Prof.

(Dr) Satish Ailawadi

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 Introduction to Operations
Management
Definition
• Production and operations management
concerns itself with the conversion of inputs
into outputs, using physical resources, so as to
provide the desired utility to the customers
while meeting the organizational objectives of
effectiveness, efficiency and adaptability.
• The desired utility could be of form, place,
possession or state or a combination thereof.
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• It distinguishes itself from other functions such as
personnel or marketing by its primary concern for
‘conversion by using physical resources’
• There may be number of situations in either marketing
or personnel or other functions which can be classified
under production and operations management.
• A Few Examples:
(a) The physical distribution of products to the customers.
(b) Collection of marketing information.
(c) Recruitment and selection process.
(d) Paper flow and conversion of accounting information
in an accounts office.
(e) Paper flow and conversion of data into information
usable by the judge in a court of law.
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Cases Input Physical Output Type of Type of utility
resources used Input/Output provided to
the customer
Inorganic Ores Chemical plant Inorganic Physical input Form
chemicals and equipment, chemical and physical
production other chemicals, output.
labour etc.
Outpatient Sick patients Doctors, nurses, Healthier Physical input State
ward of a equipment and patients and physical
general other facilities output.
hospital
Petrol pump Petrol in Operators, Petrol in Physical input Possession
possession of errand boys, possession of and physical
the petrol equipment etc. the car output.
pump owner owner
Taxi Service Customer at Driver, taxi Customer at Physical input Place
the railway itself, petrol his residence and physical
station output.

Income tax Information Officers and Raid Non-physical State and

office other staff, office input and possession.
facility physical output
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• However, a clear demarcation may not be always
possible between operations systems that provide
‘physical goods’ and those that provide ‘service’
• Examples:
(a) ‘Food in Southern Railways is quite good’ however
food is not the main business of Railways., or
(b) ‘Goodwill Refrigerator Company’ not only makes
good refrigerators, but also provides good ‘after sales
service’.
• In today's environments, the concept of ‘physical
goods production’ and ‘service provision’ are not
mutually exclusive.
• In fact, quite often, these are mixed, one being more
predominant than the other.
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 A Conceptual Model of Operations System

Adjustment Monitor
Inputs needed output
•Labour Outputs
•Materials Conversion Goods and
•Equipment process Services
•Capital
•Management

Comparison
•Actual
v/s
Planned
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 Objectives of Operations
Management System
(a) Customer satisfaction
(b) Effectiveness
(c) Efficiency
- Efficiency implies optimal utilization of
resource inputs
- Effectiveness has to be viewed in terms of
short and long term horizons.
- Effectiveness would depend upon the
flexibility or adaptability of the system to
changed situation. 1 7
Long-term horizon Intermediate term horizon Short Time horizon
Product design Methods selection Production scheduling

Technology employed Quality control and Materials allocation and

inspection implementation handling
Site selection Plant and machine loading Scheduling of manpower
decision
Plant and machinery Purchasing policy Breakdown maintenance
selection
Long lead time raw Purchase source selection, Progress monitoring and
material supplies development and change in priorities in
evaluation production scheduling
Process selection Make or buy decisions Temporary manpower

Warehouse arrangements Transport arrangements Attention towards problem

areas in labour, materials
and machines.
Setting up of work Preventive maintenance
standards scheduling
Effluent and waste disposal Shift working1 decisions 8
 Decision Areas in Operations
Management
1. Technology selection and management
2. Capacity management
3. Scheduling/ Timing/ Time allocation
4. System maintenance
 Technology Selection and Management
- Primarily pertains to long-term decision
- Important issue to be addressed in an age of
spectacular technological advances so as to ensure
organization’s preparedness in selecting an
appropriate technology. 1 9
- Has significant bearing on the management of
manpower, machinery, capacity, and materials .
- Closely linked with the capacity and system
maintenance.
Capacity Management
- Important for achieving organizational
objectives of efficiency, customer service and
overall effectiveness.
- Lower than needed capacity results in non-
fulfillment of some of the customer services
while higher than necessary capacity results in
lowered utilization of resources i.e. lower
efficiency of the conversion
1
operations. 10
• There should be ‘flexibility’ built into the
capacity available.
• Flexibility would depend upon ‘technology’
decisions and nature of production/operations
systems.
• While some operations systems can be flexible
to some extent, some other have to use
inventories as the flexible joint between the
rigidities of the system.
• The degree of flexibility required depends upon
customers demand fluctuations.
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P
r
o Continuous Production/
d Operations
Flow flexibility
u
c type
t
Mass Production/
i
o production Operations
capacity
n type

V Batch
o type
l
u
m
Job-shop
e type
Output/ product variety
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• As the product variety increases, the systems of
production/ operations change.
• In a system characterized by large volume-low
variety, one can have capacities of machinery
and men which are inflexible due to repetitive
nature of activities involved.
• In a high variety and low volume demand
situation, the need is for a flexible
manufacturing system.

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• As the product variety increases, the systems of
production/ operations change.
• In a system characterized by large volume-low
variety, one can have capacities of machinery
and men which are inflexible due to repetitive
nature of activities involved.
• In a high variety and low volume demand
situation, the need is for a flexible
manufacturing system.

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Scheduling
• Deals with the time phasing of the capacities to meet
the demand as it keeps fluctuating.
• As the span of fluctuations in variety and volume gets
wider, the scheduling problems assume greater
importance.
• Thus, in job-shop i.e. tailor-made physical output or
service type operations systems, the scheduling
decisions would determine the customer delivery and
the productive use of the machinery.
• When time is viewed by customers as an important
attribute of output, the need for scheduling becomes
more important.
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• When a mass production of output is considered along
with a ‘quick response’ characteristics; a conventional
mass production assembly line needs to be modified to
bring in the ‘scheduling element’.
System Maintenance
• Refers to the safeguards in the system to ensure that
only desired outputs will be produced and the condition
of physical resources will be maintained normal.
• This area of operations management involves
technology selection and management.
• Quality checks on physical/ non-physical outputs of the
systems performance and the corrective action e.g.
repairs of an equipment would enhance the chances of
having a desired output.
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 Orientation of Operations
Management
• Traditionally, the focus of production/
operations management has been the product
and process producing the product.
• Hence, the emphasis has been towards
technology, capacity, scheduling and system
maintenance.
• Thus, the traditional view may be termed as
being ‘product-centric’.
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 Transition from Product-centric
to People-centric
• With the changes in the customers’ requirements, the
production and operations management is placing
increasing emphasis on relationships with people that
interact with the firm such as customers, employees and
suppliers or business associates.
• Supplier relationship is important for the company to
have its supplies of materials and services flowing in as
desired.
• Firms interact with its associates while taking these
‘supply’ decisions.
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 People-Centric View of
Operations Management
Target People Decision Type Affected Aspect

Employees HR decisions Quality and

productivity

Business Associates Supply decisions Supplies and capacity

Customers Timing decisions Production planning

and scheduling

All the above Spatial decisions Location of plants,

location of business
associates, Layouts
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• Quality and productivity of are intimately related
to the human input i.e. employees of the
company more than anything else.
• Another important human interaction of the firm
is with its customers.
• In addition to quality and productivity the
customer is interested in the timeliness of the
delivery. Thus, another area of decision is that of
‘timing’.
• Spatial decisions involve decisions regarding
locations and layouts.
• ‘Location’ relate to supply and timing while
‘Layout’ relate to timing
1 and productivity issues.
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 Operations Strategy
Long term/ short term decisions- A few
modifications
• Recent philosophy is that the technology is
subordinate to the customer as customer
requirements dictate the technology generation
and use.
• Capacity of the operations system is related to
the technology employed.
• Capacity is also dependent upon business
associates who provide capacity in terms of
outsourced products, supplies
1 and services. 21
• It is not the technology which is a long-term
decision but the company’s manpower and
suppliers.
• Product design is better fitted in the
intermediate term as the technology and design
keep changing or are required to be changed.
• Plant selection, manpower training and setting
up of work standards would be intermediate
term decisions.
• Outsourcing rather than ‘make or buy’ is a
long-term decision as it involves selecting
business associates who would be partners for
long time. 1 22
Components of the strategic management
(a) Defining the mission and objectives of the
organization.
(b) Scanning the environments (external and
internal)
(c) Deciding on an organizational strategy
appropriate to the strengths and weaknesses
after taking into account emerging
opportunities and possible threats to the
organization.
(d) Implementing the chosen strategy.
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After deciding upon the mission, objectives and the
target market segment , the options before the
company to choose in order to a have a competitive
advantage are:
(a) Meaningful differentiation and
(b) Cost leadership
 Meaningful differentiation
• Implies being different and superior in some aspect of
the business that has a value to the customer.
• For instance, a wider product range or functionally
superior product or a superior after-sales service.
• The underlying fundamental objective is to serve the
customer better through various
1 means. 24
• A superior product design should not be for design’s
sake as customers do not necessarily make a bee-line
for a better designed product.
• Differentiation is a strategy to win customers and to
keep retaining them for a long time.
• Therefore, it is imperative to keep retaining the
advantage of differentiation by continual improvement
in the specifically chosen area of differentiation.
• While the company differentiates itself from
competitors on one aspect, it should perform
adequately on the other aspects of service also.
• Concentrating exclusively on one aspect at the expense
of other aspects is just not done.
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 Flexibility – A Differentiation
Strategy
 Companies need to differentiate in terms of
flexibility of
(1) Product design
(2) Product range or product mix
(3) Volumes
(4) Quick deliveries
(5) Quick introduction of new product/ design
(6) Responding quickly to the changed needs of customer
or quickly attending to the problems of the customer.
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• Because the competitive conditions are
changing rapidly; a company has to be flexible
enough to respond quickly to the changed needs
of the customer.
• Flexibility involves being responsive,
responsible, reliable, accessible, communicative
and empathetic to the customer.
• Flexibility involves not only manufacturing and
supplies but also the design and development,
the project execution, the marketing and
servicing functions.
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Flexibility in manufacturing/ operations
- Flexibility in machines, process and manpower
to process the
• Altered designs
• The variety
• Small batch size
• Minimal wastage of time
• Desired quality
• Reduced process time, and
• Deliver on time through managing logistics.
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 Basis for Competition: Product is available when needed by the customer

Old Approach New Approach

Keep/increase buffer stocks of Reduction of operations lead
finished goods and other times, delivery times through
materials strategic alliances.
Invest in more machinery, hire Improvements in quality,
more people, get more materials producing right first time, self
and thus increase the production inspection and certification
capacity. thereby leading to elimination of
wastage of time and reduction in
operations/process time.
Improved machinery
maintenance, improved design of
products and processes, so that
expenditure due to breakdowns,
1 rejects and rework is avoided.29
The by-products are
Old Approach New Approach

Increased costs due to higher Improved reliability in terms of

inventories and higher deliveries.
investments
Stock outs due to overload of Reduced costs
some work centres.
Urgent orders increased in order Reduced product variability
to meet the stock outs
Increased complexity giving rise Improved flexibilities in terms
to further wastes and costs. of time, product-mix and
volumes.
Failure to meet customer’s Enhanced company/ brand
changing needs. 1
image. 30
 Cost Leadership
• Another strategic competitive option that a
company can choose is ‘cost leadership’ i.e.
offering the product/service at the lowest price in
the industry.
• The difference between the modern approach
and traditional approach to cost reduction shows
a wide difference in understanding of a
customer.

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 Basis for competition: Cost Leadership
Traditional Approach Modern Approach
Control on costs especially related to Eliminate only the non-value adding
direct labour activities

Reduction in budgetary allocations on Improve design thereby reducing costs

training, human resources. of inputs materials and costs of
processing and packaging.

Defer investment in machines, Reduce set up time and save on the

including the necessary replacements attendant costs.

Reduction in support activities Reduce the need to have inventories by

reducing lead times and uncertainties
through better management and
control.
Reduce inventories of raw materials, Use technology to simplify processes,
bought out items and other supplies procedures thereby reducing the
resultant
1 wastages. 32
The resultant effects are
Traditional Approach Modern Approach
Depletion of skills of the manpower. Lean and flexible operations

Reduction in the motivation of Better product/service quality

manpower.
Vendors feel alienated and increase in Enhanced responsiveness to customers
vendor related problems.
Higher wear and tear of machinery. Improved market performance

Delivery and quality taking back seat. Improved profits to plough back in
improved machines, training of
manpower.

Dissatisfied customers delay payments Better support to vendors and dealers

on one pretext or the other. 1 and hence better services to customers.
33
Manufacturing/ Operations strategies should
comprise of the customer oriented strategies of:
A. Improved responsiveness in terms of
• Minimizing time to respond.
• Accessibility through better locations, better
geographical proximity, improved logistics,
and better systems of communication.
• Wider product/service choices through flexible
operations/ manufacturing systems, reduced set
up times, better trained manpower, improved
product design.
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B. Reduced prices through
• Overall improvements in the production-
delivery value chain.
• Better designs of products/services.
C. Improved quality through
• Better skills, better knowledge, and better
attitudinal orientation of all production-and-
service providers.
• Improved technology
• Reduced complexity
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 Key Success Factors
Kenichi Ohmae has mentioned the following as
key success factors for effective implementation
of operations strategy.
• Product performance
• Technology leadership
• New product introduction.
• Access to key decision-makers.
• Delivery service
For a given industry, one or more of these
factors will be crucial.
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A few examples
• In a sunrise industry such as computers industry,
the key success factors will be technology
leadership and new product introduction.
• For a routine household product such as a tube-
light or bulb or a ceiling fan, the key factor is the
product performance.
• For an industrial product such as machine-tool,
the key factors are product performance,
delivery service and in some cases, new product
introduction.
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• For a company manufacturing and selling standard
agricultural pump sets in India, the key success factor
was the locally available village mechanic who was
found to be always consulted by the farmer in making
his choice of a pump set from amongst a group of
several competing brands providing almost the level of
performance.
• Similarly, in project marketing where complete/ partial
systems or large complex equipment is to be sold,
installed and commissioned, the buyer companies
generally go by the opinion of their technical
consultants.
• The village mechanic and the technical consultant are
the key influencers. 1 38
 Operations Function’s Role-A New
Concept
• Traditionally, operations function has been seen as
optimally utilizing the resources of men, machines,
materials and money while producing the required
output.
• The objective has been ensuring efficiency.
(a) Production costs should be low.
(b) Men and machines should be utilized fully.
(c) Materials wastage should be curtailed
• Thus, inventories are ordered and controlled
economically, production runs are scheduled,
maintenance programmes are arranged, work study
carried out, and physical1
layout and locations are
39
decided upon.
• Operation function needs to address the
following issues
1. Optimization for whom?
- Should optimization be limited to minimizing
costs and/or maximizing profits to the
company?
- Shouldn't the customer enter into the
calculations regarding the optimization?
2. Is ‘profits’ the prime objective or is it the
‘customer service’ that should be the primary
objective guiding the company?
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3. Resources do not comprise of machines and
materials.
• Technology and people are equally important.
- Technology relate to machines and materials as
its subsets.
- People are the ‘mother resource’ from which
technology and the competitiveness of the
organization originates.
4. Role of the operations management has
changed to provide a strategic direction and
leadership to people and
1
managing change. 41
• Operations function needs strategic support from
R&D function in improving process capabilities,
introduction of new/ modified technologies, or
coming up with better substitutes for inputs.
• For modified new products, it is necessary that
marketing function provides insight into the
customers’ requirements.
• Thus, marketing, operations and R&D functions
have to work in tandem.
5. Lean production strategy
- A manufacturing response to to the
organizational need for serving the customers
just in time. 1 42
6. Time-based competition- An organizational
strategy
- Leads to manufacturing strategy of building
flexibility and adaptability in the production
system.
Both the above strategies require to have
support of appropriate logistics and marketing
arrangement.

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 Product Design
• Mother of all operations processes in an
organization.
• The processes for manufacture, the planning of
production, the processes and the checks for
quality depend upon the nature of the product.
• Even the logistics or simple shipment of the
product depends upon the nature of the
products.
• In an organizational context, the design should
provide value to the customer,and return on
investment to the company.
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• A product’s design has a tremendous impact on
what materials and components would be used,
which suppliers will be included, what machines
or what type of processes will be used to
manufacture it, where it will be stored, how it
will be transported.
• Even marketing is impacted by the product
design e.g. a toothpaste is also designed to act as
a mouth freshener.
• Apparently, it may appear like a drawing or a
prototype of a physical product with specified
dimensions or characteristics.
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• In fact it is the conceptualization and culmination
of the thinking as to what the consumer would be
offered.
Product Design as a Strategic activity
Customer Service
Associated
Product services

Production

Product Design

Feedback Organizational Strategy

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For instance, a watch manufacturing company
starts making watches designed as jewellery.
• Results from the objective of catering to a
unique customer need.
• Organizational strategy to position differently
amongst the multitude of other watch-makers.
• An example of a company driven by a product
design to fulfill its objectives.
• Company would have to take special measures
in its production process, procurement, quality
and logistics strategies.
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 Product Design for
Organizational Competitiveness
 Cost Competitiveness
• A high proportion of a product’s cost is
determined at the design stage, for instance
(1) General Motors: 70 percent of the cost of
manufacturing is determined at the design
stage.
(2) Rolls Royce: Design determines 80 percent of
final production costs of 2000 components.
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• Considering the fixed and the variable costs of
the product, the following relationship holds
good.
(a) Total cost= (Variable cost x quantity ) + fixed
cost
(b) Unit cost= (variable cost + fixed cost)/ quantity
• Thus, if the product is not profitable because
the fixed cost is high, it would be possible to
make it up in volumes.
• As the fixed cost is divided over the number of
units, higher volumes of production should
result in lower per unit cost.
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• Components of variable cost of production are
dependent upon the design of the product.
(a) The kind of materials used.
(b) Number of components that go into the product.
(c) The required level of skills of the production
workers.
(d) The intensity of sophistication of the machinery and
automation that is required
(e) The amount of maintenance required that in turn
would depend upon the kind of machinery used and
wear-and-tear of the machinery.
(f) Kind and variety of materials used.
 A good design must take into cognizance of plant and
automation, labour and tooling.
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 A Good Design Effort
• A good design should minimize
- Materials cost
- Manufacturing cost
- Quality cost
- Operating cost for the customer.
- Maintenance cost for the customer.
- Depreciation cost for the customer, and
- Environment costs for the customer and or the
society. 1 51
 Competitiveness through quality
• A good product design contributes greatly to the
product’s quality.
• The various attributes of the product quality are
derived from a good product design., namely
1. Performance: How well the product functions.
2. Conformance: How well the product conforms to the
specifications or standards set for it.
3. Aesthetics: How attractive the product is.
4. Reliability: How well does the product maintain its
performance during a certain given period.
5. Durability: How long the product lasts in use.
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6. Serviceability: How easy is the product to
maintain.
7. Safety: How little is the risk to the users and
those in the vicinity of the users.
8. User friendliness: How easy is it to operate
and designed ergonomically.
9. Customizability: How easily can the product be
modified in case the customer requirements
were to change.
10. Environment-friendliness: How safe is the
product for the environment while it is being
used and when it is discarded after its use.
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 Competitiveness Based on Time
• One of the ways a product design helps a
company to gain advantage over its competitors
is reducing its reaction time to the market.
• When competing firms have products giving
similar service/functions to the customers, it is
important to reduce the time to manufacture the
product and thus reach the product to the
customers quickly.
• It is important to minimize the overall time for
product to enter the market.
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• The economic penalty for time delays is quite
severe for new products in a dynamic market.
• The important lead times to be considered are:
(a) Product development lead time, and
(b) Manufacturing lead time
 The Vicious Cycle of Product Development Delays
• Changes occurring in
(a) Business environment
(b) Target market
(c) Technology
(d) Overall competitive position of the firm.
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 Product Development Process
• Concept development
• Marketing/sales provide market brief
• Prototype drawing
• Prototype/cost approval.
• Product design
• Get production inputs
• Interact with suppliers.
• Detailed design of the product
• Build full-scale prototype
1 and test. 56
•Manufacturing approval.
•Pilot production.
•Design certification.
•Launch in the market.
•Design review.
Product design activities require much
interaction with production, marketing and
finance functions at several stages.

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• The manufacturing activities typically include.
(1) Defining the required process.
(2) Developing the cost estimates.
(3) Interacting with suppliers.
(4) Developing tools and equipment.
(5) Approving prototype.
(6) Trying out tools and installing equipments.
(7) Pilot production and verification
(8) Ironing out problems about suppliers
(9) Full scale production.
(10)Reviewing the process.
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• The marketing function will include following
activities
(1) Making the marketing brief to the product
design personnel.
(2) Verify the target market.
(3) Estimating the sales
(4) Evaluating the prototype.
(5) Planning the distribution of the product.
(6) Training sales personnel.
(7) Conducting sales promotional activities.
(8) Providing market feedback
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 Concurrent Engineering to speed
up Product Development
• Many of the activities of production and marketing are
interdependent.
• The product development can be speeded up by
(a) Having concurrence of the various functions.
(b) Doing several of the activities in parallel.
(c) Having information sharing across the functions.
• Serialized approach to product design would mean a
considerable lead time to introduce the product in the
market.
• For instance, if manufacturing has to wait until a
product design is released, it will only make the
company miss a market opportunity.
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• Concurrence can help in doing the ‘design right
the first time.’
• Concurrence would avoid the ‘football match’
between the design, manufacturing, quality and
marketing function.
• A concurrent approach to product designing is
termed as concurrent engineering.
• Concurrent engineering involves doing several
activities pertaining to different functions
simultaneously.

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 Cross-Functional Teams for
Product Development
• Concurrent engineering involves cross-functional teams
to solve/resolve any issue that may impede the new
product deign/ development project in the company.
• Cross-functional teams integrate the various activities of
the product development effort and help in information-
sharing on a regular basis.
• While in a traditional product design approach one
department audits the other department, in a cross-
functional team approach there is a collaboration right
from the start.
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Team approach to product design work well only when:
• The team members have good interpersonal skills.
• The roles and responsibilities of the team members are
clearly understood by the individual members.
• The authorities and responsibilities between the
functional departments and the product development
project team are clearly defined.
• The team is adequately empowered to do what it needs
to do.
• The team leader is effective.
• The team members are dedicated to their
responsibilities.
• The team does not exist only1 on paper. 63
 Developing New Products- A
Summary
1. Technical and
economic feasibility
studies.
2. Prototype design
3. Performance testing
of prototype design •The production
The Marketing 4. Market evaluation function
Function of prototype. •Technologies
and the 5. Design of production • Processes
Market model.
6. Market performance, process
testing, and economic evaluation
of production model.
7. Continual modification of
Production model.
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Concurrent Product and Process
Design
Product/ Service Ideas

Economic and Technical

Feasibility Studies

Product/Service Production
Continuous
Design Interaction Process Design

Produce and Market

New Products/Service
1 65
• To succeed in the global competition, companies must
design, develop, and introduce products faster.
• One approach to speeding up new-product design and
introduction is the concept of simultaneous engineering
or concurrent engineering.
• It implies that product/service design proceeds at the
same time as process design with continuous
interaction.
• The concept of simultaneous engineering has
significantly compressed the design, production, and
introduction cycle of new products.

1 66
 Process Planning and Design
• In designing production processes, we need to
identify the specific processes to be used in
production.
• Process planning is intense for new products
and services.
• Replanning can also occur as capacity needs
change, business or market conditions change,
or technologically superior machines become
available.
• The design of products and the design of
production processes are
1 interrelated. 67
 A Few Examples of Production
Processes-Metal Working
Assembly Casting and Cutting Forming Finishing
Moulding
Fasten Die Drill Draw Buff

Press-fit Injection Grind Punch Clean

Moulding
Shrink-fit Powdered Shape Roll Heat treat
Metal
Solder Permanent Turn Trim Paint
Mould
Weld Milling Polish
1 68
 A Few Examples of Production
Processes-Non Metal Working
Chemicals Food Mining Textiles Lumber

Crack Canning Dry Spin Cure

Cure Cooking Crush Weave Joint

Distill Crush Extract Wash Saw

Evaporate Pasteurize Screen Knit Turn

Screen Sterilize Smelt Process Plane

1 69
 Factors Affecting Process Design
Decisions
A. Nature of Product/Service Demand
- Production process must have adequate
capacity to produce the volume of
product/service that customers want.
- Provision must be be made for expanding or
contracting capacity to keep pace with th
demand pattern of sales.
- Some type of production processes can be
more easily expanded or contracted than the
others.
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B. Degree of Vertical Integration
- Vertical Integration is the amount of production and
distribution chain, from suppliers of components to the
delivery of products and services to customers, that is
brought under the ownership of a company.
- A firm’s outsourcing plans, which should be part of its
operation strategy, should help guide these decisions.
- The degree to which a company decides to be
vertically integrated determines how many production
processes need to be planned and designed.
- Because of shortage of both capital and production
capacity, small businesses and start-up ventures
ordinarily choose to have a very low degree of vertical
integration.
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- In the beginning, when products or services are
being introduced to the market, as much of the
production of products as practical will be
contracted to suppliers.
- Likewise, distribution of products will be
contracted to shipping and distributor firms.
- As the businesses grow and products mature,
more and more of production and distribution
of products typically will be brought in-house
as the companies seek more ways to reduce
costs and consolidate their businesses.
1 72
 The decision of whether to make components/ perform services
or buy them from suppliers (outsourcing) ?

* Availability of investment
Whether the cost of
capital to expand production
making components is
capacity
less than that of buying
•Technological capability
them from suppliers.
•Whether the production
processes are proprietary.

1 73
Strategic Outsourcing
• Trend is towards strategic outsourcing.
• Outsourcing of processes are primarily done to
enable the company to react more quickly to
- Changes in customer demands
- Competitor actions, and
- New technologies.

1 74
C. Production Flexibility
- Flexibility means able to respond fast to customers’
needs.
- Flexibility is of two forms
(1) Product flexibility, and
(2) Volume flexibility.
- Both are determined, to a large extent, when production
processes are designed.
(1) Product flexibility means the ability of the production
system to quickly change from producing one
product/service to producing another.
- Required when business strategies call for many
custom-designed products/services, each with small
volumes or when new products must be introduced
quickly. 1 75
- In such cases, processes must be designed to
include general purpose equipment and cross-
trained employees who can be easily changed
from one product/service to another.
(2) Volume flexibility means ability to quickly
increase or reduce the volume of
products/services produced.
- Required when demand is subject to peaks and
valleys and when it is impractical to stock
products in anticipation of customer demand.
- Production processes must be designed with
production capacities that can be quickly and
inexpensively expanded1 and contracted. 76
- As manufacturing operations are ordinarily
capital intensive, predominant resource resource
used is capital rather than labour.
- Thus, to meet variable product demand, capital
equipment in production process must be
designed with production capacities that are
closer to the peak levels of demand.
D. Degree of Automation
- While designing the production process it is
important to know how much automation is
required to be integrated in the production
system. 1 77
- Though automation reduces labour and related costs, in
many cases huge investment required by automation
projects cannot be justified on labour savings alone.
- An operations strategy that calls for high product quality
and product flexibility, automation can be important
element.
E. Product/Service Quality
- In earlier times, it was thought that only way to produce
products of high quality was to produce products in
small quantities by expert craftsmen performing
painstaking work.
- Mercedes and Rolls-Royce are the examples of
automobiles that were produced with this approach.
1 78
- Currently, many mass produced products such as
Japan’s Toyota automobiles are considered to be
of high quality.
- At every step of process design, product quality
enters into most of major decisions.
- The degree of product quality required is directly
related to the intensity of automation integrated
into the production process because automated
machines can produce products of incredible
uniformity.

1 79
 Types of Process Designs
A. Product-Focused
- A form of production process in which the
production departments are organized according
to the type of product/service being produced.
- All production operations required to produce a
product/service are ordinarily grouped into one
production department.
- Also called line-production or continuous
production.
- Products/services tend to follow direct linear
paths without backtracking
1 or sidetracking. 80
• In continuous production, product/services tend
to proceed through production without stopping.
Raw Materials Components
2 4
Components Subassemblies

Raw Materials
Subassemblies Assemblies Finished
1 3 5 7
Components Products

Assemblies

Purchased
Components 6
and Subassemblies

Raw materials, components, sub-assemblies and finished

Products follow linear and continuous path in product-focused
1 81
Production of a product.
• Product-focused process is applied to two general
forms of production.
(1) Discrete unit manufacturing
(2) Continuous process manufacturing
- Discrete unit manufacturing refers to the manufacture
of distinct or separate products such as automobiles
or dishwashers.
(a) Products are produced in batches, requiring the
system to be changed over to other products between
batches,or
(b) A system may be dedicated to only one product, in
which case the system is almost never changed over
to other products. 1 82
(c) In discrete unit manufacturing, the term product
focused is used synonymously with the line
production or assembly line, as in case of
automobile assembly plants.
- In continuous process manufacturing, flow of
materials are moved between production
operations such as screening, grinding, cooking,
mixing, separating, blending, cracking,
fermenting, evaporating, reducing, and distilling.
(a) Quite common in the food, brewing, chemical,
petroleum refining, petrochemicals, plastics,
paper, and cement industries.
1 83
• This is called continuous production because materials
tend to move through production in a linear fashion
without much stopping and because the materials are
nondiscrete or without form such as liquids or powders.
 Characteristics of Product-focused Systems
(1) Usually require higher initial investment level due to
(a) Use of more expensive, fixed-position material-
handling equipment such as overhead conveyors., and
(b) Use of equipment that is specialized to a particular
product/ service, such as automatic welding machines
specially designed for only one product.
(2) Flexibility of these systems tends to be rather low
because they are ordinarily difficult to change over to
other products/ services.
1 84
(3) The advantages ar lower labour-skill requirements,
reduced worker training, reduced supervision, and ease
of planning and controlling production.
(4) Offers high-volume production, and low unit costs.
B. Process –Focused
- A form of production in which production operations are
grouped according to type of processes.
- All production operations that have similar technological
processes are grouped together to form a production
department.
- For instance, all production operations that involve
painting are grouped together in one location to form a
painting department.
1 85
- Process-focused systems are also referred to as
intermittent production because operations are
performed on products intermittently, i.e. on
start-and-stop basis.
- Also referred to as job shops because products
move from department to department in batches
(jobs) that are usually determined by customer
orders.
- In job shops, products follow highly irregular
stop-and-go, zigzag-type routes with sidetracking
and backtracking.
1 86
 Product or Material Flow Production operations

Receiving Foundry Packaging

Machining Fabrication Painting and
And Raw
Materials Shipping
Storage
Job X 6 6 7
1 2 3

5
4 8
5
Job Y
1 7
2 3 4
Shear Assembly
Finish Debur
and Machine
punch 1 87
- In the figure shown, Job X and Job Y represents two
distinctly different product designs and hence they
require different production operations and must be
routed through different production departments and in
different sequences.
- Here both Job X and Job Y are required to be processed
through the same department i.e. Assembly department.
- Assuming that the assembly department does not have
enough production capacity to work on both these jobs
simultaneously.
- This would mean that one of the jobs must wait its turn.
- This is the fundamental characteristics of job shops as
the jobs spend large majority of time waiting to be
processed in production department.
1 88
- Process-focused production systems include hospitals,
automobile repair shops, machine shops and some of
the manufacturing plants.
Characteristics of Process-focused Systems
• These systems are quite flexible as they are capable of
producing small batches of a wide variety of products.
• Usually require less initial investment since they ar
typically general-purpose equipment, mobile material
handling equipments, which are less expensive.
• Require greater employee skill, more employee
training, more supervision,and more complex
production planning and control.
 In practice, quite often we find blends and hybrids of
product focused and process focused approach.
1 89
C. Group Technology/ Cellular Manufacturing
- The products or components being manufactured
are placed in families of groups and separate
manufacturing cells are used to manufacture
these groups.
- Group technology is used to develop a hybrid
between product-focused and process-focused
production systems.
- Enables production of a variety of parts in small
batches to achieve economies of line-flow
production without product standardization.
1 90
How Group Technology Functions?
• A multidigit code that describes the physical
characteristics of the parts is developed for the parts
made in a factory.
• For instance, a part that is cylindrical, 6 inches long,
1inch in diameter,, and is made of stainless steel.
• The part’s code would indicate these physical
characteristics.
• Parts with similar characteristics are grouped into part
families and because of such similarities these would be
made on the same machines with similar tooling.
• Part families are then assigned to manufacturing cells
for production, usually one part family to a cell.
1 91
• One production cell is created depending upon the
processes that one part family requires.
• For instance, one part family may require the following
processing steps in order:
(a) Cutting on the saw
(b) Turning on the lathe
(c) Grinding
(d) Drilling
(e) Milling, and
(f) Deburing
• One of each of the above machine is moved to an area
to create a cell.
• Machines in the cell are are often arranged in a U-
shaped so that the parts in the part family can flow
through the cell in an efficient
1 manner. 92
Characteristics of Group Technology
• Use of manufacturing cells reduces the distances
moved by parts between machines.
• Frequently, parts are processed one-by-one thereby
reducing work-in-progress inventory and the
manufacturing cycle time.
• In companies that have a large variety of parts, group
technology is helpful in selecting appropriate
families of parts that can be processed in
manufacturing cells.
• There is a greater similarity among parts within the
cells, and the flow of parts within cells tend to be
more like product-focused
1
systems. 93
 Process Design in Services
Different schemes for producing and delivering services.
1. Quasi-manufacturing
- Production of goods takes place along a production
line with almost no customer involvement in
production.
- For instance, back rooms of the fast food outlets like
McDonald’s.
- Physical goods are dominant over intangible services
and there is no customer contact.
- Either product-focused or process-focused production
would be appropriate depending on the nature of goods
or services to be produced.
1 94
2. Customer-as-participant
- Physical goods may be significant part of the service
and services may be either standardized or customized.
- High degree of customer involvement in the process of
generating the service.
- Examples are automated teller machines, and retailing.
3. Customer-as-product
- Provide customized service and a high degree of
customer contact.
- Service is provided through personal attention to the
customer.
- Can provide a perception of high quality.
- Examples are medical clinics and hair salons.
1 95
• The degree of customer contact is particularly relevant
to process design.
A. At one extreme, the customer-as-product services of
barbershops, beauty parlours, and medical clinics, the
service is actually performed on the customer.
• The customer becomes the central focus of the design
of production processes.
• Every element of the equipment, employee training,
and buildings must be designed with customer in mind.
• Also, courteous attention and comfortable
surroundings must be provided to receive, hold,
process, and release customers.

1 96
B. At the other extreme are the quasi-
manufacturing services, such as back-room
operations of banks.
(a) There is no customer contact.
(b) Operations can be highly automated to achieve
low cost and speed with little regard for
customer relations.

1 97
 Deciding Among Processing
Alternatives
• In choosing a production process, the following
factors need to be considered.
1. Batch size
2. Product variety
3. Capital requirements, and
4. Economic analysis

1 98
 Batch Size and Product Variety
Large A
Product
Focused
Dedicated
System
Batch B
size Product
Focused
Batch
System
Cellular
Mfring Process
C Focused
Job shop D
Small
Few Many
Number of Product
1
Designs 99
• As we move from Point A to Point D, the production
cost per unit and product flexibility increase.
• At point A, there is a single product, and the demand for
the product is very large.
• In this extreme case, a product focused organization that
is dedicated to only that product would be appropriate.
• Production costs per unit are very low and production
organization is very inflexible because equipment
specialized to the product and the specific training of the
employees make it impractical to change to the
production of other products.
• As the number of product design increases and as the
batch size of the products decreases, at point B, a
product-focused, batch system becomes appropriate.
1 100
• Though the system is relatively inflexible,
employees are trained to shift to the production
of other products, and equipment is designed to
be changed to other products, but with some
difficulty.
• At the other extreme, Point D represents the
production of many one-of-a-kind products.
• In this case, a job shop producing unique
products in batches of single item would be
appropriate.
• This form of production is the ultimate in
product flexibility. 1 101
• As the number of products decreases and as the batch
size of products increase from this extreme, at some
point, say Point C, cellular manufacturing for some of
the parts within the job shop becomes appropriate.
 Process Life Cycle
• Production systems tend to evolve as products move
through their cycles.
• Product life cycles and process life cycles are
interdependent; each affects the other.
• Production processes affect costs, quality, and
production capacity.
• Volume of products that are sold affects the type of
production processes that can be justified.
1 102
 Evolution of Process Designs for a
Product Life Cycle
A. Introduction
- Very low volume, Process-focused, Very Small Batch
Size.
B. Early Growth
- Slightly standardized products, Low volume, Process-
focused, Small batches.
C. Later Growth
- Standardized products, High volume, Product-focused,
Production lines to stock, Large batches.
D. Maturity
- Highly standardized products, Very high volumes,
Product-focused, To stock1 , Continuous. 103
 Capital Requirements for Process
Designs
• The amount of capital required for the production
system tends to differ for each type of production
process.
• The amount of capital required is greatest at Point
A and diminishes with movement movement
downward to the right toward Point D.
• The amount of capital available and cost of
capital to a firm are important factors in choosing
a type of process design.
1 104
 Cost Functions of Processing
Annual
Alternatives Cellular
Cost Job
Manufacturing
of shop
Production Automated
(Rs) Assembly
Line
22,50,000

11,10,000

5,00,000

1,00,000 25,00,000
Number of Units
1 Produced per Year 105
• It can be seen from the graph, the automated
assembly line has an annual fixed cost of Rs
22,50,000.
- Fixed costs are the annual cost when the volume of
the product produced is zero.
- These costs are related to the very expensive
robotics, computer controls, and material handling
equipment required for an automated assembly line.
- Variable costs such as labour, material, and other
overheads for automated assembly line are very low
relative to other forms of process design, because the
slope of its cost function is very flat.
- Annual costs do not climb very fast as annual
volume of production grows.
1 106
• The cost function of a job shop usually exhibits very low
fixed costs and very high variable costs.
• The fixed and variable costs of cellular manufacturing are
usually intermediate to those of other two process designs.
Conclusion
• If capital availability is not a factor and annual production
costs are predominant consideration, the process design
that is preferred depends on the production volume of the
product.
• As per the graph, if annual production volume is less than
1,00,000 units, a job shop would be preferred. For
production volume between 1,00,000 and 25,00,000 units,
cellular manufacturing would be preferred and for
production volume of greater than 25,00,000 units, an
automated assembly line would 1
be preferred. 107
 Facility Location
• One of the major reasons for new facilities is the
global economic boom accompanied by the capacity
expansion worldwide.
• In addition to global economic boom, other reasons
for changing or adding locations are:
1. Changes in cost or availability of labour, raw
materials, and supporting resources.
2. Changing demand in a geographical region. For
example, many international companies find it
desirable to change facility location to provide better
customer services.
3. Companies may split, merge, or be acquired by new
owners, making facilities1 redundant. 108
4. New products may be introduced, changing the
requirement and availability of resources.
5. Political, economic and legal requirements may
make it more attractive to change location.
6. Many companies are moving facilities to regions
where environment or labour laws are more
favourable.
An objective assessment of the facility needs,
supported by marketing, operations and financial
data can save substantial costs incurred in
unnecessary renovation and construction.
1 109
Objectives for any facility that is created are:
• Located in a way that provides better value to
customers.
• Once located, the facility should ensure a blend
of an efficient work environment and maintain
the most productive processing and flow in
transformation or manufacturing process.
 Four levels of facility planning
• Global- Site location
• Macro- Site Planning
• Micro- Facility and Building Layout.
• Sub-Micro-Workstation Design
1 110
 Facility Planning Matrix
Level Activity Space Planning Unit Environment
Global Site location & Sites World or Country
Selection

Macro layout Site Planning Site features and Site and Building
Departments Concept

Micro layout Facility, Building Buildings, Plant or

and Factory Workstations Features Departments
Layout

Sub-Micro Workstation & Tools & Fixture Workstations

layout Cell Design Locations

1 111
Global Level
• Initial planning stage involves selecting the region or
general area in which plant or facility should be located
• Geographic coverage of production capacity
• Source of inputs like raw materials, manpower and
skill availability.
• Freight costs
• Location of the market.
• Government regulation.
- Strategically important because it commits significant
resources of the organization and great care should be
given to long-term implications.
1 112
 Choice of Locations
Alternative location options
Initial screening
of locations
Factors relevant to the
Facility being planned

Screen location options

Screen location options
Using factor and
Using cost-benefit
Location rating
analysis
analysis
Final selection
process
Best Location Choice
1 113
 Factors Affecting the Location
Decisions
Proximity to
Markets Required Government
Amenities Policies

Proximity to
Suppliers Facility Ability to
Location Expand
Planning Capacity
Impact
Analysis
Easy Availability
Availability Of required land
Ease of Of Skilled
Funding Labour
1 114
• Quite often the source of raw materials is an
important factor in deciding locations
• For instance, in aquaculture the incubation of salmon
eggs and the first stage of lifecycle of fish are done
in fresh water.
• Therefore, it is advantageous to locate hatcheries
where there is an abundance of fresh water.
 The typical factors are
(1) Location of markets
- Locating plants and facilities near the market for a
particular product or service may be of primary
importance for many products as the location may
impact the economies of manufacturing process.
1 115
- The reasons for proximity to markets are
• Increased bulk or weight of the product.
• Products may be fragile
• It is susceptible to spoilage.
• Increase in transit time.
• Affect the promptness of service.
• Affect the selling price of the product- transportation
cost often makes the product expensive.
Assembly type industries, in which raw materials are
gathered together from various diverse locations and
are assembled into a single unit, often tends to be
located near the intended market.
• Quite important in case of custom-made product,
where close customer contact is essential.
1 116
(2) Location of materials
- Access to suppliers of raw materials, parts, supplies,
tools, equipment, etc are often considered important.
- The main issue of concern is promptness and regularity
of supply from suppliers and level of freight costs
incurred.
- The location of materials is likely to be important, if
• Transportation of materials and parts represent the
major portion of unit costs.
• Material is available only in one region.
• Material is bulky in raw state.
• Material bulk can be reduced during processing.
• Material is perishable and processing increases the shelf
life.
1 117
- Keeping in mind that various materials come
from a variety of locations; the plant would then
be located so as to minimize the total
transportation costs.
- Transportation costs are not simply a function of
distance; they can vary depending on the
specific routes as well as the specific product
classifications.
- For instance, a Delhi-Patna consignment would
be much more expensive than a Delhi-Mumbai
consignment, though distances are similar.
1 118
(3) Transportation facilities
- Adequate transportation facilities are essential
for the economic operation of a production
system and include road, rail, air, waterways,
and pipelines.
- The bulk of all freight shipments are made either
by rail or road since it offers low costs,
flexibility and speed.
- For companies that produce or buy heavy and
bulky low-unit value commodities and are
involved in import and export activities,
shipping and location of ports may be factor of
prime importance in plant1
location decisions. 119
(4) Labour supply
- Manpower is becoming costly input in most of
the production systems.
- Organizations often take advantage of a location
with an abundant supply of workers.
- Labour costs and/or skills possessed by the work
force must also be considered.
- If a particular required skill is not available, then
training costs may be prohibitive and resulting
level of productivity inadequate.
• For instance, in call centre business, the need of
English speaking workers becomes a factor in
deciding the location of1your business capacity. 120
• As India has come on the map for software
development because of large number of skilled
software personnel, Microsoft, Texas
Instruments, Cisco Systems and Oracle etc have
located facilities in India.
• Countries like China and India are turning out to
be attractive locations for industries that require
large contingents of unskilled labour.
• Hyundai Motors has announced that India would
be its hub for supply of mall cars and
automobile components worldwide.
• Companies like Nike and Reebok are setting up
supply chains in Asia and1
South America. 121
A word of caution.
• While labour costs may be low in certain
geographic location now, this may change if
the demand for labour grows significantly.
- In considering the labour supply, the
following points should be considered
(a) Skills available-size of the labour force-
productivity levels.
(b) Unionization-prevailing labour-management
attitudes.
(c) History of local labour relations-turnover
rates- absenteeism etc.
1 122
(5) Location of other plants and warehouses
- Organizations need to look at their plant locations for
the complete system point of view.
- The system should be designed to minimize total
system cost.
- The location of competitor’s plant and warehouses
must also be considered so as to obtain advantage both
in freight costs and the level of customer service.
(6) Climate
- Climatic conditions including seismic regions need to
be considered while making location decisions.
• For instance, Petrochemical plants near Houston were
seriously threatened by Hurricane
1
Katrina. 123
(7) Government controls and regulations
- Implies business environment factors such as
government controls, regulations, incentives and
labour conditions.
- There may be a more favourable investment
climate in a particular geographical or political
region that may attract the industry to invest in
that region.
(8) Service Products
- In service industry, the capacity to deliver the
service to customer must be determined; only
then can the service be 1produced. 124
- The primary parameters on which the geographical
location decisions are based for service products are:
(1) Purchasing power of customer drawing area.
(2) Service and image compatibility with demographics
of the customer drawing area.
(3) Competition in the area.
(4) Quality of the competition.
(5) Uniqueness of the firm’s and competitor’s locations.
(6) Physical qualities of facilities and neighbouring
business.
(7) Operating policies of the firm
(8) Quality of the management.
1 125
 Location Strategies-Service Vs. Industrial
Service/Retail/Professional Industrial
Cost determinants-Rent, Costs- Transportation costs of
Management caliber, Operations raw materials, Shipment cost of
policies such as wage rates etc. finished goods, Energy and utility
cost, cost of labour, raw
materials, taxes, etc.
Volume/Revenue- Drawing area, Intangible and future costs-
purchasing power, competition, Infrastructure, roads, power,
advertising, pricing labour management attitudes,
quality of life, training and
education facilities
Physical quality- Parking, Quality of state and local
security, lighting, appearance, government
image 1 126
Analytic techniques- Traffic Analytic technique- Linear
counts, Demographic analysis of programming, Transportation
drawing area, Purchasing power method, Load-distance models,
analysis of drawing area. and Break even analysis
Location is a major determinant Location is a major determinant
of revenue. of cost.
Main issue is higher customer Most major costs can be
contact. identified for each site.
Low customer contact allows
focus on costs.
Intangible costs can be
objectively evaluated.

In service industries, location is generally a determinant of

revenues, while in industrial organizations location is
determinant of costs. 1 127
 Facility Layout
• Facility Layout plan institutionalizes the following
four fundamental elements.
(1) Space Planning Units (SPUs)
(2) Affinities
(3) Space
(4) Constraints.
 The choices available are:
1. Process layout
2. Product layout
3. Fixed layout
4. Group layout 1 128
The following principles must be complied with
while considering these basic layouts.
• Emphasis should be on gross material flow,
personal pace and communication.
• Should facilitate arrangement of physical
facilities, allowing most efficient use of men,
machines and materials necessary to meet
requirements of capacity and quality.
• Properly designed facility is an important source
of competitive advantage.

1 129
An effective layout should try to
• Operate at low cost.
• Effective use of space
• Provide for easy supervision.
• Provide fast delivery.
• Minimum cost of material handling
• Accommodate frequent new products
• Produce many varied products- both high or low
volume.
• Produce at the highest quality
• Worker’s convenience and safety.
• Provide unique services or features.
1 130
Process Layout
• Also known as functional layout.
• Similar machines or similar operations are located at
one place.
• For instance, all milling operations are carried out one
place, while lathes are kept at a separate locations.
• Grinding, milling or finishing operations are carried out
in separate locations.
• Functional grouping of facilities is useful for job
production and non-repetitive manufacturing
environments.
• One of the most important principles is that centres
between which frequent trips or interaction is required
should be placed closed to one another.
1 131
Organizational implications of process layout.
• In a manufacturing plant, it minimizes materials
handling costs.
• In a warehouse, stock picking costs are reduced
by storing items typically needed for the same
order next to one another.
• In a retail store, it minimizes customer search
and travel time thereby improving customer
convenience.
• In an office where people or departments must
interact frequently are located near one another
thereby improving communication and
coordination between the1
departments. 132
 Advantages and Disadvantages of
Process Layout
• Best suited for non-standardized products; where there is a low
volume, high variety manufacturing environments; where the
market requires frequent change in product design;and in job
shop manufacturing.
 Advantages are:
1. Initial investment in process layout is low.
2. Higher degree of machine utilization may be achieved as
machines are not dedicated to any single product.
3. Greater flexibility and scope for expansion.
4. As high product variety can be handled, different product
designs and varying production volumes can be easily adopted.
1 133
• Maintenance of machines is relatively easy hence cost is
low.
• Breakdown of one machine does not result in total
stoppage of production.
• Easy, effective and specialized supervision of each
function area is easy to achieve.
Disadvantages are
• High degree of material handling as parts may have o
backtrack in the same department.
• Large work in process inventory is common and it may
lead to more storage area.
• Workers are more skilled as there are variety of products
and difference in design thereby leading to higher labour
cost.
1 134
• Total cycle time is high due to waiting in
different departments and longer material flow.
• Inspection is more frequent which results in
higher cost.
• Difficult to fix responsibility for a defect or
quality problem as the work moves in different
departments in which the machine preference is
not fixed.
• Thus, which machine or which operator was
responsible for a quality lapse may be difficult.
• The production planning and control is relatively
difficult. 1 135
Product or Line Layout
• Various facilities such as machine, equipment,
work force, etc are located based on the
sequence of operation on parts.
• Used for continuous operations, where the part
variety is less, production volume is high and
part demand is relatively stable.
• Quite suitable for assembly line such as
automobile factory.
• Using better work methods, specialized
equipment and tools, extensive employee
training and speed of producing the product can
be increased and the cost
1
decreased. 136
 Limitations of Product Layout
• Layouts are relatively fixed and changes in
product design are difficult to accommodate.
• Product variety is very much limited.
• Breakdown of a particular machine in a
production line halts the production output of
the entire line.
• Capital investment in machines is often higher
as compared to process layout.
• There is limited flexibility to increase the
production capacities. 1 137
Fixed Layout
• The material remains at a fixed position and
tools, machinery and men are brought to the
location of the material.
• Fixed layout is essential when the products are
difficult to move.
• Need for this type of layout arises in case of
extremely large and heavy products.
• For instance, production of aircrafts, ships,
dams, bridges, and housing industry.

1 138
R
E
S
O Ship Final
U Building Product
R Yard Ship
C
E
S

1 139
 Advantages & Limitations of
Fixed Layout
• Flexible with regard to change in design, operation
sequence, labour availability.
• Very cost effective when similar type products are being
processed, each at different stage of progress.
• Capital investment may be for one-off product, which
can make it expensive.
• Due to long duration to complete a product, average
utilization of capital equipment is limited.
• Space requirements for storage of materials and
equipment are generally large.
• Requires careful planning and focused attention on
critical activities to maximize
1 margins. 140
Cellular or Group Layout
• Layout is based on group technology principles and
combines the strong points of both product and process
layout.
• Suitable when a large variety of products are needed in
small volumes or batches.
• For each part family, a dedicated cluster of machines
are identified and and all processing requirements of a
particular family are completed in a corresponding
machine cell, eliminating inter-cell transfers of the part.
• Cell manufacturing is also the building block of
Flexible Manufacturing Systems (FMS).
- For instance, Telco, Jamshedpur, has different machine
shops and dye shops whose output is finally fed into the
assembly line. 1 141
 Advantages and Disadvantages
of Cellular Layout.
• Increase in overall performance by lowering costs and improving
on-time delivery.
• Lower work-in-process inventories.
• A reduction in material handling costs.
• Shorter flow times in production.
• Simplified scheduling of materials and labour.
• Quicker set ups and fewer tooling changes.
• Improved functional and visual control.
• Unless the forecasting is accurate, it has a potential to increase
the machine downtime as machines are dedicated to cells and
may not be used all the time.
• Cell may become out-of-date as products and processes change
and the disruption and cost of changing
1 cells can be significant.
142
 Capacity Planning
• Capacity planning decisions usually involve the
following
• Estimating the capacities of the present facilities
• Forecasting the long-range future capacity needs
for all products and services.
• Identifying and analyzing sources of capacity to
meet future capacity needs.
• Selecting from among the alternative sources of
capacity.
1 143
 How do we define production
capacity?
• Production capacity is the maximum production rate
of an organization.
• Factors underlying the concept of capacity are:
(1) Day-to-day variations such as employee absences,
equipment breakdowns, vacations, and material-
delivery delays combine to make the output rate of
facilities uncertain.
(2) The production rates of different products and services
are not the same. Product-mix such as 50,000 units of
A or 20,000 units of B to be produced per month must
be taken into consideration when capacity is
estimated. 1 144
(3) The level of maximum possible capacity i.e. whether
based on a five-day week work schedule.
(4) Should the capacity level be based on the use of
existing facilities or overtime, usage rate, temporary
workers, or outsourcing etc.
Capacity in context of a service organization
• Greatest level of output that can be provided with a
given level of resources under sustainable operating
conditions.
• Resources include employees, facilities, equipment,
materials, and funds.
• Sustainable operating conditions refer to such things as
hours of operation and promotional
1
activities . 145
For instance, if a clothing retail store puts on a
big sales promotion with all items 30 per cent
off the regular price, output will increase i.e.
sales will increase but the store may not be able
to profitably sustain this operating conditions for
very long.
Measurement of Capacity
• Firms that produce only a single product or a
few homogeneous products, the units use to
measure i.e. output rate capacity are straight
forward.
• For instance, automobiles per month, tons of
coal per day, barrels of1 beer per quarter. 146
• When a mix of products such as refrigerators,
air-conditioners, and washing machines are
produced from a single facility, the diversity of
products presents a problem in measuring
capacity.
• In such cases, an aggregate unit of capacity must
be established.
• This aggregate measure of capacity must allow
the output rates of the various products to be
converted to a common unit of output measure.
 For instance, tons per hour or rupee sales value
per month are often used as aggregate measure
of capacity among diverse
1
products. 147
• In case of capacity planning for services, input
rate capacity measures may be used.
 For instance, airlines use available –seat-
miles per month, hospitals use available beds
per month, tax services use available
accountants –days per month, and engineering
service firms use labour hours per month.

1 148
 Capacity Utilization
• Relates output measures to inputs available.
For instance, a tax service that had 10,000 labour hours
available during October used only 8,200 labour hours
to meet the demand of the customers.
- To arrive at percentage of capacity utilization, divide
the actual labour hours used by the maximum labour
hours available during a normal schedule viz 82% in
above example.
- Other commonly used capacity utilization calculations
are actual automobiles produced per quarter divided by
the quarterly automobile production capacity.
- Occupied airlines seats per month divided by monthly
airline seat capacity. 1 149
 Forecasting Capacity Demand
 Forecasting production capacity for a product or
service usually involves four steps.
(1) First, the total demand for a particular product or
service from all producers is estimated.
(2) Second, the market share i.e. percentage of total
demand for a single company is estimated.
(3) Third, the market share is multiplied times the total
demand to obtain the estimated demand for a single
company.
(4) Finally, product or service demand is translated into
capacity needs. 1 150
Once a company has obtained its best demand
for its products and services, it must determine
how much production capacity should be
provided for each product and service.
Why production capacity may not necessarily
equal the expected demand?
• Enough capital and other resources may not be
economically available to satisfy all the demand.
• Because of uncertainty of forecasts, a capacity
cushion may be provided.
1 151
Capacity Cushion is an additional amount of
production capacity added on to expected
demand to allow:
• Extra capacity in case more demand than
expected occurs.
• The ability to satisfy demand during peak
demand seasons.
• Lower production costs
• Product and volume flexibility as responding to
customers’ needs for different products and
higher volumes is possible because of xtra
capacity.
1 152
Another important consideration in
determining how much capacity a single
company should provide is how much
capacity its competitors are likely to add.
• If competitors have added or are expected to
add capacity that will create overcapacity
situation in the in an industry, a company
should rethink how much capacity it should
add.

1 153
 Approaches to expanding long-range capacity
1. Invest heavily in one large facility that requires
a big initial investment and best operating level
that will fulfill the capacity needs of the firm.
i.e. build the ultimate facility now and grow
into it.
2. Plan to invest in an initial facility design now
and expand or modify that facility as needed to
raise the best operating levels to meet the long-
range demand i.e. expand long-range capacity
intermittently as needed to match future
capacity demands. 1 154
 Increases in Incremental Facility
Capacity
Compare the following strategies
• Designs A, B, and C exhibit best operating
levels at 240,000 450,000 and 640,000 annual
volume respectively.
• Assume, long-range capacity needs are
estimated to be 640,000 annually 10 years from
now.
• How do we provide for this long-range capacity,
incrementally or all at once?
1 155
Year Forecasted Least Unit Cost
Annual Volume Design
1 200,000 A
2 250,000 A
3 320,000 B
4 360,000 B
5 400,000 B
6 450,000 C
7 520,000 C
8 560,000 C
9 600,000 C
10 640,000 1 C 156
1 157
• The strategy of initially selecting Design A and
subsequently modifying that design to Design B
and then to Design C would seem to make sense
because the average unit cost tends to be the
lowest.
• This incremental approach may be less risky
because if our forecast capacity needs do not
materialize, then the expansion programme
could be stopped in time to avoid unnecessary
investment in unneeded expansion.
• One of the major causes of industry
overcapacity is the argument for larger facilities
to achieve greater economies of scale.
1 158
• A major concern about building big facility now is because
funds will be tied up in excess capacity on which no return will
be realized for several years.
• Consequently, leading to additional interest expense or in
income foregone owing to not having the funds committed to
other type of investments that would generate revenue.
 Choosing between expanding capacity all at once or
intermittently?
1. In case of mature products with stable and predictable demand
pattern, firms are more receptive to building the ultimate
facility now.
2. With new products, however firms lean more toward an
incremental expansion strategy because of the riskiness of
forecasts and the unpredictable nature of their long range
demands.
3. The eventual choice will differ from firm to firm because of the
nature of their products, the availability of investment funds,
their attitude toward risk etc. 1 159
 Elements of Waiting Lines
• There are some situations when someone or
something must wait in line for service.
• The output rate of such systems depends on interplay
between random arrivals and variable service times.
• These values are predicted by waiting-line or queuing
models.
Queuing Theory
• A set of mathematical solutions that optimize
situations where there is a process which consumes
time and units arrive in the system to be processed
through it.
1 160
 Queuing models have a number of different
elements that include
• Customer population
• Service system
• Arrival and service patterns, and
• Priorities used for controlling the line.
A. Customer population
- The customer population is generated
according to statistical distribution which gives
the information about the inter-arrival times
i.e. the time between arrivals of customer.
- This is also called ‘calling population’.
1 161
• The ‘calling population’ has a size , which is the
number of potential customers to the system that
can either be finite or infinite.
• The customer population is finite when new
customer are affected by the number of
customers already in the waiting line system.
• This will indicate a definite limit as to how large
the waiting line can ever be.
• For instance, if there are ten components to be
processed by a machine, as the number of
components waiting to be processed increases,
the number of possible new components
decreases. 1 162
• When the number of customers waiting in line does
not significantly affect the rate at which the
population generates the new customers, the
customer population is considered infinite.
• In this case, number of customers in queue does not
significantly affect the population’s ability to
generate new customers.
• Waiting in lines does not add enjoyment and nor
does it generate revenue.
• Waiting lines are non-value added occurrences.
• Repeated and excessive delays may ultimately
influence the customers’ behaviour and they may
either ‘bulk’ or ‘renege’1 from the services. 163
(1) Bulking occurs when the customer decides not
to enter the waiting line.
(a) For instance, you go to the telephone bill
payment counter and see that there are already
12 persons waiting to pay their bills, so you
choose to come back later.
(2) Reneging occurs when the customer enters the
line but decides to exit before being served.
(a) For instance, you have been holding the
telephone line long enough waiting for
customer service, but after waiting 5 minutes
and seeing little progress, you decide to leave
and thereby disconnect1 the line. 164
B. The Service System
• The service system is the way that customers receive
service once they are selected from the front of a queue.
• The amount of time which a customer takes to be
serviced by the ‘server’ is called ‘service time’.
• The service mechanism is called a ‘server’.
• The service system is characterized by the number of
waiting lines, the number of servers and the arrangement
of the servers.
• Waiting-line systems can have single or multiple lines.
• Quite often, banks have single line for customers.
(a) Customers wait in line until a teller is free and then
proceed to that teller’s position.
1 165
(b) Other examples of single-line systems include many
cinema ticket counters, airline counters, call centres etc.
Advantages of using a single line when multiple servers
are available:
• The customer’s perception of fairness as the customer is
served in a true first-come, first served basis.
• The single line approach eliminates jockeying
behaviour.
• A single-line, multiple-server system has better
performance in terms of waiting times than the same
system with line for each server.
 Jockeying occurs when the customer enters one line
and then switches to a different line in an effort to
reduce the waiting time.
1 166
 Single and Multiple Line Service
Systems
Single server,
single phase

Single server, multiphase

Multiserver, multiline
Single-phase

Person Processing point

1 167
Multiserver,
Multiline
Single phase

Multiserver,
multiphase

Person Processing point

1 168
There are four basic waiting line structures describing
the general conditions t a service facility.
(1) The simplest structure is the single server case, e.g.
The cashier at a bank counter, or ny production line
with a unidirectional material flow.
(2) If the number of processing stations is increased but
still draws on a single waiting line, we have
multiple server’s case.
(a) A bank with several open windows for cashiers but
drawing on a single waiting line is a common
example of multiple server waiting line structure.

1 169
Services can require a single activity or a series of
activities.
• These activities are identified by the term phase.
• In a single-phase system, the service is completed in a
single activity, such as with a bank transaction or an
airline check-in.
• In a multiphase system, the service is completed in a
series of steps.
For instance, if you go to Haldiram’s, a fast food outlet,
you first choose your order, and then you pay for the
items chosen , and finally get your order at the pick-up
window.
• This type of multiphase system is also true for most
manufacturing processes.
1 170
C. Arrival and Service Patterns
• The amount of time for which a customer waits in a
queue is called the queuing time.
• The arrival rate specifies the average number of
customers arriving per time period.
(a) For example, a system may have ten customers arriving
on average each hour.
• The service rate specifies the average number of
customers that can be served per time period.
• The service rate is the capacity of the service system.
• If the number of customers you can serve per time
period is less than than the average numbers of
customers arriving, the waiting line grows infinitely and
you cannot catch up with the demand.
1 171
• It is the variability in arrival and service patterns that causes
waiting lines.
• Lines are formed when several customers request service at
approximately the same time.
• This surge of customers temporarily overloads the service system
and a line develops.
• Customers either arrive at a service facility according to some
known schedule e.g.one patient every fifteen minutes or one
student for counseling every half-hour or else thy arrive
randomly.
• Arrivals are considered random when they are independent of one
another and their occurrence cannot be predicted exactly.
• Frequently in queuing problems, the number of arrivals per unit
of time can be estimated by a probability distribution known as
Poisson distribution.
1 172
D. Waiting Line Priority Rules
• Service oriented organizations face unique scheduling
problems.
• Quite often, demands for services and time to perform
the service may be highly variable.
• The basis on which the customers are selected is called
the queue discipline.
• The queue discipline is the method by which customers
are selected from the queue for processing by the
service mechanism.
• Usually, we can improve on the system response of
simply ‘keeping hours’.
• Sometimes overall performance can be improved by a
priority system.
1 173
 Some of the priority rules
1. First come, first served (FCFS)
• Customers are processed in the order in which
they arrive in the queue, such that the head of
the queue is always processed next.
• Units are served in the order in which they
arrive.
2. Last come, First Served (LCFS)
• Under this system, the units are served in the
reverse of their arrival order.
1 174
3. Queues with Bulking or Reneging
• These are the queues in which some arrivals will not
wait if the queue is long, and they will leave.
4. Truncated Queues
• These are queuing situations in which there is limited
waiting area. When the maximum queue length is
reached, all further arrivals leave.
5. Priority Queue
• The arrivals are placed in various priority groups. The
item to be selected for service is taken from the highest
priority group in which there is a queue.
•
1 175
 The priority rule used affects the performance
of the waiting line system.
• First come first served is generally considered
fair, yet it is against customers requiring short
service times or emergency assistance.
• For instance, in a busy emergency room,
someone critically sick or injured may have to
wait for a significant period of time and may
result in death.
 In production scheduling system, the alternate
priority systems used are:
(a) Earliest Due Date (EDD), and
(b) Shortest Processing Time1 (SPT) 176
 Aggregate Planning
• While strategic planning deals with long range
operations of facilities and resources, aggregate
planning deals with developing ways to utilize those
facilities and resources.
• As one moves from strategic planning to aggregate
planning and operations planning, three distinct trends
occur.
1. The time horizon for the planning process becomes
shorter. Strategic planning’s time horizon requires
planners to think in terms of years. Aggregate planning
involves time horizon limited to one to one and half
years or less.
1 177
• Aggregate planning is done on an aggregate
basis i.e. in financial terms, such as tons of steel.
• These plans are then used by operations level
personnel and hence need more detailed
information.
For instance, an assembly plant manager needs
to know the projected volume of each of the end
products so that the right amount will be on
hand.
* The planning activities become more repetitive
as one moves from aggregate planning towards
operations planning.
1 178
• Aggregate planning reflects the operational
decisions that must be made in the short to
intermediate time horizon to ensure that
operations function has the resources needed to
the job.
• The basis is the business plan which is a
statement of organization’s overall level of
business activity for coming 6-18 months.
• The business plan is an agreement between all
functional areas viz. finance, production,
marketing, engineering, R& D to support the
level of activity that they get committed to.
1 179
The aggregate plan addresses the demand and
supply side of the firm’s activities for its
different product groups. It reflects decisions on:
• Output rates.
• Employment levels and changes
• Inventory levels and changes
• Backorders
• Subcontracting/ outsourcing.
The goal of aggregate planning is to achieve a
production plan that will effectively utilize the
organization’s resources to satisfy the expected
demand.
1 180
• In a manufacturing firm, the aggregate plan
links the strategic goals with plans for
individual products i.e. master production
schedule.
• In a service firm, the aggregate plan links the
strategic goals with the detailed work-force
schedules.
• Aggregate plan answers the following
(a) Should prices or other factors be changed to
influence demand ?
(b) Should inventories be used to absorb changes
in demand during the planning period ?
1 181
(c) Should changes in demand be accommodated
by varying the size of the work force?
(d) Should part-time workers be used or should
overtime and idle time absorb the changing
demand?
(e) Should sub-contractors be used during
increased demand so that a stable workforce
can be maintained?

1 182
 Operations Planning Hierarchy
Strategic Plan Work

Aggregate Raw Materials

Demand Plan for Available
Forecasts Production
Inventory on
Master Production
hand
Schedule, and
MRP systems
External Capacity
Detailed Work subcontractors
Schedule
1 183
• The strategic plan is translated into aggregate plan.
• The aggregate plan provides inputs for production control
group to draw up a Master Production Schedule (MPS)
The Purpose of MPS
• Is to meet the demand for individual products in the product
group. At this level of planning, product groups are
disaggregated into individual products.
• It shows when incoming sales orders can be scheduled into
production.
• It also shows when each shipment can be scheduled for
delivery.
• It also takes into account current backlog so that production
and delivery schedules are realistic.
• It generates amounts and dates of specific items to be
produced. 1 184
The purpose of MRP
• It uses the MPS to determine the end product
requirements and breaks these down into
component parts and subassemblies to create a
material plan.
• It shows the time-phased requirements for
releasing materials and receiving materials that
enable the MPS to be implemented.
• It specifies when production and purchase orders
must be placed for each part and subassembly to
complete the products on schedule.
1 185
 Objectives of Aggregate
Planning
• Minimize costs/ maximize profits.
• Maximize customer service.
• Minimize inventory investment.
• Minimize changes in production rates.
• Minimize changes in workforce levels.
• Maximize utilization of plant and equipment.

1 186
 Nature of Aggregate Plan
• The primary requirements for effective
aggregate planning are to determine the course
the organization takes in medium term, with the
following in mind.
1. Capability specifications and Performance
metrics.
2. Demand forecasts and/or actual orders
3. Resource availability.

1 187
 The Aggregate Planning Process
Operations Distribution and marketing
•Current machine capacities •Customer needs
•Plans for future capacities •Demand forecasts
•Workforce capacities •Competition behaviour
•Current staffing level
Aggregate Plan
Materials Accounting and Finance
•Supplier capabilities •Cost data
•Storage capacity •Financial condition
•Materials availability of the firm

Engineering Human Resources

•New products •Labour-market conditions
•Product design changes •Training capacity
•Machine standards 1 188
 Capability Specifications and
Performance Metrics
Aggregate planning has to transform its
understanding of the market into a set of
capability specifications.
Number of steps required to be followed are:
• The organization must develop some logical
overall unit for measuring output, e.g. tons of
steel in the steel industry, cases of beer in the
beer industry, machine hours in mechanical
industries, beds occupied in hospitals, or seating
capacity in an airline. 1 189
• Short term metrics would indicate how a company is
achieving its results and it is likely to perform over next
one to three years.
• Develop demand forecasts for each planning period that
would facilitate decision regarding the allocation of
resources.
• Finally, a performance measurement system needs to be
in place to assess the organization’s effectiveness. For
instance,
(a)An auto manufacturer would like to know whether it met
its profit targets by encouraging dealers to increase their
inventories or by increasing sales to customers through
on-line ordering system.
(b) A retailer might want to examine its revenue growth per
store and in new stores or its revenue per square foot
compared with that of competitors.
1 190
 Basics of Materials Requirement
Planning (MRP)
• Consists of logically related procedures, decision rules and
records, designed to translate a Master Production Schedule into
net requirements and planned coverage of such requirements, for
each component of inventory item needed to implement this
schedule.
• In the process of planning, MRP system allocates existing
inventories on hand to the items to be manufactured.
• Based on the gross requirements, it reevaluates the validity of the
timing of any outstanding orders.
• The system establishes a schedule of planned orders for each
item, including orders, if any, to be released immediately plus
orders scheduled for release at specific future date.
1 191
 Assumptions and Prerequisites
The MRP system makes certain assumptions regarding
inventories. These are:
• Lead times for all inventory items are known and can
be supplied to the system, at least an estimates.
• Every inventory item under reference goes into and out
of stock i.e. there will be reportable receipts, following
which the item will be in an ‘on-hand’ state and
eventually be disbursed to support an order for an item
into which it is merged.
• All components of an assembly must be available at the
time an order for that assembly is to be released to the
factory.
1 192
• Components and materials are discreetly
disbursed and used.
(a) In case of materials come in continuous form
e.g. rolls of sheet metal, the planning
procedures are adapted and executed to handle
such inventory items properly.
• The process is independent i.e. a
manufacturing order for any given inventory
item can be started and completed on its own
and is not dependent on the existence or
progress of some other order for completing
the process. 1 193
And the pre-requisites are:
• A Master Production Schedule exists.
• All inventory items are uniquely identified.
• A bill of material exists at the time of planning.
• Inventory records contain data on the status of
every item.
• There is integrity of the file data.

1 194
 Master Production Schedule
• The MPS is statement translating the aggregate
plan into how many and how items are
produced, and when.
• The MPS gives details about the quantities and
timing of the planned production of a product.
• It is derived from the master schedule by
taking into account the inventory status of the
product in a given time period.
• The master schedule provides details about the
quantities and delivery timings of a product,
but not the production plan.
1 195
For instance,
• If according to the master schedule, 1200 cars
of a particular model are to be delivered to the
customer in week 1 and 1000 cars of the model
are already in the inventory, then only 200 units
have to be produced in this week.
• On the other hand, if there are 1500 units of this
model of the car in the inventory, there may be
no requirement of any production in this week.

1 196
 Available-to-promise Inventory
• Difference between the inventory available
from the previous period and the customers
orders booked.
• Necessary for sales personnel to know
available-to-promise inventory which gives the
sales personnel information on how many units
of the product at maximum they can commit to
the customers in a given time.

1 197
 Bill Of Materials
• The bill of material is not simply a materials list
but is a materials list that provides information
useful to reconstruct the manufacturing process.
• It serves as an interface to order entry.
• The manufacturing bill of material is developed
by re-sequencing the engineering bill of
materials in the context of the assembly process.
• Subsequently, the process information is derived
that will allow the new part to be ready for
production. 1 198
 MRP Record of Rubber Hose
Item X123 Lot Size: 100 Units,
Description: Rubber Hose Lead Time: 2
Weeks
Week 1 2 3 4 5 6 7 8

Gross Requirement 150 100 120 150

Scheduled receipts 200

Projected on hand 150 50 200 80 200

inventory
Planned receipts

Planned order
releases 1 199
• A MRP record of an inventory divides the
future into time periods called time buckets,
although other time periods could also used.
• The time-phased information contained in the
inventory record consists of:
(a) Gross requirement
(b) Scheduled receipts.
(c) Projected on-hand inventory.
(d) Planned receipts, and
(e) Planned order releases.
1 200
A manufacturing inventory is defined as
consisting of following:
• Raw materials in stock.
• Semi finished components parts in stock.
• Finished components parts in stock.
• Sub-assemblies in stock.
• Components parts in process.
• Sub-assemblies in process.

1 201
 Outputs-The Material Requirement
Plan
• The common objective of all MRP systems is to
determine gross and net requirements i.e.
discreet period demands for each item of
inventory.
• It enables to generate information needed for
correct action in ordering inventory i.e. relating
to procurement and production.
• The action is either a new action viz. release of
an order or a revision of previous action.
1 202
• The essential data required for any action to be taken are:
1. Item identity i.e. the part number
2. Order quantity
3. Date of Order Release.
4. Date of Order Completion (due date)
• Once the order has been placed, the types of order action that
are required when revising an action taken previously, are
limited to the following:
• Increase in order Quantity.
• Decrease in Order Quantity.
• Order Cancellation.
• Advancement of Order Due Date.
• Deferment of Order Due Date.
• Order Suspension (indefinite deference)
1 203
• MRP systems meet their objective by computing net
requirement for each inventory item.
• The term component in MRP covers all inventory items
other than products or end items.
• Requirements for end items are stated in MPS and are
derived from forecasts, customer orders, field
warehouse requirements, interplant orders, et.
• Requirements for all component items including raw
materials and their timings are derived from the MPS.
• After determining the gross requirements these are
converted into net requirements and are time-phased to
ensure their proper coverage.
1 204
 Enterprise Resource Planning
• Companies world-wide use ERP to integrate
business processes and thereby reduce costs and
increase productivity.
• Traditionally, companies developed isolated
computer applications to suit and satisfy each of
their functional segments such sales, purchase,
production, inventory, personnel and accounts.
• Materials Requirement Planning (MRP I ) and
Manufacturing Resource Planning (MRP II) were
developed basically to address the requirements
of the manufacturing set up.
1 205
• The information available in various functional
segments is felt to be so much scattered that it
becomes almost impossible to consolidate
information and provide the same to the top
management to enable them to take vital
business decisions.
• Hence, the companies whether in manufacturing
or the service sector have been searching for the
‘total solutions’ on an integrated system which
could provide for the information needs of the
entire enterprise.
• ERP software was developed to provide such a
‘total solution’ to the business enterprise.
1 206
• In order to be successful in today’s global
competitive markets, business enterprises
continuously strive for developing a high
level of interaction and coordination along the
supply chain and improve in the area of
quality, time to reach the market, customer
satisfaction, performance and profitability.
• The ERP software fulfills this need.

1 207
 What is ERP ?
• ERP integrates the entire enterprise starting from
the supplier to the customer, covering logistics,
financial and human resources.
• This enables the enterprise to increase
productivity by reducing costs.
• Once the ERP is implemented, a single solution
addresses the information needs of the whole
organization.

1 208
 Functions of ERP
Suppose, an order is placed by the dealer, then
ERP checks for the stock, reserves the inventory
for dispatch, opens the dealer account to verify
the credit limit of the dealer and processes the
order.
If the credit limit exceeds, then it places hold on
the order.
All these functions are carried out
instantaneously, as ERP integrates production,
logistics, distribution, marketing, Human
Resource Development1 and Finance. 209
 Features of ERP
• The general ERP model has a central data base shared
by all functions of the enterprise.
• The salient features are:
1. Electronic data interchange to electronically accept
customer information like purchase orders, schedule
amendments, cash payment, and send electronically
the order acknowledgement and invoices to the
customers.
2. Ability to display drawings or specifications, ability to
store original sale orders, purchase orders, quotations
and contracts.
1 210
• Integration of new product introductions or changes to
existing products also known as ‘engineering change
management’.
• Optimize the overall flow in end-to-end supply chain
management.
• Facilitates effective management of equipment resources,
by having on line records of equipment location and their
status.
• Facilitates effective management of human resources by
having employee database, job description and evaluation,
applicant tracking, requisition management, performance
review, career and succession planning, creating alternate
organization structures, taking care of training needs.
• Facilitates quality planning required for ISO certification.
1 211
 Scope of ERP
(a) Financials
- Financial accounting, treasury management, asset management
and enterprise control.
(b) Logistics
- Production planning, materials management, plant
maintenance, quality management, project management, sales
and distribution management.
(c) Human Resources
- Personnel management, training and development, and skills
inventory.
(d) Work flow
- Integrates the entire organization with flexible assignment of tasks
and responsibilities with respect to location, positions, jobs,
groups or individuals. 1 212
 Tangible Benefits of ERP
• Reduction of lead time by 60 percent.
• 99 percent on-time shipments
• Doubled business.
• Increase of inventory turnover to over 30
percent.
• Reduction of cycle time to 80 percent.
• Reduction of work-in-process inventory to 70
percent.
1 213
 Intangible benefits of ERP
• Better customer satisfaction
• Improved vendor performance
• Reduced quality costs.
• Improved resource utilization
• Improved information accuracy
• Improved decision-making capability.

1 214
 Basics of Scheduling
 Scheduling problems and opportunities are
faced almost everyday.
For example, at the railway stations, someone is
responsible for assigning platforms to different
trains that come in and go out.
In a manufacturing facility, someone is in charge
of assigning jobs to machines.
The main component of scheduling requires the
following variables to be identified.
• When are people, machines, vehicles, etc
available to do work ? 1 215
• What product needs to be made or service needs
to be performed?
• What is the process to make the product or
perform the the service?
• What resources are required to complete or
perform the process i.e. machines, people,
tooling, materials, etc.
• How many parts do we need to make for each
customer, or what services does the customer
need?
• When do they need the products delivered or the
services performed?
1 216
 There are two basic types of scheduling exercises.
1. Operations scheduling assigns jobs to machines or
workers to jobs.
(a) In manufacturing, operations scheduling is crucial
because many performance measures, such as on-time
delivery, inventory levels, the manufacturing cycle
time, cost, and quality, relate directly to the
scheduling of each production lot.
(b) Workforce scheduling determines when employees
work.
(c) In service organizations, workforce scheduling
becomes critical because measures of performance
such as customer waiting time, waiting-line length,
utilization, cost, and quality are related to the
availability of servers. 1 217
The fundamental questions in scheduling are:
1. What is the capacity?
2. How do you balance load and capacity?
 Capacity has two types of constraints- a hard
ceiling and soft ceiling.
 Hard Ceiling
1. Hard ceilings are where the capacity is
extremely difficult to flex.
2. For instance, a major piece of capital equipment
which runs at a fixed rate such as heat treatment
process, where process times are fixed, or
production line where the output rate is fixed.
1 218
• In this case, all that can be done is maximize utilization,
avoid breakdown and quality problems, and ensure that it is
always working to customer needs.
• Hard ceiling may be due to a job requiring a scarce skill that
is difficult to train,that is often encountered in software
programming, tool making, or maintenance.
(1) There can be limit to how much overtime can be worked to
meet demand, or
(2) Training programme to reach a basic level may be
protracted.
• In both the cases, it is difficult to increase outputs above a
given level and also sub-contracting may not be a viable
option because of quality reasons, or lack of availability of
suitable sources.
1 219
Soft Ceilings
• Soft ceilings can be flexed by scheduling
manpower, buying additional inexpensive plant
machinery, recruiting unskilled or semi-skilled
staff, or sub-contracting, or overtime.
• The essential difference between two types of
capacity constraints are cost and lead-time,
which need to be built into the calculations.
Rules that are used to assign work to the
resource are:
• Select the task that is due the soonest.
• Select the task that requires the least amount of
time to complete i.e. shortest
1 processing time.220
• Select the task that requires the least amount of set up
time or clean up time or travel time.
In real live business situations, the rules could be more
complex.
• Select the task that is due the soonest unless there are
any tasks to be completed for customer A in which case
all tasks for Customer A should be completed first.
• Select the task that uses the same tooling, has the same
colour, and the same due date as the last task completed
by a particular resource.
• Select the task that allows the resource used to be
completed or prepared for another task by a certain
time.
1 221
• Select the resource that best meets all skill
requirements to complete the specific task.
• For instance, allocate repairmen to service calls
where each service call will require a certain skill
set and the repairmen will have that skill set.
Loading
• In continuous processes, different sub-assemblies
have to loaded to bring out the final product.
• In intermittent processes, each customer job order
has its unique product specifications.
• Thus, for each planning period, job orders ar
assigned on facilities , thereby establishing how
much of a load each work1 centre must carry. 222
• Ultimately, this determines the workload or jobs
to be performed in a planned period.
• This assignment is known as machine loading.
Finite and Infinite loading
• When the loading is determined by the maximum
capacities of the machines, it is called finite
loading.
• In infinite loading, the maximum capacity is not
the basis for assigning tasks to it.
(a) This option is applied when excess load can be
handled by overtime, sub-contracting, or by
shifting to other work centres or time slots.
1 223
 Gantt Charts-A Scheduling Tool
Gantt charts take the form of
1. The job or activity progress chart, and
2. The machine chart
• Displays a progress chart graphically showing
the current status of each job relative to its
scheduled completion date.
• The chart allows us to obtain a bird’s eye view
of the process in totality.

1 224
• From beginning to end the chart forces us to
(a) Make a realistic assessment of the end-time of
the process.
(b) Sequence the tasks for phases or activities –
one after the other, as well as in parallel.
(c) Think in terms of task dependencies- which
task depends on what.
(d) Concentrate on the necessary resources, both
when and where, throughout the run of the
process.
1 225
Activity Week Number

1 2 3 4 5 6 7 8 9

Scheduling
Engg
Release
Procurement
Receipt of
materials
Tooling
Fabrication
Assembly
Inspection

Shipping
1 226
 Basics of Project Management
• A project is an organized endeavor to accomplish a
specified non-routine or low volume task.
• Although projects are non-repetitive, they take
significant amount of time to complete and are large
scale or complex enough to be recognized and managed
as separate undertakings.
• Operations managers organize project teams that work
to tight time schedules, adhere to strict budgets, report
to top management personnel of the organization and be
temporarily removed from their regular jobs.

1 227
• The type of techniques required to manage the
projects depends on the complexity of the projects.
• For small projects, Gantt charts are adequate whereas
for large and complex projects, the critical path
method (CPM) or the programme evaluation and
review technique (PERT) would be more effective.
 Project Life Cycle
• Typically a project will pass through the following
phases.
1. The Concept Phase.
- Organization is requested to propose a plan to perform a
project for some customer.
1 228
2. Initial Planning or Feasibility Phase
- The project manager plans the project to a level
sufficient for initial scheduling nd budgeting.
3. Detailed Planning Phase
- f the project is approved, then detailed
scheduling and budgeting is done in this phase.
4. Organization Phase
- A detailed work breakdown structure (WBS) is
examined.
- Similar to the bill of material and divides the
total work into major packages to be
accomplished.
1 229
- Personnel and other resources necessary to accomplish
the project are then made available for all or a portion
of the project’s duration through temporary
assignments from other parts of the organization or by
leasing resources or sub-contracting portion of the
project.
5. Execution Phase
- Various activities planned are completed as per the
schedule, utilizing the allotted resources.
6. Termination Phase
- Project is terminated or disbanded after completion.
- The personnel who were working in the project are
assigned back to their regular jobs or to other jobs in
the organization or to other projects in this phase.
1 230
 Project Organization
• A variety of organizational structures are used
by enterprises to perform project work.
• The various considerations are:
(a) Proportion of company’s work that is
performed by projects.
(b) The scope and duration of the project.
(c) The capabilities of the available personnel.
(d) The preferences of the decision makers.
The most frequently used structure is Matrix
Organization structure.
1 231
 Top Management

Manager Manager Manager Manager

Quality Engineering Production Marketing

Project A A
A A A
Manager

Project B
Manager B B B B

1 232
 Project Scheduling
• In a project environment scheduling function is
more important than it would be in an ongoing
operation because projects lack the continuity of
day to day operations and are more complex to
coordinate.
• The basic approach is to form a network of
activity and event relationships portraying the
sequential relations between the tasks in the
project.
• Tasks that must precede or follow other tasks are
clearly identified, in time as well as function.
1 233
 The Benefits of network
• It is a framework for planning, scheduling,
monitoring and controlling the project.
• It illustrates the interdependence of all tasks,
activities and sub-activities.
• It relieves interpersonal conflict by clearly
showing task dependency.
• Based upon the information/ data used, an
estimate of the probability of project completion
by various dates can be made.
1 234
 Network Techniques: PERT &
CPM
• The Programme Evaluation & Review Technique
(PERT) was developed by the US Navy in co-operation
with Booz-Allen Hamilton and Lockheed Corporation in
1958.
• The Critical Path Method (CPM) was developed by
DuPont during the same period.
• PERT has been primarily used for R&D projects;
though its use is more common on the “development”
side of R&D than it is on “research” side.
• CPM has been designed for construction projects and
thus has been embraced by 1construction industry. 235
• The two methods are quite similar an are often
combined for educational purpose.
• Research has indicated that greater use of
PERT/CPM techniques are used on R&D type
projects, projects with greater level of
complexity, and on projects with resource
limitations.
 Terminology Used in the Networks
1. Activity
- A specific task or set of tasks that are required
by the project.
- Use up the resources, and take time to complete.
1 236
2. Event
- The result of completing one or more activities. An
identifiable end occurring at a particular time.
- Events do not use use any resources.
3. Network
- The combination of all activities and events defining
the project and the activity precedence relationships.
- The features are as under:
(a) Usually drawn starting on the left and proceeding to
the right.
(b) Before an event can be realized, all activities that
immediately precede it must be completed.
(c) These are called predecessors.
1 237
4. Path
- The series of connected activities between any
two events.
5. Critical
- Activities, events or paths, which if delayed,
will delay the completion of the project.
 The sequence of critical activities that connect
the project’s start event to its finish event is
called project’s critical path.

1 238
 How to transform a project into a
network?
• One must identify what activities comprise the project
and, for each activity, what its predecessors and/or
successors are.
• The condition of an activity may fall under any one of
the following:
1. It may have a successor(s) but no predecessor(s)
2. It may have a predecessor(s) but no successor(s)
3. It may have both predecessor(s) and successor(s)

1 239
 Type 1 Type 3 Type 2
“Start” “Continue” “Finish”
Arrow represents activity

Node stands for an event

This kind of network is called A-O-A i.e. activity-on-arrow

The first of these is an activity that starts a network, the second
ends a network and the third is in the middle.
1 240
• More than one arrow can start a network, end a
network, or be in the middle.
• Any number of arrows can end at a node or
depart from a node, as shown below.

1 241
• The interconnections depend on the technological
relationships described in the action plan.
For example, while painting a room; filling small
holes and cracks in the wall, and masking
windows and woodwork are predecessors to
painting of walls.
Similarly, removing curtains and blinds, as well
as picture hooks from the wall are predecessors to
filling and masking.

1 242
 Activity on Node (AON) format
for drawing network
• Activities are represented by nodes, usually
rectangles, with arrows to show the precedence
relationships.
• When there are multiple activities with no
predecessors, it is usual to show them all starting
from a ingle node called “start”.
• Similarly, when multiple activities have no
successors, it is usual to show them connected to
a node called “end”
1 243
 1a 3a 2a

Start 1b 3b 2b
End

1c 3c 2c

1 244
 The Choice between AOA and
AON
• Users of PERT favour AOA and users of CPM
favour AON.
• Both are used in commercially available
computer package, though AON is more popular
in PC-based software.

1 245
1 246
 Constructing a Network
1. Assume the node numbered 1 denotes the
event called “START”.
2. The nodes numbered 2 and 3 are their
destination.
2
Start 1

3
1 247
3. Activity ‘c’ follows ‘a’, activity ‘d’ follows ‘b’
and activity ‘e’ also follows ‘b’. The network
will be.
c 4
a 2
1
b
3 5
d

e
6

1 248
4. Assume, activity ‘f’ must follow both ‘c’ and
‘d’.
5. Any given activity must have its source in one
and only one node and therefore ‘c’ and ‘d’
both of which precede ‘f’ must end in the same
node where ‘f’ starts.
c 4 f
2 6
a
1 d
b
3 5
e

1 249
 Final Network

2 c 4 f 6
a

1 d
b

3 5
e

1 250
 Dummy Activities for AOA
Networks
• Dummy activity is used if two activities occur
between the same events.
• For example activities ‘a’ and ‘b’ both start from
node 1 and end at node 2.
a 2
a
1 2 Dummy
1
b
b
3

1 251
 An illustration – How to use
dummy activities
• Assume activities a, b, and c must precede
activity d, but only a and b must precede activity
e. a
e
1
a d b
b 1
2 d
e c
c
Wrong Right
Dummy activity does not use any resources and has no duration.
It is indicated by dashed line.
1 252
Activity Optimistic Most likely Pessimistic Immediate
time (days) time(days) time (days) predecessor
activities
a 10 22 22 None
b 20 20 20 None
c 4 10 16 None
d 2 14 32 a
e 8 8 20 b,c
f 8 14 20 b,c
g 4 4 4 b,c
h 2 12 16 c
i 6 16 38 g,h
j 2 8 1
14 d,e 253
1. Activities a,b, and c have no predecessors, they
can emerge from the same node.
2. Activity ‘d’ requires that ‘a’ be completed, and
‘e’, ‘f’, and ‘g’ all require that ‘b’ and ‘c’ be
completed.
3. Here dummy may be necessary unless ‘b’ and
‘c’ start from the separate nodes.
4. Activity ‘h’ requires only ‘c’ be completed.

1 254
 Partial Network

d
2
a

1 b e
f
3

c g

4 h

1 255
5. Activity ‘i’ requires that both ‘g’ and ‘h’ be
completed, so ‘g’ and ‘h’ are directed to a
single node 5.
6. Activity j requires the completion of both ‘d’
and ‘e’, which are directed to node 6.
7. Since activities ‘f’, ‘i’ and ‘j’ do not precede
any activity these are directed to project
completion node 7.

1 256
 Final Network

d 6
2
a j
e
1 b f
3 7
c g
i
4 h 5

1 257
 Optimistic, Pessimistic & Most
Likely Time
• Expected completion times are found by using
the three time estimates viz., optimistic,
pessimistic and most likely time.
• These estimates ae an expression of the risk
associated with the time required for each
activity and this begins the process of risk
management.
• These estimates are represented by by a
statistical distribution called ‘asymmetrical
distribution.’ 1 258
• The ‘most likely’ time, ‘m’, is the mode of the
distribution.
• Optimistic time ‘a’ – actual time required by the
activity will be ‘a’ or greater about 99 percent of
time.
• Pessimistic time ‘b’- about 99 percent of time
the activity will have duration of ‘b’ or less.
• The expected time, TE= (a+4m+b)/ 6
• The range about m is symmetric when m-a=b-m.

1 259
 Critical Path and Time
Activity Expected Time, TE (days) Immediate
predecessor activities
a 20 None
b 20 None
c 10 None
d 15 a
e 10 b,c
f 14 b,c
g 4 b,c
h 11 c
i 18 g,h
j 8 1 d,e 260
• There are eight activity paths leading to event
7.

d 6
2
a j
e
1 b f
3 7
c g
i
4 h 5

1 261
(1)
a-d-j= 20+15+8= 43 days.
(2)
b-f= 20+14=34 days.
(3)
b-e-j=20+10+8=38days
(4)
b-g-i= 20+4+18=42 days.
(5)
c-h-i=10+11+18= 39 days
(6)
c-dummy-e-j=10+0+10+8=28days.
(7)
c-dummy-f=10+0+14=24 days
(8)
c-dummy-g-i= 10+0+4+18=32days.
 The longest of this path is a-d-j using 43 days, which
means that 43 days is the shortest time in which the
entire network can be completed.
 This is called the critical time of the network, and
 a-d-j is the critical path.
1 262
 CPM Model and Crashing
• The main thrust of CPM analysis is on time-cost
relationship and it seeks to determine the project
schedule, which minimizes the total cost.
• The costs associated with the project can be divided
into two components viz, direct and indirect costs as
indicated under:
(a) Direct costs are incurred on direct material and direct
labour.
(b) Indirect costs consists of overhead like indirect
supplies, rent, insurance, managerial services etc.
1 263
• Activities of the project can be expedited by
crashing which involves employing more
resources.
• Crashing reduces time but enhances direct
costs, because of factors like overtime
payments, extra payments, and wastages.

1 264
Direct
Cost
Of
Activity

Crash time Normal time

Activity Duration
1 265
 Indirect costs associated with the project increase
Indirect linearly with project duration.
Cost of
Project

Project Duration
1 266
 Work Study
• Improving labour productivity and reducing costs by
improving work methods and simplifying the work
needs special attention by operations managers.
• To facilitate this, the work study technique also called
industrial engineering has been developed over a period
of time.
How do we define work study?
• A body of knowledge concerned with the analysis of
the work methods and equipment used in performing a
job, the design of an optimum work method and the
standardization of proposed work methods.
1 267
• Work study is a management tool to achieve a
higher productivity in any organization, whether
manufacturing tangible products or offering
services to its customers.
• Work study makes use of techniques of method
study and work measurement to ensure the best
possible use of material resources in carrying out
a specific activity.

1 268
 Objectives of Work Study
1. To analyze the present method of doing a job,
systematically in order to develop a new and better
method.
2. To measure the work content of a job by measuring
the time required to do the job for a qualified worker
and hence to establish standard time.
3. To improve the operational efficiency and
productivity by ensuring the best possible use of
human, machine and material resources and to
achieve best quality product/service at minimum
possible cost.
1 269
Relationship of Motion and Time
Study to Job Design
Job Deign

Used to
Evaluate
Method Study alternate Work Measurement
Design
Developed by methods
Gilbreths Developed by Taylor
Used to
Motion Study find out Time Study
the fastest
motion sequence
1 270
• Method study is concerned with reduction of
work content while work measurement is
concerned with the investigation and reduction
of the ineffective time.
• Leads to establishment of time standards for the
task or the job or operation on the basis of work
content established by the method study.
• Usually method study must precede work
measurement.

1 271
 Basic Work Study Procedure
1. Select the job or the process or the operation
to be studied.
2. Record all relevant facts about the job or
process or operation using suitable
techniques such as operation process charts,
flow process charts, etc.
3. Examine critically all the recorded facts,
questioning the purpose, place, sequence,
person and means of doing the job/process/
operation. 1 272
4. Develop the new method for the job/process/
operation.
5. Measure the work content and establish the
standard time using an appropriate work
measurement technique, viz., time study using
stop watch, analytic estimating method.
6. Define the new method for
job/process/operation.
7. Install the new method as standard practice.
8. Maintain the new method for the
job/process/operation.
1 273
 Method Study
• Scientific technique of observing, recording and
critically examining the present method of
performing task or job or operation with the
aim of improving the present method and
developing a new and cheaper method.
• It encompasses the study of work processes,
working conditions and equipments and tools
used to carry out the job.

1 274
 Factors facilitating Method Study
1. High operating cost.
2. High wastage and scrap.
3. Excessive movement of materials and
workmen.
4. Excessive production bottlenecks
5. Excessive rejections and rework.
6. Complaints about quality.
7. Complaints about poor working conditions.
8. Increasing number of accidents.
9. Excessive use of overtime.
1 275
 Procedure for Method Study
1. Select the work or job to be studied.
- The job selected should have maximum
economic advantage and should offer vast scope
for work improvement.
- Reduction of material handling activities and
fatigue of workmen can lead to improvement in
working conditions.
2. Record all the relevant facts or information
pertaining to existing methods by using the
recording techniques. 1 276
A. Process charts such as
(a) Operation process chart
(b) Flow process chart
(c) Man-machine chart
(d) Multiple activity chart.
B. Diagrammes such as
(a) Flow diagramme.
3. Examine the recorded facts critically, challenging
everything being done and seeking alternatives,
questioning the purpose (What is achieved ?), the
means (How is it achieved?), sequence (When is it
achieved?), place (Where is it achieved?), and the
person (Who achieves it?)
1 277
 The Questioning Attitude of Method
Study
• What is done? What is the purpose of the operations?,
Why should it be done?, What would happen if it were
not done?, Is every part of operation necessary?
• Who does the work ?, Why does this person do it?, Who
could do it better?, Can changes be made to permit a
person with less skill and training to do the work?.
• Where is the work done?, Why is it done there?, Could
it be done somewhere else more economically?
• When is the work done?, Why should it be done then?,
Could it be done somewhere else more economically?
• How is the work done?, Why is it done this way?
1 278
4. Develop the improved method by generating several alternatives
and selecting the best method. The factors to be considered are:
(a) Cost of implementation.
(b) Expected savings in time and cost.
(c) Feasibility.
(d) Producibility
(e) Acceptance to design, production planning and control, quality
control, production and sales department.
(f) Reaction of the employees to the new method.
(g) Short term or long term implication of the alternative.
 Establish the new method by providing suitable equipment
design, mechanical devices, jigs, fixtures, working conditions,
material handling equipments, and workplace layout.

1 279
5. Implement and install the new method as a
standard practice to achieve the desired results.
6. Maintain the new method by ensuring that the
installed method is functioning well.
(a) This is done by periodic checks and
verification at regular intervals.
(b) Proper controls procedures are used to ensure
that the new method is practiced to achieve the
benefits of method study leading to higher
productivity.

1 280
 Some Symbols Used in the Charting
Process
Standard Symbol Name of the Activity Definition of Activity

Operation Modification of an
object, change in physical
or chemical
characteristics,
assembled or
disassembled, arranged
for another operation.
Transportation or Change in the location
movement from one place to
another.
1 281
 Inspection Examination of an object to
check on quality or quantity
characteristics.
Delay/ Retention of an object in a
D Temporary location awaiting next
storage activity.
Storage Retention of an object in
storage which is protected
against unauthorized
removal.
Combined A combined activity occurs
activity when two activities occur
1 282
simultaneously.
 Motion Study
• Motion study is the science of eliminating
wastefulness , resulting from using unnecessary, ill-
directed and inefficient motion.
For instance, sewing of garments and assembling small
parts.
- Studies the inter-relationship among the members of a
work group.
- Study the relationship between an operator and the
machine which he operates.
- To obtain the time for an operator.
- To establish a permanent record of the method of doing
a job. 1 283
 Work Measurement
• Work measurement is defined as the the application of
techniques designed to establish the work content of a
specified task by determining the time required for
carrying out the task at a defined standard of
performance by a qualified worker.
• A qualified worker is one who is accepted as having the
necessary physical attributes, possessing the required
intelligence and education and having acquired the
necessary skill and knowledge to carry out the work in
hand to satisfactory standards of safety, quantity and
quality.
1 284
 Steps in Work Measurement
• Break the job into elements.
• Record the observed time for each element by
means of either of time study, or analytic
estimating method.
• Establish time values by extending observed
time into normal time for each element by
applying a rating factor.
• Assess relaxation allowance for personal needs
and physical and mental fatigue involved in
carrying out each element.
1 285
• Add the relaxation allowance time to the
normal time for each element to arrive at the
work content.
• Determine the frequency of occurrences of
each element in the job, multiply the work
content of each element by its frequency and
add up the times to arrive at the work content
for the job.
• Add contingency allowance, if any, to arrive
at the standard time to do the job.

1 286
 Apply Observed time
Rating
factor
Normal time
Add
Relaxation
allowances
Work content

Add contingency
And other
Allowances Standard time
If required
1 287
 Time Study
• Concerned with determination of the amount of
time required to perform a unit of work.
• As defined by ILO, “Time study is a work
measurement technique for recording the times
and rates of working for the elements of a
specified job carried out under specified
conditions and for analyzing the data so as to
obtain the time necessary for carrying out the
job at a defined level of performance.”

1 288
 Objectives of Time Study
• To determine by direct observation, the quantity
of human work in a specified task and hence to
establish the standard time, within which an
average worker working at a normal pace
should complete the task using a specified
method.
• To set labour standard for satisfactory
performance.
• To compare alternative methods in method
study in order to select the best method.
• To determine the standard costs.
1 289
• To determine equipment and labour
requirements.
• To determine basic times/ normal times.
• To provide a basis for setting piece rate or
incentive wages.
• To determine the cycle time for completion of a
job.

1 290
 Steps involved in Time Study
1. Select the job to be studied
- The reasons for selecting a job for time study
are:
(a) New job for production.
(b) Change in the manufacturing method.
(c) Design change
(d) Change in the raw material or components used
for a job.
(e) When labour cost is high.
(f) When new tools, jigs and fixtures are used.
1 291
2. Select the worker to be studied
- The ideal worker would be ‘qualified worker’.
3. Conducting stop watch time study
- Record the method of doing the job and break down
the job into elements.
- The various type of elements involved in a job are:
(a) Repetitive element e.g. picking up a component
from the container before the assembly operation.
(b) Occasional element e.g. setting a tool on a machine.
(c) Constant element; for which basic time or normal
time remains same e.g. measuring a dimension.
(d) Manual element; which is performed manually.
(e) Foreign element e.g. unexpected breakage of tool.
1 292
 ISO 9000
• ISO is acronym for International Organization
for Standardization located in Geneva,
Switzerland.
• The term ‘isos’ is a Greek word meaning equal,
homogenous or uniform.
• The idea behind ISO 9000 is to bring in
uniformity in quality standards prevailing in
different countries.
• The genesis of ISO 9000 began with the launch
of Technical committee in the year 1979 and
culminated in ISO 90001 series. 293
• The ISO 9000 standards consist of six parts viz
ISO 8402, ISO 9000, ISO 9001, ISO 9002, ISO
9003 and ISO 9004.
• These stand for system standardization and
certification rather than product standardization
and certification.
• These do not replace but complement the
product standards.

1 294
 Content of ISO 9000
• ISO 8402 deals with quality vocabulary.
• ISO 9000 is actually a series of guidelines for
selection and use of appropriate system
standards of ISO 9001, ISO 9002, or ISO 9003.
• ISO 9004 builds up an entire quality system and
provides guidelines for interpreting the
elements required in ISO 9001, ISO 9002, or
ISO 9003.
 ISO 9004 encompasses the following:
• Scope and field of application
1 295
• Management responsibility
• Quality system principles
• Quality related cost considerations.
• Quality in marketing.
• Quality in specification and design.
• Quality in procurement.
• Quality in production /process control.
• Product verification –inspection & testing.
• Control of measuring and tst equipments.
• Non-conformity – control of non-confirming
product. 1 296
• Corrective action.
• Handling post production actions- storage, packing,
delivery and after-sales services.
• Quality documentation records.
• Training of personnel.
• Product safety and liability.
After a company adopts ISO 9000, an independent official
certifying body will assess the company.
The assessor will check whether the company, desirous of
the certification, has covered the basic quality elements
pertaining to its industry, business and customers.
The firm then gets certified to either ISO 9001, ISO 9002,
or ISO 9003.

1 297
• ISO 9001 is a comprehensive certification desired by
manufacturing / service organizations which design their
own products.
• For ISO 9002 certification, two elements viz. design and
servicing are dropped so as to focus more on
manufacturing.
• ISO 9002 applies to firms which provide goods/services
as per the design or specifications given by the customer.
• ISO 9003 standard drops most of manufacturing, leaving
only final testing and inspection.
• ISO 9003 certification is generally desired by
organizations like the testing laboratories which inspect
and test the supplied products.
• ISO 9003 standard is the least comprehensive of the three.

1 298
• As the ISO 9000 series is a system standard
and not a product quality standard, it does not
automatically mean that the firm’s
product/services are superior in quality to
other firms which have not opted for such
certification.
For instance, for a long time, Japanese firms
producing excellent quality products have not
bothered to obtain the ISO certification.
This does not make their products inferior.

1 299
 Benefits from ISO 9000
• Has become the de facto minimum requirement
for those wishing to compete globally.
• Activities in preparing for ISO 9000
certification and maintaining the certification
result in streamlining of quality management
system which may lead to improvements in
product quality. However, extent of
improvement may vary from one firm to
another.
• May lead to significant cost reduction through
reduction in rework, repair, scrap etc.
1 300
• Lays substantial stress on customer orientation
resulting into improving customer relations.
• Leads to improvement in employee relations,
employee empowerment, and organizational
development.
Maintaining certification
• Internal audits at frequent intervals within a
given year..
• Surveillance audits every year.

1 301
 ISO Standards as Non-Tariff
Barriers
• Apprehensions amongst developing nations tat
ISO 9000 could be used as NTB by developed
nations.
• In the year 1992 European Union started asking
for full compliance to ISO 9000 for imports
from other countries.
• In India we need to view implementation of ISO
9000 standards as an impetus to continuous
improvement in our organizations.
1 302
 ISO 14000-Global Environmental
Management Standards
• Though having no formal relationship with ISO 9000
series, the structures are alike.
• The intention behind ISO 14000 is to bring about global
environmental considerations in all industrial and business
activities, transcending narrow national or regional
considerations.
• As the environmental issues are transnational and the
effects are global, the corporate should encounter a single,
uniform environmental management system anywhere in
the world.
• ISO 14000 certification though currently voluntary like
ISO 9000, it is likely to become an essential prerequisite
for carrying out the trade around
1 the world. 303
 Value Analysis and Value
Engineering
• Value Analysis is a technique that allows to increase
the value of a product or a service systematically,
eliminating all the functions that do not add any value
or benefit to the product.
• A product or process exists to fulfill a need.
• This need or set of needs is termed as a function, that
the product or process satisfies.
• For instance, knife exists to fulfill the need of cutting
and hence to cut is the function of knife.

1 304
What is meant by term Value?
• Value is a function of ‘Desired Performance’
and ‘Cost’.
• Expressed as Desired Performance (P) ÷
Overall Costs (C)
• Desired performance is expressed by the term
worth which is defined as the lowest cost to
achieve the Use (work) function and Aesthetic
(sell) function.

1 305
 How do define VA & VE
• Very often the two terms Value Analysis and Value
Engineering are used synonymously.
• However, difference between them will be clear from
the way they originated.
How VA originated?
• During the Second World War, U.S. government
reserved certain materials from armament industry.
• Therefore, General Electric Company found itself in fix
as many of their regularly used materials suddenly
became unavailable due to reservation.
1 306
• A purchase executive of the company, Lawrence D.
Miles made many substitutions in place of original
materials.
• Surprisingly, the results showed that substituted
materials did not affect the quality but brought costs
down.
• Later Larry developed a step by step approach for this
exercise and named the technique as Value Analysis.
 Thus it is a step by step approach to identify the
functions of a product, process, system or service; to
establish a monetary value for that function and then
provide the desired function at an overall minimum cost
without affecting any of the existing parameters like
Quality, Maintainability, Productivity, Safety and other
Performance Characteristics.
1 307
• In the year 1954, U.S. Navy Bureau of Ships adopted
same technique in their effort at ‘cost avoidance’
during the design stage and saved million of dollars .
• They named this technique as Value Engineering.
Value Engineering is where the value of all
components used in construction of a product from
design to final delivery stage are completely analyzed
and pursued.
• Thus, Value Engineering indicates application at
design stage whereas Value Analysis is the
application on the product that is into manufacturing.

1 308
 Difference between Value Analysis
and Value Engineering
Value Analysis Value Engineering

Indicates application on the product that Indicates application on the product at

is into manufacturing. its design stage

Workers, subcontractors and engineers Done by a specific product design team

come together to make a team with (Engineers)
experience and knowledge

May change the present stage of the Changes are executed at the initial
product or operation stages only.

Worked out mostly with the help of Requires specific technical knowledge
knowledge and experience
1 309
 What is the meaning of overall
costs?
For a manufacturer/ producer
• Overall cost is summation of all elements of the
costs required to produce or service such as
labour, material, overhead etc.
For a consumer
• Overall cost is the monetary sum (price) for
which the product or service is purchased in the
market.
1 310
The Value of the a function V= P/C can be increased
by four methods.
(1)Decrease the cost while ensuring the same level of
performance.
• Reduce the thickness of wooden drums in case of
packing of telephone cables.
• Earlier CDs and DVDs were sold at above Rs 100/-
Moser Baer introduced the same at almost half the
price.
(2) Enhance the performance at the same cost
• Providing a supplement of Mumbai Mirror along with
the copy of The Times of India at no extra cost.
1 311
(3) Decrease the cost and increase the performance
• Intel’s Pentium chip is cheaper and has much more
processing power than all its earlier chips.
(4) Increase both performance and cost ensuring that
performance increases more than the increase in cost.
• American cola giant increased quantity of soft drink
from 250 ml to 300 ml (20% more) but increased price
just by 10%
 In all the above cases ‘cost’ is viewed at from
customer’s point of view.

1 312
 Value Analysis Tests
Each product or component is subjected to the following tests:
• Does its use contribute value?
• Is its cost proportional to its usefulness?
• Does it need all its features?
• Is there anything better for the intended use?
• Can a usable part be made by lower cost method?
• Can a standard product be found which will be usable?
• Is it made on proper tooling, considering quantities used?
• Do materials, reasonable labour, overhead, and profit total its
cost?
• Will another dependable supplier provide it for less?
• Is anyone buying it for less? 1 313
 Functions-Use and Aesthetics
A. Use function
- Prashant wants to go for a trek to a place 15 kms from Karjat.
He wants to purchase shoes that will protect his feet from stones
and thorns etc. Therefore he opts for ‘Hunter shoes’.
- To protect feet is called as the Use Function of the shoes.
B. Aesthetic function
- Parag is preparing for prize distribution ceremony of his college.
Dressed in blazer he will be putting on black leather shoes with
good appearance.
- To give good appearance is called as the Aesthetic Function of
shoes.
 Use and Aesthetic functions are always present in all the
products. Depending on the user and the need, one function
assumes predominance over other.
1 314
 Primary Function & Secondary
Function
• AR Dairies is a Mumbai based milk and dairy products
company. They used to supply milk (cow and buffalo) in 500 ml
glass bottles. Lately they have introduced Masala Milk in 200
ml bottles, which became an instant success. While Masala Milk
is supplied throughout the day, other type of milk is supplied
only in the morning. While going through the audit reports,
Shalini found that there is a transit loss of 2% due to breakage of
bottles. To overcome that Shalini introduced polythene bags in
place of 500 ml bottles. However Masala Milk continued to be
sold in glass bottles.
• Why did Shalini not introduce polythene bags for Masala Milk?

1 315
• The Primary Function of bottle is ‘to hold the liquid’
and Secondary Function is ‘to facilitate drinking’.
• In this case, shape of the bottle facilitates drinking;
however when primary function is achieved by some
other means i.e. polyethylene bag then secondary
function ceases to exist.
• As a consumer drinks Masala Milk on the spot,
secondary function of facilitation of drinking is very
important whereas cow milk or buffalo milk is never
drunk without heating it.
• Therefore Shalini could sacrifice secondary function in
case of cow & buffalo milk but not in case of Masala
Milk.
1 316
 Higher Order & Lower Order
Function
• The basic function of a Torch is ‘To Give Light’
• Let us analyze order of functions.
• Give Light (why)  Facilitates Viewing (How)  Light the Bulb (How)
Supply Current (How)  Insert Battery
• When we ask question ‘Why’ to the basic function; then the answer we get is
called as ‘Higher Order function’.
• And when we put question ‘How’ to the Higher Order Function we get
‘Lower Order Function’.
• Thus ‘Facilitate Viewing’ is higher order function and ‘Light the Bulb’ is a
lower order function.
• As we continue asking questions ‘How’ we will get functions still lower in
order.
• Therefore ‘Insert Battery’ is lower than ‘Supply Current’ which in turn is
lower than ‘Light the Bulb’.
1 317
• Incidentally if we take any part or function and
put the question ‘Why’ , then we will get
functions higher in order.
• Insert Battery (Why)Supply Current
(Why)Light the Bulb (Why)Facilitate
Viewing.

1 318
 Summary of Functions
Type of Function Meaning

Use Function Perform some action, expresses in

active tone.

Aesthetic Function Pleases customer, expressed in passive

or non-measurable tone.

Primary Function Basic purpose for which a product

exists
Secondary Function Arises out of specific design chosen to
fulfill the Primary Function.

Higher Order Needs Reasons of satisfying the Basic

Function
Lower Order Needs Means of achieving the Basic Function.
1 319
A product can have more than one primary function
• For example, LPG cylinder apart from holding the LPG
must also withstand high pressure and must prevent
leakage of gas. Therefore any cylinder design must
address all these factors.
Many times some of the secondary functions are
unnecessary or even undesirable.
• For example, Lamp used for producing image in OHP
also produces heat that calls for fan. The fan is quite
unnecessary but with present level of technology we
have not been able to produce light without heat.
• Therefore, a customer has to pay for fan even though it
does not add any direct value to him.
1 320
 Function Analysis System Technique
• Helps in a thorough understanding of the scope and intricacies of
the problem under study.
• Provides a determinate logic for testing the functions.
• Assists in identifying the basic, required secondary and
unwanted functions, and establishes their inter-linking in a
logical sequence.
• Highlights the missing links or functions which might have been
overlooked.
• Demonstrates that the problem has been thoroughly analyzed by
the team and helps in persuading the decision makers to accept
the VE team recommendations

1 321
 FAST Diagramme for Pen
Part Function Remark

Head Position Refill

Locate Refill

Cylinder Provide Grip Serration on cylinder

Protect Refill
Improve Aesthetic Carry Name & Logo
Show ink-level Transparency

Tail Support Refill

Rings (Front & Back) Help Location

Cap Protect Tip

Facilitate Carrying Projection on the Cap

Refill Contain Ink

Control Flow

Ink in Refill Make Marks 1 322

The alternatives can be
(1)Eliminate head and make it part of Cylinder
(2)Eliminate Tail and make it part of Cylinder
(3)Eliminate Rings
Financials & Operational Report
(1)Design change suggested
(2)Reason for change
(3)Additional expenditure required for new die,
advertising expenses etc.
(4)Savings (cost of rings, elimination of one process etc.)

1 323
 Principles of Value Analysis
• Do not use a part that does not contribute to the value of the
product.
• Do not use a part whose cost is not proportional to its function/
usefulness.
• Do not provide any features to the component or finished
product that are not absolutely required.
• Accept change if part of required quality is made by a process
costing less than the alternative process.
• Use standardized parts wherever possible.
• Use proper manufacturing methods taking into account the
quantities.
• Use the material best suited for the purpose.
• Purchase the part instead of in-house manufacturing if suitable
supplier can provide the part of good quality at a reasonable
price. 1 324
When to Apply Value Analysis?
• Products are losing their market share and
there is a decline in sales.
• Products are priced higher than competition
in a price sensitive market or product cost is >
sales price of competition.
• New designs to be undertaken.
• Rising manufacturing costs.

1 325
 Reasons for Unnecessary Costs
• Lack of relevant information leads to wrong
decisions which increase costs.
• Wrong beliefs in accepting opinions.
• Lack of ideas.

1 326
Strategic Steps In Value Analysis
• Determine function and cost of each element
in finished product.
• Consider alternatives that fulfill functions.
• Select best alternative which includes
standardized materials and standardized
dimensions.
• Strategic choice of make products or
subcontract.
• Modify design to reduce costs.

1 327
 Value Analysis Procedure
• Identify items to be analyzed.
• Differentiate whether item or process.
• Identify internal and external customers.
• Identify basic functions.
• Identify secondary functions which support basic.
• To prioritize determine value or importance to customer
of each function.
• Break item/process into constituent components by
using flow chart.
• Associate components with functions.
• Look for components which can be modified or
eliminated. 1 328
Options in Value Analyses/Value
Engineering
• Modify
• Integrate
• Substitute
• Simplify

1 329
 When to Use Value
Analysis/Value Engineering
• Aim is to evaluate real value of
Product/process
• Focus is on saving costs
• Aim is on increasing value of
process/product.

1 330
 Benefits of Value Engineering
• Cost reduction /elimination techniques.
• Balances costs and performance
• Prevents overdesign of product (Customer
Function Deployment)
• Increases profits and reduces costs.
• Increases customer satisfaction

1 331
 Examples of Value Analysis
• Modify-Motor car engines have been modified to
run on LPG/CNG
• Integrate-Air conditioner and heater integrated into
one unit.
• Substitute-In-house wiring has been changed from
copper to aluminum or coke bottles changed from
Glass to Plastic.
• Simplify-Application software simplified by being
made modular. Earlier all modules were bundled or
an equipment made modular which simplifies
transportation and maintenance
1 332
FUNDAMENTAL CONCEPTS OF
TQM
• Total quality management is both a philosophy
and a set of guiding principles that represent the
foundation of a continuously improving
organization.
• Encompasses mobilizing the entire organization
to satisfy the demands of the customers.
• TQM is focused on routine involvement and
participation of everyone in the organization in
the systematic improvement of quality.
• It involves each individual and group within all
parts of the organization.
1 333
• TQM provides a way of life to constantly
improve performance at every level and at in
every activity, by creating a positive
environment for continuous improvement
based on
- Team work
- Trust and Respect
- Examining the processes in a systematic
manner
- Application of quantitative methods and
analytic techniques

1 334
 Deming’s Chain Reaction

Decrease costs due to less

Improve Improve
rework, fewer mistakes, fewer
Quality delays and snags, and better use productivity
of time and materials

Capture the market Provide steady jobs

with better quality and Stay in business and more jobs.
lower prices
 A shift from traditional approaches to quality
TOTAL QUALITY MANAGEMENT
-Involvement of all employees, customers and suppliers - Empowered
employees - Teamwork - Quality strategy based upon a common mission and
vision -Process oriented

QUALITY ASSURANCE
-Quality systems (ISO 9000) -Quality planning - Quality
policy - Quality costing - Problem solving
QUALITY CONTROL
-Quality standards -Statistical quality techniques
-Process performance -Treating quality
problems

INSPECTION
-Error detection
- Rectification
1 336
• TQM can be perceived as being concerned with
the following
- Meeting the needs and expectations of
customers.
- Covering all parts of the organization
- Examining all costs which are related to quality
- Doing things right the first time i.e. quality
designing rather than inspecting.
- Developing the systems and procedures which
support quality and improvements
- Developing a continuous process of
improvement
1 337
 Kaizen Philosophy
• TQM concerns incremental and ongoing
improvement of yourself, your work, and your
organization.
• The Kaizen philosophy is imbedded in the
TQM concept and encompasses the continuous
and gradual improvement of all employees in
the organization.
• Leads to improvement in employees’ personal
output on a daily basis

1 338
 Important Kaizen Rules
• Work with and according to guidelines
• Problems are opportunities for improvements
• Retrieve information where it happens
• Consider the facts
• Work according to the plan
• Avoid waste
• Order and neatness
• Keep appointments

1 339
 Deming Wheel- focal point in Kaizen
Approach
• In the Kaizen approach “Deming Wheel” is central,
consisting of a cycle of activities necessary for effective
quality improvement.
• The cycle consists of Plan, Do, Check, and Act.
1. Plan
- Define the problem, analyze the causes and draft an
action plan for solving the problem.
- Determine the quality objectives, and critical success
factors.
- Define performance indicators, collect and analyze the
process data, generate the possible solutions.
- Select the most feasible solution and work it out.
1 340
2. Do
- Implement the plan on a limited scale or conduct an
experiment to test the proposed improvement.
- Train all involved employees in the use of quality
improvement methods and techniques.
- Describe the process which is considered for
improvement and form project teams to lead the
process.
3. Check
- Evaluate the trial project with performance indicators.
- Verify whether the improvement has been successful.
- What have we learnt?
1 341
4. Act
- Implement proven improvements.
- The improvements are documented in standard
procedures so all employees involved are well
informed on how to handle in future.
- Usually the cycle gets repeated under different
circumstance and conditions to test how
consistent the results are.
ACT PLAN

CHECK DO

1 342
 Quality Principles
A. Customer focus and customer involvement
- Employees regularly visit their customers.
- Customers are known and understood
- Customers’ needs are integrated in the
activities.
- More is being done than the customer expects
- Satisfied customers are priority number one.
- Changing customer needs are systematically
collected and lead to improvement
1 343
B. Involvement of all employees
• Voluntary total involvement of everyone.
• Teamwork that leverage the knowledge and
provides synergy based on open communication,
respect and trust.
• Skills are developed on the basis of “Learning
by doing”.
• Decisions on the basis of consensus.
• The present situation is open for discussion.
• Investing in knowledge.
• Empowered employees
• Entrepreneurial approach and leadership skills at
all business levels.
1 344
. C. Consistency of purpose
- An inspiring mission and vision is developed
and communicated to all organizational levels.
- SMART- goals are formulated and preserved.
(Specific, Measurable, Achievable, Realistic,
and Time specific).
- Managers are consistent in their behaviour
regarding these goals.
- Guidance is given to quality improvement
process.
- There is commitment at top management.
1 345
D. Act according to facts
- Work according to facts and not based on
rumours or feelings.
- The causes and consequences of problems are
analyzed according to “measuring is knowing”.
- Goal oriented data is gathered and interpreted
accordingly.
- Measurements are based on figures; verify
everything with data.
- Quality costs are analyzed.
1 346
E. Process oriented
- Internal customers are also satisfied.
- The process is more important than the results; address
the means of work accomplishment and not the
outcomes.
- The effectiveness of process is measured.
- The output is standardized.
- The processes are documented in schemes and standard
working procedures.
- Suppliers are regarded as partners and long term
relationships are established.
- The TQM culture is expanded to suppliers.
- Reduction of process variations
1 occurs continuously.347
F. Focus on continuous improvement.
- Employees improve themselves and their work
and help others improve themselves and their
organization.
- Problems are regarded as a means for
improvement and a chance to improve processes.
- Emphasis on problem prevention instead of
correction.
- Improvements are based on cross-functional,
structured, and holistic approach, and are
continuously documented.
1 348
- Multidisciplinary improvement teams are
established.
- There is a working climate in which
continuous improvement is a way of life.
- Improvement of whole and not just the parts.

1 349
 Deming’s and Crosby's 14 points for quality
improvement
S.No. Demimg Crosby

1. Create constancy of purpose Establish management commitment

towards improvement of product
and service .
2. Adopt the new philosophy
3, Cease dependence on inspection
Form interdepartmental quality
improvement teams.
Establish quality measurement.

4. End awarding business on the basis Evaluate the cost of quality.

of price tag
5. Improve constantly the system of Establish quality awareness.
production and service.

6. Institute training on the job. Instigate corrective action.

7. Institute leadership. Ad hoc committee for the zero

1 defects programme. 350
 S.No. Deming Crosby

8. Drive out fear, so that everyone Supervise employee training.

may work effectively for the
company.
9. Break down barriers between Hold a zero defects day to let all
departments. employees realize that there has been a
change.
10. Eliminate slogans and Encourage individuals to establish
exhortations. improvement goals for themselves and
their groups.

11. Eliminate quotas or work Error cause removal.

standards.
12. Give people pride in their job. Recognize and appreciate those who
participate.
13. Institute education and a self- Establish quality councils to communicate
improvement programme. on a regular basis.

14. Put everyone to work to Do it over again to emphasize that the

accomplish it. 1
quality improvement programme never 351
ends.
• Total quality management is a common method
to improve the whole organization stepwise,
structured and systematically according to hard
work, discipline, intensive training, and
consistent implementation of techniques and
resources.
• The quality principles form the foundation of
TQM and are expressed in the four pillars of the
TQM-house, namely
1.Problem solving Discipline
2.Interpersonal skills
3.Teamwork
4.Quality improvement process.
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 Total Quality Management

Problem Interpersonal Teamwork Quality

solving Skills. improvement
discipline process

Employee involvement, Structured, Stepwise, Discipline,

Consistency.
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• The success of TQM improves proportionately
in conjunction with the percentage of employees
within the organization who master this quality
attitude, mentality, and skills,
• TQM covers all parts of the organization.
• For an organization to be truly effective, every
single part of it, each department, each activity,
each person and each level must work properly
together, because every person and every
activity affects and in turn is affected by others.

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THANK YOU

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