinion of a small group of high-level
managers and results in a group estimate of demand.
 Salesforce composite method is based on estimate of expected sales by sales persons.
 Market research method or consumer survey method determines consumer interest in
a product or service by means of a consumer survey.
 Delphi method is a judgemental method which uses a group process that allows experts
to make forecasts.
(ii) Quantitative methods involve either projection of historical data or the development of
association models which attempt to use causal variables to arrive at the forecasts.
1. Time series models use a series of past data to make a forecast for the future. Time series is a
time-ordered sequence of observations taken at regular intervals over a period of time.
Yc = T. S. C. R multiplicative model
Yc = T + S + C + R additive model
where T is Trend, S is Seasonal, C is Cyclical, and R is Random components of a series.
Trend is a gradual long-term directional movement in the data (growth or decline).
Seasonal effects are similar variations occurring during corresponding periods, e.g., December
retail sales. Seasonal can be quarterly, monthly, weekly, daily, or even hourly indexes.
Cyclical factors are the long-term swings about the trend line. They are often associated with
business cycles and may extend out to several years in length.
Random component are sporadic (unpredictable) effects due to chance and unusual
occurrences. They are the residual after the trend, cyclical, and seasonal variations are removed.
Trend: Three methods for describing trend are: (1) Moving average, (2) Hand fitting, and
(3) Least squares.
MOVING AVERAGE
A centered moving average (MA) is obtained by summing and averaging the values from a given
number of periods repetitively, each time deleting the oldest value and adding a new value.
∑x
MA =
Number of Period
A weighted moving average (MAw) allows some values to be emphasized by varying the
weights assigned to each component of the average. Weights can be either percentages or a real
number.
∑ (Wt)X
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MAwt =
∑Wt
HAND FITTING
A hand fit or freehand curve is simply a plot of a representative line that (subjectively) seems to
best fit the data points. For linear data, the forecasting equation will be of the form:
Yc = a + b (X) (signature)
where Yc is the trend value, a is the intercept (where line crosses the vertical axis), b is the slope
(the rise, y, divided by the run, x), and X is the time value (years, quarters, etc.). The
―signature‖ identifies the point in time when X = 0, as well as the X and Y units.
LEAST SQUARES
Least squares are a mathematical technique of fitting a trend to data points. The resulting line of
best fit has the following properties: (1) the summation of all vertical deviations about it is zero,
(2) the summation of all vertical deviations squared is a minimum, and (3) the line goes through
the means X and Y. For linear equations, the line of best fit is found by the simultaneous solution
for a and b of the following two normal equations:
∑Y = na b∑X
∑XY = a∑Xb∑X2
EXPONENTIAL SMOOTHING
Exponential smoothening is a moving-average forecasting technique that weights past data in an
Exponential manner so that most recent data carry more weight in the moving average.
With simple Exponential smoothening, the forecast Ft is made up of the last period forecast Ft–1
plus a portion, α, of the difference between the last periods actual demand At–1 and last period
forecast Ft–1.
Ft = Ft–1 + (At–1– Ft–1).
Adjusted Exponential Smoothing
Adjusted exponential smoothing models have all the features of simple exponential smoothing
models, plus they project into the future (for example, to time period t + 1) by adding a trend
correction increment, Tt, to the current period smoothed average, Ft Ft+1=FtTt
The components of a trend-adjusted forecast that utilizes a second smoothing coefficient β. The
βvalue determines the extent to which the trend adjustment relies on the latest difference in
forecast amounts ( F t -F t-1) versus the previous trend Tt–1
A low βgives more smoothing of the trend and may be useful if the trend is not well-
established. A high βwill emphasize the latest trend and be more responsive to recent
changes in trend. The initial trend adjustment Tt–1 is sometimes assumed to be zero.
REGRESSION AND CORRELATION METHODS

Regression and correlation techniques quantify the statistical association between two or more
variables.
(a) Simple regression expresses the relationship between a dependent variable Y and a
independent variable X in terms of the slope and intercept of the line of best fit relating the two
variables.
(b) Simple correlation expresses the degree or closeness of the relationship between two
variables in terms of a correlation coefficient that provides an indirect measure of the variability
of points from the line of best fit. Neither regression nor correlation gives proof of a cause-effect
relationship.
BA7201 Dept of MBA
Differences between qualitative and quantitative:
Qualitative Quantitative
Methods Methods
Uses when situation is vague Used in stable situations
and little data available Historical data available
New products Existing products
New technology Current technology
Involves mathematical techniques
Example: forecasting newly introduced Example: sales of color TVs

online sales
Capacity
Amount of output a system is capable of achieving over a specific period of time.
Actual output
Efficiency =
Effective capacity
Actual output
Utilisation =
Design capacity
Capacity Planning:
Capacity planning is the process of determining the production capacity needed by an

organization to meet changing demands for its products.
• Capacity planning involves activities such as:

1. Assessing existing capacity
2. Forecasting future capacity needs
3. Identifying alternative ways to modify capacity
4. Evaluating financial, economical and technological capacity alternatives
BA7201 Dept of MBA
Selecting a capacity alternative most suited to achieve the strategic mission of the firm. Capacity
planning involves capacity decisions that must merge consumer demands with human, material
and financial resources of the organization
Capacity planning – Long range:
- The long range planning generally considers planning horizons of one year or longer. A
time period of one year or longer is needed to provide sufficient time to build a new
facility, to expand the existing facility or to move to a new facility due to forecasted
changes in demand.
- We determine long-term capacity needs by forecasting demand over a time horizon and
then converting those forecasts into capacity requirements
Long-term considerations relate to overall level of capacity, such as facility size (affected by
trends and cycles)
• 1.Long range capacity planning: T>1 year.
Decisions: planning for capacity that requires a long time to acquire.
e.g. Plant/building/equipment/high cost facility
• 2. Intermediate range capacity planning: T(6-18 months).
Decisions: planning for capacity requirement (month or quarterly).
e.g. work force size/new tools/inventory/…..
• 3. short range capacity planning: T (1-6moth).
Decisions: weekly (or daily) capacity planning.
e.g. overtime use/personnel transfer/alternative routings/……
Ways of Changing Long Range Capacity:

• Expand Capacity
– Subcontract with other companies to become suppliers of the expanding firm‘s
components or entire products
– Acquire other companies, facilities, or resources
– Develop sites, buildings, buy equipment
– Expand, update, or modify existing facilities
– Reactivate facilities on standby status
• Reduce Capacity
– Sell existing facilities, sell inventories, and layoff or transfer employees
– Mothball facilities and place on standby status, sell inventories, and layoff of
transfer employees
– Develop and phase in new products as other products decline
Types of Capacity Planning:

• Long term Capacity Planning
• Short-term Capacity Planing
• Finite Capacity Planning
• Infinite Capacity Planning.
Two categories of factors affecting capacity planning are:
• Controllable Factors
• Less Controllable Factors.
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Long Term Capacity: Long range capacity of an organization is dependent on various other
capacities like design capacity, production capacity, sustainable capacity and effective capacity.
Design capacity is the maximum output possible as indicated by equipment manufacturer under
ideal working condition.
Production capacity is the maximum output possible from equipment under normal working
condition or day.
Sustainable capacity is the maximum production level achievable in realistic work condition and
considering normal machine breakdown, maintenance, etc.
Effective capacity is the optimum production level under pre-defined job and work-schedules,
normal machine breakdown, maintenance, etc.
Medium Term Capacity: The strategic capacity planning undertaken by organization for 2 to 3
years of a time frame is referred to as medium term capacity planning.
Short Term Capacity: The strategic planning undertaken by organization for a daily weekly or
quarterly time frame is referred to as short term capacity planning.
Finite and infinite Capacity planning: If time is fixed by the customer required delivery date or
processing cycle, it is possible to accept time as the primary constraint and plan backwards to
accommodate these times. In such cases, planning backwards to infinite capacity offers a
potential solution to the problem. On the other hand if the processing time is not a constraint in
cases where products are produced to stock and sell, it is simpler to use a forward plan based on
finite capacity i.e., based on available resources.
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Rough Cut plan:
(RCCP) is the process of determining if the plan is feasible; it determines whether the
organization has sufficient capacity to carry out the plan. Although RCCP is more refined than
resource requirements planning (RRP), it is called ―rough cut" because it is less refined than
capacity requirements planning (CRP).
Rough cut capacity planning involves validating the works orders produced by the MRP system.
This is achieved through calculating the capacity required to complete the works order and
comparing this against the available capacity. Should the available capacity be greater than the
required capacity, then the plan is valid, otherwise the MRP system will have to recalculate the
works orders to attain a valid capacity plan. Normally the analysis is based around key resources
or bottlenecks - if there is sufficient capacity available at these resources then it is assumed that
there is sufficient capacity available throughout the rest of the system.
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Capacity Requirements Planning (CRP):

CRP is a process of determining what labour personnel and equipment capacities are needed to
meet the production objectives in MPS and MRP.
Capacity Requirement Planning (CRP) Process
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 Orders are converted in to workload sheets

 When work center capacity is verified, MRP verification is done
 How it can be improved if deficiency occur
CRP Inputs
 Planned orders and released orders from MRP system.

 Loading information from the work centre status file.
 Routing information from the shop routing file.
 Changes which modify capacity, give alternative routings or altered planned orders.
CRP Outputs
 Rescheduling information which call for capacity modifications or revision of MPS.
 Verification of planned orders for MRP system and
 Load reports.
Developing capacity alternatives:
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Aggregate Planning:
• Aggregate planning involves planning the best quality to produce in the intermediate-
range horizon (3 months to one year)
• Aggregate production planning is the process of determining output levels of product
groups over the next 6 to 18 months period.
• Objectives of Aggregate Planning
i. The overall objective is to balance conflicting objectives involving customer
service, work force stability, cost and profit.
ii. To establish company-wide strategic plan for allocating resources.
iii. To develop an economic strategy to meet customer demand.
Inputs to and Outputs from Aggregate Production Planning
Aggregate Planning or Aggregate Capacity Planning

 Need for Aggregate Capacity Planning
1. It facilitates fully loaded facilities and minimizes overloading and underloading
and keeps production costs low.
2. Adequate production capacity is provided to meet expected aggregate demand.
3. Orderly and systematic transition of production capacity to meet the peaks and
valleys of expected customer demand is facilitated.
 Steps in Aggregate Capacity Planning
1. Determine the demand (i.e., sales forecast) for each product for each time period
(i.e., weeks or months or quarters) over the planning horizon (6 to 12 months).
2. Determine the aggregate demand by summing up the demand for individual
products.
3. Transform the aggregate demand for each time period into workers, materials,
machines required to satisfy aggregate demand.
BA7201 Dept of MBA
4. Identify company policies that are pertinent (e.g., policy regarding safety stock
maintenance, maintaining stable workforce etc.).
5. Determine unit costs for regular time, overtime, subcontracting, holding
inventories, back orders, layoffs etc.
6. Develop alternative resource plans for providing necessary production capacity to
support the cumulative aggregate demand and compute the cost of each
alternative plan.
7. Select the resource plan from among the alternatives considered that satisfies
aggregate demand and best meets the objectives of the firm.
Approaches to Aggregate Planning
1. Top down approach
2. A bottom-up approach or subplan consolidation approach
 Rough-cut Capacity Planning
This is done in conjunction with the tentative master production schedule to test its
feasibility in terms of capacity before the master production schedule (MPS) is finalised.
Costs associated with aggregate planning:

Work force and inventory levels influence several relevant costs. These costs need to be
identified and measured so that alternative aggregate plans can be evaluated on a toal cost
criterion.
Those costs are
 Pay roll costs
 Costs of overtime, second shifts and sub-contracting
 Costs of hiring and laying off workers
 Costs of excess inventory and backlog
 Costs of production rate changes
Relationship to Master Production Scheduling

• Objectives of Master Production Scheduling
1. To schedule end items to be completed promptly and when promised to
customers.
2. To avoid overloading or underloading the production facility so that production
capacity is efficiently utilized and low production costs result.
Functions of MPS:
• Translating aggregate plans
• Evaluating alternative master schedules
• Generating material and capacity requirements
• Facilitating information processing
• Maintaining priorities
• Utilizing the capacity effectively.
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Master Production Schedule - Flow Chart
Guidelines for Master Scheduling

1. Work from an aggregate production plan
2. Schedule common modules when possible
3. Load facilities realistically
4. Release orders on a timely basis
5. Monitor inventory levels closely
6. Reschedule as required
MPS in Produce-to-stock and Produce-to-order Firms
 The elements of the MPS that are affected by the type of production system are:
a. Demand management
b. Lot-sizing
c. Number of products to be scheduled (product-mix).
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Over view of MRP (or) Information Flow in Planning and controlling with MRP.
MRP - It is a technique for determining the quantity and timing for the acquisition of
dependent demand items needed to satisfy MPS
Information flow of planning and controlling with MRP

Business Plan
Current
Production Plan conditions
Forecast
Tentative MPS Rough –cut Capacity check
Master Schedule
Inventory status file MRP Program Product Structure file
Make items
Buy items
CRP
Purchase Order
Detailed Production Plans
Vendor
feed-back Production Activity Control
Objectives of MRP
1. To improve customer service by meeting delivery schedules promised and shortening delivery
lead times.
2. To reduce inventory costs by reducing inventory levels.
3.To improve plant operating efficiency by better use of productive resources.
Three main purposes of a basic MRP system are to:
• Control inventory levels
• Assign operating priorities
• Assign capacity to load production systems.
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MRP System Inputs

Master Production Schedule: One of the three primary inputs in MRP, specifies what end
products are to be produced, in what quantities and when.
Bill of Materials file: Provides the information regarding all the materials, parts and sub
assemblies that go into the end product.
Inventory Status file: Gives complete and up-to-date information on the on-hand inventories,
gross requirements, scheduled receipts and planned order releases for the item.
MRP System Outputs
Primary outputs of MRP Systems:
• Planned order schedule
• Changes in planned orders.
Secondary inputs of MRP system:
• Exception reports
• Performance reports
• Planning reports
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Computational procedure of
The MRP Computational Procedure

MPS File
Inventory Status MRP Processing BOM File

File Logic
Order release Order rescheduling Planned order

requirements ( expedite, de- (future)
( orders to be expedite or cancel
released now) open order)
MRP
(a) BOM - A listing of all of the raw materials, parts, subassemblies, and assemblies
needed to produce one unit of a product
(b) Inventory status file – It contains important information such as what items
should be ordered and when orders should be released
(c) Gross Requirements – Project the use of the items
(d) Schedule receipts – indicates when the previously released orders if any are
scheduled to be received and available for use
(e) On hand inventory – It indicate the number of units projected to be available at
the end of each time period.
(f) Net requirement – Calculated by subtracting from the gross requirements for that
period.
(g) Planned order release- It indicate when orders should be placed ot meet the
requirements for the item.
Issues in MRP
a. Lot Sizing
b. Safety Stock
c. Scrap allowance
d. Pegging
e. Cycle counting
f. Updating
g. Time fence
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Lot- Sizing Rules

1. Fixed Order Quantity (FOQ)
A rule that maintain the same order quantity each time an order is issued
Formula:
(Projected On-hand inventory balance at end of week t) =
(Inventory on hand at end of week t-1) + (Scheduled (or) planned receipts in week t)
– Gross requirement in week t)
2. Periodic Order Quantity (POQ)-

A rule that allows a different order quantity for each order issued but tends to issue
the order at predetermined time intervals.
Formula:
(POQ lot size to arrive in week t) =
(Total gross requirements for P weeks, including week t ) – (Projected on-hand
inventory balance at end of week t-1)
3. Lot for lot (L4L)
A rule under which the lot size ordered covers the gross requirement of a single week.
Formula:
(L4L lot size) =
(Gross requirement in week t) – (Projected on-hand inventory balance at the end of
week t-1)
Manufacturing Resource Planning (MRP II ):

Broad-based resource co-ordination system involving other areas of a firm in the planning
process, such as marketing, finance and the human resource.
 Manufacturing Resource Planning (MRP II) addresses the planning and control of
activities related to materials, capacity, finance, engineering, sales and marketing.
 Closed-loop MRP:
A system built around material requirement planning (MRP-I) and also including
additional planning functions such as master production scheduling and capacity requirement
planning
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Manufacturing
Business Plan (Materials, Capacity
Production Schedules)
Production Plan
Purchasing (Vendor
MPS orders)
Rough cut
capacity plan
Engineering (Process
and product design)
MRP
Marketing (sales order

entry, delivery
Detailed projections)
capacity plan
Finance (Capital
requirements for
capacity, working capital
Shop floor control,
requirements
purchase control
Accounting (Bills
payable, Accounts
receivable)
BA7201 Dept of MBA
ERP: Enterprise Resource Planning

 Enterprise Resource Planning (ERP): A software package developed for optimum use
of resources of an enterprise in a planned manner. It integrates the entire enterprise
starting form the supplier to the customer, covering, logistics, financial and human
resources.
Features of ERP
1. Accommodating variety
2. Integrated Management Information
3. Seamless integration
4. Supply chain management
5. Resource management
6. Integrated data model
Scope of ERP
a. Financials
b. Logistics
c. Human resources
d. Work flow
Application of ERP
ERP is gaining popularity in India at a rapid pace. This is mainly due to the need for reducing
costs especially when the sales are sluggish in the sub-emerging markets.
BA7201 Dept of MBA
1. ERP – Enterprise Resource Planning: General Model of ERP

2.
Work Flow Electronic Mail Database Creation
Automation
Strategic and business planning- Strategic and business planning-

Materials Resources
*New product introduction
*Intelligent resource planning
*Product pricing
*BOM
*Long range forecasting *Human resource
and capacity planning planning
*Engineering change *Quality management

management
Organisation
payroll/Employee cost I
accounting m
Accounts receivable a
E *Order General ledger *Facilities
D Management Job/Project Management Maintenance g
I *Distribution Fixed Assets planning and i
Management Accounts Payable implementation n
Budgeting
Inventory g
Logistics/Distribution
Materials
Data Model
Operational planning and Operational planning and
execution - Materials execution - Materials
*Routing *Pay roll *Recruitment
*Order processing *Costing and Budgeting
*Supplier Management *Job evaluation and performance
*Inventory/Warehouse appraisal
management *Quality control and
*Distribution management planning
*Maintenance engineering and
*Scheduling and WIP scheduling *Fixed assets
Management management
*Resource MIS
Multi-platform Multi-Facility Multi-Mode Multi-Currency Multi-Lingual

Manufacturing
BA7201 Dept of MBA
UNIT – III DESIGN OF PRODUCT, SERVICE AND WORK SYSTEMS 9

Product Design – Influencing factors, Approaches, Legal, Ethical and Environmental issues.
Process – Planning, Selection, Strategy, Major Decisions. Service Operations – Types,
Strategies, Scheduling (Multiple resources and cyclical scheduling). Work Study – Objectives,
Procedure. Method Study and Motion Study. Work Measurement and Productivity – Measuring
Productivity and Methods to improve productivity.
Product: ―A product is a bundle of physical services and symbolic particulars expected to yield
satisfactions or benefits to the buyer‖ – by Phillip Kotler
Product design: ―Product design in its broadest sense includes the whole development of the
product through all the preliminary stages until actual manufacturing begins‖
– by C.S. Deverell
New product development (Steps)
Advance product
Needs Advance Design
planning
identification
Detailed
Engineering
Design
Production process Product Product use and

design and Evaluation and support
development improvement
Interrelationship (or) interaction (or) linkage of product design and process design
Product ideas
Feasibility
studies
Product design Process design
Advance product planning, Advance Organising the process flow

design Relation of process design to
Continuous process flow
Production process design and
development interaction Evaluating the process design
Product evaluation and improvement,
product use and support
Produce and market new product/service
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Interrelationship (or) interaction (or) linkage of product planning and process planning
Product development
Product planning system

Product Final design
New
Technology
Process R& Process Design

D
Work station Selection Work flow

analysis
Operation
design
Operation Content
Operation
method
Plant planning systems
Product Design: Concerned with form and function of a product. It refers to the arrangement
of elements or parts that collectively form a product.
Process Design: Concerned with the overall sequence of operations required to achieve the
design specification of the product.
Production Design: Concept of designing products from the point of view of producibility.
Objectives of Product Design
(i) The overall objective is profit generation in the long run.
(ii) To achieve the desired product quality.
(iii) To reduce the development time and cost to the minimum.
(iv) To reduce the cost of the product.
(v) To ensure producibility or manufacturability (design for manufacturing and assembly).
BA7201 Dept of MBA
Influencing factors for Product design:

Influencing factors
Customer perspectives Organisational perspectives

1. Functions 1. Intrinsic cost of material
2. Aesthetics 2. Intrinsic cost of labour
3. User Friendliness 3. Replacement, Exchange
4. Esteem Associated with and disposal
possession
Other Factors Influencing Product Design

i. Customer requirements
ii. Convenience of the operator or user
iii. Trade off between function and form
iv. Types of materials used
v. Work methods and equipments
vi. Cost/Price ratio
vii. Product quality
viii. Process capability
ix. Effect on existing products
x. Packaging
Approaches to /Elements in Product design
Reverse
Engineering
Research and
development
Manufacturabi
lity
Approaches/ Robust design

Standardizatio Elements in
n product
design
Modular
design
Product life
cycle
http://www.francisxavier.ac.in 38 Computer
Concurrent aided design
engineering (CAD)
BA7201 Dept of MBA
Approaches to Product Design

i. Designing for the customer
• Industrial design
• Voice of the customer
• Quality function deployment (QFD)
ii. Designing for Manufacture and Assembly (DFMA)
• ―Over-the-wall approach‖
• Concurrent engineering
• Design for Manufacturing (DFM) Design for Assembly (DFA)
iii. Designing for ease of production (or for producibility or manufacturability)
• Specification
• Standardisation
• Simplification
iv. Designing for Quality
a. Designing for robustness (or robust design)
b. Designing for production
i. Modular design
ii. Designing for automation
c. Designing for reliability
v. Designing for Ergonomics
vi. Designing for environmental protection
vii. Designing for recycling
viii. Designing of disassembly (DFD)
ix. Designing for mass customisation
Delayed differentiation and modular designs are two tactics used to make mass
customisation possible.
x. Other issues in product design are (a) Computer aided design (CAD), (b) Value
engineering or value analysis which
• Computer aided design: Use of computer graphics for designing the product helps
to generate a number of alternative designs and identify the best alternative which
meets the designer‘s criteria.
• Value engineering/Value analysis: Concerned with the improvement of design
and specifications at various stages of product planning and development.
Legal, Ethiocal and Environmental issues:

Legal Aspect of Product Design :
(i) The imposition of rules and acts passed by State and Central Govt.
(ii) The standards related to code of practice for design, fabrication and testing of products
prepared by standards organization.
(iii)The imposition of punitive damages by the courts in product liability cases.
(iv) The resistance of consumer protection forums to badly designed and manufacturing
products.
(v) The resistance of public to damage of their environment.
(vi) The most important law to consider while dealing with the product liability is the
Consumer Protection Act of 1986.
(vii) The sales of Goods Act of 1956.
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Other Legal issues:

 Product liability
 Intellectual Property
Ethical issues:
 Assessing the impact of the design on consumer
 Protection of Intellectual Property
 Privacy
 Exposure to the undesirable
 Advertising of Design
 Right to alter natural order
 Whether designs should be tested on animals and humans
 Environmental impact
 Sustainable technology
 Minority groups
Environmental Issues
Product Pollution
Designer should anticipate environmental trends and design products that are clean enough for
future environmental standards.
Process Pollution
Product designer must avoid the process that causing pollution from solvents, combustible
products, wastes etc. or he may change the processes at the early stages.
Ease of recycling product
Everyone has a moral obligation about the happens to the product after it‘s useful life is over?
Can it be recycled into new even be able to profit in some manner from recycling of it‘s product.
Process Planning and Process Design

 After the final design of the product has been approved and released for production, the
production planning and control department takes the responsibility of process planning
and process design for converting the product design into a tangible product.
What is a Process?
A process is a sequence of activities that is intended to achieve some result, for example, to
create added value for the customers
Process planning: Concerned with planning the conversion processes needed to convert the
raw material into finished products.
Steps in process planning:
1. Analysis part print
2. Consult with product engineer on product design changes
3. List the basic operation
4. Determine – economical and practical manufacturing methods
5. Combine the operation and put them in to sequence
6. Specify the gauging required for process
BA7201 Dept of MBA
Process design: Concerned with the overall sequences of operations required to achieve the
product specifications
Operations design: Concerned with the design of the individual manufacturing operation.
Process Selection
Process selection refers to the way production of goods or services is organised.
Three primary questions to be addressed before deciding on process selection are:
(i) How much variety of products or services will the system need to handle?
(ii) What degree of equipment flexibility will be needed?
(iii) What is the expected volume of output?
Process Selection Decisions
Processes by market orientation
1. Make to stock
2. Assemble to order
3. Make to order
4. Engineer to order
Characteristics Make-to-Stock Make-to-Order

Product Producer-specified Customer-specified
Low variety High variety
Inexpensive Expensive
Objectives Balance inventory, Manage delivery lead

capacity, and service times and capacity
Main operations Forecasting Delivery promises

problems Planning production Delivery time
Control of invenntory
Processes as production systems –

1. Project
2. Job shop
3. Batch production
4. Assembly line
5. Continuous flow
Processes and customer involvement
1. Self service
2. Produt selection
3. Partnership
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Process Strategy
An organisation‘s approach to selection of the process for the conversion of resource inputs into
outputs.
Key aspects in process strategy include:
i. Make or buy decisions
ii. Capital intensity and
iii. Process flexibility
Types of process designs (or) Process Strategy

(A) Product –focused (production line or continuous production) - Organised according
to the type of product/service being produced
2 general form
1. Discrete unit manufacturing
2. Process manufacturing
Product-Focused production
Product or material flow
Production operations
Raw materials Components 4

2
Components Subassemblies
Raw materials 3 5 7 Finished

1 Components Subassemblies Assemblies
product
Assemblies
4-17
Purchased components
6
and subassemblies
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(B) Process-Focused (Intermittent production or job shops) – Production operations are

grouped according to type of processes.
Receiving and Foundry Rough Fabrication Painting Packaging

raw material machine and shipping
1 2 3 6 6 7
8
4 5 5
1
4
2 3 7
Shear and Finish Debur Assembly

punch Machine
(C) Repetitive Focus system:
It falls between product and process focuses system – modules
Classic assembly lineMass customization focus
(D)Mass customization focus
Mass customization focus
Change Repeat-Again Either-Or

Transparent Collaborative
Customization Customization
Product
Sort-Through Form-Of
Adaptive Cosmetic
Change Customization Customization
No Change Change
Representation 4-20
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(E) Group Technology/Cellular Manufacturing system
BA7201 Dept of MBA
Major Strategy:
1. Process choice
2. Nature of product/Services
3. Vertical integration
4. Resource flexibility
5. Customer involvement
6. Capital intensity
Process Strategy Decisions

Process Structure
• Customer-contract position
(services)
• Product-process position
(manufacturing)
• Layout
Customer Involvement Resource Flexibility
• Low involvement • Specialized
• High involvement • Enlarged
Capital Intensity
• Low automation
• High automation
Strategy for Change

• Process reengineering
• Process improvement
Effective Process
Design
Figure 3.1 – Major Decisions for Copyright © 2010 Pearson
Effective Processes Education, Inc. Publishing
as Prentice Hall.
Process Choice – it depends on volume and degree of customization

Project, Job,Batch,Line and Continuous.
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PRODUCT-PROCESS MATRIX (Figure

4.5)
Low volume,
Unique, one of Low volume, Higher volume High volume, high
Multiple
a kind low few major standardization,
products
product standardization products commodity
Project
Building NONE
Job Shop
Printing
Heavy
Batch
Equipment
Auto
Assembly assembly
line
Sugar
Continuous NONE Refinery
4-26
Vertical integration – degree to which a firms own production system or service facility
handles the entire supply chain
1. Backward integration – firms movement upstream towards sources of raw material and
parts
2. Forward integration – downstream by acquiring more channels of distribution such as
its own distribution centers and retail sources
• Outsourcing
• Make-or-buy decision
Flexible workforce – A workforce whose members are capable of doing many tasks
either at their own workstation or as they move form one workstation to another
Workforce
Equipment
Customer involvement –
1. Self service
2. Product selection
3. Time and location
Capital Intensity
Automation is one way to address the mix of capital and labor
Fixed Automation
Flexible Automation
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Process Selected Must Fit with Volume and Variety
SERVICE OPERATIONS
 Planning and Scheduling service systems is different from planning and scheduling
manufacturing systems.
 Competitive priorities for service firm:
• Low service product costs.
• Fast and on time delivery
• High quality services
• Customer service
• Flexibility.
Three types of service operations
 Quasi manufacturing: In quasi manufacturing physical goods are more dominant then
service associated with the product. Here the stress is on cost of production, technology,
products, product quality and prompt delivery. It may be either a standardized or
customized product.
 Customer-as-participants: Here there is a high involvement of customer the physical
goods may not be that must sufficient. Services can be either customized or standardized.
 Customer- as-product: Here the service is performed on customer. Service here is
customized physical goods may or may not significant.
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Scheduling Quasi-Manufacturing Operations

Two types of quasi-manufacturing operations are:
• Product-focussed operations
• Process focussed operations.
• Personnel Scheduling in Services
Three difficulties faced in scheduled personnel in services are:
• Demand variability
• Service time variability
• Availability of person when they are needed.
Scheduling “Customer-As-Participant” Service Operations
 ―Customer-as-participant‖ service operations:
• Customer actually participates in service operations for eg. retailing, tourism etc.
• Has huge invovement of customer in service operations.
Scheduling “Customer-As-Product” Service Operations
 ―Customer-as-product‖ service operations:
• Service is actually performed on the customer. for example, hair dressing,, medical
treatment, surgery etc.
• Scheduling Multiple Resources
Two major characteristics of service operations are:

• Services are produced and delivered by people
• The pattern of demand for services is not uniform
 Scheduling of service system involve scheduling
• Customers
• Work force
• Equipment
Strategies:
 Two common strategies for scheduling services are:
• Schedule for peak demand
• Chase Demand. Other Possible Strategies
 Other possible strategies for services are:
• Reservation strategy
• Customer participation
• Adjustable capacity
• Cross-Training
• Sharing capacity.
Scheduling Multiple Resources:
In some service organization it is necessary to coordinate the uses of more than one resource.
The complexity of scheduling the resources increases with multiple resources used by the service
systems.
Cyclical Schedule or Rotating Schedule:
Cyclical or rotating schedule rotates employees through a series of workdays or working hours.
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Work Study-Method Study and Work Measurement
• Methods engineering includes work simplification, job design, value analysis and the
like.
• Work study method was developed to improve performance of a given work.
• Work study is the body of knowledge concerned with analysis of the work methods, and
the standard of proposed work methods.
• Objective of work study is to improve operational efficiency.
• The purpose of work study is to determine the best or most effective method of
accomplishing a necessary operation.
Relationship of Time and Motion Study to Work Study
• Time study and motion study are results of practices developed by F.W. Taylor, Frank
and Lillian Gilbreth.
• Time study: Exercising control over the output in respect of a job by setting standards for
performance.
• Time study may be used to compare the effectiveness of alternative work methods.
Objectives:
 To analyse the present method of doing a job, systematically in order to develop a new
and better method
 To measure the work content of a job by measuring the time required to do the job for a
qualified worker and hence to establish standard time
 To increase the productivity by ensuring the best possible use of human, machine and
material resources and to achieve bet quality product/service at minimum possible cost.
 To improve operational efficiency
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Steps or procedure Involved in Work Study
Method Study or Methods Analysis

• Method study is also known as methods improvement.
• Prime objectives of method study are to eliminate wasteful and inefficient motions.
Steps in method study
1. Select- select the work to be studied.
2. Record-record all the relevant facts of the present method of direct observation.
3. Examine-examine the facts critically in sequence, using special critical examination sheet.
4. Develop-develop the best method (i.e) the most practical, economic and effective method,
under prevailing circumstances.
5. Install-install that method as standard practice
6. Maintain- maintain the standard practice by regular routine check.
Motion Study
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Motion study is the science of eliminating wastefulness resulting from using unnecessary; ill-
directed and inefficient motion. The aim of motion study is to find and perpetuate the scheme of
least waste methods of labour.
Micro motion study provides a valuable technique for making minute analysis of those
operations that are short in cycle, contain rapid movements and involve high production over a
long period of time.
Micro-motions are also known as ‗Therbligs‘.
Examples of Therbligs
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1. Search (Sr)
2. Select (St)
3. Grasp (G)
4. Transport empty (TE)
5. Transport loaded (TL)
6. Hold (H)
7. Release load (RL)
8. Position (P)
9. Pre-position (PP)
10. Inspect (I)
11. Assemble (A)
12. Disassemble (DA)
13. Use (U)
14. Unavoidable delay (UD)
15. Avoidable delay (AD)
16. Plan (Pn)
17. Rest for overcoming fatigue (R)
18. Find (F)
Principles of Motion Economy

Principles of motion economy are divided into three groups.
a. Effective use of the operator
b. Arrangement of the workplace
c. Tools and equipment
Work measurement and productivity:

Work measurement is the application of techniques designed to establish the time for a qualified
worker to carry out a specified job at a defined level of performance.
Techniques of Work Measurement

The main techniques used to measure work are:
 Direct Time Study.
 Synthesis Method.
 Analytical Estimating.
 Pre determined Motion Time System (PMTS).
 Work sampling or Activity Sampling or Ratio Delay Method.
Steps in Work Measurement

Work measurement involves seven steps.
1. Break the job into elements
2. Record the observed time for each element by means of either time study, synthesis or
analytical estimating.
3. Establish elemental time values by extending observed time into normal time for each
element by applying a rating factor.
4. Assess relaxation allowance for personal needs and physical and mental fatigue involved
in carrying out each element.
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5. Add the relaxation allowance time to the normal time for each element to arrive at the
work content.
6. Determine the frequency of occurrences of each element in the job, multiply the work
content of each element by its frequency (i.e., number of time the element occurs in the
job) and add up the times to arrive at the work content for the job.
7. Add contingency allowance if any to arrive at the standard time to do the job.
Techniques of work measurement
The following are the principal techniques by which work measurement is carried out:
1. Time study
2. Activity sampling
3. Predetermined motion time systems
4. Synthesis from standard data
5. Estimating
6. Analytical estimating
7. Comparative estimating
Of these techniques we shall concern ourselves primarily with time study, since it is the basic
technique of work measurement. Some of the other techniques either derive from it or are
variants of it.
1. Time Study
Time Study consists of recording times and rates of work for elements of a specified job carried
out under specified conditions to obtain the time necessary to carry out a job at a defined level of
performance.
In this technique the job to be studied is timed with a stopwatch, rated, and the Basic Time
calculated.
1.1 Requirements for Effective Time Study
The requirements for effective time study are:
a. Co-operation and goodwill
b. Defined job
c. Defined method
d. Correct normal equipment
e. Quality standard and checks
f. Experienced qualified motivated worker
g. Method of timing
h. Method of assessing relative performance
i. Elemental breakdown
j. Definition of break points
k. Recording media
One of the most critical requirements for time study is that of elemental breakdown. There are
some general rules concerning the way in which a job should be broken down into elements.
They include the following. Elements should be easily identifiable, with definite beginnings and
endings so that, once established, they can be repeatedly recognised. These points are known as
the break points and should be clearly described on the study sheet. Elements should be as short
as can be conveniently timed by the observer. As far as possible, elements - particularly manual
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ones - should be chosen so that they represent naturally unified and distinct segments of the
operation.
1.2 Performance Rating
Time Study is based on a record of observed times for doing a job together with an assessment
by the observer of the speed and effectiveness of the worker in relation to the observer's concept
of Standard Rating.
This assessment is known as rating, the definition being given in BS 3138 (1979):
The numerical value or symbol used to denote a rate of working.
Standard rating is also defined (in this British Standard BS3138) as:
"The rating corresponding to the average rate at which qualified workers will naturally work,
provided that they adhere to the specified method and that they are motivated to apply
themselves to their work. If the standard rating is consistently maintained and the appropriate
relaxation is taken, a qualified worker will achieve standard performance over the working day
or shift."
Industrial engineers use a variety of rating scales, and one which has achieved wide use is the
British Standards Rating Scale which is a scale where 0 corresponds to no activity and 100
corresponds to standard rating. Rating should be expressed as 'X' BS.
Below is an illustration of the Standard Scale:
Rating Walking Pace
0 no activity
50 very slow
75 steady
100 brisk (standard rating)
125 very fast
150 exceptionally fast
The basic time for a task, or element, is the time for carrying out an element of work or an
operation at standard rating.
Basic Time = Observed Time x Observed Rating
The result is expressed in basic minutes - BM's.
The work content of a job or operation is defined as: basic time + relaxation allowance + any
allowance for additional work - e.g. that part of contingency allowance which represents work.
1.3 Standard Time
Standard time is the total time in which a job should be completed at standard performance i.e.
work content, contingency allowance for delay, unoccupied time and interference allowance,
where applicable.
Allowance for unoccupied time and for interference may be important for the measurement of
machine-controlled operations, but they do not always appear in every computation of standard
time. Relaxation allowance, on the other hand, has to be taken into account in every
computation, whether the job is a simple manual one or a very complex operation requiring the
simultaneous control of several machines. A contingency allowance will probably figure quite
frequently in the compilation of standard times; it is therefore convenient to consider the
contingency allowance and relaxation allowance, so that the sequence of calculation which
started with the completion of observations at the workplace may be taken right through to the
compilation of standard time.
Contingency allowance
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A contingency allowance is a small allowance of time which may be included in a standard time
to meet legitimate and expected items of work or delays, the precise measurement of which is
uneconomical because of their infrequent or irregular occurrence.
Relaxation allowance
A relaxation allowance is an addition to the basic time to provide the worker with the
opportunity to recover from physiological and psychological effects of carrying out specified
work under specified conditions and to allow attention to personal needs. The amount of the
allowance will depend on the nature of the job. Examples are:
Personal 5-7%
Energy output 0-10%
Noisy 0-5%
Conditions 0-100%
e.g. Electronics 5%
Other allowances
Other allowances include process allowance which is to cover when an operator is prevented
from continuing with their work, although ready and waiting, by the process or machine
requiring further time to complete its part of the job. A final allowance is that of Interference
which is included whenever an operator has charge of more than one machine and the machines
are subject to random stoppage. In normal circumstances the operator can only attend to one
machine, and the others must wait for attention. This machine is then subject to interference
which increased the machine cycle time.
It is now possible to obtain a complete picture of the standard time for a straightforward manual
operation.
2. Activity Sampling
Activity sampling is a technique in which a large number of instantaneous observations are made
over a period of time of a group of machines, processes or workers. Each observation records
what is happening at that instant and the percentage of observations recorded for a particular
activity or delay is a measure of the percentage of time during which the activity or delay occurs.
The advantages of this method are that
1. It is capable of measuring many activities that are impractical or too costly to be
measured by time study.
2. One observer can collect data concerning the simultaneous activities of a group.
3. Activity sampling can be interrupted at any time without effect.
The disadvantages are that
1. It is quicker and cheaper to use time study on jobs of short duration.
2. It does not provide elemental detail.
The type of information provided by an activity sampling study is:
a. The proportion of the working day during which workers or machines are producing.
b. The proportion of the working day used up by delays. The reason for each delay must be
recorded.
c. The relative activity of different workers and machines.
3. Predetermined Motion Time Systems

A predetermined motion time system is a work measurement technique whereby times
established for basic human motions (classified according to the nature of the motion and the
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conditions under which it is made) are used to build up the time for a job at a defined level of
performance.
The systems are based on the assumption that all manual tasks can be analysed into basic
motions of the body or body members. They were compiled as a result of a very large number of
studies of each movement, generally by a frame-by-frame analysis of films of a wide range of
subjects, men and women, performing a wide variety of tasks.
The first generation of PMT systems, MTM1, were very finely detailed, involving much analysis
and producing extremely accurate results. This attention to detail was both a strength and a
weakness, and for many potential applications the quantity of detailed analysis was not
necessary, and prohibitively time -consuming. In these cases "second generation" techniques,
such as Simplified PMTS, Master Standard Data, Primary Standard Data and MTM2, could be
used with advantage, and no great loss of accuracy. For even speedier application, where some
detail could be sacrificed then a "third generation" technique such as Basic Work Data or MTM3
could be used.
4. Synthesis
Synthesis is a work measurement technique for building up the time for a job at a defined level
of performance by totaling element times obtained previously from time studies on other jobs
containing the elements concerned, or from synthetic data.
Synthetic data is the name given to tables and formulae derived from the analysis of accumulated
work measurement data, arranged in a form suitable for building up standard times, machine
process times, etc by synthesis.
Synthetic times are increasingly being used as a substitute for individual time studies in the case
of jobs made up of elements which have recurred a sufficient number of times in jobs previously
studied to make it possible to compile accurate representative times for them.
5. Estimating
The technique of estimating is the least refined of all those available to the work measurement
practitioner. It consists of an estimate of total job duration (or in common practice, the job price
or cost). This estimate is made by a craftsman or person familiar with the craft. It normally
embraces the total components of the job, including work content, preparation and disposal time,
any contingencies etc, all estimated in one gross amount.
6. Analytical estimating
This technique introduces work measurement concepts into estimating. In analytical estimating
the estimator is trained in elemental breakdown, and in the concept of standard performance. The
estimate is prepared by first breaking the work content of the job into elements, and then utilising
the experience of the estimator (normally a craftsman) the time for each element of work is
estimated - at standard performance. These estimated basic minutes are totalled to give a total job
time, in basic minutes. An allowance for relaxation and any necessary contingency is then made,
as in conventional time study, to give the standard time.
7. Comparative estimating
This technique has been developed to permit speedy and reliable assessment of the duration of
variable and infrequent jobs, by estimating them within chosen time bands. Limits are set within
which the job under consideration will fall, rather than in terms of precise capital standard or
capital allowed minute values. It is applied by comparing the job to be estimated with jobs of
similar work content, and using these similar jobs as "bench marks" to locate the new job in its
relevant time band - known as Work Group.
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Productivity
Production refers to the total output.
• Productivity: The amount of goods and services produced with resources used.
• Partial productivity: Output in a given period divided by labors hours used in the period.
Output in a given period

Total productivity =
Labour + Capital + Materials + Energy used in the same period
Measuring Productivity:
Productivity refers to output relative to the inputs. Inputs in any production process comprise
capital, labour materials and energy. Productivity of each resource can be measured separately.
Such measurement gives partial productivity. Productivity of all resources put together gives
productivity on the total facto basis. This method of calculating productivity considering all
resources is called multi-factor approach to measuring productivity.
Partial productivity = Out put in a given period / Labour hours used in the period
Total productivity = Out put in a given period / Labour + Capital+ Material+ Energy used in the
same period
Labour productivity in 3 ways
(i) Output per man-hour

Labour productivity = Output / Man – hours used
(ii)Labour hours per unit of output

Labour productivity = Total labour hours used / Output
(iii)Added value per unit of labour cost

Labour productivity = Added value for the product total wages / Total wages
Methods to improve productivity:
- To understand the factors that influences the relationship between output and input.
- In long run, it cannot be achieved only by increased worker effort. The real growth can
come abut only through capital investments in newer and better machines, equipment and
facilities
BA7201 Dept of MBA
- Own the best of machines, but if the people do not work with dedication, productivity
cannot increase. Employees‘ job performance depends on their ability and motivation.
Ability depends on the quality of people hired. Motivation is the effort of leadership.
- Other ways are - production planning and control, inventory control , operations
research, cost control, budgetary control, marketing research, preventive maintenance and
the like, help improve productivity.
Production function – Areas of productivity

- Improving volume of production
- Reducing rejection rates
- Minimising rework rate
- Maintaining delivery schedules
- Controlling idle time of machines and men
- Establishing/updating/improving/setting industrial engineering orms.
- Updating processes and procedures
- Maintaining accuracy and timeliness of MIS.
- Decreasing machine set-up time.
- Controlling overtime
- Good hours-keeping
- Checking absenteeism, thefts/pilfers age and misconduct
- Eliminating accidents
- Effective grievance handling
- Efficient training and team building
- Minimising inventory and achieving better yields
- Enhancing customer satisfaction
- Total quality management
- Business process re-engineering (BPRE)
- Automation
BA7201 Dept of MBA
UNIT – IV MATERIALS MANAGEMENT 9
Materials Management – Objectives, Planning, Budgeting and Control. Overview of Materials

Management Information Systems (MMIS). Purchasing – Objectives, Functions, Policies,
Vendor rating and Value Analysis. Stores Management – Nature, Layout, Classification and
Coding. Inventory – Objectives, Costs and control techniques. Overview of JIT.
Why Materials Management?

 Materials is one of the five M‘s(Men, Material, Money, Machine and Methods) of an
industrial organization.
 Materials offer considerable scope for improving profit.
 Materials form an important form of current assets in any organization.
 Value addition is the margin between the raw material value and finished goods value.
 Suppliers and materials management account for more than 50 percent of total value.
 Quality of the finished product depends on quality of materials used.
 Conservation of materials and their availability for posterity is one of the planks of social
responsibility of business.
 Exploring new sources of supply is a challenge for material management executives.
Materials Management
 Material management involves organizing and coordinating all management functions that
are responsible for every aspect of materials, storage, and transformation.
 Buying, storage, and movement of material are the three basic objectives of materials
management.
 Optimum investment in inventory is the prime objective of materials management.
 Development of personnel is very important for long-term growth of a firm.
 Engineering groups are primarily responsible for standards of specifications.
Importance of Materials Management
1. Lower prices for materials and
equipment
2. Faster inventory turnover
3. Continuity of supply
4. Reduced lead time
5. Reduced transportation costs
6. Less duplication of efforts
7. Elimination of buck-passing
8. Reduced materials obsolescence
9. Improved supplier relationships and
better records, and information
10. Better interdepartmental cooperation
11. Personnel development
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Functions of Materials Management

1. Materials planning and programming
2. Raw material purchase
3. Receiving, store keeping, and warehousing
4. Issuing of material
5. Inventory control
6. Value engineering
7. Transportation of materials
8. Vendor development
9. Vendor rating
10. Disposal of scrap and surpluses
Objectives
Primary Objectives
1. Buying the best item at the lowest cost
2. Reduction in inventory cost and High inventory turnover
3. Maintaining the flow of production
4. Maintaining the consistency of quality
5. Optimization of acquisition and possession, resulting in lower cost
6. Cordial relationship with suppliers
7. Maintaining good records
8. Contribution towards competitiveness
9. Personnel development
Secondary Objectives
1. Promotion of standardization with suppliers
2. Development of reciprocal relations with customers
3. Committees to decide on economic make –or- buy decisions
4. Development of inter departmental relationships
Material Planning And Control

Material planning is a scientific technique of determining in advance the requirements of raw
materials, ancillary parts and components, spares etc. as directed by the production programme.
It is a subsystem in the overall planning activity. There are many factors, which influence the
activity of material planning. These factors can be classified as macro and micro systems.
1. Macro factors: Some of the micro factors which affect material planning, are price trends,
business cycles Govt. import policy etc.
2. Micro factors: Some of the micro factors that affect material planning are plant capacity
utilization, rejection rates, lead times, inventory levels, working capital, delegation of powers
and communication.
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Materials Budgeting
The Process of Preparing Material Budgets
Materials Budgeting: Process of preparing materials budget or purchase budget in terms of

quantity and money value of materials to be procured for a given period of time.
Material Budgeting is an estimate of expenses to be incurred in the procurement of material and
its helps in effective execution and control of material plans.
Material Control
Function of maintaining constantly availability of all kinds of materials required for the
manufacture of products.
Materials Management Information System (MMIS)

1. MMIS provides on-line information on stock level, work-in- process; finished goods, and
stores and spares.
2. It provides information at right time, it also request the supplier to supply the material on
time.
3. It also helps in accessing information rapidly, detects errors and assures prompt decision
making.
4. It also takes decisions regarding when to buy or when to make parts and the like.
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Purchasing
The term ‗purchasing‘ refer to buying of a material or an item from a company or division that
supplies materials. Since a manufacturing firm is involved in the conversion of raw material into
finished goods, it should ensure that right type of material are purchased in the right time. A one
percent saving in cost is equivalent to 10 percent increase in turnover.
Objectives of Purchasing
The basic objective of the purchasing function is to ensure continuity of supply of raw materials,
sub-contracted items and spare parts and to reduce the ultimate cost of the finished goods. In
other words, the objective is not only to procure the raw materials at the lowest price but to
reduce the cost of the final product.
The objectives of the purchasing department can be outlined as under:
 To avail the materials, suppliers and equipments at the minimum possible costs: These
are the inputs in the manufacturing operations. The minimization of the input cost increases the
productivity and resultantly the profitability of the operations.
 To ensure the continuous flow of production through continuous supply of raw materials,
components, tools etc. with repair and maintenance service.
 To increase the asset turnover: The investment in the inventories should be kept minimum
in relation to the volume of sales. This will increase the turnover of the assets and thus the
profitability of the company.
 To develop an alternative source of supply: Exploration of alternative sources of supply of
materials increases the bargaining ability of the buyer, minimisation of cost of materials and
increases the ability to meet the emergencies.
 To establish and maintain the good relations with the suppliers: Maintenance of good
relations with the supplier helps in evolving a favourable image in the business circles. Such
relations are beneficial to the buyer in terms of changing the reasonable price, preferential
allocation of material in case of material shortages, etc.
To achieve maximum integration with other department of the company: The purchase
function is related with production department for specifications and flow of material,
engineering department for the purchase of tools, equipments and machines, marketing
department for the forecasts of sales and its impact on procurement of materials, financial
department for the purpose of maintaining levels of materials and estimating the working
capital required, personnel department for the purpose of manning and developing the
personnel of purchase department and maintaining good vendor relationship.
 To train and develop the personnel: Purchasing department is manned with varied types of
personnel. The company should try to build the imaginative employee force through training and
development.
 Efficient record keeping and management reporting: Paper processing is inherent in the
purchase function. Such paper processing should be standardised so that record keeping can be
facilitated. Periodic reporting to the management about the purchase activities justifies the
independent existence of the department.
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Purchase Cycle
Purchasing cycle comprising of eight steps.

1. Recognition of Need : Identifying an item that is officially brought to the attention of
purchasing department.
2. Description of Requirement: Purchase requisition should give accurate information for
ordering recognised product.
3. Selection of Source: Registered suppliers who are approved by the company. Buying
from single supplier helps develop long-term relationship and reduces the risk and
interruption in the supply. Buying from multiple suppliers may not help in maintaining
quality and helps get material at competitive prices.
4. Determination of Price and Availability
5. Placing the Order
6. Order Acknowledgement
7. Follow Up and Expediting
8. Checking The Invoice and Approval
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Purchase Functions
1. Obtaining prices
2. Selecting vendors
3. Awarding purchase orders
4. Follow up on delivery promise
5. Adjusting and settling complaints
6. Selecting and training of purchase personnel
7. Vendor relations
Purchasing Policies
• Ancillary Development: The firms sub-contracts, i.e., decides to buy the parts from outside
suppliers. Mostly the fabricated parts, components are brought from outside suppliers by the
firms.
• Make or buy: Another purchasing policy is whether to buy the parts or components from
outside supplier or manufacture within the firm. The decisions lie depending in various
factors.
• Speculative buying: Speculative buying is conducted with the hope of making profit out of
price changes. Here the profit is made by buying at low price and selling at higher price.
Vendor rating:
The evaluation of supplier or vendor rating provides valuable information which help in
improving the quality of the decision. In the vendor rating three basic aspects are considered
namely quality, service and price
The Development Project Committee of the National Association of Purchasing Agents (U.S.A.)
has suggested following methods for evaluating the performance of past suppliers.
1. The categorical plan: Under this method the members of the buying staff related with the
supplier like receiving section, quality control department, manufacturing department etc., are
required to assess the performance of each supplier. The rating sheets are provided with the
record of the supplier, their product and the list of factors for the evaluation purposes. The
members of the buying staff are required to assign the plus or minus notations against each
factor.
2. The weighted-point method: The weighted-point method provides the quantitative data for
each factor of evaluation. The weights are assigned to each factor of evaluation according to the
need of the organization, e.g., a company decides the three factors to be considered—quality,
price and timely delivery. It assigns the relative weight to each of these factors as under:
Quality ……… 50 points
Price ……… 30 points
Timely delivery ……… 20 points
3. Critical incidents method: Record of events related to buyer vendor relationships is
maintained in each vendor‘s file. They reflect positive and negative aspect of actual
performance. This kind of documentation useful in discussing ways and means of improving
performance, acknowledging the existence of good relationships, determining the competence of
a vendor, and if necessary considering termination
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4. The cost-ratio plan: Under this method, the vendor rating is done on the basis of various
costs incurred for procuring the materials from various suppliers. The cost-ratios are ascertained
delivery etc. The cost-ratios are ascertained for the different rating variables such as quality,
price, timely delivery etc. The cost-ratio is calculated in percentage on the basis of total
individual cost and total value of purchases.
5. Checklist system: A simple checklist is used to evaluate the vendors. Check list may
be something like Reliability, technical capability, after sales service, availability, buying
convenience etc
Value Analysis
Value engineering or value analysis had its birth during the World War II Lawrence D. Miles
was responsible for developing the technique and naming it. Value analysis is defined as ―an
organized creative approach which has its objective, the efficient identification of unnecessary
cost-cost which provides neither quality nor use nor life nor appearance nor customer features.‖
Value analysis focuses engineering, manufacturing and purchasing attention to one objective-
equivalent performance at a lower cost.
Function .
Value =
Cost
Steps in Value Analysis
In order to answer the above questions, three basic steps are necessary:
1. Identifying the function: Any useful product has some primary function which must be
identified—a bulb to give light, a refrigerator to preserve food, etc. In addition it may have
secondary functions such as withstanding shock, etc. These two must be identified.
2. Evaluation of the function by comparison: Value being a relative term, the comparison
approach must be used to evaluate functions. The basic question is, ‗Does the function
accomplish reliability at the best cost‘ and can be answered only comparison.
3. Develop alternatives: Realistic situations must be faced, objections should overcome and
effective engineering manufacturing and other alternatives must be developed.
Stores Management
Stores play a vital role in the operations of company. It is in direct touch with the user
departments in its day-to-day activities. The most important purpose served by the stores is to
provide uninterrupted service to the manufacturing divisions. Further, stores are often equated
directly with money, as money is locked up in the stores.
Nature of Stores
 Store as building where inventories are kept.
 Storage is the function of receiving, storing, and issuing materials.
 Stores ensure ready accessibility of major materials there-by efficient service to users.
 Minimisation of stores cost, and continuous supply is the prime function of stores.
 Stores layout is a fundamental factor in determining the efficient performance of stores
department.
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 A satisfactory storage system compromises between the use of space and the use of time.
 Random location means that items can be stored in any storage position which is
available.
 Keeping stock on one side of the aisle in which case the layout is called comb type .
 Stores manual is a written statement of policies, and procedures.
Layout:
Comb type layout: Stock may be kept on one side of the aisle in which case it is called comb
type.
Aisle
Tree type layout: Goods may be placed on either side of the aisle in which case, the method is
called tree type layout
Aisle
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Classification and Codification:
It is one of the functions of stores management. Codification is a process of representing each

item by a number, the digit of which indicates the group, the sub-group, the type and the
dimension of the item.
OBJECTIVES OF CODIFICATION
The objectives of a rationalized material coding system are:
1. Bringing all items together.
2. To enable putting up of any future item in its proper place.
3. To classify an item according to its characteristics.
4. To give an unique code number to each item to avoid duplication and ambiguity.
5. To reveal excessive variety and promote standardization and variety reduction.
6. To establish a common language for the identification of an item.
7. To fix essential parameters for specifying an item.
8. To specify item as per national and international standards.
9. To enable data processing and analysis.
Inventory
A physical resource that a firm holds in stock with the intent of selling it or transforming it into a
more valuable state.
 Raw Materials
 Works-in-Process
 Finished Goods
 Maintenance, Repair and Operating (MRO)
Objectives:
The main objective of inventory management is to maintain inventory at appropriate level to
avoid excessive or shortage of inventory because both the cases are undesirable for business.
Thus, management is faced with the following conflicting objectives:
1. To keep inventory at sufficiently high level to perform production and sales activities
smoothly.
2. To minimize investment in inventory at minimum level to maximize profitability.
Other objectives of inventory management are explained as under:-

1. To ensure that the supply of raw material & finished goods will remain continuous so that
production process is not halted and demands of customers are duly met.
2. To minimize carrying cost of inventory.
3. To keep investment in inventory at optimum level.
4. To reduce the losses of theft, obsolescence & wastage etc.
5. To make arrangement for sale of slow moving items.
6. To minimize inventory ordering costs.
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Inventory Control:
Inventory Control is the supervision of supply, storage and accessibility of items in order to
ensure an adequate supply without excessive oversupply.
It can also be referred as internal control - an accounting procedure or system designed to

promote efficiency or assure the implementation of a policy or safeguard assets or avoid fraud
and error etc.
Objectives of Inventory Control

1. To ensure adequate supply of products to customer and avoid shortages as far as possible.
2. To make sure that the financial investment in inventories is minimum (i.e., to see that the
working capital is blocked to the minimum possible extent).
3. Efficient purchasing, storing, consumption and accounting for materials is an important
objective.
4. To maintain timely record of inventories of all the items and to maintain the stock within the
desired limits
5. To ensure timely action for replenishment.
6. To provide a reserve stock for variations in lead times of delivery of materials.
7. To provide a scientific base for both short-term and long-term planning of materials.
Inventory Costs
Inventory costs includes ordering cost plus carrying costs.
Ordering Cost
Cost of procurement and inbound logistics costs form a part of Ordering Cost. Ordering Cost is
dependant and varies based on two factors - The cost of ordering excess and the Cost of ordering
too less.
Both these factors move in opposite directions to each other. Ordering excess quantity will result
in carrying cost of inventory. Where as ordering less will result in increase of replenishment cost
and ordering costs.
These two above costs together are called Total Stocking Cost. If you plot the order quantity vs
the TSC, you will see the graph declining gradually until a certain point after which with every
increase in quantity the TSC will proportionately show an increase.
This functional analysis and cost implications form the basis of determining the Inventory
Procurement decision by answering the two basic fundamental questions - How Much to Order
and When to Order.
How much to order is determined by arriving at the Economic Order Quantity or EOQ.
Carrying Cost
Inventory storage and maintenance involves various types of costs namely:
 Inventory Storage Cost
 Cost of Capital
Inventory carrying involves Inventory storage and management either using in house facilities or
external warehouses owned and managed by third party vendors. In both cases, inventory
management and process involves extensive use of Building, Material Handling Equipments, IT
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Software applications and Hardware Equipments coupled managed by Operations and

Management Staff resources.
Inventory Storage Cost
Inventory storage costs typically include Cost of Building Rental and facility maintenance and
related costs. Cost of Material Handling Equipments, IT Hardware and applications, including
cost of purchase, depreciation or rental or lease as the case may be. Further costs include
operational costs, consumables, communication costs and utilities, besides the cost of human
resources employed in operations as well as management.
Cost of Capital
Includes the costs of investments, interest on working capital, taxes on inventory paid, insurance
costs and other costs associate with legal liabilities.
The inventory storage costs as well as cost of capital is dependant upon and varies with the
decision of the management to manage inventory in house or through outsourced vendors and
third party service providers.
Inventory Control Techniques:

Economic Order Quantity:
EOQ (Economic Order Quantity) -EOQ is the level of inventory order that minimizes the total
cost associated with inventory management. The objective is to find out and maintain optimum
level of investment in inventory to minimize the total cost associated with it.
The total cost includes:
Carrying Cost: Are associated with the maintenance/holding of inventory.

Ordering Cost: Are costs associated with acquisition of/placing order for inventory.
It is that quantity where the total of ordering cost and holding cost remains lowest.
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Re-order level: stock level at which fresh order is placed.

Average consumption per day x lead time + buffer stock
Lead time: Duration time between placing an order & receipt of material
Ideal – 2 to 6 weeks.
1. Always better control (ABC) classification. In this analysis, the classification of

existing inventory is based on annual consumption and the annual value of the items. Hence
we obtain the quantity of inventory item consumed during the year and multiply it by unit
cost to obtain annual usage cost. The items are then arranged in the descending order of such
annual usage cost.
(a) A-Item: Very tight control, the items being of high value. The control need be exercised at
higher level of authority.
„A‘ ITEMS
Small in number, but consume large amount of resources
Must have:
• Tight control
• Rigid estimate of requirements
• Strict & closer watch
• Low safety stocks
• Managed by top management
(b) B-Item: Moderate control, the items being of moderate value. The control need be exercised
at middle level of authority.
‗B‘ ITEM
Intermediate
Must have:
• Moderate control
• Purchase based on rigid requirements
• Reasonably strict watch & control
• Moderate safety stocks
• Managed by middle level management
(c) C-Item: The items being of low value, the control can be exercised at gross root level of
authority, i.e., by respective user department managers.
‗C‘ ITEMS
Larger in number, but consume lesser amount of resources
Must have:
• Ordinary control measures
• Purchase based on usage estimates
• High safety stocks
ABC analysis does not stress on items those are less costly but may be vital
This is based on cost criteria.

It helps to exercise selective control when confronted with large number of items it rationalizes
the number of orders, number of items & reduce the inventory.
About 10 % of materials consume 70 % of resources
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2.High, medium and low (HML) classification. In this analysis, the classification of
existing inventory is based on unit price of the items. They are classified as high price, medium
price and low cost items.
3.Vital, essential and desirable (VED) classification. In this analysis, the classification of
existing inventory is based on criticality of the items. They are classified as vital, essential and
desirable items. It is mainly used in spare parts inventory.
4.Scarce, difficult and easy to obtain (SDE). In this analysis, the classification of existing
inventory is based on the items.
5.GOLF analysis: In this analysis, the classification of existing inventory is based sources of the
items. They are classified as Government supply, ordinarily available, local availability and
foreign source of supply items.
6.SOS analysis: In this analysis, the classification of existing inventory is based nature of supply
of items. They are classified as seasonal and off-seasonal items.
7.Fast moving, slow moving and non-moving (FSN).
8.Economic order quantity (EOQ). Inventory models deal with idle resources like men,
machines, money and materials. These models are concerned with two decisions: how much to
order (purchase or produce) and when to order so as to minimize the total cost.
9.Max-Minimum system.
10.Two bin system
Overview of JIT
What is a “Just-in-time System”?
―Just-in-time‖: A philosophy of manufacturing based on planned elimination of all waste
and continuous improvement of productivity.
Just in time is a ‗pull‘ system of production, so actual orders provide a signal for when a product
should be manufactured. Demand-pull enables a firm to produce only what is required, in the
correct quantity and at the correct time.
This means that stock levels of raw materials, components, work in progress and finished goods
can be kept to a minimum. This requires a carefully planned scheduling and flow of resources
through the production process. Modern manufacturing firms use sophisticated production
scheduling software to plan production for each period of time, which includes ordering the
correct stock. Information is exchanged with suppliers and customers through EDI (Electronic
Data Interchange) to help ensure that every detail is correct.
Supplies are delivered right to the production line only when they are needed. For example, a car
manufacturing plant might receive exactly the right number and type of tyres for one day‘s
production, and the supplier would be expected to deliver them to the correct loading bay on the
production line within a very narrow time slot.
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Overview of JIT manufacturing

1. Inventory reduction
2. Quality improvement
3. Lead time reduction
4. Lead time reduction
5. Continuous Improvement
6. Total Preventive Maintenance
7. Strategic Gain
Advantages of JIT
 Lower stock holding means a reduction in storage space which saves rent and insurance
costs
 As stock is only obtained when it is needed, less working capital is tied up in stock
 There is less likelihood of stock perishing, becoming obsolete or out of date
 Avoids the build-up of unsold finished product that can occur with sudden changes in
demand
 Less time is spent on checking and re-working the product of others as the emphasis is on
getting the work right first time
Disadvantages of JIT
 There is little room for mistakes as minimal stock is kept for re-working faulty product
 Production is very reliant on suppliers and if stock is not delivered on time, the whole
production schedule can be delayed
 There is no spare finished product available to meet unexpected orders, because all
product is made to meet actual orders – however, JIT is a very responsive method of
production
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UNIT – V PROJECT AND FACILITY PLANNING
Project Management – Scheduling Techniques, PERT, CPM, Crashing CPM networks – Simple
Problems. Facility Location – Theories, Steps in Selection, Location Models – Simple Problems.
Facility Layout – Principles, Types, Planning tools and techniques.
Project Management:
A project is an organized endeavour to accomplish a specified non-routine or low volume task.
Although projects are not repetitive, they take significant amount of time to complete and are
large scale or complex enough to be recognized and managed as separate undertakings.
Project life cycle:

1. The concept phase: During this phase, the organization realises that a project may
be needed or the organization is requested to propose a plan to perform a project
for some customer.
2. Initial planning or feasibility phase: During the phase, the project manager plans
the project to a level of detail, sufficient for initial scheduling and budgeting.
3. Detailed planning phase: If the project is approved, then detailed scheduling and
budgeting is done in this phase.
4. Organisation phase: During this phase, a detailed project definition such as the
work breakdown structure is examined.
5. Execution phase: During this phase the various activities planned and completed
as per the schedule, utilizing the allotted resources.
6. Termination phase: This is the phase, during which the project is terminated or
disbanded after completion. The personnel who were working in the project are
assigned back to their regular jobs or to other jobs in the organisation or to other
projects in this phase
Role of a Project Manager:

1. Manage the project‘s scope to define the goals and work to be done, in sufficient
detail to facilitate understanding and correct performance by the participants
2. Manage the human resources involved in the project
3. Manage communications to see that, the appropriate parties are informed
4. Manage time by planning and meeting a schedule
5. Manage quality so that, the projects results are satisfactory
6. Manage costs so that, the project is performed at the minimum practical cost and
with in budget if possible.
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Terms Used in Project Management
Activity : A certain amount of work or task required in the project

Activity duration: In CPM the best estimate of time to complete an activity . In PERT the
expected time or average time to complete an activity
Critical activity : An activity that has no room for schedule slippages : if it slips the entire the
entire project completion will slip. An activity with zero slack
Activity : A certain amount of work or task required in the project
Activity duration: In CPM the best estimate of time to complete an activity . In PERT the
expected time or average time to complete an activity
Critical activity : An activity that has no room for schedule slippages : if it slips the entire the
entire project completion will slip. An activity with zero slack
Event :A beginning , a completion point ,or a milestone accomplishment within the project
. An activity begins and ends with events
Latest finish (LF) : The latest that an activity can finish from the beginning of the project
Latest start (LS) :The latest that an activity can start from the beginning of the project
Most likely time ( t m) : The time for completing the activity that is is the consensus best
estimate, used in PERT
Optimistic Time (to): The time for completing an activity if all goes well : used in PERT
Pessimistic Time (tp): The time for completing an activity if bad luck is encountered : used in
PERT
Predecessor activity : An activity that must occur before another activity .
Slack : The amount of time that an activity or group of activities can slip without causing a delay
in the completion of the project
Successor activity : An activity that must occur after another activity
Conventions used in drawing network diagrams (Arrows & Circles )
 Activity on Arrow (AOA) : The activities are denoted by Arrows and events are
denoted by circles
 Activity on Node(AON) : Activities are denoted by circles(or nodes) and the precedence
relation ships between activities are indicated by arrows
Scheduling:
Scheduling is the process of deciding how to commit resources between a variety of
possible tasks. Time can be specified (scheduling a flight to leave at 8:00) or floating as
part of a sequence of events.
Scheduling Techniques
Gantt Chart:
During the era of scientific management, Henry Gantt developed a tool for displaying the
progression of a project in the form of a specialized chart. An early application was the tracking
of the progress of ship building projects. Today, Gantt's scheduling tool takes the form of a
horizontal bar graph and is known as a Gantt chart, a basic sample of which is shown below:
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The horizontal axis of the Gantt chart is a time scale, expressed either in absolute time or in
relative time referenced to the beginning of the project. The time resolution depends on the
project - the time unit typically is in weeks or months. Rows of bars in the chart show the
beginning and ending dates of the individual tasks in the project.
In the above example, each task is shown to begin when the task above it completes. However,
the bars may overlap in cases where a task can begin before the completion of another, and there
may be several tasks performed in parallel. For such cases, the Gantt chart is quite useful for
communicating the timing of the various tasks.
For larger projects, the tasks can be broken into subtasks having their own Gantt charts to
maintain readability.
Gantt Chart Enhancements

This basic version of the Gantt chart often is enhanced to communicate more information.
A vertical marker can used to mark the present point in time.
The progression of each activity may be shown by shading the bar as progress is made, allowing
the status of each activity to be known with just a glance.
Dependencies can be depicted using link lines or color codes.
Resource allocation can be specified for each task.
Milestones can be shown.
PERT:
Complex projects require a series of activities, some of which must be performed sequentially
and others that can be performed in parallel with other activities. This collection of series and
parallel tasks can be modeled as a network.
In 1957 the Critical Path Method (CPM) was developed as a network model for project
management. CPM is a deterministic method that uses a fixed time estimate for each activity.
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While CPM is easy to understand and use, it does not consider the time variations that can have a
great impact on the completion time of a complex project.
The Program Evaluation and Review Technique (PERT) is a network model that allows for
randomness in activity completion times. PERT was developed in the late 1950's for the U.S.
Navy's Polaris project having thousands of contractors. It has the potential to reduce both the
time and cost required to complete a project.
The Network Diagram
In a project, an activity is a task that must be performed and an event is a milestone marking the
completion of one or more activities. Before an activity can begin, all of its predecessor activities
must be completed. Project network models represent activities and milestones by arcs and
nodes. PERT originally was an activity on arc network, in which the activities are represented on
the lines and milestones on the nodes. Over time, some people began to use PERT as an activity
on node network. For this discussion, we will use the original form of activity on arc.
The PERT chart may have multiple pages with many sub-tasks. The following is a very simple
example of a PERT diagram:
PERT Chart
The milestones generally are numbered so that the ending node of an activity has a higher
number than the beginning node. Incrementing the numbers by 10 allows for new ones to be
inserted without modifying the numbering of the entire diagram. The activities in the above
diagram are labeled with letters along with the expected time required to complete the activity.
Steps in the PERT Planning Process
PERT planning involves the following steps:
Identify the specific activities and milestones.

Determine the proper sequence of the activities.
Construct a network diagram.
Estimate the time required for each activity.
Determine the critical path.
Update the PERT chart as the project progresses.
1. Identify Activities and Milestones
The activities are the tasks required to complete the project. The milestones are the events
marking the beginning and end of one or more activities. It is helpful to list the tasks in a table
that in later steps can be expanded to include information on sequence and duration.
2. Determine Activity Sequence
This step may be combined with the activity identification step since the activity sequence is
evident for some tasks. Other tasks may require more analysis to determine the exact order in
which they must be performed.
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3. Construct the Network Diagram
Using the activity sequence information, a network diagram can be drawn showing the sequence
of the serial and parallel activities. For the original activity-on-arc model, the activities are
depicted by arrowed lines and milestones are depicted by circles or "bubbles".
If done manually, several drafts may be required to correctly portray the relationships among
activities. Software packages simplify this step by automatically converting tabular activity
information into a network diagram.
4. Estimate Activity Times
Weeks are a commonly used unit of time for activity completion, but any consistent unit of time
can be used.
A distinguishing feature of PERT is its ability to deal with uncertainty in activity completion
times. For each activity, the model usually includes three time estimates:
Optimistic time - generally the shortest time in which the activity can be completed. It is
common practice to specify optimistic times to be three standard deviations from the mean so
that there is approximately a 1% chance that the activity will be completed within the optimistic
time.
Most likely time - the completion time having the highest probability. Note that this time is
different from the expected time.
Pessimistic time - the longest time that an activity might require. Three standard deviations
from the mean is commonly used for the pessimistic time.
PERT assumes a beta probability distribution for the time estimates. For a beta distribution, the
expected time for each activity can be approximated using the following weighted average:
Expected time = ( Optimistic + 4 x Most likely + Pessimistic ) / 6
This expected time may be displayed on the network diagram.
To calculate the variance for each activity completion time, if three standard deviation times
were selected for the optimistic and pessimistic times, then there are six standard deviations
between them, so the variance is given by:
[ ( Pessimistic - Optimistic ) / 6 ]2
5. Determine the Critical Path
The critical path is determined by adding the times for the activities in each sequence and
determining the longest path in the project. The critical path determines the total calendar time
required for the project. If activities outside the critical path speed up or slow down (within
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limits), the total project time does not change. The amount of time that a non-critical path
activity can be delayed without delaying the project is referred to as slack time.
If the critical path is not immediately obvious, it may be helpful to determine the following four
quantities for each activity:
ES - Earliest Start time

EF - Earliest Finish time
LS - Latest Start time
LF - Latest Finish time
These times are calculated using the expected time for the relevant activities. The earliest start
and finish times of each activity are determined by working forward through the network and
determining the earliest time at which an activity can start and finish considering its predecessor
activities. The latest start and finish times are the latest times that an activity can start and finish
without delaying the project. LS and LF are found by working backward through the network.
The difference in the latest and earliest finish of each activity is that activity's slack. The critical
path then is the path through the network in which none of the activities have slack.
The variance in the project completion time can be calculated by summing the variances in the
completion times of the activities in the critical path. Given this variance, one can calculate the
probability that the project will be completed by a certain date assuming a normal probability
distribution for the critical path. The normal distribution assumption holds if the number of
activities in the path is large enough for the central limit theorem to be applied.
Since the critical path determines the completion date of the project, the project can be
accelerated by adding the resources required to decrease the time for the activities in the critical
path. Such a shortening of the project sometimes is referred to as project crashing.
6. Update as Project Progresses
Make adjustments in the PERT chart as the project progresses. As the project unfolds, the
estimated times can be replaced with actual times. In cases where there are delays, additional
resources may be needed to stay on schedule and the PERT chart may be modified to reflect the
new situation.
Benefits of PERT
PERT is useful because it provides the following information:
Expected project completion time.

Probability of completion before a specified date.
The critical path activities that directly impact the completion time.
The activities that have slack time and that can lend resources to critical path activities.
Activity start and end dates.
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Limitations
The following are some of PERT's weaknesses:

The activity time estimates are somewhat subjective and depend on judgement. In cases where
there is little experience in performing an activity, the numbers may be only a guess. In other
cases, if the person or group performing the activity estimates the time there may be bias in the
estimate.
Even if the activity times are well-estimated, PERT assumes a beta distribution for these time
estimates, but the actual distribution may be different.
Even if the beta distribution assumption holds, PERT assumes that the probability distribution
of the project completion time is the same as the that of the critical path. Because other paths can
become the critical path if their associated activities are delayed, PERT consistently
underestimates the expected project completion time.
The underestimation of the project completion time due to alternate paths becoming critical is
perhaps the most serious of these issues. To overcome this limitation, Monte Carlo simulations
can be performed on the network to eliminate this optimistic bias in the expected project
completion time.
CPM:
In 1957, DuPont developed a project management method designed to address the challenge of
shutting down chemical plants for maintenance and then restarting the plants once the
maintenance had been completed. Given the complexity of the process, they developed the
Critical Path Method (CPM) for managing such projects.
CPM provides the following benefits:
 Provides a graphical view of the project.

 Predicts the time required to complete the project.
 Shows which activities are critical to maintaining the schedule and which are not.
CPM models the activities and events of a project as a network. Activities are depicted as nodes
on the network and events that signify the beginning or ending of activities are depicted as arcs
or lines between the nodes. The following is an example of a CPM network diagram:
CPM Diagram
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Steps in CPM Project Planning

1. Specify the individual activities.
2. Determine the sequence of those activities.
3. Draw a network diagram.
4. Estimate the completion time for each activity.
5. Identify the critical path (longest path through the network)
6. Update the CPM diagram as the project progresses.
1. Specify the Individual Activities
From the work breakdown structure, a listing can be made of all the activities in the project. This
listing can be used as the basis for adding sequence and duration information in later steps.
2. Determine the Sequence of the Activities
Some activities are dependent on the completion of others. A listing of the immediate
predecessors of each activity is useful for constructing the CPM network diagram.
3. Draw the Network Diagram
Once the activities and their sequencing have been defined, the CPM diagram can be drawn.
CPM originally was developed as an activity on node (AON) network, but some project planners
prefer to specify the activities on the arcs.
4. Estimate Activity Completion Time
The time required to complete each activity can be estimated using past experience or the
estimates of knowledgeable persons. CPM is a deterministic model that does not take into
account variation in the completion time, so only one number is used for an activity's time
estimate.
5. Identify the Critical Path
The critical path is the longest-duration path through the network. The significance of the critical
path is that the activities that lie on it cannot be delayed without delaying the project. Because of
its impact on the entire project, critical path analysis is an important aspect of project planning.
The critical path can be identified by determining the following four parameters for each activity:
 ES - earliest start time: the earliest time at which the activity can start given that its
precedent activities must be completed first.
 EF - earliest finish time, equal to the earliest start time for the activity plus the time
required to complete the activity.
 LF - latest finish time: the latest time at which the activity can be completed without
delaying the project.
 LS - latest start time, equal to the latest finish time minus the time required to complete
the activity.
The slack time for an activity is the time between its earliest and latest start time, or between its
earliest and latest finish time. Slack is the amount of time that an activity can be delayed past its
earliest start or earliest finish without delaying the project.
The critical path is the path through the project network in which none of the activities have
slack, that is, the path for which ES=LS and EF=LF for all activities in the path. A delay in the
critical path delays the project. Similarly, to accelerate the project it is necessary to reduce the
total time required for the activities in the critical path.
6. Update CPM Diagram
As the project progresses, the actual task completion times will be known and the network
diagram can be updated to include this information. A new critical path may emerge, and
structural changes may be made in the network if project requirements change.
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CPM Limitations
CPM was developed for complex but fairly routine projects with minimal uncertainty in the
project completion times. For less routine projects there is more uncertainty in the completion
times, and this uncertainty limits the usefulness of the deterministic CPM model. An alternative
to CPM is the PERT project planning model, which allows a range of durations to be specified
for each activity.
Example:
St. Paul‟s Hospital
Immediate
Activity Description Predecessor(s)
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B-D-H-J-K is the critical path which have longest time duration.
Critical Path:
The longest path in the network
Defines the shortest time project can be completed
Critical path activity delay --- project delay
Earliest Start and Earliest Finish:

Begin at starting event and work forward
ES is earliest start
ES = 0 for starting activities
ES = Maximum EF of all
predecessors for
non-starting activities
EF is earliest finish
EF = ES + Activity time
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Earliest Start / Earliest Finish:
Latest Start and Latest Finish:

Begin at ending event and work backward
LF is latest finish
LF = Maximum EF for ending activities
LF = Minimum LS of all successors for non-ending activities
LS is latest start
LS = LF – Activity time
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Crashing CPM networks:

Crash mode —
Pouring additional resources into an activity in order to complete the activity in the shortest
possible time.
Crash mode analysis —
An analysis technique that involves modifying a project network to study time and cost tradeoffs.
This # discusses the use of project networks and the critical path method to evaluate options for
developing a system in crash mode. Often, it is possible to expedite a project by pouring
additional resources (personnel, computing power, etc.) into one or more critical path activities,
essentially trading cost for time. Crash mode analysis is a technique for studying the cost/time
tradeoff by manipulating the project network (# 21).
Table 22.1 lists the activities associated with a generic system development project. The initial
project network is shown as Figure 22.1. The time to complete each activity is shown above the
activity arrow. The earliest event time and latest event time for each event are noted to the right
of the event circle. Note that there are two critical paths, 1-2-3-7-8 and 1-2-3-4-7-8.
Table 22.2 provides additional information about the completion times and costs for each of the
activities. For example, the normal completion time for activity 1-2 is 2 weeks, but the crash
mode time (the shortest possible time for completing the activity) is only 1 week. Saving that
week is expensive, however. Normally, activity 1-2 is expected to cost $5000, but operating in
crash mode will increase the cost by $3000 to $8000. Thus, the cost per week saved (the cost
increase divided by the number of weeks saved) is $3000.
Table 22.1 The Activities Associated with the # Example
Duration
Activity Description (Weeks)
1-2 Study the old system 2

2-3 Interview users 6
2-4 Determine user needs 4
2-5 Examine old system requirements 2
3-7 Analyze interview results 4
4-7 Define new system objectives 5
3-6 Resolve conflicts 3
7-8 Determine new systems specifications 2
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Figure 22.1 The initial project network for the # example.

Read through Table 22.2. The time and cost columns are estimates. Cost per week is computed
by dividing the extra cost for crash mode by the number of time periods (in this example, weeks)
saved.
Given the data in Table 22.2, the project network can be modified (Figure 22.2) to show crash
time (next to the normal time, in parentheses) and the cost per week (below the activity line) for
each activity. The next step is to investigate the impact of performing one or more of the
activities on the critical path in crash mode. Generally, those activities with a smaller cost per
week saved promise a greater return (time saved per dollar spent). Obviously, those activities
with the greatest difference between normal and crash mode time have the greatest potential for
shortening the schedule.
Table 22.2 Normal and Crash Mode Activity Times and Costs
Time (weeks) Cost ($) Cost Cost
Activity Normal Crash Saved Normal Crash increase week
1-2 2 1 1 5,000 8,000 3,000 3,000

2-3 6 4 2 14,000 20,000 6,000 3,000
2-4 4 3 1 8,000 10,000 2,000 2,000
2-5 2 1 1 4,000 6,000 2,000 2,000
3-7 4 3 1 5,000 10,000 5,000 5,000
4-7 5 3 2 9,000 15,000 6,000 3,000
3-6 3 2 1 4,000 6,000 2,000 2,000
7-8 2 1 1 3,000 4,000 1,000 1,000
Total 52,000 79,000
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Figure 22.2 The project network with crash times and crash costs per week saved.
For example, suppose the system designer decides to crash those activities that promise to save
the greatest amount of time (2-3 and 4-7). Figure 22.3 shows the new project network; note that
activities 2-3 and 4-7 use the crash mode time estimates while the other activities use the normal
time estimate. Changing some of the activity times changes the computed earliest and latest
event times which, in turn, (potentially) changes the critical path. The new project network has a
single critical path (1-2-3-7-12). The total elapsed time is 12 weeks, a saving of 3 weeks. From
Table 22.2, the extra cost associated with activity 2-3 is $6,000, and the extra cost associated
with 4-7 is $6,000, so the total project cost is $64,000, an increase of $12,000 over performing
all activities in normal mode.
Additional alternatives can be considered. For example, Figure 22.4 shows the project network
for performing only activity 2-3 in crash mode. Once again there are two critical paths. The total
elapsed time is 13 weeks and the total system cost is $58,000, an increase of $6,000 over
performing all activities in normal mode.
Table 22.3 summarizes the elapsed times and total system costs for several alternatives,
including performing all activities on the critical path in crash mode. Clearly, the option of
crashing 4-7 (14 weeks, $58,000) can be eliminated because crashing 2-3 (13 weeks, $58,000)
saves an extra week for the same cost. Note that crashing activity 7-8 (14 weeks, $53,000) saves
one week at a cost of only $1,000, an outcome consistent with the cost per week saved
computations in Table 22.2. Although the optimal solution is not obvious, the cost/time tradeoff
is clearly defined, giving the responsible managers the information they need to make a decision.
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Figure 22.3 The project network with activities 2-3 and 4-7 performed in crash mode.
Figure 22.4 The project network with only activity 2-3 performed in crash mode.
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Table 22.3 Several Alternatives
Crash Total Time Total Cost
None 15 weeks $52,000

2-3, 4-7 12 weeks $64,000
2-3 13 weeks $58,000
4-7 14 weeks $58,000
7-8 14 weeks $53,000
All 10 weeks $68,000
Facility location:
Meaning- the establishment of an industry at a particular place.

Or
The selection of a place for locating a plant is one of the problems, perhaps the most important,
which is faced by an entrepreneur while launching a new enterprise.
It is of 2 types-
1. Localization /centralization-means concentration of similar type of industries at some
particular place. E.g. textile in Mumbai.
2. Delocalization /Decentralization-means spreading of similar type of industries at different
places. E.g. banking industries
Factors affecting location & site decisions:

1. Availability of raw material
2. Nearness to the potential market
3. Near to the source of operating requirements like electricity, disposal of waste, drainage
facilities.
4. Supply of labor
5. Transport & communication facilities
6. Integration with other group of companies
7. Suitability of land & climate
8. Availability of housing, other amenities & services
9. Local building & planning regulations
10. Safety requirements
11. Others like low interest on loans, special grants, living standards
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Location Theories:
This location theory was propounded by Alfred Weber in 1909. But he fails to explain all subtle
variances in decision-making but does provide a simple set of guidelines.
Weber classified locational factors into two brad categories – primary and secondary. Materials
and labour constitute primary factors that contribute to dispersal of industries over different
regions. Industrial units are materials oriented, if their cost of transportation to units is higher.
Industrial plants are market-oriented when cost of transporting finished goods to markets is
higher. Another primary factor is labour. Weber assumes that centers flush with cheap and
skilled labour pull industries towards themselves
Banking credit, insurance, communication and rent and rates constitute the secondary factors of
location. Some of these attract industries to certain areas from different places and some other
contribution to their dispersal from original places. The latter are called the degglomerating
factors and the former is agglomerating factors.
Steps in selection:
To be systematic in choosing a plant location, the entrepreneur would do well to proceed step by
step, the steps being
1. Deciding on domestic or international location.

2. Selection of region
- Availability of raw material
- Nearness to the market
- Availability of power
- Transport facilities
- Suitability of climate
- Government policy
- Competition between states
3. Selection of community
- Availability of labour
- Civic amenities for workers
- Existence of complementary and competing industries
- Finance and research facilities
- Availability of water and fire-fighting facilities
- Local taxes and restrictions
- Momentum of a early start
- Personal factors
4. Selection of the site
- Soil, size and topography
- Disposal of waste
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Location Models:
- Factor rating method
- Point rating method
- Break –even analysis
- Quantitative factor analysis
1. Factor rating method
Popular because a wide variety of factors can be included in the analysis
Six steps in the method
1. Develop a list of relevant factors called critical success factors
2. Assign a weight to each factor
3. Develop a scale for each factor
4. Score each location for each factor
5. Multiply score by weights for each factor for each location
6. Recommend the location with the highest point score
2. Point Rating Method:

In selecting a site or location, companies have several objectives, but not all are
of equal importance. The relative weight a company assigns to each objective or to each location
factor may be represented by the number of points a perfect site would receive in each category.
Each potential site is then evaluated with respect to every factor a company is looking for and
points are assigned for each factor. The site with the highest total number of points is considered
superior to other sites.
3. Break even analysis:
Method of cost-volume analysis used for industrial locations
Three steps in the method
1. Determine fixed and variable costs for each location
2. Plot the cost for each location
3. Select location with lowest total cost for expected production volume
Example: Consider a corporate office, which wants to identify the best location. They have
identified 3 locations after a preliminary survey. They are locations A, B and C. The corporate
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has estimated the variable cost and fixed cost and then the total cost for the each location against
the production quantity. This is shown in the table.
Fixedcost Variable cost
SITE
(Rupees in lakhs) (Rupees per unit)
A 2.5 1000
B 3 750
C 4 500
Solution:
Considering site A and B,
the total cost for site A for ‗x‘ quantities = 250000 + 1000x. --------- (1)
the total cost for site B for ‗x‘ quantities = 300000 + 750x. --------- (2)
Therefore from (1) and (2),
x = (300000 – 250000)/(1000-750)
= 200 units.
Considering site B and C,
the total cost for site B for ‗x‘ quantities = 300000 + 750x. ---------- (3)
the total cost for site C for ‗x‘ quantities = 400000 + 500x. --------- (4)
Therefore from (3) and (4),
x = (400000 – 300000)/(750-500)
= 400 units.
Result,
If ‗x‘ < 200 units, select site A as it has minimum fixed value.
If 200 < ‘x‘ < 400 units, select site B as it has minimum variable cost compared to A and
minimum total cost compared to C.
If ‗x‘ > 400 units, select site C as it has the least variable cost.
Graphical representation:
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4. Qualitative factor analysis method:

IF economic criteria are not sufficiently influential to decide the location alternative, a system of
weighting the criteria might be useful in making a plant location decision. This approach is
referred to as qualitative factor analysis.
Steps:
- Develop a list of relevant factos
- Assign a weight to each factor to indicate its relative importance ( Weights may
total upto 1.0
- Assign a common scale to each factor (say 0 to 100) and designate any minimum
point to be scored by any location.
- Score each potential location according to the designated scale and multiply the
scores by the weights to arrive at the weighted scores.
- Total the points for each location, and choose the location with the maximum
points
Other Location models:

Center-of-Gravity Method: This technique is used in determining the location of a facility which
will either reduce travel time or lower shipping costs. Distribution cost is seen as a linear
function of the distance and quantity shipped. The Center of Gravity Method involves the use of
a visual map and a coordinate system; the coordinate points being treated as the set of numerical
values when calculating averages. If the quantities shipped to each location are equal , the center
of gravity is found by taking the averages of the x and y coordinates; if the quantities shipped to
each location are different , a weighted average must be applied (the weights being the quantities
shipped).
Calculate X and Y coordinates for ‗center of gravity‘

Assumes cost is directly proportional to distance and volume shipped
where dix = x-coordinate of location i

diy = y-coordinate of location i
Qi = Quantity of goods moved to or from location i
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Facility layout:
A Facility or plant layout is the placing of the right items coupled with the right place and the
right method, to permit the flow of production process through the shortest possible distance in
the shortest possible time.
Definition: Plant layout refers to the arrangement of physical facilities such as machines,
equipment, tools, furniture etc. 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
raw material to the delivery of the final product.
Objectives of good Plant Layout:

· A well designed plant layout is one that can be beneficial in achieving the following
Objectives:
· Proper and efficient utilization of available floor space
· Transportation of work from one point to another point without any delay
· Proper utilization of production capacity.
· Reduce material handling costs
· Utilize labour efficiently
· Reduce accidents
· Provide for volume and product flexibility
· Provide ease of supervision and control
· Provide for employee safety and health
· Allow easy maintenance of machines and plant.
· Improve productivity
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CRITERIA FOR GOOD LAYOUT

1. Flexibility
2. Maximum coordination
3. Maximum visibility
4. Maximum accessibility
5. Minimum distance
6. Minimum handling
7. Minimum discomfort- proper light,ventilation etc.
8. Inherent safety
9. Efficient process flow
10. Identification –provision of space to workers.
The principles of plant layout
1. Integration of all factors - The plant should integrate all the essential resources of men,
machines and materials in order to give an optimum level of production.
2. Minimum Movement - The less the movement of men, machines and materials, the less will
be the cost of production. Thus, minimum movement of theses resources will provide cost
efficiency.
3. Unidirectional flow - All materials should progressively move towards the same direction i.e.
towards the stage of completion. Any back-tracking should be avoided here.
4. Efficient space handling - The space used up during the plant work also costs money as more
the space required, more will be the floor rent. The materials should be organized in stacks in a
proper and recognizable order to maintain space efficiency.
6. Maximum observation capacity - The layout of the plant should 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.
7. Maximum accessibility - The layout of the plant should ensure that all essential resources are
accessible to the labour and machines without any delay. The aisles should be free from
obstacles. The materials should be placed as close,to the machines concerned, as possible.
8. Minimum Handling - The ineffective handling of materials leads to a rise in cost. Materials
should be handled in stacks and transferred in one go. Handling of a material twice in the same
direction must be avoided.
9. Maximum protection - The layout should ensure the protection of the materials and machines
while they are in the working or the storage stage. The security system should be efficient
without making too many doors or barriers.
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10. 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.
5. Inherent safety - The environment of the plant should be safe for the workers as well as the
machines. There should be fire extinguishers and fire exits placed strategically. There should be
minimum contact of the labour to toxic chemicals and environment.
Types Of Layout:
There are mainly four types of plant layout:
(a) Product or line layout

(b) Process or functional layout
(c) Fixed position or location layout
(d) Combined or group layout
PRODUCT OR LINE LAYOUT:

In this type of layout the machines and equipments are arranged in one line depending upon the
sequence of operations required for the product. It is also called as line layout. The material
moves to another machine sequentially without any backtracking or deviation i.e the output of
one machine becomes input of the next machine. It requires a very little material handling.
It is used for mass production of standardized products.
Advantages of Product layout:
· Low cost of material handling, due to straight and short route and absence of backtracking
· Smooth and continuous operations
· Continuous flow of work
· Lesser inventory and work in progress
· Optimum use of floor space
· Simple and effective inspection of work and simplified production control
· Lower manufacturing cost per unit
Disadvantages of Product layout:

· Higher initial capital investment in special purpose machine (SPM)
· High overhead charges
· Breakdown of one machine will disturb the production process.
· Lesser flexibility of physical resources.
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PROCESS LAYOUT:
In this type of layout the machines of a similar type are arranged together at one place. This type
of layout is used for batch production. It is preferred when the product is not standardized and
the quantity produced is very small.
Advantages of Process layout:

· Lower initial capital investment is required.
· There is high degree of machine utilization, as a machine is not blocked for a single
product
· The overhead costs are relatively low
· Breakdown of one machine does not disturb the production process.
· Supervision can be more effective and specialized.
· Greater flexibility of resources.
Disadvantages of Process layout:

· Material handling costs are high due to backtracking
· More skilled labour is required resulting in higher cost.
· Work in progress inventory is high needing greater storage space
· More frequent inspection is needed which results in costly supervision
COMBINED LAYOUT:
· A combination of process & product layout is known as combined layout.
· Manufacturing concerns where several products are produced in repeated numbers with
no likelihood of continuous production, combined layout is followed
FIXED POSITION OR LOCATION LAYOUT:

Fixed position layout involves the movement of manpower and machines to the product which
remains stationary. The movement of men and machines is advisable as the cost of moving them
would be lesser. This type of layout is preferred where the size of the job is bulky and heavy.
Example of such type of layout is locomotives, ships, boilers, generators, wagon building,
aircraft manufacturing, etc.
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Advantages of Fixed position layout:

· The investment on layout is very small.
· The layout is flexible as change in job design and operation sequence can be easily
incorporated.
· Adjustments can be made to meet shortage of materials or absence of workers by
changing the sequence of operations.
Disadvantages of Fixed position layout:
· As the production period being very long so the capital investment is very high.
· Very large space is required for storage of material and equipment near the product.
· As several operations are often carried out simultaneously so there is possibility of
confusion and conflicts among different workgroups.
Planning Tools and Techniques:
Templates: Templates are patterns which consist of a thin plate of wood or metal, which a
serves as a gauge or a guide in mechanical work. A plant layout template is a scaled
representation of physical object in a layout. This object may be amachine, materials handling
equipment, a worker or even materials. The templates are fixed to a plan drawing and are moved
around the drawing to explore the various layout possibilities until a layout, which eliminate
unnecessary handling and back tracking of materials and offers flexibility to admit revisions at
the least cost, emerges. The template method is particularly useful in developing a layout,for an
existing department or building or when the configuration of the building to already established
through other layout techniques
Operations sequence analysis:

This technique utilizes computer technology in designing the facility layout by sequencing out
all activities and then arranging them in circular or in a straight line.
Line Balancing:
Line: an assembly line composed of several work stations, at which specific operations are
performed.
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• Line Balancing is the process of assigning tasks to workstations in such a way that the
workstations (operations) have approximately equal time requirements.
• For Product Layouts (Sequence of tasks!)
• Multiple tasks can be assigned to one workstation.
Cycle Time of Workstation
• The time a workstation needs to complete its set of assigned tasks once.
Example: Workstation A is assigned 2 tasks, task one needs 0.5 minute and task two 1 minute.
So the Cycle Time (CT) of Workstation A is?
The CT of a product line containing multiple workstations is the longest CT of the workstations.
(Line CT)
Precedence Diagram:
• Task assignments must respect precedence relationships and other technological
constraints.
• Precedence diagram: Tool used in line balancing to display elemental tasks and sequence
requirements
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Number of Workstations:
Question: How does one determine the number of workstations to use?
Answer: By specifying a desired line cycle time or, equivalently by specifying an output rate.
(How are cycle time and output related?)
Desired Cycle Time
Operating Time per Day (OT)

Desired Line CT 
Desired Output per Day (D)
Suppose OT = 8 hours per day (480 minutes per day) and D = 400 units per day. Then CT = ??
Minimum Number of Workstations Required:
Sum of Task Times (D)(  t)

N m in  N=
OT
Cycle Time
 t = sum of task time s

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CT = 480/400= 1.2 minutes per unit per workstation, Sum of task times = 2.5 minutes per unit.
Nmin =???
Line Efficiency:
Sum of task time s

Line Efficiency  x100%
(N actual)(CT)
CT = 1.2 minutes per unit per workstation

Sum of task times = 2.5 minutes per unit.
Line Efficiency = 2.5/(3*1.2) =69.4%
Line Balancing Procedure:

1. Calculate CT and NMin.
2. Assign tasks to workstations moving from left to right through the precedence diagram.
3. Tasks eligible for assignment are
a. tasks where all preceding tasks have been assigned and
b. tasks with times that do not exceed the remaining time at the work station.
4. Select an eligible task for assignment using one or more of the following rules:
a. Assign the task with the greatest number of tasks following it.
b. Assign the task with the longest task time.
5. After each task assignment calculate time remaining at the current work station.
6. Continue this until all tasks have been assigned to workstations.
7. Compute appropriate measures (e.g., line percent idle time and line efficiency) for the set
of assignments.

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BA7201 OPERATIONS MANAGEMENT LT P C

UNIT – I INTRODUCTION TO PRODUCTION AND OPERATIONS

Production Systems – Nature, Importance and organizational function. Characteristics of Modern

UNIT – II FORECASTING, CAPACITY AND AGGREGATE PLANNING

UNIT – III DESIGN OF PRODUCT, SERVICE AND WORK SYSTEMS 9

UNIT – IV MATERIALS MANAGEMENT 9

Materials Management – Objectives, Planning, Budgeting and Control. Overview of Materials

UNIT – V PROJECT AND FACILITY PLANNING

1. Aswathappa K and Shridhara Bhat K, Production and Operations Management,

1. Kanishka Bedi, Production and Operations Management, Oxford University Press,

UNIT – I INTRODUCTION TO PRODUCTION AND OPERATIONS

Production Systems – Nature

The nature of production can be explained under three heads:

1. Production as a system: A system can be understood as a group of independent but

b. Conversion Sub-system: It is a sub-system of the larger production system where the

c. Control Sub-system: It is a sub-system of the larger production system where a portion

 Production system model comprises:

2. Production as an organizational function: As an organizational function the conversion

3. Decision making in Production: Operation managers have to make crucial decisions

Importance of Production Function:

1. Manufacturing as Competitive Advantage

Organisation of Production function:

Duties and Responsibilities of Production Managers in Manufacturing

Emerging Role of the Production and Operations Manager

· Participate in strategic decision making of the company.

Recent Trends in Production and Operations Management:

2. Production/Operations Strategy: An operations strategy becomes important for overall

provide one firm competitive edge over the other.

8. Re-engineering: This involves drastic measures or break through improvements to

9. Environmental Issues: There is increasing emphasis on reducing waste, recycling waste,

Role of Operations in Strategic Management:

 The supporter of business strategy.

managers behave. The most obvious example is in the environmental responsibility

The polar representation of performance objectives

Types of Production system:

Manufacturing System Service System

Continuous Production Intermittent Production

Batch Production Job Production

Mass production( Flow) Processing Production

Production and Operations strategy – Elements of operation strategy

8. Supply chain management

Nature of International Operations Management:

UNIT – II FORECASTING, CAPACITY AND AGGREGATE PLANNING

Demand forecasting is needed for:

Objectives of Demand Forecasting

Steps in the Forecasting Process

Overview of Qualitative and Quantitative methods:

(i) Qualitative methods consist mainly of subjective inputs, often of non-numerical

Trend is a gradual long-term directional movement in the data (growth or decline).

REGRESSION AND CORRELATION METHODS

Differences between qualitative and quantitative:

Uses when situation is vague Used in stable situations

and little data available Historical data available

New products Existing products

New technology Current technology

Involves mathematical techniques

Example: forecasting newly introduced Example: sales of color TVs

Capacity planning is the process of determining the production capacity needed by an

• Capacity planning involves activities such as:

Capacity planning – Long range:

Ways of Changing Long Range Capacity:

Types of Capacity Planning:

Rough Cut plan:

Engineering change Quality management