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OPERATIONS MANAGEMENT

1 Edition 2011

OPERATIONS MANAGEMENT-INDEX
SNO
1 2 3 4 5 6 7 8 9 10

TOPICS
INTRODUCTION KEY TERMS IN OPERATIONS MANAGEMENT FIVE GUIDING PRINCIPLES IN TQM THEORY OF CONSTRAINTS OPERATIONS STRAGEGY PRODUCT DESIGN AND PROCESS DESIGN AGGREGATE/CAPACITY PLANNING TYPES OF PRODUCTION FACTORY LOCATION FACTORY LAYOUT

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4 to 18 19 to 21 22 23 24 to 29 30 to 35 36 to 61 62 to 71 72 to 82 83 to 97

OPERATIONS MANAGEMENT-INDEX
SNO
11 12 13 14 15 16 17 18 19 19 20

TOPICS
MATERIAL HANDLING PRODUCTIVITY BASICS OF JOB SCHEDULING BASICS OF ERP BASICS OF PROJECT MANAGEMENT METHOD STUDY QUALITY CONTROL AND INSPECTION BASICS OF ISO 9000 BASICS OF ISO 14000 JOB SEQUENCING VALUE ENGINEERING AND ANALYSIS

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98 to 109 110 to 112 113 to 116 117 to 120 121 122 to 125 126 to 134 135 to 138 139 140 to 143 144 to 145 3

OPERATIONS MANAGEMENT-INTRODUCTION
Definition Production and Operations Management (POM) is about transformation of production and operational inputs into outputs that when distributed, meets the needs of customers. Operations Management is the systematic direction and control of processes that transform inputs into finished goods and services.

INPUTS

TRANSFORMATION PROCESS

OUTPUTS

The process in the above diagram is often referred to as the Conversion Process. There are different methods of handling the conversion or production process-Job, Batch, Flow.
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OPERATIONS MANAGEMENT-INTRODUCTION
POM incorporates many tasks that are interdependent, but which can be grouped under five main headings: PRODUCT Marketers in a business must ensure that a business sells products that meets customers needs and wants. The role of Production and Operations is to ensure that the business actually makes required products in accordance with the plan. The role of Product in POM therefore concerns the area such as: Performance Aesthetics Quality Reliability Quantity Production cost Delivery dates
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OPERATIONS MANAGEMENT-INTRODUCTION
PLANT To make Product, Plant of some kind is needed. This will compromise the bulk of the fixed cost of the business. In determining the Plant to use, management must consider areas such as: Future demand (volume, timing) Design and layout of factory, equipment, offices Productivity and reliability of equipment Need for maintenance Health and safety (particularly the operation of equipment) Environmental issues (e.g. disposal of waste products) PROCESSES There are many different ways of producing a product. Management must choose the best process or series of processes. They will consider:
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OPERATIONS MANAGEMENT-INTRODUCTION
Available capacity Available skills Type of production Layout of plant and equipment Safety Production cost Maintenance requirements PROGRAMMES The production programme concerns the dates and times of the products that are to be produced and supplied to the customers. The decision made about programme will be influenced by factors such as: Purchasing patterns (e.g. lead time) Cash flow Need for/availability of storage Transportation
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OPERATIONS MANAGEMENT-INTRODUCTION
PEOPLE Production depends on people, whose skills, experience and motivation vary. Key people related decisions will consider the following areas: Wages and salaries Safety and training Leadership and motivation Unionization Communication

OPERATIONS MANAGEMENT-INTRODUCTION
Definitions The terms production management and operations management are often interchanged. Production is directly related to the manufacturing of goods. In the world of services, production refers to the service delivery. Operations refers to the daily actions necessary for the system to work. A Production System is a system whose function is to transform an input into desired output by means of a process (the production process) and of resources.

Resources Input Production Process Output


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OPERATIONS MANAGEMENT-INTRODUCTION Examples of Production Systems


Automobile Factory
Input Raw Material Input Output Complete cars Output Process Process Fabrication, Assembly Assembly line, Workers
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Hospital

Patients Healthy Individuals Health care Medical Doctors, Nurses,Medical supplies, Equipment

Resources

Resources

OPERATIONS MANAGEMENT-INTRODUCTION The Makeoffee production system


Preparing coffee in the morning is a nice example of production system

Coffee machine Electricity Operator Water,filter,coffee

Prepare

Drinkable coffee

When somebody prepares coffee in the morning, she/he performs different operations and makes different decisions. Here we will review these operations and decisions and draw a parallel between the problems the coffee maker faces and those faced by a production manager in his/her company. 11

OPERATIONS MANAGEMENT-INTRODUCTION
0.When do you make coffee in the morning?
Before washing is convenient because it is ready when you come back from the bathroom. You must here schedule the production of coffee and the other activities.

Scheduling/project management
In a company, you need to organize the different activities(sequence,priority,----)

1. Get water,coffee,filter and coffee machine.


Where is the coffee machine? Usually, the coffee machine is in the kitchen where you get the water and drink the coffee. You locate the production system where you get the raw materials and where you use the finished products.

Location
Where are the different ingredients? Usually, the coffee and the filters are together and close to the coffee machine. The coffee machine is close to the water filter. You place the different elements to avoid useless trips and handling.

Layout
In a company, where to locate your plant or your shop is a strategic question. The layout is also critical. It usually follows the material flow. 12

OPERATIONS MANAGEMENT-INTRODUCTION 2.Estimate how much coffee must be prepared.


How many people will drink coffee today and what time? You take account your experience, the day of the week and anything you know.

Forecasting
Then, you must decide whether you prepare the coffee for the breakfast or for the whole day. Your aim is a compromise between work and quality.

Lot sizing
You do not want to run out of coffee this morning but you do not want to waste coffee either.

Inventory control

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OPERATIONS MANAGEMENT-INTRODUCTION 3.Prepare the coffee


How do you really prepare coffee? Which operations are needed? In which order? If it takes a long time to fill the can with water, you prepare the filter while the can is filling. Here, you want to minimize the time needed to prepare the coffee.

Process design
You measure each operation in order to check whether your process is still optimal. If it takes much time, perhaps you should buy other filters or a new machine?

Productivity measurement
In a company, the production process are specified with lot of details. They are permanently controlled and many redesigns take place.

4.Drink coffee
You want to check the quality of the products and of the process. By drinking a single cup, you decide about the quality of the whole pot. You do not want to drink the whole pot before deciding its a good coffee.

Quality control: Statistical process control

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OPERATIONS MANAGEMENT-INTRODUCTION 5.Wash and descale the coffee machine


If you do not want the machine to require one hour for one coffee can, you should descale it from time to time.

Maintenance
You should keep your production system in good shape. Keeping a clean environment also prevents dirt from mixing with coffee when you prepare it.

Quality control: Total Quality Management


Getting the opinion of the customers is another important quality control check.

6.Buy filters and coffee


How much coffee and how many filters are required depends on the consumption of coffee.

Material requirement planning(MRP)

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OPERATIONS MANAGEMENT-INTRODUCTION
If you have a long way to buy the raw material, you will buy in big quantities. If the coffee is very expensive, you will buy quite often small quantities. A compromise must be found

Lot sizing
You do not want to run out of coffee or of filters. But if the shop is quite often closed, you could keep some safety stock of raw material.

Inventory control
How to choose between different coffee qualities at different prices in different shops which are accessible at different times?

Purchasing

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OPERATIONS MANAGEMENT-INTRODUCTION 7. Buy a new coffee machine?


You must choose between different options here too. However, the size( or type) of the machine will first depend on the amount of coffee you drink everyday. If you foresee that the people you would invite in the near future are hard coffee drinkers, you could perhaps already buy higher capacity machine. Furthermore, this machine can be used for normal coffee in the morning and for expresso in the evening.

Forecasting Aggregate/ Capacity planning


If you need this higher capacity only in few months, delaying could perhaps be more profitable.

Investment analysis
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OPERATIONS MANAGEMENT-INTRODUCTION
Here is the list of problems/subjects encountered during the description of the makoffee production system.
Scheduling/Project mngt. Facility Location Facility layout Forecasting Lot sizing Inventory control Process design Work measurement Quality control Maintenance and reliability Material req. planning Lot sizing Inventory control Purchasing Forecasting Aggregate planning Investment analysis When do you schedule makoffee? Where is the coffee machine? Where are the components? How much coffee for today? Do I prepare coffee for the whole day? What is the risk of running out of coffee? How do I make coffee? Can I improve the time it takes? Is the coffee good? How often do I clean the coffee machine? How many filters do I need and when? Do I buy them one by one? What if the shop is closed? What is the best shop? Will I always drink as much coffee? Shall I buy a bigger pot now? Or do I go on my small pot?

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OPERATIONS MANAGEMENT-KEY TERMS

1.

Project Management Planning, directing and controlling resources (people, equipment, material) to meet the technical cost and time constraints of a project. Productivity is the ratio of the input facilities to the output of goods and services. Throughput time the average time that it takes a unit to move through an entire process. Throughput rate the output rate that the process is expected to produce over a period of time. Total Quality Management managing the entire organization so that it excels on all dimensions of products and services that are important to the customer.
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2. 3. 4. 5.

OPERATIONS MANAGEMENT-KEY TERMS

6. 7. 8. 9.

Six Sigma a statistical term to describe the quality goal of no more than four defects out of every million units. PDCA Cycle also called The Deming Cycle refers to the plando-check-act cycle of continuous improvement. Continuous improvement the philosophy of continually seeking improvements in processes through the use of team efforts. Kaizen Japanese term for continuous improvement.

10. Lean production integrated activities designed to achieve high volume, high quality production using minimal inventories of raw material, work in process and finished goods. 11. Kanban an inventory or production control system that uses a signaling device to regulate flows.
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OPERATIONS MANAGEMENT-KEY TERMS

12. Throughput the rate at which money is generated by the system through sales (Goldratts definition). 13. Inventory the money that the system has invested in purchasing things it intends to sell (Goldratts definition). 14. Operating Expenses all the money that the system spends to turn inventory into throughput (Goldratts definition). 15. Value analysis / Value engineering analysis with purpose of simplifying products & processes by achieving equivalent or better performance at a lower cost.

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OPERATIONS MANAGEMENT- FIVE GUIDING PRINCIPLES IN TQM


Results through processes Continuous improvement of processes Managing with facts Management establishing priorities Involvement of everyone through teamwork

When things go wrong, first ask what in the process broke down, not who did it.

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OPERATIONS MANAGEMENT - THEORY OF CONSTRAINTS


FIVE FOCUSSING STEPS OF TOC Identify the system constraints (No improvement is possible unless the constraint or weakest link is found) Decide how to exploit the system constraints (Make the constraints as effective as possible) Subordinate everything else to that decision (Align every other part of the system to support the constraints even if this reduces the efficiency of non constraint resources). Elevate the system constraints (If output is still inadequate, acquire more of this resource so it no longer is a constraint). If in the previous steps the constraints have been broken, go back to Step 1, but do not let inertia become the system constraint. (After this constraint problem is solved, go back to the beginning and start over. This is a continuous process of improvement : identifying constraints, breaking them and then identifying the new ones that result)
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OPERATIONS MANAGEMENT-OPERATIONS STRAGEGY


Definition of Strategy
Strategy is a deliberate search for a plan of action that will develop a businesss distinctive competence and compound it.

Definition of Operations Strategy


An operations strategy consists of sequence of decisions that, over time, enables a business unit to achieve a desired operations structure, infrastructure, and set of specific capabilities in support of the competitive priorities.

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OPERATIONS MANAGEMENTOPERATIONS STRAGEGY


Levels of Strategy Corporate Corporate
What business are we in?

Divisional (Business)

How do we compete?

Fin

HR

Mkt

Prod Dev

Ops

Role of each function


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OPERATIONS MANAGEMENTOPERATIONS STRAGEGY


Operations/manufacturing strategy has to be an integral part of the overall organizational strategy. Without deciding the mission and objectives of the organization, checking up on the external and internal environment, performing the SWOT analysis for the organization and then deciding on the basis for competing and/or key factors for success, no operation strategy can be formulated.
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OPERATIONS MANAGEMENTOPERATIONS STRAGEGY


Population Characteristics

Opportunities?
Govt& Policy changes Motivation New Markets Resource availability Manage ment systems
Quality

RBI intervention

Capacity

Strengths?
Equipment age

Interest rates Cost Structure Technology Exchange rates Skills Limited access to world markets. IR Competitors plans

New Products

Weaknesses?
Employee age

New Technologies

Threats?
New Competitors 27

SWOT Analysis

OPERATIONS MANAGEMENTOPERATIONS STRAGEGY


Components of Operations Strategy
Structural decision categories: Capacity Facilities Vertical Integration Technology Workforce Organization Information/Control systems Unique to each firm Cost Quality  High performance design  Consistent quality Time  Fast delivery time  On-time delivery Development speed Flexibility  Customization  Volume flexibility

Infrastructural decision categories:

Capabilities: Competitive priorities:

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OPERATIONS MANAGEMENTOPERATIONS STRAGEGY


Clients look to Operations Strategy for help with these critical business issues: Cost efficiency and performance improvement Focus on companys core business Increasing shareholders value Continuous process improvement Maintaining competitive edge Improving customer service quality Migration to new technology Product innovation management Merger synergy realization
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OPERATIONS MANAGEMENT-PRODUCT AND PROCESS DESIGN


Product Design can be defined as the idea generation, concept development, testing and manufacturing or implementation of a physical object or service. The development of a new product passes through seven distinct stages as shown in the figure below:
Needs Identification Advance Product Planning Advance Design

Detailed Engineering Design

Product Process Design and Development

Product Evaluation And Improvement

Product use and support 30

OPERATIONS MANAGEMENT-PRODUCT AND PROCESS DESIGN


Process Design is concerned with the overall sequences of operations required to achieve the product specification. It specifies the type of work stations that are to be used, the machines and equipments necessary and the quantities in which each is required. The sequences of operations in the manufacturing process is determined by The nature of product The materials used. The quantities being produced and The existing physical layout of the plant. Major Factors affecting Process Design Decisions Nature of product/service demand. Degree of vertical integration. Product/service and volume flexibility. Degree of automation. Level of product/service quality Degree of customer contact
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OPERATIONS MANAGEMENT-PRODUCT AND PROCESS DESIGN


Interrelationship of Product and Process Design
Product Ideas

Feasibility Studies

Product Design Advance Product Planning Advance Design Product Process Design and Development Product Evaluation and Improvement Product Use and Support Continuous interaction Produce and Market New Products

Process Design

Organizing the process flows Relation of Process Design to Process Flow Evaluating the Process Design

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OPERATIONS MANAGEMENT-PRODUCT AND PROCESS DESIGN


Machines A and B are both capable of manufacturing a product. They compare as follows:
Data Investment Interest on Capital Hourly Wages No of pieces produced per hour Annual operating hours Machine A Rs50000 15% per annum Rs 10 5 2000 Machine B Rs80000 15% per annum Rs 8 8 2000

Which machine will have the lowest cost per unit of output ,if run for the whole year? If only 4000 pieces are to be produced in a year, which machine would have the lowest cost per piece? Will your answer to above vary if you are informed that 12.5% of the output of machine B gets rejected at the inspection stage. If so, what would be the new solution. 33

OPERATIONS MANAGEMENT-PRODUCT AND PROCESS DESIGN


Methods P and Q are both capable of manufacturing a product.They compare as follows: Data Fixture-cost -life Tooling-cost - life Pressing time per piece Method P Rs 24000 6 months Rs 2560 300 pieces 6minutes Method Q Rs 16000 4 months Rs 4800 580 pieces 4minutes

The annual requirement is 1500 nos. Operating cost per hour is Rs 128 for both the processes. Material cost is the same in each case. Which method would you choose for production during period of one year? 34

OPERATIONS MANAGEMENT-PRODUCT AND PROCESS DESIGN


Production manager of a unit wants to know for what quantity he can use automatic machine as against semi-automatic machine.

Data Time for the job Set up time Cost per hour

Automatic 2 minutes 2 hours Rs 20

Semi-automatic 5 minutes 1.5 hours Rs 12

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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Aggregate planning involves planning: The best quantity to produce during time periods in the intermediaterange horizon (often 3 months to 1 year). The lowest cost method of providing the adjustable capacity to accommodate the production requirements. Workforce size, production rate (work hours per week) and inventory levels. Objectives of Aggregate Planning To develop plans that are:  Feasible: The plans should provide for the portion of demand that the firm intends to meet and should be within financial and physical capacity of the firm.  Optimal: The firm should aim for plans which will ensure that resources are used as wisely as possible and cost kept as low as possible. To increase the range of alternatives of capacity use, that can be considered by the management of the firm.
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Operations Planning and Scheduling System
This system is concerned with the volume and timing of outputs, the utilization of operations capacity and balancing outputs with capacity at the desired levels of competitive effectiveness.

Aggregate Output Planning


It is the process of determining output levels (units) of product groups over the next 6 to 18 months period on a weekly or monthly basis. The plan indicates the overall level of output supporting the business plan.

Aggregate Capacity Planning


It is the process of devising plan for providing a production capacity scheme to support the intermediate range sales forecast.
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Business plan

Output planning
Aggregate output planning

Operations

Capacity planning
Aggregate capacity planning

Master production scheduling

Rough-cut capacity planning

Material Requirement planning

Detailed capacity planning

Loading Shop floor control Sequencing Short term capacity control

Detailed scheduling Expediting 38

Operations planning and scheduling system

OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


In developing an intermediate aggregate capacity plan, the variables that may be manipulated to vary the production capacity from month to month are:
The size of workforce. The use of overtime or idle time The use of inventories or back orders The use of sub-contractors  The approval of design and drawings

Cost associated with Aggregate planning


Pay roll cost Cost of overtime, second shift and subcontracting. Cost of hiring and laying off workers. Cost of excess inventory and backlog. Cost of production rate changes 39

OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Types of Capacity Fixed capacity: The capital assets (buildings and equipments) at a particular time are known as the fixed capacity. Adjustable capacity: It is on and the size of the workforce, the numbers of hours per week they work, the number of shifts and extent of sub-contracting. Design capacity: it is the planned rate of output of goods and services under normal operating conditions, It is also known as installed capacity. System capacity: it is the maximum output of a specific product or productmix that the system of workers and machines is capable of producing. Potential capacity: it is that capacity which can be made available within the decision horizon of the top management. Effective capacity: It is the capacity which is used within the current budget period. It is also known as practical capacity or operating capacity. Actual capacity: This is actual output achieved during a particular time period.
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


The figure given below illustrates the relationship between design capacity, system capacity and actual output. Design capacity System capacity Actual output
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Measurement of Capacity
Capacity may be measured in terms of inputs or outputs of the conversion process, Some of the examples of common measures of capacity are given below: Organization
Automobile factory Steel mill Power plant Brewery

Measures of capacity
No of vehicles Tons of steel Megawatts of electricity generated Barrels of beer Output rate capacities

Airline Hospital University

No of seats No of beds No of students Input rate capacities 42

OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Capacity Decisions
Major considerations in capacity decisions are: What size of plant? How much capacity to install? When capacity is needed? When to phase-in capacity oe phase-out capacity? At what cost? How much budget for the cost?

Determination of Capacity
Capacity determination is a strategic decision in factory planning. Capacity decisions are important because: They have a long term impact Capacity determines selection of appropriate technology, type of labor and equipments, etc. Right capacity ensures commercial viability of the business venture. Capacity influences the competitiveness of a firm.
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Factors affecting determination of Plant Capacity
Market demand for a product/service. The amount of capital that can be invested. Degree of automation desired. Level of integration (i.e. vertical integration). Type of technology selected Dynamic nature of factors affecting determination of plant capacity, viz; changes in product design, process technology, market conditions and product life cycle, etc. Difficulty in forecasting future demand and future technology. Obsolescence of product and technology over a period of time. Present and future demand. Flexibility for capacity additions.
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Capacity planning is the process of determining the production capacity needed by an organization to meet challenging demands for its products. In the context of capacity planning, capacity is the maximum amount of work that an organization is capable of completing in a given period of time. A discrepancy between the capacity of an organization and demands of its customers results in an inefficiency, either in under-utilized resources or unfulfilled customers. The goal of capacity planning is to minimize this discrepancy. Demand for an organizations capacity varies based on changes in production output, such as decreasing the production quantity of an existing product, or producing new products. Capacity can be increased through introducing new techniques, equipment and materials, increasing the number of shits, or acquiring additional production facilities. Capacity is calculated: (no of machines or workers) *(no of shifts) *(utilization)* (efficiency).
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


The broad classes of capacity planning are lead strategy, lag strategy, and match strategy. Lead Strategy is adding capacity in anticipation of an increase in demand. Lead strategy is an aggressive strategy with the goal of luring customers away from the companys competitors. The possible disadvantage to this strategy is that it often results in excess inventory, which is costly and often wasteful. Lag strategy refers to adding capacity only after organization is running at full capacity or beyond due to increase in demand. This is more conservative strategy. It decreases the risk of waste, but it may result in loss of possible customers. Match strategy (also known as the tracking strategy) is adding capacity in small amounts in response to changing demand in the market. This is a more moderate strategy.
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Capacity planning involves activities such as: Assessing existing capacity. Forecasting future capacity needs. Identifying alternate ways to modify capacity. Evaluating financial, economical and technological capacity alternatives. Selecting capacity alternative most suited to achieve the strategic mission of the firm. Figure given below illustrates the inputs to capacity decisions. Market consideration Resources available

Capacity decisions
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Illustrations: A firm has 4 work centre a, b, c and d in series with individual capacities in units per day shown in the figure below. The actual output is also shown in the figure: A 430 B 380 C 350 D 410
Actual Output

310/day

2. A work centre operates 5 days a week on a 2 shifts per day basis, each shift of 8 hours duration. There are five machines of the sme capacity in this work centre.If the machines are utilized 80% of the time at a system efficiency of 90%, what is the rated output in standard hours per week.
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


The following is tentative master schedule for four weeks:

Product
1 A B C 3000 2000 1200 2 4000 1500 1800

Week
3 1200 3000 2500 4 2500 3500 2000

The bill of labor in key work centers for the companys three major products A,B & C is as below:

Dept. A X Y Z
0.20hr

Product B 0.05hr 0.15hr 0.08hr C 0.10hr 0.20hr 0.05hr


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0.08hr 0.11hr

Determine the load on department X,Y,Z over the next 4 weeks.

OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


A firm produces two products P and Q on produce-to-order basis. The demand for the products come from several sources. The estimated demand for the two products over the next 5 weeks are given below:

Sources of demand
1

Product P
2 Week 3 4 20 10 5 10 1

Product Q 2 Week 3 4 10 5 10

Intra company orders Branch warehouse orders R&D orders Customer demand (forecast +on hand order)
20

20

10

10

10

10

25

25

20

25

20

30

30

25

25

20 50

The safety stock for product P is 25 and for Q is 30.The lot size for P is 60 and for Q is 70.The beginning inventory for P is 50 and for Q is 60.Prepare a master production schedule for these two products.

OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


The following information is available regarding a product: Regular time production capacity= 2500 units per month. Overtime production cost=Rs 10 per unit. Inventory carrying cost=Rs 3 per unit per month Backlog cost=Rs 5 per unit per month. Beginning Inventory=400 units. Demand in units for four months is 4000,3500,2500 and 2800 respectively. Develop a level capacity plan that yields zero inventory at the end of 4th month. What is the total cost that will result from this plan?
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


A firm developed the following demand forecast in units for a product. Month Jan Feb March April May June
(a)

Demand (units) 210 100 200 400 600 700

Month July Aug Sept Oct Nov Dec

Demand (units) 400 220 200 120 100 250

Determine the production rate required to meet the average demand if the available working days are as below:
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Month Jan Feb March April May June Working Days Available 22 18 21 22 22 20 Month July August Sept Oct Nov Dec Working Days Available 21 22 20 23 19 20

(b) Determine the monthly inventory balance required to follow a plan of letting the inventory absorb all fluctuations in demand. assuming a constant workforce, no idle time or overtime, no back orders, no use of sub-contractors and no capacity adjustment, and no safety stock, determine the beginning inventory to avoid backlogging of order during any month (i.e. no negative inventory). 53

OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


XYZ Manufacturing company produces a product which has 6 months demand cycle as below:

Month Jan Feb March April May June

Forecast Demand(Units) 300 500 400 100 200 300

Work days/month 22 19 21 21 22 20
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


The company works on a single shift basis of 8 hours per shift. Each unit requires 10 labour-hours to be produced at labour cost of Rs 6 per hour (regular rate) or Rs 9 per hour (overtime rate). Units can be subcontracted at a cost of Rs 200/- per unit. There are currently 20 workers employed. The hiring and training cost of additional workers is Rs 300/per person whereas the lay off cost is Rs 400/- per person. Company's policy is to retain safety stock of 20% of monthly forecast and each months safety stock becomes the beginning inventory for the next month. The beginning inventory in January is 50 units and the inventory carrying cost is estimated as Rs 20 per unit per month. Three aggregate plans are proposed. Plan 1: Vary the workforce size to accommodate demand. Plan 2: Maintain a constant workforce of 20 and use overtime and allow idle time to meet demands. Plan 3: Maintain a constant workforce of 20 and build inventory or incur stock-out cost. Compare the cost of these 3 plans and choose the best plan.
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


The monthly production requirements of an item for a six month period was arrived at, keeping in view the opening stock, forecast demand and safety stock etc. as below:

Month

Production Requirement(Units)

Working days

July August Sept Oct Nov Dec

1850 1425 1000 850 1150 1850

22 19 21 21 22 20

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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


The information relating to the cost is as follows: Manufacturing cost per unit= Rs 100/Shortage cost = 1.5 per unit per month Marginal cost of sub-contracting =Rs 2 per unit Manhours required per unit =5 hours. The company wants to met the production requirements by adopting one of the two levels of manufacturing as follows: Strategy 1: Maintain a constant workforce level based on average production requirements during the 6 months, allow inventory to accumulate and fill shortages from next months production. Strategy 2: Fix the constant workforce level at minimum necessary to meet the low Oct demand and sub-contract any monthly difference between requirements and production. Which strategy should the firm adopt?
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


A company adopts a counter seasonal product strategy to smooth production requirements. It manufactures its product during the first four months of the year and would like to employ a strategy that minimizes production cost while meeting the demand during these four months. The company presently has on its rolls 30 employees with an average wage of Rs 100/- per month. Each unit of the product requires 8 manhours. The company works on a single shift basis(8 hours shift/day). Hiring an employee cost Rs 400 and discharging an employee cost Rs 500/-. Inventory carrying cost is Rs 5 per unit per month and shortage cost is Rs 100 per unit per month. The company forecasts the demand for the next four months as follows:

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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


Month Jan Feb March April Demand (Unit) 500 600 800 400 No of working days/month 22 19 21 21

The company is thinking of adopting one of the following strategies: Plan 1 : Vary workforce levels to meet the demand. Plan 2 : Maintain 30 employees and use inventory and stock outs to absorb demand fluctuations. Which strategy would you recommend? Assume nil inventory at the start.
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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


The order position (i.e. requirements of despatch) for the next 12 months in respect of a particular product is as under

Month 1 2 3 4 5 6

Required Units 13000 12000 10000 9000 11000 13000

Month 7 8 9 10 11 12

Required Units 11000 7000 15000 13000 12000 10000


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OPERATIONS MANAGEMENTAGGREGATE/CAPACITY PLANNING


The production capacity of the shop is 10,000 units per month on regular basis and 3000 units per month on overtime basis. Sub-contracting can be relied upon up to a capacity of 3000 units per month after giving a lead time of 3 months. Cost data reveal as under: Rs 5 per unit on regular basis Rs 9 per unit on overtime basis Rs 7 per unit on sub-contract basis Cost of carrying inventory is Rs 1 per unit per month. Assuming an initial inventory of 1000 units and that no back logging of order is permissible. Suggest an optimal production schedule. Also work out the total cost on the basis of the suggested schedule.

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OPERATIONS MANAGEMENT-TYPES OF PRODUCTION


It is usually accepted that there are three main types of production, namely: job, batch and flow production. It is important to realize at the outset that these types of production are not necessarily associated with any particular volume of production and that depending upon the circumstances the same task can be undertaken by any of the above methods. These three different types of production all exhibit distinct characteristics and require different conditions for their effective inception and working. The circumstances in any factory at any time must be carefully considered before a decision is taken as to the method of production to be used. Frequently, the type of production employed depends on the development of the company concerned. Many factories start on a job production basis, proceed as volume increases to batch production methods, in part at least, and finally manage to flow-produce all or some of the products concerned.

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OPERATIONS MANAGEMENT-TYPES OF PRODUCTION


 JOB PRODUCTION: Job or make complete production is the manufacture of a single complete unit by an operator or group of operators, and a number of identical units can proceed in parallel under job production conditions. Bridge-building, dam-construction and ship-building are common examples of the job production industries. Job production is characterized by the fact that the whole project is considered as one operation and work is completed on each product before passing on to the next. Labour tends to be versatile and highly skilled, capital investment is high, while control is relatively simple, being largely exerted by the operator or group. In the case of production of a single specialized equipment, it is inevitable that job production should be used, but in the case of quantity manufacture it is conceivable though unlikely that job production could also be used.  BATCH PRODUCTION: As quantity increases, work may be carried on under batch production methods. Such methods require that the work on any product is divided into parts or operations, and that each operation is completed throughout the whole batch before the next operation is undertaken
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By its use some degree of specialization of labour is possible, and capital investment is kept low, although the organisation and planning required to ensure freedom from idle and waste time is considerable. It is in batch production that the production control department can produce most benefits, and these can often be spectacular, but it is also in batch production that it will be found most difficult to organize the effective working of a production control department. In order to clarify the difference between job and batch production, consider a small quantity of units, say five, being made by a number of operators. Under job production conditions the operators would be divided into five groups and each group would be responsible for the complete manufacture of one unit. Under batch conditions, however, the work content of each unit would be broken into a number of operations not necessarily of equal work content, and the operators would again divide into groups. The first group would then complete the first operation on all five units, passing the batch as a whole on to the next group and so on until the manufacture was complete. In general, the batch is not passed on from one operator or group to the next until all the work is completed on that operation. Transferring part batches can often lead to considerable organizational difficulties. It should be noted that during the batch manufacture of the five units mentioned above, four units are always at rest, no work being carried out on them. In fact, the rest periods of any

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one unit from a batch of a total = (n-1)/n x 100 percent, of the total batch production time. This is characteristic of batch production, where the work content of the material increases irregularly and results in a substantial workin-progress. In addition to the rest period indicated above, the organizational difficulties of batch production may well generate other rest times, where numbers of batches are passing through the same production stages, and competing for resources, it is usual to move a batch from an operator or machine into a buffer or work-in-progress stores, to wait there for the next operator or machine to become available. The sequencing of batches from different jobs to reduce this source of rest is one of the most difficult problems encountered in the management of a production unit, and however successfully it is solved, there will inevitably be some element of rest time brought about by this competition for resources. Thus in batch production, there is a rest period for each unit in the batch, whist work is proceeding on other members of the batch, and another rest period whilst the whole batch is in buffer store. This often results in the time between the origination of work on a batch and its eventual completion being much greater than the simple manufacturing time for the batch.

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The effect of the considerable time lag between an initial investment in material and its subsequent translation into cash upon the sale of the finished product can be very serious in terms of the investment in capital which is tied up in the work in progress. On the other hand, the presence of buffer stores permits the production unit to absorb shocks and changes, thus building in some element of flexibility, and it assists in making more effective use of the various limited manufacturing resources. This balancing of investment in material against investment in resources is a continually recurring task, and one to which there is rarely a simple unique answer.  FLOW PRODUCTION: Batch production is characterized by the irregularity in the increase of work added to the basic material. Batch production turns into flow production when the rest period mentioned above vanishes. In other words, flow production can be defined as production during which work content of the product continually increases. Flow production then means that as the work on each operation is complete, the unit is passed to the next work stage without waiting for the work to be completed on the total batch. In order that this can flow smoothly, the times of each operation must be of equal length, and there must be no movement off the production line. For example, inspection must be physically located within the flow production line and the inspection function must not occupy more than the unit operation time. Furthermore, since the whole system is balanced, any fault affects not
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only the stage at which the fault occurs, but also all the stages in the production line. Thus, a fault occurring at one stage of a flow production line which cannot be cleared within the time cycle of the line, will result in that stage being held up. This, in turn, causes all stages previous to it to be held up and all stages subsequently to run out of work. The line as a whole, therefore, must be considered as a single entity and not allowed to break down at any point at all. In order that flow production can function satisfactorily, the following requirements must be met: 1. There must be continuity of demand. Should demand be spasmodic, there will be a build-up of finished work which can give rise to storage difficulties. Alternatively, if production is caused to fluctuate along with demand, then the setting up and balancing of the flow line will need to be carried out frequently, giving an excessively high total cost. In industries with widely varying demands, a leveling out is achieved by making for stock during the flat periods, the stock supplementing the current production during peak periods.

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2. The product must be standardized. A low line is inherently inflexible and cannot accommodate variations in the product. 3. Material must be to specification and delivered on time. Due to the inflexibility mentioned above, the flow line cannot accept the variations in material which can be incorporated in a batch or job production process. Furthermore, if material is not available when it is required the effect is very serious, since the whole line will be frozen. 4. All stages must be balanced. If the requirement that the material does not rest is to be fulfilled, then the time taken at each stage must be the same. This can lead to inefficiency due to inability to balance stages. For example, assume a product with a work content of 10 hours has to be made at a rate of 400 a week, and the normal working week is 40 hours, then The total weekly work content = 400 x 10 hours. Hence the number of operations required = (400 x 10)/40 = 100 And the time for each operation = 6 minutes

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To meet the required production, then, a flow line with 100 stages needs to be set up, the work content of each stage being 6 minutes. It may be found, however, that one stage has a work content of only 3 minutes and that it cannot be compounded with any other stage. Under these circumstances, this stage must have an idle time content of 3 minutes. This is known as synchronizing loss and the only way of avoiding this would be to increase the rate of production so that, in fact, all stage times could be reduced to 3 minutes. In the situation where an element cannot be reduced to the required stage time for example, a machine-controlled operation is 10 minutes then resources must be increased so that the effective operation time becomes less than the stage time. This can lead to an under-utilization of resources. 5. All operations must be defined. In order that the line will maintain its balance, all operations must remain constant. This can only be done if the operations are recorded in detail.
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6. Work must conform to quality standards. In job or batch production, variation in quality at one stage can be compensated for by extra work elsewhere. In flow production this cannot happen, since each stage has a defined operation. 7. The correct Plant and Equipment must be provided. Lack of correct apparatus will unbalance a line, causing weaknesses throughout the whole sequence. 8. Maintenance must be by anticipation not default. If equipment breaks down at any one stage, the whole line is halted. To avoid this, a programme of preventive maintenance must be in force. 9. Inspection must be in line with production. Unless the inspection stage is balanced with the rest of the production, a dislocation to the flow will inevitably take place. The achievement of the above requires considerable pre-production planning, particularly in assuring that the correct material is delivered on time, and that the operations are of equal length of time.

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It must be noted that flow-production is not necessarily large-scale production. The following advantages can be derived from the effective institution of flow production techniques a) The direct labour content will be reduced, since the comprehensive preproduction planning which is necessary will often produce economies in time. (b) Assuming the product is initially designed correctly, then reproducibility, and hence the accuracy, is high. (c) Since inspection is in line, deviations from standard are rapidly picked up. (d) Since there is no rest period between operations, work in process is at a minimum. (e) Again, since there is no waiting period, the provision of work-in-process stores is unnecessary, and the total storage space required is minimized.
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Introduction The prime criterion for a preferred location is the least total cost, the minimum delivered-to-customer cost of the product or service. The location of factory may well have a substantial effect upon the operation of the unit and on the factories within a geographical region. No set of rules can be laid down whereby the solution to the problem of location can be solved or programmed. There are, however, a number of factors, such as raw material availability, labour costs, and so on, which should be considered and these factors will be discussed in detail later. A plant location problem is not encountered everyday, but the factors that can create a problem are constantly developing. Technological improvements make existing products non-competitive. New products replace established lines. A requirement for different materials or a change in the source of materials alters supply costs, power, water or other resource needs are subject to production levels which in turn are a function of demand. Any or all of these factors can force a firm to question whether its plant should be altered at the present location or moved to another locality.
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It is worth differentiating between the problem of location and of site. The location is the general area and the site is the place chosen within the location. The decision on site thus probably proceeds in two stages: in the first stage the general area is chosen and then a detailed survey of that area is carried out to find possible site. Thus, a study to identify the best location typically starts with an evaluation of regional factors and progresses to particular communities within the favored region. Information of a general nature suffices to rate regions. They are compared with respect to market proximity, raw material, tax rates, and other characteristics of special interest to the organization seeking the site. The factors affecting the choice of a community and a particular site within the community involve specific details. The models given here for factory location can be used for both the selection of a location and also for the selection of a site in a particular location. The selection of a site decision is probably made by taking into account the more detailed factors than considered for selection of a location (. is the view pleasant? . is there a good restaurant nearby?.).
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Factors affecting location The following are some of the factors which will influence the choice of location either for a new construction site or for an available building shed. 1. Integration with other group companies If the new factory is one of a number of factories owned or operated by a single group of companies, the new factory should be situated such that its work can be integrated with the work of associated factories or warehouses. This will require that the group should be considered as an entity, not as a number of independent units. (There is a high possibility of using the linear programming model for such factory locations.) 2. Availability of transport In some cases, where products or purchased parts are heavy and bulky, it is important that goods transport facilities shall be readily available. Goods intended largely for export indicate a location near a seaport or a large airfield. Years ago industrial growth began in seaports because of reliance on inexpensive ocean traffic. As the railroad network grew, the relationship of raw materials to manufacturing to markets became more flexible. Air and trucking transportation encouraged further versatility and industrial centers spread throughout the land. The distance in time between supply and demand is ever diminishing.
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3. Availability of materials While it is true that good transport facilities will enable goods to be obtained and delivered readily, a location near main suppliers will help to reduce cost and permit staff to go readily to see suppliers to discuss technical or delivery problems. Any buyer who has tried to improve deliveries from an inaccessible supplier will bear witness to the considerable difficulties involved. 4. Availability of services There are six main services that need to be considered, namely a) Gas d) Drainage b) Electricity e) Disposal of waste c) Water f) Telephone Certain industries use considerable quantities of water for food preparation, laundries, metal plating, etc. Others use a great deal of electricity for chemical processing and so on. An assessment must be made of the requirements of the factory for as far ahead as possible. Underestimating the needs of any of the services can prove to be extremely costly and inconvenient.
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5. Suitability of land and climate Here, not merely must the genealogy of the area be considered, that is, whether the subsoil can support the loads likely to be placed on it, but also whether the climatic conditions (humidity, temperature and atmosphere) will adversely affect the manufacture. Modern building techniques are such that almost all disadvantages of terrain and climate can be overcome, but the cost of so doing may be high and a different locality could avoid an inflated first cost. 6. Site cost As a first cost, the site cost is important, although it is important not to let immediate gain jeopardize long term plans. 7. Availability of amenities A location which provides good amenities outside the factory shore, theatres, cinemas, restaurants is often much more attractive to staff than one which is more remote. This is particularly so where a large proportion of married women are employed who find it convenient to shop for the family during the lunchbreak and on the way home. One important amenity in this connection is good personnel transport buses and trains; and some companies find this so vital that they provide special company buses. Other amenities such as good canteen, co-operative stores, child-care are also important.

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8. Availability of labour Labour may be more readily available in some cases than in others. The Department of Trade & Industry can provide information on this point. Certain areas, however, have traditional skills. For example, woollen products in Punjab and coir products in Kerala. It is very rate today that a location can be found which has appropriate skilled labour both readily available. (Big cities, however, could be excluded from this generalization.) The choice has to be made between a location where skilled men exist but are not readily available and where there is a supply of unskilled labour. It must be remembered that new skills can be taught, processes simplified and made less exacting and key personnel moved. The importance of labour depends, of course, on the particular firm, its policies and its products. If the firm is science-oriented, it should anticipate going to an area where engineers and scientists congregate because it is unlikely that many can be lured to remote sections.

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9. Labour stability Thorough precautions to assure low production costs are of no avail unless the proposed new labour laws and regulations can operate with continuity and tranquil labour-management relations. More than one company has been forced out of business because of unreasonable or prohibitive labour demands. Wage increases and jurisdictional disputes continue to be important points of conflict. The question of labour stability must be approached from a positive standpoint. There are certain strong points of community attitude that should influence its selection. Perhaps, the most crucial question that can be asked about a community is What is its past history? 10. Availability of housing Where staff has to be recruited other than locally, housing will need to be available. It is general experience that the offer of good housing can be of greater assistance in attracting staff than almost any other factor.

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11. Local building and planning regulations It is important to check at an early stage that the proposed location does not infringe any local regulations. A discussion with the surveyors department of the local authority is most desirable. Compliance with pollution standards is a recent location constraint for heavy users of air and motor resources. Reliable fuel and raw material supplies may become critical factors in the future. 12. Room for expansion It is most unwise to build a factory to the limit of any site. Adequate room for genuine expansion should be allowed. It is dangerous to assume that at a later date the car park can be built on or that the canteen can be used as a productive area. 13. Safety requirements Some factories may present, or may be believed to present, potential dangers to the surrounding neighbourhood; for example, nuclear power stations and explosive factories are often considered dangerous. Location of such plants in remote areas may be desirable or locating at a safe distance from such factories would be advisable.
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14. Adequacy of circulation The movement of goods, visitors and staff to and from a factory presents a problem not only of easy access but also easy control. There is also a need for emergency access fire fighting equipment or ambulances which if impeded could endanger life and seriously affect the company. 15. Political situation The political situation in potential locations should be considered. 16. Special grants Government and local authorities often offer special grants, low interest loans, low rentals and other inducements in the hope of attracting industry to particular locations. As these are often areas with large reservoirs of labour, these offers can be most attractive. Every State in India has got different bodies that advise on product selection and plant location. In Maharashtra, these are: SICOM, MIDC, MSSIDC and SISI.
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17. Taxation Few industries have relocated their plants solely because of unfavourable State taxes. It is rather the cumulative effect of this factor and other high cost factors that may prompt a manufacturer to consider relocation. 18. Availability of car space There is no doubt that the use of cars as a means of transport to and from work will increase, whatever public transport facilities are provided. If open space is not available for car parking, special car-park structures may be necessary. It is difficult to satisfy all the above factors for plant location. However, a compromise between what is wanted and what can obtained may be the only solution.

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                  1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Integration with other group companies Availability of transport Availability of materials. Availability of services. Suitability of land and climate. Site cost. Availability of amenities. Availability of labour. Labour stability. Availability of housing. Local building and planning regulations. Room for expansion. Safety requirements. Adequacy of circulation. Political situation. Special grants. Taxation. Availability of car space.
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 Introduction The disposition of the various parts of a plant, along with all the equipment used therein, is known as the Plant Layout, which should be designed to enable the plant to function most effectively. Plant Layout is a companion problem to Plant Location. A decision to relocate provides an opportunity to improve total facilities and services. A decision not to relocate is often accompanied by plans to revise the current plant arrangement. The re-layout must be designed to reduce increasing production costs that gradually evolve from piecemeal expansion or to introduce an entirely new process. In either case, the re-layout strives to maximize production flow and labour effectiveness. In this section, we shall explore the relationship of production departments grouping of production activities rather than individual machines or architectural features. A facility layout of a hospital would concern emergency rooms, operating theatres, patient rooms and even the parking lot, but it would not initially involve the location of an x-ray machine or a cash register. However, the detailed equipment or facilities layout would follow the same methodology as the overall departmental layout.

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 Objectives of Plant Layout The chief objectives are likely to be improved operations, increased output, reduced costs, better services to customers, and convenience and satisfaction for company personnel.  Types of Plant Layout There is a layout by fixed position or by fixed material location. This is a layout where the material or major component remains in a fixed place. All tools, machinery, men and other pieces of material are brought to the major component. The complete job is done or the product is made with the major component staying in one location. Ship-building and heavy construction of dams, bridges and buildings are typical examples. Advantages are: Handling of major assembly unit is reduced. Highly skilled operators are allowed to complete their work at one point and responsibility for quality is fixed on one person or assembly crew. Frequent changes in products or product design and in sequence of operations are possible. The arrangement is adapted to a variety of products and intermittent demands. It is more flexible in that it does not require highly organized or expensive layout engineering, production planning or provisions against breaks in work continuity.

The disadvantage is that the required movement of materials and machines may be cumbersome and costly. 84

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 Product, Flow, Sequential or Line Layout Here the Plant is laid out according to the requirements of the product. This is typical of flow production. One product or one type of product is produced in one area. But unlike layout by fixed position the material moves. This layout places one operation immediately adjacent to the next. It means that any equipment used to make the product, regardless of the process it performs, is arranged according to the sequence operations. Diametrically, this is illustrated in Figure 1, where Product 1 goes first to machine-A, then to machine-B, then to machine-C, these machines being used exclusively.

for Product 1, Product 2 and Product 3 have their own line of machines (K,L,M, and R,S,T) and, even though machines A,K,R are identical and interchangeable, work is not transferred from one product line to another. 85

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Advantages are: 1. Reduced handling of material. 2. Reduced amounts of material-in-process, allowing reduced production time and lower investment in materials. 3. More effective use of labour (a) through greater job specialization and (b) through ease of training. 4. Easier control of production allowing less paperwork and effective supervision. 5. Reduced congestion of floor space otherwise allotted to aisles and storage. Disadvantages are: 1. Unless volume is very high, machine utilization may be low, with a subsequent high capital investment. 2. One machine breakdown may immobilize a complete production line. 3. The system is inflexible, being unable to accommodate changes. 4. Unless the production is true flow production and all operations balanced, buffer stock (work-in-process) will be inevitable. 5. The pace of the line is set by the slowest operation. 6. Any changes in product design, volume, etc., in the line will normally require a major investment.

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 Process of Functional Layout In this type of layout, plant is grouped according to its function. Thus, all drilling machines will be together, as will all milling machines, presses, lathes and so on. This is most commonly met with in jobbing product. This is illustrated in figure, where products 1, 2 and 3 all go to machine-A, then after processing, product 1 goes to machine-B and thence to machine-C, while products 2 and 3 go to machine-L. Product 2 then goes to machine-C, while product 3 goes to machine-T. To allow all machines to be fully loaded, work-in-progress stores are necessary between each machine

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Advantages are: 1. Better machine utilization allows lower machine investment. 2. It is adapted to a variety of products and to frequent changes in sequence of operations. 3. It is adapted to intermittent demand (varying production schedules). 4. The incentive for individual workers to raise the level of their performance is greater. 5. It is easier to maintain continuity of production in the event of (a) machine or equipment breakdown; (b) shortages of material; (c) absent workers Disadvantages are: 1. Substantial pre-production planning is required if machine loading is to be high. 2. Control is difficult. 3. Buffer stocks are essential; hence, relatively high investment in raw materials and workin-progress. 4. It increases handling, space requirements and production time. 5. Close supervision is essential.

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Which type of layout to use? Use layout by fixed position or fixed material location when 1. Material forming or treating operations require only hand tools or simple machines. 2. Making only one or a few pieces of an item. 3. The cost of moving the major piece of material is high. 4. The skill of workmanship lies in the abilities of the workers or it is desired to fix responsibility for product quality on one worker or crew.
Use layout by product when 1. There is a large quantity of pieces or products to make. 2. The design of the product is more or less standardized. 3. The demand for it is fairly steady. 4. Balanced operations and continuity of material flow can be maintained without difficulty.
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Use layout by process when 1. Machinery is highly expensive and not easily moved. 2. Making a variety of products. 3. There are wise variations in times required for different operations. 4. There is a small or intermittent demand for the product.

In actual practice, most layouts are a combination of the basic layouts discussed above. They are made to utilize the advantage of all three types of layout. Criteria for a good layout While the techniques employed in making a layout are normal work-study techniques, the process is a creative one which cannot be set down with any finality, and one in which experience plays a very great part. Furthermore, it is not possible to define a good layout with any precision. However, there are certain criteria which will be satisfied by a good layout, and these are discussed below:

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1. Maximum Flexibility A good layout will be one which can be rapidly modified to meet changing circumstances. In this context, particular attention should be paid to supply points, which should be ample and of easy access. These can be simply and cheaply provided at the outset of a layout, and failure to do so can often present very necessary modifications to unsatisfactory, outdated or inadequate layouts. 2. Maximum Coordination Entry into, and disposal from, any department should be in such a manner that it is most convenient to the issuing or receiving departments. Layout requires to be considered as a whole and not parochially. 3. Maximum use of Volume A factory must be considered as a cubic device, as there is airspace above the floor area. Maximum use should be made of the volume available. Conveyors can be run above lead height and used as moving work-in-progress stores, or tools and equipment can be suspended from the ceiling. This principle is particularly true in stores, where goods can be stacked at considerable heights without inconvenience
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4. Maximum Visibility All men and materials should be readily observable at all times; there should be no hiding places into which goods can get mislaid. This criterion is sometimes difficult to fulfill, particularly when an existing plant is taken over. Every piece of partitioning or screening should be scrutinized most carefully while introducing undesirable segregation and reducing effective floor space. 5. Maximum Accessibility All servicing and maintenance points should be readily accessible. For example, a machine should not be placed against a wall in such a manner that a grease-gun cannot reach the grease nipples. The maintenance under these circumstances is likely to be skimped at best and will occupy excessive time. Similarly, a piece of plant in front of a fuse box will impede the work of the electricians and may cause unnecessary stoppage of the machine when the fuse box is opened. If it is impossible to avoid obscuring a serviced point, then the equipment concerned should be capable of being moved. It should not be a permanent installation.
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6. Minimum Distance All movements should be both necessary and direct. Handling material adds to the cost of the product but does not increase its value. Consequently, any unnecessary or circuitous movements should be avoided. It is a common failing for material to be moved off a work-bench to a temporary storage point. This intermediate rest place is often unnecessary and unplanned, being used only because an empty space appears convenient. The providing of extra shelves, benches and tables should be questioned very thoroughly and avoided if possible. 7. Minimum Handling The best handling is no handling, but where handling is unavoidable it should be reduced to a minimum by the use of conveyors, lifts, chutes, hoists and trucks. Material being worked on should be kept at working height and never placed on the floor if it is to be lifted later. 8. Minimum Discomfort Poor lighting, excessive sunlight, heat, noise, vibrations and odour should be minimized and if possible counteracted. Apparently, trivial discomforts often generate troubles greatly out of proportion to the discomfort itself. Attention paid to the lighting and general decoration and furniture can be rewarding without being costly. Recommendations on the intensity of lighting for various tasks are published and most manufacturers of lighting equipment will provide useful advise on the subject.
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9.Inherent Safety All layouts should be inherently safe, and no person should be exposed to danger. Care must be taken not only of the persons operating the equipment but also of the passers-by, who may be required to go behind a machine, the back of which is unguarded. Adequate medical facilities and services must be provided, and these must satisfy the Chief Inspector of Factories. Experience shows that the factory inspector is not only most competent to advise on these matters, he is always ready to be of assistance. 10.Maximum Security Safeguards against fire, moisture, theft and general deterioration should be provided, as far as possible, in the original layout. 11.Unidirectional Flow Work lanes and transport lanes must not cross. At every point in a factory, material must flow in one direction only, and a layout which does not conform to this will result in considerable difficulties, if not downright chaos, and should be avoided.

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12.Visible Routes: Definite lines of travel should be provided and, if possible, clearly marked. No gangways should ever be used for storage purposes, even temporarily. The co-existence of a large number of criteria makes the definition of an optimum schedule virtually impossible. Furthermore, the writing of a computer programme for plant layout becomes a task of considerable difficulty unless some very drastic simplifications are made. ` 1. Maximum Flexibility 3. Maximum Use of Volume 5. Maximum Accessibility 7. Minimum Handling 9. Inherent Safety 11. Unidirectional Flow 2. 4. 6. 8. 10. 12. Maximum Coordination Maximum Visibility Minimum Distance Minimum Discomfort Maximum Security Visible Routes

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Advantages of a good Layout A layout satisfying the above conditions will have the following advantages over one which does not:

1. The overall process time and cost will be minimized by reducing unnecessary handling and by generally increasing the effectiveness of all work. 2. Labour supervision and production control will be simplified by the elimination of hidden corners in which both men and materials can be misplaced. 3. Changes in programme will be most readily accommodated. 4. Total output from a given plant will be as high as possible by making the maximum effective use of available space. 5. A feeling of unity amongst employees will be encouraged by avoiding unnecessary segregation. 6. Quality of products will be sustained by safer and better methods of production.
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Symptoms of a poor Layout The main symptoms of a poor layout are: 1. Lack of control. 2. Congestion of men and materials. 3. Excessive re-handling. 4. Long transportation lines. 5. Frequent accidents. 6. Low worker performance.
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Material handling may be broadly defined as the movements of materials from one place to another. It may be picking up or putting down, moving horizontally or vertically or in any inclined plans of materials, of any kind in their raw, semifinished or finished state.  OBJECTIVE Material handling often does not add anything to the value of the product but only increases the cost. Handling costs constitute a substantial portion of the total cost of production. Besides, material handling is also found to be responsible for a large percentage of product damage. 80 to 90% of industrial accidents and other disadvantages. In spite of this, material handling is an essential feature of industrial activity. Materials have to be moved from one place to another without which all the activities would come to a standstill. Material handling often accounts for improved utilization of men and machines, and provides for specialization of skills and the related advantages. Since material handling cannot be eliminated completely in any organisation, the objective of material handling may be stated as instituting an efficient system of handling. Eliminating unnecessary and wasteful handling system saves money and time, reduces damage to materials and makes the work safer.

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 Some Principles Some of the major principles in the design of an efficient system of material handling are: a) Reduce handling to a minimum: As far as possible, materials should always move towards completion, over the shortest distance without back-tracking. A large amount of handling can be eliminated by planning the location of operations so that one operation finishes right where the next begins. The flow of product should receive top priority in planning of layout. b) Avoid re-handling: It may not be possible to eliminate re-handling completely. Nevertheless, re-handling is a wasteful and costly operation. Re-handling can be reduced by (i) not keeping anything on floor, (ii) avoiding transfers from floor to container or vice versa or from container to container, and (iii) avoiding making of materials. c) Combine handling with other operations: Many times, handling may be made a productive activity by combining with other operations, such as production, inspection and storage. In process industries, materials undergo physical and chemical changes while in movement, handling devices may be used as live storage of materials may be sorted and inspected while they are being handled
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d) Ensure safety in handling: Safety is a key word in handling. A large percentage of industrial accidents are attributed to poor handling practices. Even costlier in terms of money is the damage to equipment and products due to improper handling methods. A good handling system should ensure safety to workers and materials. Manual handling of heavy objects, materials scattered on the floor or projecting into aisles are but a few causes of accidents. Keeping gangways and aisles clear is one of the primary precautions against accidents in handling. e) Handle materials in unit loads: It is easier and quicker to move a number of materials at a unit rather than piece by piece. Modern material handling devices are designed to take advantage of unutilized loads. f) Use gravity where possible and mechanical means, if necessary: The simplest and cheapest way to handle materials is by using gravity. Often chutes and inclined boards can be conveniently used to transport materials quickly to the point of use without much investment on costly handling equipment. Where it is not possible to use gravity for various practical reasons, some mechanical means should be considered. Lifting and carrying of heavy materials mechanically saves time and reduces fatigue of workers.

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OPERATIOS MANAGEMENT-MATERIAL HANDLING


g) Select proper handling equipment: There are as many types of handling equipment available today as the number of materials to be handled. And any single equipment may not solve all handling problems. It is therefore necessary to choose the equipment suitable for the job under consideration. The equipment selection needs to be done carefully so that there is an efficient coordination of all handling, resulting in overall economy. Use of standardized equipment facilitates maintenance and repair. Another important factor in the selection of equipment is flexibility. Industrial activity is subject to constant changes and handling equipment should provide for this change. In other words, the equipment selected should be capable of a variety of uses and applications. h) Reduce terminal time of equipment: The advantage of mechanical and power equipment would be lost of they are made to wait during loading and unloading which may take considerable amount of time. By reducing this waiting time the handling equipment would be released for more productive work. There are various mechanical devices like trailers, tipping arrangements, cranes and hoist arrangements, to quicker loading and unloading operations

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i) Buy equipment for overall savings: In selecting equipment, savings in overall handling cost must be the guiding principle rather than the first cost of equipment. Arriving at the handling cost is a difficult problem but a fairly accurate estimate can be obtained by determining the handling elements and applying work measurement. In India, labour is still comparatively less costly and a longer period may have to be allowed for amortizing the handling equipment. All direct and indirect savings are to be taken into consideration while deciding on handling equipment. j) Use labour consistent with handling jobs: Manual handling could be done by unskilled labour, whereas mechanical handling may require semi-skilled or skilled workers. Proper allocation of skills helps in overall economy. As far as possible, direct production operators should not be used for handling operations. It is preferable to have a separate gang of material handlers to ensure proper utilization of production workers. k) Train workers and maintain equipment: Careful operation and proper upkeep are essential for getting the maximum out of the handling equipment. Careful selection and training of employees in principles, operation and safety rules and planned maintenance of equipment are worthwhile investments in the long run.
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 Material Handling Equipment: A pre-requisite to the design of a material handling system is a knowledge of the different kinds and types of material handling equipment that are available. Although there are hundreds of different handling equipment, all can be placed in three major categories.  Conveyors: The first major class of material handling equipment consists of conveyors. A conveyor is any device which moves material in either a vertical or horizontal directions between two fixed points, and this movement can take place either continuously or intermittently. One of the distinct characteristics of conveyors is that they create a relatively fixed route. Consequently, they are employed primarily in continuous manufacturing in which materials leaving one work station invariably go to some other specific work station in the production line. Therefore, it is possible to connect two such work stations by material handling equipment which is capable of moving materials only between two fixed points. In intermittent manufacturing, however, materials leaving one work station may go to any number of other work stations. Obviously, it would not be feasible to set up a network of conveyors which would provide all the possible route which materials may have to follow.

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A second characteristic of conveyors is that, unless they are of the portable type, they occupy space continuously. As a result, they must be installed in locations in which they will not interfere with the flow of other traffic. For example, if two work stations are located on opposite sides of an aisle which is used as a path of travel by men and trucks, a floor mounted conveyor could not be used to link these two work stations. Therefore, unless cross traffic can be bypassed, no serious consideration would be given to the use of conveyors. In so far as listing of different types of conveyors is concerned, the ones most frequently encountered are the following: Gravity Conveyor: As the name implies, gravity conveyors rely on nature for their driving force. Roller, wheel and chute conveyors call in this category. They are used primarily to move materials and are a relatively inexpensive type of conveyor as a rule, although for some applications, such as in moving grain, they can be quite expensive. Compared with other types, gravity conveyors are highly flexible and transportable and are well suited to variable paths. Movement is restricted, however, to route that involves some degree of vertical fall.

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Endless chain conveyors: These conveyors are usually driven by an electric motor and, as a consequence, are usually more expensive than gravity conveyors. They have several important advantages, however. These conveyors can move materials up as well as down, and the progress of the materials can be closely controlled. In addition, special carrying devices and containers can be attached to the chain. Frequently, production tasks such as dip painting, cleaning and washing may be performed as the conveyor moves. Finally, by varying the speed of the conveyor at different points, or by building loops into it, work-in-process inventory may be stored between operating stages. Belt conveyors: Belt conveyors are also driven by electric motors. These belts are usually made of some flexible material such as rubber. However, special belts are used in many industries. In the baking industry, for example, Tefloncoated metal is utilized to prevent sticking. The belt passes over rollers, which normally create a trough in the centre of the belt where the materials are concentrated. Conveyors of this sort are used mainly for transporting bulky material. Baggage is moved from the ground to the baggage compartments of airplanes and shipped by conveyor belts. They are also used to move ores from the min face to work areas. Stock brokerage firms and insurance companies even use them to route papers to various parts of their buildings. When work is to be performed, however, the materials must be taken from the belt and later replaced when the work is completed.
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OPERATIONS MANAGEMENT-MATERIAL HANDLING


Other conveyor equipment: Pipelines are often employed for moving liquids and gases such as gasoline and natural gas. Pneumatic tubes are used in some firms for rapid dissemination of internal communications. Screw conveyors have been successfully used to lift materials in both grain elevators and food-processing industry to move delicate foods in steady streams without damage.  Industrial trucks: Industrial trucks which represent the second category of material handling equipment, are vehicles powered by hand, fuel or electricity, which are capable of transporting materials horizontally between any two points. As opposed to a conveyor, a truck is able to more from one location to any other location so long as suitable traveling surface is available and its path of travel is not obstructed. For this reason, the prevalent method of handling material in a firm engaged in intermittent manufacturing is by means of trucks. The variable path of travel they are able to follow permits them to transport materials from one work station to any of a number of other work stations at which a subsequent operation is scheduled to be performed. A second desirable feature of trucks is that they occupy a given amount of space intermittently. This means that a certain amount of space in a given location is required to house a truck for only as long as the truck is in that location. As soon as the vehicle is moved, the space is free for other uses.

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As in the case of conveyors, there are many types of trucks, and each of these can be equipped with a variety of attachments. But the most important ones are as follows: Hand operated vehicles, tractors, platform trucks, forklift trucks, straddle carriers. When the loads are not too heavy and the hauls are short, manual equipment may be used. However, when the load size and weight and the distances to be traveled are great, powered equipment is used. Today, most industrial trucks are powered. They are generally equipped with forks or platforms that can be raised or lowered to facilitate the movement and storage of materials, and for this reason the loads are generally placed on pallets or skids.  Cranes and hoists: The third classification of material handling equipment consists of cranes and hoists. This equipment is able to move materials vertically and laterally in any area of limited length, width and height. It is used primarily when material must be lifted prior to being moved from one point to another. These points may represent different work stations or different locations at a single work station. For example, if a part is large or heavy, the operator may find it necessary to use a hoist to aid him in loading or unloading the machine. Subsequently, a crane may be used to move the part to another work-station.

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One of the advantages of cranes and hoists is that they are able to transport objects through the overhead space in the plant. Consequently, space is utilized, which would otherwise be unused, and floor space is freed for other uses. To illustrate, it might be possible to move a large heavy casting by means of a truck from one work-station to another. However, this would create a need for wide aisles at appropriate locations in the plant. If a floor space is at a premium, a more desirable alternative would be to transport the item through the air by means of a crane which would either eliminate the need for certain aisles or, at least, permit the use of aisles which may be required for the movement of smaller objects. But there are cases in which cranes and hoists are used, not because they free floor space but because they are the best available means of positioning material in a particular location. However, when considering cranes and hoists, it is important to keep in mind that any one unit of this equipment is capable of serving on a limited area.The size and shape of this area will vary with the kind of crane or hoist being used. Nevertheless, the equipment is somewhat more flexible in this respect than are conveyors, but not a flexible as are industrial trucks. Also, it will be found that cranes and hoists are as likely to be used intermittently as in continuous production. Again, there are many types of equipment which are placed in the crane and hoist category. However, the most common ones are the following: overhead bridge cranes, gantry cranes, jib cranes, elevators, lifts, chain hoists, air hoists, electric hoists.

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Overhead bridge crane are commonly employed in factories where large, heavy pieces of equipment such as electrical transformers, generators and power regulators are manufactured. These cranes ride on parallel overhead rails and are usually designed so that they can service any place in the work area of the plant. Another common type of crane, which is designed for outside work, is the gantry crane. It moves in limited areas on wheels, providing its own superstructure, and is chiefly used for such tasks on moving lumber and loading and unloading in railroad freight yards. Large cranes of this sort must be disassembled if they are to be moved from one location to another. This is their main limitation. Elevators and lifts are used to raise everything from materials to workers. Since moving materials on this type of equipment is quite costly, the modern trend is to construct one storey plants, thus eliminating the need to raise and lower material between floors.

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Productivity is a measure of how much input is required to produce a given output, i.e., it is the ratio of output to input. Factors affecting productivity  Technology employed.  Tools and raw materials used.  Organization structure.  Planning and scheduling of work.  Plant layout.  Innovations.  Personnel policies.  Work environment.  Materials management.  Skills of the workforce.  Health, attitude towards workers, staff.  Continuous training to the workers and staff.  Proper maintenance of machines.  Management Union relationship.  Morale of the employees.  Discipline.  Transport and canteen facilities.

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 Techniques to improve productivity Better planning and training of employees. Use of time and motion studies to study and improve work performance. Better transportation and material handling system. Providing work incentives and other benefits to workers. Involvement of workers in decision-making. Improvement in technology of production process. Simplification, standardization and specialization techniques like PERT, CPM. Better and efficient utilization of resources. Use of linear programming and other quantitative techniques. ABC analysis to identify more important items and then apply inventory control to reduce capital investments.
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OPERATIONS MANAGEMENT-PRODUCTIVITY
Measurement of productivity 1) Labour productivity = amount of output amount of labour 2) Capital productivity = sales turnover capital employed 3) Profit productivity = profit investment

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OPERATIONS MANAGEMENT-BASICS OF JOB SCHEDULING


Detailed day-to-day planning of operations is called job scheduling. It deals with questions such as:  Which work centers will do which job?  When should an operation/job be started? When should it end?  On which equipment should it be done, and by whom?  What is the sequence in which jobs/operations need to be handled in a facility or on an equipment? The job-shop type of production system is more concerned with day-to-day planning. There would be a variety of jobs. Each job has a variety of operations to be performed. The variety of jobs and operations generate a multiplicity of semi-finished items which may have to wait for further operations to be done on them. When hundreds or thousands of such variations in operations or-materials are to be handled, a systematic detailed daily plan is called for.

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Planning and scheduling in Industry
Production planning/Master scheduling Capacity status Scheduling constraints Schedule performance Quantities, due dates Capacity planning/Material requirement planning Shoporders,release dates Scheduling and rescheduling Schedule Dispatching Shop status Shop floor management Job loading Shop floor 114 Data collection Orders, demand

OPERATIONS MANAGEMENT-BENIFITS OF JOB SCHEDULING


A production schedule can determine whether delivery promises can be met and identify time periods available for preventive maintenance. A production schedule gives shop floor personnel an explicit statement of what should be done so that supervisors and managers can measure the performance. Minimize WIP inventory. Minimize average flow time through the system. Maximize machine and/or worker utilization. Minimize setup times. A production schedule can identify resource conflicts, control the release the jobs to the shop, and ensure that required raw materials are ordered on time. Better coordination to increase productivity and minimizing operating cost.
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OPERATIONS MANAGEMENT-BASICS OF JOB SCHEDULING


Shop loading can be done using simple charts as shown below: Facility /Work Centre Time available (capacity 1 2 3 4

90 Job No: 10 11 12 13 14 15 Hours Required Hours Available Hours Required Hours Available Hours Required Hours Available Hours Required Hours Available Hours Required Hours Available Hours Required Hours Available 9 81 11 70 8 62 4 58 10 48 2 46

45 14 31 9 22 5 17 3 14 7 7 2 5

135 4 131 19 112 11 101 5 96 6 90 5 85

45 10 35 7 28 7 21 5 16 9 7 2 5 116

OPERATIONS MANAGEMENT-BASICS OF ERP


Enterprise Resource Planning systems (ERPs) integrate (or attempt to integrate) all data and processes of an organization into an unified system. ERP systems typically attempt to cover all basic functions of an organization, regardless of the organizations business or charter. Businesses, non- profit organizations, nongovernmental organizations, governments, and other large entities utilize ERP systems. Technically, a software package that provides both payroll and accounting functions would be considered an ERP software package. However, the term is typically reserved for larger, more broadly based applications. The introduction of an ERP system to replace two or more independent applications eliminates the need for external interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance to easier and/or greater reporting capabilities( as all data is typically kept in one database).
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OPERATIONS MANAGEMENT-BASICS OF ERP


Examples of modules in an ERP which formerly would have been stand-alone applications include: Manufacturing, Supply Chain,Financials,Customer Relationship Management (CRM), Human Resources, Warehouse Management and Decision Support System. Today ERP systems typically handle the manufacturing, logistics,distribution,inventory,shipping,invoicing, and accounting for a company. ERP software can aid in the control of many business activities, like sales,marketing,delivery,billing,production,inventory management, quality management, and human resource management.

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OPERATIONS MANAGEMENT-BASICS OF ERP Advantages


In the absence of an ERP system, a large manufacturer may find itself with many software applications that do not talk to each other and do not effectively interface. Tasks that need to interface with one another may involve: Design engineering (how to best make the product). Order tracking from acceptance to fulfillment. The revenue cycle from invoice through cash receipt. Managing interdependencies of complex bill of materials. Tracking the 3-way match between the purchase orders (what was ordered), Inventory receipts (what arrived), and Costing (what the vendor invoiced). Accounting for all these tasks, tracking the revenue, cost and profit at regular intervals.
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OPERATIONS MANAGEMENT-BASICS OF ERP Disadvantages


ERP system is often operated by personnel with inadequate education in ERP in general. Customization of ERP software is limited. Reengineering of business processes to fit the industry standard prescribed by the ERP system may lead to loss of competitive advantage. ERP systems can be very expensive to install. ERPs are often so rigid and too difficult to adapt to the specific workflow and business processes of some companies. Systems can be difficult to use. Once a system is established, switching cost are very high. Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software. The system may be over-engineered relative to the actual needs of the customer.
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OPERATIONS MANAGEMENT-BASICS OF PROJECT MANAGEMENT


A Project may be defined as a series of related jobs usually directed towards some major output and requiring a significant period of time to perform. Project management can be defined as planning, directing and controlling resources (people, equipment, material) to meet the technical, cost and time constraints of the project. A project plan can be considered to have five key characteristics that have to be managed: Scope: defines what will be covered in a project. Resource: what can be used to meet the scope. Time: what tasks are to be undertaken and when. Quality: the spread or deviation allowed from a desired standard. Risk: defines in advance what may happen to drive the plan off course, and what will be done to recover the situation. The sad thing about plans is you cannot have everything immediately. any people plan using planning software packages, without realizing the tradeoffs that must be made. They assume that if they write the plan down, reality will follow their wishes. Nothing is further from the truth. The point of plan is to balance: The scope, and quality constraint against, The time and resource constraint, While minimizing the risks. 121

OPERATIONS MANAGEMENT-METHOD STUDY


Method Study and Work Measurement are the two basic techniques of work study. While Method Study aims to improve the existing methods of operations and procedures, work measurement helps to assess the human effectiveness. Though these two are distinctly separate techniques, they are very much interdependent. The application of both these techniques in adequate proportions based on the nature and type of problems would result in maximum benefits to the organisation. Method Study is essentially concerned with finding better ways of doing work. It is a technique of cost reduction. The philosophy of Method Study is, there is always a better way and the tools of Method Study are designed to systematically arrive at this better way of doing a job. Method Study can be applied to almost all types of work, whether it be a factory, electrical or any other type of activity. The scope of Method Study is not restricted to manufacturing industries alone, but extends to all other spheres. Methods improvement has been very successfully adopted in banks, hospitals, offices and retailing, in addition to defence, agriculture and all types of industries. There are various techniques which are suitable for tackling Method Study problems on all scales and for all types of work. There is no limit to the types of work which can be profitably studied. Another important aspect of Method Study is that often, with limited capital expenditure, it would be possible to obtain considerable economies in the use of resources and achieve large monetary savings.
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OPERATIONS MANAGEMENT-METHOD STUDY


Method Study is the systematic recording and critical examination of existing and proposed ways of doing work, as a means of developing and applying easier and more effective methods and reducing costs. (Definition adopted in the B.S.Glossary of terms in Work Study.)  OBJECTIVES The objectives of Method Study are i) Improve basic processes. ii) Improve the design of plant and equipment. iii) Improve factory, office and work place layouts and handling of materials. iv) Improve the use of material, plant, equipment and power. v) Improve the working procedures. vi) Improve the working environment. vii) Improve quality
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OPERATIONS MANAGEMENT-METHOD STUDY


 METHOD STUDY PROCEDURE The analysis of problems for Method Study consists of an ordered and systematic procedure. This procedure involves six basic steps as follows: SELECT the work to be studied RECORD all relevant facts EXAMINE these facts critically DEVELOP the most effective, economical and practical method INSTALL the method as standard practice MAINTAIN the standard practice by regular checks The above procedure is a logical one and is easy to follow in any type of work. Each of the steps is equally important and clearly defined. Faithful adherence to the basic procedure would result in achieving maximum results.

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Selection of work for Method Study is the first step. The field of choice for Method Study is quite wide and every job is amenable to improvement. But the selection of the job should be based on scope and need for improvement, resulting economy, priority, objective and similar other considerations. Once the job has been selected, the next step is to record all the pertinent facts relating to the present or proposed method. There are a variety of recording techniques suitable for different types of situations. A proper recording is necessary since it forms the basis for further investigation. Critical examination is the crux of Method Study. All these recorded facts are subjected to a thorough examination. Nothing is taken for granted and each activity is challenged with a view to get as many alternatives and improved methods as possible. All the alternative proposals thus obtained are evaluated and the most practical and economical method is developed. Considerable planning and preparation is necessary before the proposed method is installed. Full cooperation and participation from the Management, Supervisors and workers is essential for the implementation of the new method. A number of difficulties may crop up when the proposed method is under operation. There is also a tendency on the people to get back to the old methods with the slightest of excuses. Proper maintenance through routine and regular checks is an important factor in the Method Study procedure.

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OPERATIONS MANAGEMENT-QUALITY CONTROL & INSPECTION


It is important that production process meets the quantity goals established in the production schedule, but it is of equal importance that the output meets the quality specifications as well. To manufacture products of desired quality, control over their quality must be exercised throughout the production and associated functions, including production planning, procurement and distribution. Quality considerations are present in every aspect of the production cycle from the purchase of raw material to the customer. Monitoring all the quality level is usually assigned to a staff group that reports to the top management. Organizationally, this group is commonly referred to as Quality Control. The authority that quality control exercises varies according to the relative defect of controlling quality and to management assessment of the consequences of circulating the defective products. Since quality assurance enters into so many linkages within the production system, more support is needed from all levels of management than for most of the functions. No single department or staff can assure quality by itself. It takes cooperation of line workers, the supervisors and related staff organization. Quality assurance is a skill. Like other skills, if it is not continuously exercised, it will deteriorate. Also, it has been said that quality is everybodys concern. But a job that belongs to everybody can easily become a job that nobody does.

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The overall value of the quality organisation should be judged by the ratio of cost incurred to cost saved, and not by the glamour of its own advertisements. Cost of vigilance versus cost of error: In most production situations, the cost of vigilance and error varies inversely. Greater vigilance may take the form of extra time taken by individual worker, close supervision, additional test for products and inspection of all or portion of the output. The cost of error includes re-work, rejects and customer dissatisfaction. Somewhere between the extremes of no vigilance and extra vigilance is a point where control over the magnitude of errors produces a minimum total cost. Inspection versus quality control: Inspection is an act of comparing a product with accepted specifications or other recognized standards. The purpose of this inspection is to know where the product conforms to or does not conform to the specified quality limits expressed in the specifications. Units of the product found to conform are accepted; others are rejected. Inspection is essentially a post-mortem operation performed on the product after it has been completely processed. As a screen operation, the purpose of inspection is to separate products into two classes: accepted and not accepted. Inspection operation itself adds nothing to the value of the product. Hence, the inspection operation itself does not improve product quality and neither does it reduce rejections, since it involves no corrective action on the operation.
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OPERATIONS MANAGEMENT-QUALITY CONTROL & INSPECTION


The problem is, how to guarantee a product of high quality to the customer and not burden the manufacturer with the loss of high percentage of rejections entailed by the inspection screening operation. The answer to this lies in quality control. Quality control is a system of inspection, analysis and action applied to a manufacturing process so that by inspecting a small portion of the product currently produced, an analysis of its quality can be made to determine what action is required on the operation to achieve and maintain the desired level of quality. In its broader application, quality control is a preventive tool and is used to minimize rejections to the end that all products and processes will meet the specified quality limits. When and where and how to inspect: Where to inspect depends largely on when the inspection is scheduled. The location of most inspection stations is at the site of production the receiving dock for incoming shipments, the assembly area, the construction site, distribution points, etc. In a fixed-position layout, inspectors must come to the product to check quality at various stages of development. In product layouts, particularly mechanized production lines, products come to the inspectors at special stations built into the line. Receiving floor inspectors examine output from the individual work stations associated with a process layout.

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Deciding where to inspect during a production process is simply a matter of common sense when it will do the most good. Logical choices are the beginning and end of the production process. Raw material and component inputs should be inspected to see whether they meet expected standards. Acceptance of substandard inputs obviously jeopardizes outgoing quality and may damage equipment or disturb process continuity. Outgoing products are examined to protect the producer from customer discontent or buyer rejection. During the production process, inspection is scheduled in front of operations that are costly, irreversible or masking. Considerable expense is avoided by eliminating defective units before they undergo a costly phase of their development or before they pass through a process that cannot be undone, such as welding, pouring concrete, or mixing. Chemical operations such as painting and encapsulating may hide defects easily detectable before the masking operation. From the foregoing, it may appear that products are continually under inspection. Actually, workers continually check the quality of their own or a machines output, but there are just a few distinct inspection stations. Constant formal surveillance would not only increase cost, it would also create an uncomfortable atmosphere for workers. The timing and location of inspection points are key features in the design of any testing programme.

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How to inspect: The two basic types of inspection are called variables and attribute. When precise measurements are made of dimensions, weight or other critical characteristics capable of expression on a continuous scale, the products are being subjected to variables inspection. The alternative to exact measurements is to set limits within which the product is judged acceptable or defective. A go-no-go rating results from an attribute inspection. Since a good or bad grading normally requires less time and skill to make and uses lowercost equipment than exact measurements, attribute inspection is usually less expensive than variables inspection. It is generally assumed that the variables measured have a normal distribution. Precise measurements require closely calibrated devices, rulers, micrometers, scales, meters, etc., capable of measuring the products fineness standard. Devices to check attributes are designed to provide a quick verdict of acceptability go-no-go gauges, snap gauges, templates, etc. Statistical sampling techniques frequently reduce inspection cost. The use of samples to replace 100% inspection is usually appropriate for machine output where units are not so likely to vary as are hand-crafted products. High production quantities and expensive inspections also suggest sampling. Then there is destructive testing (the performance test destroys the unit tested) which absolutely rules out 100% inspection.

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Acceptance sampling: The purpose of acceptance sampling is to recommend a specific action; it is not an attempt to estimate quality or to control quality directly. The basic action recommended is to accept or reject the items represented by the sample. The sampling plan specifies the sample size and the associated number of defectives that cannot be accepted without rejecting the lot from which the sample was taken. In its simplest form, the quality of a certain number of products of the same type is measured by drawing a random sample from the lot. The sample is tested, on which basis the entire lot is either accepted or rejected on the basis of the quality of the sample. The rejected lots may then be inspected 100%. In sampling, accepting a bad lot is termed as consumers risk whereas rejecting a lot with fewer defectives than the standard, is termed as producers risk. Limitations of acceptance sampling: Since the conclusion is based on a sample, there is always some likelihood / risk of making a wrong inference about the quality of the lot. The success of the scheme depends on the randomness of the samples, quality characteristics to be tested, lot size, acceptance criteria, etc.

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 Various sampling plans: Single sampling plan. Double sampling plan. Sequential sampling plan.  Statistical Quality Control Statistical Quality Control is applied by taking samples and drawing conclusions by means of some mathematical analysis. It has already been explained in a previous section that variation in the quality of the product is an inherent characteristic of a manufacturing system. Irrespective of all possible precautions and quality measures there are always a large number of random disturbances responsible for deviations in the quality of the product from the set standards. The sources of these disturbances are known as chance causes. For example, movement of the machine due to passing traffic, sudden changes in temperature etc. The presence of these causes in the system is due to a multitude of reasons which are difficult to identify and uneconomical to eliminate. These can neither be discerned or removed. There is very little that we can do about these.
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There may be other sources of variations in a system which further cause the product to deviate from set standards. These individual causes can be identified and eliminated economically. The magnitude of variability due to these causes varies with the conditions of the production process, nature of the raw material, behavior of operations etc. These causes are known as assignable causes. The reasons for the presence of assignable causes can be (i) differences among workers performance (ii) differences among machines (iii) variation in material and (iv) variation due to the interaction of any two or all the three factors e.g. tool wear, errors in setting poor machine maintenance etc. The chance and assignable causes combine together to lower the quality of the product. Any item which is not in accordance with the quality specifications is known as defective item and is liable to be rejected by producer and consumer. The object of quality control is to minimize the proportion of defectives in the given lot. Inspection is the method of locating defective items by examining these against specifications and statistical quality control is to ascertain whether the variation in the quality of the product is due to chance causes or due to assignable causes. If the process is found to be in statistical control then it indicates that the variation in the quality is due to chance causes only; otherwise presence of assignable
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 Benefits of Statistical Quality Control: The use of statistical quality control ensures rapid and efficient inspection at a minimum cost. It minimizes waste by identifying the causes of excessive variability in the quality of product. SQC exerts more effective pressure for quality improvement than 100% inspection.  Control Charts : A Control Chart is a graphical aid for depiction of quality variation in output from a production process. As opposed to the aim of acceptance sampling (to reject or accept products already produced), control charts aid in the production of a better product. The charts have three main applications: To determine the actual capability of production processes. To guide modification to improve the output of the processes. To monitor the output wherein the current status of the output quality provides an early warning of deviations from the quality goals.

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OPERATIONS MANAGEMENT-BASICS OF ISO 9000


ISO is derived from the Greek work isos, meaning equal. ISO is a worldwide federation of national standard bodies from 100 countries. ISO 9000 is a series of standards that help organisations define and maintain a quality system. ISO is not a quality assurance system. ISO 9000 stands for systems standardization and registration rather than product standardization and registration. The standards merely stipulate where organizations need documentation to validate processes and approaches but never dictates how much they require. The ISO 9000 standards basically have three requirements:  The company must document quality system and business process in detail  The company must make sure each employee understands and follows the guidelines put forth by the documentation.  Documented quality system must be constantly monitored through internal and external audits, and changed or updated when necessary.
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OPERATIONS MANAGEMENT-BASICS OF ISO 9000

Benefits of ISO9000 registration Higher perceived quality Improved customer satisfaction Reduced customer quality audits Better documentation Greater quality awareness Positive cultural change Increased efficiency and productivity Competitive edge
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OPERATIONS MANAGEMENT-BASICS OF ISO 9000

Within the ISO 9000 family are specialized standards that include ISO9001,9002,9003. Below is a description of each: 9001 applies to organizations doing design development, production, testing and servicing of product. 9002 applies to organizations not having design responsibility. 9003 applies only to testing of a product.
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OPERATIONS MANAGEMENT-BASICS OF ISO 9000 ISO


Does not impose additional requirements on your work processes. Does not require standardizing our work to confirm to another quality standard. Does requires us to document how we do our work and then follow our own instructions. All processes will be managed in accordance with the following ISO principles: Does not dictate how you should perform your work. Say what you do; Do what you say; Prove it!
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OPERATIONS MANAGEMENT-BASICS OF ISO 14001


ISO 14001 latest version is 2004. It is a Environmental Management System addressing environmental issues. It is not mandatory and not customer driven. Organization has to decide whether it wants to self certify or get its system certified by an authorized body for authenticity. The company having ISO 14001 should define objectives and targets which are measurable and which can be monitored. The company will maintain manual as per ISO guidelines and should contain scope (dept or complete office), procedures (how to monitor, measures which will be take up), emergency plan, training to employees, roles and responsibilities of HODs, legal requirements, etc. In the HSE policy the company should make commitment towards preventing pollution, injury and ill-health in their operations by proactively addressing HSE concerns in their activities and services and make provision for continuous improvements..

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OPERATIONS MANAGEMENT-JOB SEQUENCING


Job sequencing is concerned with appropriate selection of jobs to be done on a finite number of service facilities (like machines) in some well-defined technological order so as to optimize total elapsed time or overall cost.

Task

A B C D E F G H I

Machine 2 5 4 9 6 8 7 5 4 I Machine 6 8 7 4 3 9 3 8 11 2
Determine the optimum sequence that minimizes the total elapsed time required to complete the tasks on two machines. 140

OPERATIONS MANAGEMENT-JOB SEQUENCING


In a machine shop 4 different products are being manufactured, each requiring time on the two machines A and B given below: Product Time in minutes on Machine A 35 Time in minutes on Machine B 20

45

30

15

50

20

35

Determine the optimum sequence to minimize the total manufacturing time for all the products. Also find the idle time on both the machines. 141

OPERATIONS MANAGEMENT-JOB SEQUENCING We have five jobs each of which must go through three machines A, B and C in the order ABC. Processing time in hours is as given below:
Job 1 2 3 4 5 A B 16 10 20 12 12 4 14 6 22 8 C 8 18 16 12 10

Determine a sequence for the five jobs that will minimize the total elapsed time. Find also the idle time of the machines A, B and C.
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OPERATIONS MANAGEMENT-JOB SEQUENCING

Find an optimum sequence for the following sequencing problem of four jobs and five machines. The processing time in hours is given below:
Job 1 2 3 4 A 7 6 5 8 B 5 6 4 3 C 2 4 5 3 D 3 5 6 2 E 9 10 8 6

Also find total elapsed time.


143

OPERATIONS MANAGEMENT-VALUE ENGINEERING AND ANALYSIS


Value Engineering (VE), also known as a systematic and function based approach to improve the value of products, projects, or processes. VE involves a team of people following a structured process. The process helps team members communicate across boundaries, understand different perspectives, innovate, and analyze. VE improves value by focusing on delivering the product or service at the best price by incorporating those value characteristics deemed most important by the customer. VE is a tool that will improve your ability to manage projects, solve problems, innovate, and communicate. Cost savings, risk reduction ,schedule improvements, improved designs and better collaboration are some of the outcomes of VE studies.
144

OPERATIONS MANAGEMENT-VALUE ENGINEERING AND ANALYSIS


How does VE work? VE follows a structured thought process to evaluate options. Every VE session goes through a number of steps:
1.Gather information . What is being done now? 2.Measure Performance .How will the alternatives be measured? 3.Analyze Functions .What must be done? .What does it cost? 4.Generate Ideas (Brainstorming) .What else will do the job? 5..Evaluate and Rank Ideas .Which ideas are the best? 6.Develop and Expand Ideas .What are the impacts? .What is the cost? .What is the performance? 7.Presernt Ideas .Sell Alternatives

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