Production & Operations Management

(OM)
 Meaning of Production
 In Economic Sense, Production is the
creation of utilities
 Production is a value addition process.
 Production is a process by which goods &
services are created
 In a manufacturing Organization
Production is the Fabrication of physical
object through the use of Men, materials &
equipments.
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 Meaning of Production Management

 Production Management is a process of planning,

organizing, directing & controlling the activities of
the Production function.

Meaning of operations Management

 operations Management is concerned with the
activities, concepts & techniques employed in
producing goods & services.
 operations Management is the process of
designing, operating,& controlling a productive
system that capable of transforming physical
resources & human talent into needed goods &
services.
2
Production System/Process

Adjustment Random Major

Needed Fluctuations Output

Output
Conversion
Goods & Services
Process
Inputs
Men
Machine
 Materials
Comparison of
Actual Vs Desired
Feedback

3
 Production System characteristics

 Production is an organized activity, so every

production system has an objective
 The system transforms the various inputs into
usable outputs
 Production system does not operate in isolation
from the other organizational systems such as
Finance, Marketing, e.t.c
 There exist feedback about the activities which
is essential to control & improve system
performance. 4
Functions of a production &
Operations manager
1. Demand forecasting 9. Plant location
2. Job design 10. Inventory control
3. Production planning 11. Wage incentives
4. Production control 12. Work measurement
5. Quality control 13. Measurement of
6. Method analysis performance
7. Plant lay out 14. Product development
8. Material handlings & design
9. Maintenance

5
 Distinguish between Manufacturing & service
Operations

Aspects of Differences are: 8. Nature of inventory

1. Definition 9. Measurement of
2. Nature of Product productivity
3. Consumption of 10. Quality
Product 11. Expenses for material
4. Degree of Customer handling
contact 12. Utilization of investment
5. Customer perception 13. Maintenance
6. Measurement of 14. Response time
performance
15. Facilities
7. Nature of work
16. Nature
6
 Some of major issues facing production or operations
managers or executives today in the constantly changing
business environment
or
Challenges faced by Operations Executives in the
continuously changing global Environment
1. Reducing the development & manufacturing time
for new product & services
2. Achieving & sustaining high quality while keeping
cost down
3. Integrating new technologies & control systems into
existing production systems
4. Obtaining, training & retaining qualified workers &
Managers
5. Working effectively with other functional areas
of business to accomplish the goals of the firm
7
 Challenges faced by operations Executives in
the continuously changing global Environment

6. Controlling production & services at

multiple sites in decentralized
organization
7. Working effectively with suppliers &
being user that is friendly for customers
8. Working effectively with New patterns
formed by strategic alliances

8
 Critical Decisions areas/Scope/Subject matter
of Production & Operations Management

A. Strategic Level Decisions are: that is

1. New Product Identification & development design
2. Process design & planning
3. Facilities Location
4. Layout Planning
5. Capacity Planning
6. Job design
7. Selection of equipment
9
 Critical Decisions areas/Scope/Subject matter
of Production & Operations Management

B. Operations Level Decisions are: that is

1. Production Planning
2. Production controlling & scheduling
3. Inventory Control
4. Quality control
5. Material handlings
6. Labor control
7. Maintenance & Reliability
8. Cost control& improvement 10
Principles of OM or how can you increase
Operational efficiency in an organization.

1. Get to Know the customer

2. Cut that is work that is in Process
3. Cut throughput time
4. Cut setup & change over time
5. Cut flow distance & space
6. Decrease cycle intervals for production
7. Cut number of suppliers to a few goods one
8. Cut number of components of the product or
services
11
Principles of OM or how can you increase
Operational efficiency in an organization

9. Make it easy to make

10. Arrange the work place to climate search
time
11. Cross train for mastery of more than one
job
12. Record & retain production, quality &
problem data at the work place
13. Assume that the line people get first
check at problem solving 12
Principles of OM or how can you increase
Operational efficiency in an organization

14. Maintain & improve existing

equipment & human work before
thinking about new equipment
15. Look for simple, Cheap, & Movable
equipment
16. Automate increasingly when process
variability can’t otherwise be reduced.

13
Today's Factors Affecting OM
 Global Competition
 Quality, Customer Service, and Cost
Challenges
 Rapid Expansion of Advanced
Technologies
 Continued Growth of the Service Sector
 Scarcity of operations Resources
 Social that is Responsibility Issues
14
Historical Milestones in OM
 The Industrial Revolution
 Post that is Civil War Period
 Scientific Management
 Human Relations and Behaviorism
 operations Research
 The Service Revolution

15
 The Industrial Revolution
 The industrial revolution developed in England in the 1700s.
 The steam engine, invented by James Watt in 1764, largely
replaced human and water power for factories.
 Adam Smith’s The Wealth of Nations in 1776 touted the
economic benefits of the specialization of labor.
 Thus the late is1700s factories had not only machine power
but also ways of planning and controlling the tasks of
workers.

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The Industrial Revolution
 The first great industry in the US was the textile
industry. The industrial revolution spread from England
to other European countries and to the United Sates.
 In 1790 an American, Eli Whitney, developed the
concept of interchangeable parts.
 The first great industry in the US
 In the 1800s the development of the gasoline engine and
electricity further advanced the revolution.
 By the midthat is1800s, the old cottage system of
production had been replaced by the factory system.
 . . . more

17
 Postthat isCivil War Period
 During the postthat isCivil War period great
expansion of production capacity occurred.
 By postthat isCivil War the following developments
set the stage for the great production explosion of
the 20th century:
 increased capital and production capacity
 the expanded urban workforce
 new Western US markets
 an effective national transportation system

18
 Scientific Management
 Frederick Taylor is known as the father of
scientific management. His shop system
employed these steps:
 Each worker’s skill, strength, and learning ability
were determined.
 Stopwatch studies were conducted to precisely
set standard output per worker on each task.
 Material specifications, work methods, and
routing sequences were used to organize the
shop.
 Supervisors were carefully selected and trained.
 Incentive pay systems were initiated.
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 Scientific Management
 In the 1920s, Ford Motor Company’s Operations
embodied the key elements of scientific
management:
 standardized product designs
 mass production
 low manufacturing costs
 mechanized assembly lines
 specialization of labor
 interchangeable parts

20
 Human Relations and Behavioralism

 In the 1927that is1932 period, researchers in the

Hawthorne Studies realized that human factors were
affecting production.
 Researchers and managers alike were recognizing that
psychological and sociological factors affected production.
 From the work of behavioralists came a gradual change in
the way managers thought about and treated workers.

21
 operations Research
 During World War II, enormous quantities of resources
(personnel, supplies, equipment, …) had to be deployed.
 Military operations research (OR) teams were formed to
deal with the complexity of the deployment.
 After the war, operations researchers found their way
back to universities, industry, government, and
consulting firms.
 OR helps operations managers make decisions when
problems are complex and wrong decisions are costly.

22
 The Service Revolution
 The creation of services organizations accelerated
sharply after World War II.
 Today, more than twothat isthirds of the US workforce
is employed in services.
 About twothat isthirds of the US GDP is from services.
 There is a huge trade surplus in services.
 Investment per office worker now exceeds the
investment per factory worker.
 Thus there is a growing need for service operations
management.

23
 The Computer Revolution
 Explosive growth of computer and
communication technologies
 Easy access to information and the availability of
more information
 Advances in software applications such as
Enterprise Resource Planning (ERP) software
 Widespread use of email
 More and more firms becoming involved in Ethat
isBusiness using the Internet
 Result: faster, better decisions over greater
distances
24
Today's Factors Affecting OM
 Global Competition
 Quality, Customer Service, and Cost
Challenges
 Rapid Expansion of Advanced
Technologies
 Continued Growth of the Service Sector
 Scarcity of operations Resources
 Socialthat isResponsibility Issues
25
 Facility Location

 Meaning of Facility Location

By Facility Location mean determining
an areas as well as site for
establishment of an enterprise, the
performance of an organization is
considerably affected by its location.
Facility Location planning involves
choosing the best place from the
available options for setting plant
/service facility.
26
Importance & reasons for in the selection
of Facility Location
1. A company’s Facility Location affects its operations
& ability to compete
2. In manufacturing organization, location affects
direct costs
3. In service operations Facility Location affects the
demand for the service
4. Long lasting consequences
5. Effective marketing of products & services
6. Prospective location implies respective market area
7. Selection of Good Facility Location enables a
company to provide convenient, dependable
services to its customers.
8. Facility Location Influence public Relations 27
 Factors affecting choice of location of
facilities
1. Materials & supplies availability & costs
2. Labor availability & costs
3. Proximity to market
4. Transportation system & costs
5. Utilities & costs
6. Infrastructure availability
7. Environmental regulations
8. Govt. restriction & incentives
28
Factors affecting choice of location of
facilities
9. Community attitude
10. Social infrastructural facilities
11. Proximity to related industry or
services
12. Site availability
13. Zoning restrictions
14. Constructions costs
15. Climate
16. Political situation of a particular place.

29
Factors affecting choice of location of service
operations
1. Proximity to customers & market
2. Transportation facilities & costs
3. Location of competitors
4. Residential density
5. Proximity to support & services
6. Image of the area
7. Visibility of site
8. Local ordinance
9. Community attitude
10. Law & order situation
30
 Reasons for relocation of
existing facilities
1. Changes in availability of input
resources
2. Shift in the structure in the market
3. Undesirable labor situation
4. Relocation of various associates
industries
5. Demolition, Expropriation
6. Merger
7. Change in regulations & law
8. Scientific discoveries 31
Facility Location quantitative
analysisthat is
BEP analysis,
Factors Rating System,
 Transportation model

32
 Break even analysis
Problem: For the Location Fixed Cost Variable
following data (TK) Cost Per
determine the best Unit (TK)
among of facility
A TK200000 TK62
Requirement: that is B TK500000 TK38
Find which location
is best & the Break C TK600000 TK50
even quantity & cost
D TK400000 TK70

33
 Break even analysis
Location Fixed Cost (TK) Variable Cost Per Unit TC=TFC+TVC
(TK)

TK200000 TK62×20000=1240000 TCa= TK200000+1240000

A =TK 1440000

TK500000 TK38×20000=760000 TCb= TK500000+760000

B = TK 1260000

TK600000 TK50×20000=1000000 TCc= TK600000+1000000

C = TK 1600000

TK400000 TK70×20000=1400000 TCd= TK400000+1400000

D = TK 1800000

34
 20
D
1800000
C
1600000
15 A

1440000
B
1260000
Costs 10
In
0000

6
5
4
3
2 Feasible Region Feasible Region
1 Feasible Region for Location “A” for Location “B’ for Location “B’

5000 10000 1250 15000 20000 25000

35

Quantity
 Facility Layout Planning
 Facility Layout/ Plant Layout: that
is Plant layout is a plan of the most
effective way of arrangement of the
physical facilities & manpower for
manufacturing of Products &
services.

36
Objectives of Facility Layout

 Provide enough production capacity

 To reduce material handling costs
 Conform to site & building constraints
 To allow space for production machine
 To allow high labor, Machine & space
utilization & productivity
 Provide for volume & product flexibility
 Provide for employee safety & health
 To allow ease of Supervision
 To allow ease of Maintenance
37
Types of Layout
1. Product or Line layout: Product or Line
layout is a type of layout in which
equipment, machineries or processes are
arranged according to the progressive steps
by which product is made.
Product or Line layout is a type of layout in
which equipments & works are laid out
according to the sequences of operations so
that R & M started at the head of the line
move progressively to adjacent item at the
other end of the line.
38
Process Layout
 Process Layout is a type of layout in which
work stations or work departments groups
according to functions to accomplish the
purpose of the organization.

39
 Figure:that is Product Layout
Turning Milling Drilling Package
Assembly Inspection
Operations Operations Operations Dispatch

Figure:that is Process Layout

Milling Lathes
Assembly

Welding Grinding Inspection Shipping & Painting

Receiving /Printing
40
 Each Machine
Process Layout Unit with Machines
Ex -that is Lathe Department

41
 Hybrid Layout
Hybrid Layout is a flow strategy combines
elements of both a product & process layout
focus.

Product or
Process Layout
Line Layout

42
Fixed position Layout
 In this type of layout the product remains
stationary at one location. This is called the
project type layout. In Fixed position Layout,
the materials or major components remain in
a fixed location tools, Machineries, men &
others materials are bought to this Location.
EXthat is Construction of BRIDGE or
Infrastructure.

43
Factors Affecting the design of Layout
of facilities
1. Nature of manufacturing System
2. Production process
3. Nature of product to manufacture
4. Material handling systems used
5. Volume of production
6. Nature of factory building
7. Availability of floor Place
8. Flexibility required in the system
9. Ease of supervision
10. Accessibility to other related departments
11. Provisions of Factory Act.
44
Planning Product Layout: Planning Product Layout
is the analysis production lines is the central focus of
analysis of product layouts
 Line Balancing: is an analysis process that
tries to equally divide the work to be done
among work stations so that the number of
work stations or workers required on a
production line minimized, it is also called line
balancing staff techniques.
 Work Elements: Work Elements are the
smallest units of work that can be performed
independently.
 Desired outthat isRate: Desired outthat
isRate is what should be line’s output rate.
45
 Some Terminologies
 Cycle Time: Cycle Time is the maximum
allowed time for work on a unit at each
station.
Production time (I)
C=
Rate of output

46
 Theoretical Minimum: is a benchmark or goal
for the smallest number of stations possible,
where the total time required to assemble
each unit.

Sum of work elements time (t)

Formula; TM =
Cycle Time (C)

47
 Balance Delay: Balance Delay is the amount
by which efficiency falls short of 100%.

t
Efficiency = 100
NC

48
Problemthat isLine balancing with the
longestthat isTask time hurestic
Work Elements Time (Second) Immediate Predecessors
“t”
A 40 None
B 80 A
C 30 D,E,F
D 25 B
E 20 B
F 15 B
G 120 A
H 145 G
I 130 H
J 115 C,I
Total=720 49
(Seconds)
Using the information above:
1. Draw the precedence diagram
2. Compute the cycle time
3. Determine the minimum number of work
stations
4. Assign tasks to workstations using the
longest that is task that is time heuristic
5. Calculate the efficiency & balance delay of
the solution found

50
Figure :that is Precedence
Diagram

D
25

A B E C J
40 80 20 30 115

F
15 I
130

G H
120 145 51
Station Candidates Choice Work Cumulative Idle Time
element Time (Second)
time=“t” (Seconds) Out of
(Second) “c”=150
S1 A,B,D,E,F A 40 40 110
B 80 120 (150that is40)
D 25 145 30
(110that is80)
5 (30that
is25)
S2 E,F,C,G E 20 20 130
G 120 140 10
S3 F,C,H H 145 145 5
S4 F,C,I F 15 15 135
I 130 145 5
S5 C,J C 30 30 120
J 115 145 5
∑t=720 Total Idle time = 30
Seconds Seconds
52
Figure :that is Precedence
Diagram

D
25

A B E C J
40 80 20 30 115

F
15 I
130

G H
120 145 53
 Materials Handling
Meaning of Materials Handling:that is
 Materials Handling involves movement of
materials mechanically or manually in
batches or one by one within the plant.
Movement may be vertical, horizontal or a
combination of two.
 Materials Handling system is the entire
network of transportation that receive
materials, store materials in inventories,
moves them about between processing
points within & between buildings, &
finally deposits the finished products into
vehicles that will deliver them to
customers.
54
Purposes of Materials Handling
1. Minimize the unit materials Handling cost
2. Reduce manufacturing cycle time
3. Provide for improved working conditions &
greater safety in the movement of materials
4. Contribute toward better control of the flow
of production
5. Gain higher productivity at lower
manufacturing cost.

55
Factors affecting the design of
Materials handlings System
1. Nature of production process
2. Layout of the plant
3. Nature of factory building
4. Nature of materials to be moved
5. Paths over which materials to be moved
6. Volume of materials to move
7. Space of holding
8. Capacity of the holding equipments

56
 Principles of Materials handlings
1. Materials should move through the facility in direct flow
patterns, minimizing zigzagging or back tracking
2. Related production processes should be arranged to
provide for direct material flow
3. Mechanical materials handling devices should be designed
& located and materials storage locations should be
selected so that human effort expended through bending,
reaching, lifting, & walking is mini9mized.
4. Heavy or bulky materials should be moved the shortest
distance through locating processes that use them near
receiving & shipping areas
5. The number of times each material is moved should be
minimized
6. Provide for safe handling methods & equipments
7. Replace obsolete handling equipments when more efficient
methods & equipments will improve operations

57
Factors affecting the selection of efficient
Materials handlings Equipments
1. Adaptability
2. Flexibility
3. Load capacity
4. Power & speed
5. Space requirement
6. Easy of maintenance
7. Cost of equipments
8. Safety
9. Efficient manpower availability
10. Supervision required
58
 Different Materials handlings Equipments
1. Conveyers: Conveyers primarily performs the
movement of uniform loads between fixed points.
Types of Conveyers:
 Belt Conveyers
 Pipeline Conveyers
 Monorail
 Chain Conveyers
Conveyers are useful when
A. Loads are uniform
B. Materials move continuously
C. Routes don’t vary
D. Movement rate is relatively fixed
E. Movement is from one point to another point

59
Different Materials handlings Equipments

2. Cranes: Cranes are devices capable of

moving materials vertically & laterally in area
of limited length & width & height. Cranes
are employed for lifting & lowering heavy
objects & moving them from one point to
another. Cranes find their application in
heavy engorging industries & in intermittent
type of production

60
 Different Materials handlings
Equipments
3. Hoists: Hoists are used for loading & unloading of
heavy objects & they are also used for raising &
lowering heavy & long objects.
Types of Hoists & cranes:
 Overhead traveling cranes
 Chain Hoists
 Electric Hoists
 Elevators
The hoists & cranes are useful when
1. Movement is within fixed areas
2. Movements are intermittent
3. Loads vary in size & weight
4. Loads handled are not uniform
Industrial trucks: Forklift, Platform truck, Tractor trailer
61
Product Design & Development
 Definition of Product Design: Product
Design is the structuring of component
parts or activities so that as a unit they
can provide a specific value.
 Product or Service Design is concerned
with the functional & aesthetic
requirements necessary to meet the
demand of the market place & at the same
time achieve an acceptable rate of return.

62
 How can you design product & service for an organization?
or
Discuss the steps involved in the development of product &
service Design
Steps Key Activities Key outputs
Step1 Idea Search for consumer needs Selection of ideas
generation
Step2 Product selection Market analysis & feasibility Choice of specific
study products features

Step3 Preliminary Design Evaluation of alternative Selection of best

Design design including
Productivity
Step4 Final Design Process development & Final specification
testing process in the form of
assembly, drawing
processing
formulas,procedure
63
,statement etc.
steps involved in the development of product & service Design

Steps Key Activities Key outputs

Step4 Final Design Process development & Final specification in

testing process the form of
assembly, drawing
processing
formulas,procedure,
statement etc.

Facility Exist New Facilities required

Technological choice
Evaluation of specific
Step5 Process Selection equipment
Technology alternatives
& process flow

Capacity planning
Production planning
Scheduling
64
Designing service organizations
 Designing a service organization entails the
execution of Four elements of what James
Hoskett refers as the “Service Vision”.
 The First element is Identification of target market
that is who is our customer
 The second is the service concept that is How we
differentiate our service in the market
 The Third is the service strategy – what is our
service package& the operating focus of our service?
 And Fourth is the service delivery system that is
what are the actual process, staff, & facilities by
which the service is created?
65
Production Planning & control
 Production Planning: - Production
Planning implies formulation,
coordination, & determination of activities
in a manufacturing system necessary for
the accomplishment of desired objectives.
 Production Planning is the determination,
acquisition & arrangement of all facilities
necessary for future Production of
products.

66
Production Planning & control
 Production control: - Production control is
the process of maintaining a balance
between various activities during
Production Planning providing most
effective & efficient utilization of
resources.
 Production Planning & control:-
Production Planning & control can be
defined as the direction & coordination of
firms resources towards attaining the pre
fixed goals
67
 Objectives of production Planning
& control
1. To achieve the highest efficiency in production of goods
2. To determine the nature & magnitude of various input
factors to manufacture the desired output
3. Establish targets & checking these against performance
4. To achieve the production objectives in respect of
quality, quantity & cost & timeliness of delivery.
5. Ensure smooth flow of materials by eliminating
bottlenecks, in production
6. Effective utilization of firm resources
7. Conform to delivery commitments
8. Make adjustments due to changes in demand & rush
orders.

68
 Different Manufacturing system

 Intermittent Manufacturing: - In this type

of system the goods are manufactured
specially to fulfill orders made by the
customers rather than for stock.
 Intermittent Manufacturing systems are
those where the production facilities are
flexible enough to handle a wide variety of
production & sizes.
 Continuous manufacturing system:- In
this system the items are produced for
stocks & not for specific orders.
69
 Difference between Intermittent Manufacturing system
& Continuous manufacturing system
Intermittent Continuous
Manufacturing system manufacturing system

Flexible production process Rigid production system

High product variety Low productivity

Work in process Low
inventory high
Demand can be Continuous demand
discontinuous
Customize product production Standardize product

Wide variety product produces Fewer variety of products are

produced
Flexible sequence schedule Standard set of process & sequence
required in this system used 70
Aggregate production planning (APP)
 Aggregate production planning (APP) is
related to the planning of overall production
activities & their associated operating
resources.
 Aggregate production planning (APP) is a
process by which a company determines
level of capacity, level of production, level of
subcontracting & even pricing over specified
time period.

71
 Master Production Schedule
 Master Production Schedule is an
extension of aggregate production plan. It
tells us the number of units of different
models of product to be manufactured on a
weekly or monthly basis.

72
 Maintenance
 Defination (Marked)

73
Factors emphasizing increasing
importance of maintenance
 Increased mechanization
 Increased complexity of equipment
 Increased parts and supplies investment
 Tighter control of production
 Tighter delivery schedule
 Increased quantity requirement
 Rising costs

74
How does maintenance contribute for incoming
operations efficiency/competitive advantage to the
enterprise?
 By reducing cost of operations
 By ensuring manufacture or quality product
 By reducing lead time of production
 By reducing wastage
 By ensuring maximum utilization of efforts of human
resources and capacity of equipment
 By minimizing investment inventory
 By meeting delivery schedule to customer
 By minimizing machine downtime
 By increasing longibility of equipment and machines
 By ensuring smooth flow of production
 By providing safe working environment.

75
 Types of maintenance
 Connective/Repair maintenance Connective or
Repair maintenance: Repair activities are reactive, that is they
are performed after malfunction has occurred. This is also
known as breakdown maintenance or corrective maintenance.
 Objectives of repair program: operations managers
implement repair programs to achieve the following activities:
 To get equipments back into operations as quickly as possible
in order to minimize interruptions to production.
 To control the cost of repair crews.
 To control the cost of the operation of repair shops.
 To control the investment in replacement spare parts those
are used when machines are repaired.
 To control the investment in replacement spare machines.
 To perform the appropriate amount of repairs at each
malfunction. 76
Preventive/planned/schedule maintenance
 Preventive maintenance: this is a type of maintenance work which is undertaken
before malfunctioning of equipments and buildings. It is a planned maintenance of
equipment and machines. This is also called scheduled maintenance.
 In broader sense “preventive maintenance is the periodical inspection and service
activities which are aimed to detect potential failures and perform minor
adjustments or repairs which will prevent major operating problems in future.
 Objectives of preventive maintenance program:
 Reduce the frequency and severity of interruptions to production cause d by
machine malfunctions.
 Extend the useful life of production machinery.
 Reduce the total cost of maintenance by substituting preventive maintenance cost
for repair cots.
 Provide safe working environment for workers.
 Improve product quality by keeping equipment in proper adjustments well
serviced, and in good operating conditions.
 Advantages of preventive maintenance(marked)
 Limitations of preventive maintenance(marked)
 How preventive maintenance can be made effective?(marked) Page 20
 Equipment malfunctions in manufacturing ands service industries have a
direct impact on :
 Production capacity
 Product and service quality
 Employee and customer safety
 Production cost
 Customer satisfaction

77
Distinction between connective and
preventive maintenance?
 Autonomous/Total production maintenance
 Autonomous maintenance refers to take additional
responsibility to maintain the whole production
system. In that approach production and
maintenance department jointly take the
responsibility. It is widely used maintenance
approach which gives the competitive advantage.
 Pre-requisites of Autonomous maintenance:
 Adequate and skilled people.
 Additional incentives for people
 Require necessary training
78
Chapter: Productivity Measurement
 Productivity: Productivity refers to the efficiency of the
production system.
 Productivity is some relationship between inputs and
outputs of an enterprise. It is the quantitative
relationship between what we produced and the
resources used. That it is the ratio of outputs to
inputs
 According to P.F. Drucker, “productivity means
balance between all factors that will give the
maximum output with the smallest effect. Productivity
is therefore defined as = outputs/inputs
 Symbolically; productivity= measure of
/
outputs measure of inputs.

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Types of productivity measurement
 there are a number of ways to measure
productivity. The main criterion of measuring
productivity are
 In term of input performance by calculating changes
in output per unit of input.
 On the basis of output performance by calculating
change in input per unit of output.
 Total productivity=total(Tangible)output/total
inputs=output/Labor+ Machine+ Capital
+technology+ information +Management
 multifactor productivity=output/L+M+C+T+I
 Partial productivity=output/L/M/C/I/T/M
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Productivity Measurements
 Advantages of total productivity measure:
 Easy and more accurate representation of the
total picture of the company.
 Easily related to total cost
 Considers all quantifiable outputs and inputs.
 Limitations of total productivity measure:
 Difficulty in obtaining data.
 Requirement of special data collection system.
 Advantages of potential productivity measure:
 Easy to understand and calculate.
 A tool to pinpoint improvement.
 Limitations:
 Misleading of used alone.
 No consideration of overall impact.

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 Maintenance
 Maintenance means up-keep of property or
plant. Types of Maintenance
 Connective/Repair maintenance
 preventive/planned/schedule maintenance
 predictive maintenance

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Importance of maintenance

 Factors emphasizing increasing importance

of maintenance
 Increased mechanization
 Increased complexity of equipment
 Increased parts and supplies investment
 Tighter control of production
 Tighter delivery schedule
 Increased quantity requirement
 Rising costs

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How does maintenance contribute for incoming operations
efficiency/competitive advantage to the enterprise?

 By reducing cost of operations

 By ensuring manufacture or quality product
 By reducing lead time of production
 By reducing wastage
 By ensuring maximum utilization of efforts of human
resources and capacity of equipment
 By minimizing investment inventory
 By meeting delivery schedule to customer
 By minimizing machine downtime
 By increasing legibility of equipment and machines
 By ensuring smooth flow of production
 By providing safe working environment.

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Types of maintenance

 Connective/Repair maintenance
 preventive/planned/schedule maintenance
 predictive maintenance

Connective or Repair
maintenance:
Repair activities are reactive, that is they are
performed after malfunction has occurred. This is
also known as breakdown maintenance or corrective
maintenance.

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Objectives of repair program:
 operations managers implement repair programs to achieve
the following activities:
 To get equipments back into operations as quickly as
possible in order to minimize interruptions to production.
 To control the cost of repair crews.
 To control the cost of the operation of repair shops.
 To control the investment in replacement spare parts those
are used when machines are repaired.
 To control the investment in replacement spare machines.
 To perform the appropriate amount of repairs at each
malfunction.

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Preventive maintenance:
 Preventive maintenance: this is a type of
maintenance work which is undertaken before
malfunctioning of equipments and buildings. It is a
planned maintenance of equipment and machines.
This is also called scheduled maintenance.
 In broader sense “preventive maintenance is the
periodical inspection and service activities which are
aimed to detect potential failures and perform minor
adjustments or repairs which will prevent major
operating problems in future.

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Objectives of preventive maintenance
program:
 Reduce the frequency and severity of interruptions to
production cause d by machine malfunctions.
 Extend the useful life of production machinery.
 Reduce the total cost of maintenance by substituting
preventive maintenance cost for repair cots.
 Provide safe working environment for workers.
 Improve product quality by keeping equipment in
proper adjustments well serviced, and in good
operating conditions.

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 Inventory Management
 Good inventory management is essential to
successful operations of management of the
organizations for a number of reasons. Inventory
policies are important enough that production,
marketing and financial managers work together to
reach an agreement of these policies. There are
conflicting a view concerning inventory policies under
scores the balance that must be stuck among
conflicting goals.
 Reduce production costs, reduce inventory
investment and increase customer
responsiveness. An effective control of
inventory becomes a must for smooth and
efficient running of production cycle with last
interruptions.
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Meaning /definition of Inventory

 Inventory is defined as the stock of any item or

resources used in an organization.
 Inventory is the piles of raw materials and finished
goods in the warehouse.
 All materials, parts, and in-process or finished
products recorded on the books by an organization
and kept in its stores, warehouses and plants are
known as inventories.
 Inventory refers to the physical stock of goods which
through remain idle in store but is essential for
smooth sailing of the company and hence has
economic value.

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Characteristics of inventory
 Inventories serve as cushions to absorb
shocks.
 Inventory for any organization is necessary
evil.
 Inventories are the result of many interrelated
decisions and policies with in organization.
 Inventory provides production economies.

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Classification of inventories
 Classification of inventories according to
functions
 Transit inventories
 Cycle inventories
 Buffer inventories
 Decoupling inventories

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Purposes of Inventory
1. to protect against uncertainty
1. to take the advantage of price discounts
2. to meet demand during the replenishment period
3. to keep face with or adapt with changing market
conditions
4. to prevent loss of orders(sales)
5. to take advantage of economies of scale
6. to support a strategic plan
7. to hedge against price increase
8. generated by the transformation process
9. to ensure smooth flow of production
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Functions of Inventory

 Inventories serve a number of functions. Among the

most important are the following:
 To meet anticipated demand.
 To smooth production requirements
 To decouple components of the production
distribution system.
 To protect against stock out.
 To take advantage of order cycles.
 To hedge price increases or to take advantage of
quantity discounts.
 To permit operations.

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 Inventory Control

 Inventory control is the techniques of

maintaining the size of the inventory at some
designed level keeping in view the best
economic interest of an organization.
 Inventory control is a panned approach of
determining what to order, when to order ,
and how much to order, and how much to
stock so that costs associated with buying
and storing are optimal without interrupting
production and sales.
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Techniques/Types/methods of
Inventory Control
 Techniques/Types/methods of Inventory Control
 ABC analysis
 Two-Bin System
 Economic order quantity
 Material Requirement Plan (MRP)
 Cad system
 JIT system

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 ABC Analysis.
 It is the process of dividing items into three classes according to
their usages so that manages can focus on items that have the
highest dollar value.
 A class items typically represent about10pecent of the items but
account 80%of the dollar usage i.e., dollar value. These items
required right and strict control and need to be stocked in the
smaller quantities. The inventory of A, class items is kept at
minimum.
 “B” class items account another 2%of the items (i.e., Quantity)
but only 15% of the dollar usage (i.e., value) these are
intermediate items. The control on these items should be
intermediate between “A and C” items.
 Finally, 70% of the items fall in class C .representing mean5%
of the dollar usage (i.e., value). These items’ being less
representative does not require strict control. These are ordered
in bulk as against infrequent ordering of A class items.
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To Bin System or Two Bucket System

 A visual system version f the Q system in the

two bin system in which an items inventory is
stored at two different locations. Inventory is
first withdrawn from one bin. If the first bin is
empty then second bin provides backup to
cover demand until a replenishment order
arrives. An empty bin signals the need to
replace a new order.

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Economic Order Quantity (EOQ)
 EOQ is an optimum quantity level which minimizes
the cost and maximizes return.
 Some Technologies of EOQ :
 Reorder point/Level=safety stock+ Lead time usage
wages
 =safety stock+ Lead
time*daily usage
 Maximum inventory= Safety stock+ EOQ
 Minimum Inventory=Safety stock
 Average inventory=Safety Stock+EOQ/2

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Some Technologies of EOQ
 Total Inventory cost= Total Carrying Cost+ Total Ordering Cost
 =EOQ/2*Carrying cost per unit+ D/EOQ*Ordering
cost per order
 MinimumTotalCost(MTC)=Total carrying cost +Total ordering
Cost+ Cost of the materials=EOQ/22*Carrying cost per unit+
D/EOQ*order cost per order+ Cost of the materials
 EOQ= √ 2DCO/CC
 Where, D=Annual demand
 CO=Cost per order (per year)
 CC=Carrying cost per unit per year
 Time between successive order/Order cycle
 =360/No of orders per year

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 (Purchase model with instantaneous
replenishment and without storage)

 Problem: Alpha Industry needs 5400 units per

year of a bought out component which will be
used in its main product. The ordering cost is
taka 250 per order and the carrying cost per
unit per year per year of average industry is
Taka 30. Find EOQ, the number of orders per
year and the time between successive orders.
(Lead time)

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