SYLLABUS PRODUCTION & OPERATIONS MANAGEMENT

Transcription

1 SYLLABUS PRODUCTION & OPERATIONS MANAGEMENT MBA 2nd SEMESTER, M.D.U., ROHTAK External Marks : 70 Time : 3 hrs. Internal Marks : 30 UNIT-I Meaning, nature, scope and major decision areas of production management; production system: meaning and types (production to order & production to stock); facilities location; facilities layout and materials handling; line balancing. UNIT-II Product and process planning and selection; capacity planning; aggregate planning and master production scheduling; materials requirement planning. UNIT-III Planning & control in mass production; shop floor and batch production; line of balance; work study; objectives, pre-requisites and procedure, method study & work measurement. UNIT-IV Materials Management- meaning, importance and functions; purchasing management; stores management and Inventory management; quality assurance-acceptance sampling, statistical quality control; maintenance management Note : The question paper will be set by the external examiners. The external examiner will set 8 questions in all, selecting not more than two questions from each unit. The candidates will be required to attempt five questions in all, selecting atleast one question from each unit. 175

2 PRODUCTIONS & OPERATIONS MANAGEMENT MBA 2nd Semester (DDE) UNIT I Q. Define production Management. Also Explain its Scope. Ans. Meaning and Definition of Production : Production may be defined as conversion of inputs-men, machine, materials, money, methods and management (6Ms) into output through a transformation process. Output may be goods produced or services rendered. Systems Aspects of Production Function : INPUTS Men Machines Material Money Methods Mangement TRANSFORMATION (CONVERSION) PROCESS OUTPUT Goods Produced OR Services Rendered Feedback Information/Control Diagram : SYSTEM ASPECTS OF PRODCUTION/OPERATIONS FUNCTION This figure explains the systems aspect of production/operations function of an organization. The organization received several inputs as indicated on the left hand side and converts them into useful products and/or services using its facilities. In the process of conversion, definitely, there will be some deviation in the product s attributes like quality, size, shape and number of units produced. Just to cope up with the pre determined plans and policies, it is highly essential to communicate these deviation to the input stage in the form of feedback for making necessary corrections. A sample list of corrections is presented below : a) Tight quality check on the incoming raw material b) Adjustment of machine settings 176

3 PRODUCTION & OPERATIONS MANAGEMENT c) Change of tools d) Change in the production plans, like increase or decrease in volume of production. Meaning of Production Management : Production management is a branch of management which is related to the production function. Production management is the management which by scientific planning and regulation sets into motion the part of an enterprise to which it has been entrusted the task of actual transformation of inputs into outputs. Definition of Production Management : Production/Operations management is the process which combines and transforms various resources used in the Production/Operations subsystem of the organization into value added products/services in a controlled manner as per the policies of the organization. Thus production management is concerned with the decision making regarding the production of goods and services at minimum cost according to the demands of the customers through the management process of planning, organizing and controlling. Production management is thus assigned with the following task : (1) Specifying and accumulating the input resources i.e. Management Men Materials Machine Money Methods (2) Designing and installing the assembly or conversion process to transform the inputs into output, and (3) Co-ordinating and operating the production process so that the desired goods and services may be produced efficiently and at a minimum cost. Scope of Production Management : Production management mainly associated with the factory management as the problem of production can be removed with the development of factory system. Before the evolution of factory system, manufacturing activities are carried on by single person that pose no problem or very insignificant problem of production and therefore question of production management did not arise. But with the inception of factory system, the situation changed and now production management is necessary. Thus, the scope of production management began to develop. Scope of production management are: (1) Activities relating to Production system Design : Decision relating to the production system design is the firm and fore-most activity of the production management. This activity concerns the : 177

4 (i) Production engineering. (ii) Problems regarding design of tools and jigs. (iii)design, development and installation of equipment (iv)selection of the optimum size of the firm. (v) The selection of an optimum plant location very much depends upon the decision taken regarding production engineering. (vi) Decision regarding production system design concerns the use of those techniques which are concerned with work environment and work measurement and includes problem like motion study process analyses. (vii) Layout of the plant. (viii) Material Handling (ix) Time Study. (2) Activities relating to analysis and control of activities : The next problem arises after the designing of the production system. In includes all decision regarding production administration and therefore all functions of the management so far as they are applicable to the production system from the subject matter of the production management. These activities are: a) Production Planning : The first decision in this regarding is production planning. It includes preparation of short term production schedules etc. Various major decisions required in production management are as follows: (i) Production Design : To lead in research and engineering competitions in all areas of our primary business, designing and producing products and services with outstanding quality and inherent customer value. (ii) Process designing and equipment selection : To determine and design the production process and equipment that will be compatible with low cost and high quality. (iii) Layout : To achieve production efficiency and effectiveness through skills, imagination and resourcefulness in plan layout and work method. (iv) Location and Facility Engineering : To locate, design and build efficiency and economic facilities that will yield high value to the company. (v) Human Resource Management : To provide good quality of work life with well designed, safe rewarding jobs, Stable employment and equitable pay in exchange for outstanding individual contribution from employees at all levels. (vi) Maintenance : To achieve high utilization of equipment. (vii) Quality Assurance Control : To attain exceptional quality that is consistent with company policy and marketing objective. (viii) Material Management : To cooperate with supplies and sale control to develop stable, effective and efficient sources of supply for those components that are to be processed from outside sources. 178

5 PRODUCTION & OPERATIONS MANAGEMENT (ix) Inventory Control : To achieve low investment through scientific inventory control such as: ABC Analysis VED Analysis Economic Order Quantity Inventory Turnover Ratio etc. And through appropriate customer service levels and high facility utilization. b) Production Control : After planning the next step is production control because production plan cannot be activated unless they are properly guided and controlled. For this purpose, production manager has to regulate work assignment, service work progress and check and remove discrepancies, if any, in the actual and planned performances of production manager has to look after the production control activity through: (i) Control on inventory such as raw materials purchased parts, finished goods etc. (ii) Control on work-in-progress through production control. (iii) Control of quality through process control. Q. Define Production Management. Also explain the major decision areas of Production Management? Ans: Meaning of Production Management : Production management is a branch of management which is related to the production function. Production management is the management which by scientific planning and regulation sets into motion the part of an enterprise to which it has been entrusted the task of actual transformation of inputs into outputs. Definition of Production Management : Production/Operations management is the process which combines and transforms various resources used in the Production/Operations subsystem of the organization into value added products/services in a controlled manner as per the policies of the organization. Major Decision Areas of Production Management management involves the following major decisions: Production 1) Strategic Decisions : Strategic decisions are taken at top level management. Some example of strategic decisions are: (i) Warehouse Location. (ii) Distribution systems (iii)building a new plant (iv) Mergers and Acquisitions : 179

6 (v) New Product Planning. (vi) Compensation planning (vii) Quality assurance planning (viii) R&D planning (ix) Forming new technology department (x) Dropping a product from the existing product mix. (xi) Social Responsibility planning, etc. The type of decision taken at this level is often highly unstructured in nature. 2) Tactical Decisions : Tactical decisions are taken at middle level management. Some examples of tactical decisions are: (i) Pricing a product (ii) Product improvement through value analysis. (iii)preventive maintenance policy (iv) Budget analysis (v) Short term forecasting (vi) Make or buy Analysis (vii) Credit evaluation (viii) Plant layout (ix) Project scheduling (x) Reward system design. (xi) Buying equipments etc. The type of decision taken at this level is mostly semi-structured in nature. 3) Operational Decisions : Operational decisions are taken at bottom level management. Some examples of operational level decisions are: (i) Designing sampling plan to inspect the raw materials at stores while receiving materials from vendors (ii) Deciding price discount at salesman level in the field (iii)scheduling of maintenance manpower. (iv) Machine loading (v) Daily operator scheduling (vi) Order Entry (vii) Production scheduling (viii) Inventory Control (ix) Buying software (x) Approving loans etc. Q. Define Production System. Discuss different types of production systems with suitable examples. Ans. Production System : The production system is the framework in which the conversion of input into output occurs. At the one end of the production system are the inputs and at the other end, outputs, input and output are 180

7 PRODUCTION & OPERATIONS MANAGEMENT linked by certain operations or processes which impact to the inputs and are called transformation process. Systems Aspects of Production Function : INPUTS Men Machines Material Money Methods Mangement TRANSFORMATION (CONVERSION) PROCESS OUTPUT Goods Produced OR Services Rendered Feedback Information/Control This figure explains the systems aspect of production/operations function of an organization. The organization received several inputs as indicated on the left hand side and converts them into useful products and/or services using its facilities. In the process of conversion, definitely, there will be some deviation in the product s attributes like quality, size, shape and number of units produced. Just to cope up with the predetermined plans and policies, it is highly essential to communicate these deviation to the input stage in the form of feedback for making necessary corrections Types of Production System systems: : There are mainly two main production Types of Production System Continuous Production System (Production to Stock) Intermittent Production System (Production to Order) Mass Production System Production Process Production System Job Production Batch Production (A) Continuous Production System : It involves a continuous or almost continuous physical flow of material. It makes use of special purpose machines and produces standardized items in large quantities. Such processes are 181

8 adopted by concern which produce goods or services continuously by putting them through a series of successive connected operations in anticipation of customer demand and rather than in response to customer orders. Petroleum Industry Chemicals Industry Steel and Sugar Industry Examples of industry using such technology are: (i) Analytical Industry : An analytical industry like oil industry breaks up their materials into several parts along with its process of production. (ii) Synthetical Industry : A Synthetical industry like current industry uses several raw materials, mixes them up and manufacture a product through the process of production. (1) Mass Production : This system of production is used by concerns where manufacturing is carried on continuously in anticipation of demand though demand of the product may not be uniform throughout the year. Standardization is the keynote of mass production. This system may also be called Flow Production System. This system is useful on single purpose type of machines and where standardized products are manufactured through standardized plant machineries and processes. Moreover this system requires huge investments in machines are equipment. (2) Process Production : This system is an extended form of mass production where production is carried on continuously through a uniform predetermined sequence of operations. Generally under this system finished product of once process is used in the next process as a raw material till the last process. Large industries like petroleum refining, heavy chemical industries generally use this system of production. Under this system, generally one principal raw material is transformed into several product (may be called by products) at different stages of operations. For example crude oil is processed into Kerosene, gasoline and other products. (B) Examples : Classification of Continuous Production Industries : Classification of Continuous Production System : Intermittent Production System : Intermittent production system situations are those where the facilities must be flexible enough to handle a wide variety of products and sizes or where the basic nature of activity imposes change of important characteristics the input. Under this system no single sequence of operations is appropriate and therefore standardized materials or machines cannot be used. Under this system of manufacturing production is done in lots rather than on a continuous flow 182

9 PRODUCTION & OPERATIONS MANAGEMENT basis. It is done more often on the basis of customer orders. The finished product is heterogeneous but with in a range of standardized options assembled by the producers. Since production is partly for stock and partly for customer demand, there are problems to be met in scheduling, forecasting control and co-ordination. Examples of such industries are : Auto-mobile Industry Electrical Goods Manufacturing plants Printing press etc. Classification of Intermittent Production System : production system may be divided into two types, namely Intermittent (1) Job Production : In this system, goods are produced according to the orders of the customers. Continuous demand of such items is not assured and therefore production is done only when the orders for the manufacturing of items are produced from the customers. As the need of each customer differs the materials, plants and equipments to be used also differ and therefore each product is a class by itself a constitutes a distinct and separate job for production purposes. (2) Batch Production : Under this system, the manufacturing is done in Batches or groups or lots either on the basis of customer s order or with a hope of a continuous demand of the product. Under this system, medium scale production is warranted. The best example of this type of production system is chemical industry where different medicines are produced in batches. Both job or batch production are similar in nature and almost have the same feature except in regard to the quantity of production. Q. Explain Facilities Location. Ans: Introduction : Business systems utilize facilities like, plant and machineries, warehouses, etc, while performing the task of producing products/services. A proper planning of these facilities would definitely reduce their cost of operation and maintenance. Meaning of Facilities Location : Facilities location may be defined as selection of suitable location or site or plan or place where the factory or plant or facilities to be installed, where plant will start functioning. Situation give rise to the problem of Location : The problem of location is to be tackled by the entrepreneur not only at the time of starting a business unit but throughout the life of an undertaking. The problem arises under one or the other of the following conditions: 1. At the time of starting a business unit. 183

10 2. The increase volume of its business and the extent of its market requirement. 3. The facilities provided for in the original location plan are no longer sufficient for the expanding business and therefore expansion of the existing plant or a new location is necessary. 4. The lease for the site has expired, owner of the property is not prepared to renew the lease agreement. 5. The existing power or water supply at the site is no longer sufficient for the purpose of production. Ideal Location : Ideal location means that location which ensures the optimum results in relation to costs. Ideal location is one that permits the lower unit cost in the production and distribution of a product or service. Factors of Ideal Location : (1) Minimum costs of transporting the materials and products. (2) Easy availability of raw materials and other factors of production. (3) Convenience in accessibility to markets (4) Availability of adequate space for the site of the enterprise. (5) Sufficient scope for further expansion (6) Integration of the enterprise with the economic, social and cultural traits of the community of the region. Types of Facilities : The various types of facilities are discussed below: (1) Heavy Manufacturing : Heavy manufacturing facilities are primarily plants that are relatively large and require a lot of space and as a result, are expensive to construct. Examples : Automobile Plants, Steel Mills and Oil Refineries. Sites for manufacturing plants are normally selected where construction and land cost can be kept at minimum and raw material sources are near by in order to reduce transportation costs. (2) Light Industry : Light industry facilities are typically perceives as smaller, cleaner plants that produce electronic equipment as components, parts used in assemblies or assembled products. Environmental issues are less important in light industry. Important factors effecting these types of industries are: Labour Pool Especially the availability of skilled workers The Community Environment Government regulation Land Use Requirements. Examples : Examples might include plants making stereos, TVs or Computers etc. 184

11 PRODUCTION & OPERATIONS MANAGEMENT (3) Warehouses and Distribution Centres : Warehouses are a category of their own. Products are not manufactured or assembled with in their confines, nor are they sold from them. They represent an intermediate point in the logistical inventory system where products are held in storage. (4) Retail and Service : Retail and service operations generally require the smallest and least costly facilities. Examples : It includes such service facilities as restaurants, banks, hotel cleaners, clinics and law offices ad retail facilities such as groceries and department stores. Q. Define Facilities Layout. What are the types of Facilities layout? Ans. Facilities Layout : Facilities payout is a floor plan of the physical facilities which are used in production. Layout planning refers to the generation of several possible plans for the spatial arrangement of physical facilities and selects the one which minimizes the distance between the departments. Objectives of Facilities Layout : The objectives of facilities layout are: (1) Minimize investment in equipment (2) Minimize overall production time. (3) Utilize existing space most effectively. (4) Provide for employee convenience, safety and comfort. (5) Maintain flexibility of arrangement and operations (6) Minimize materials handling cost (7) Facilitate the manufacturing process (8) Facilitate the organizational structure. Classification of Layout : Layouts can be classified into the following four categories: (1) Process Layout (2) Product Layout (3) Group Layout (Combination layout) (4) Fixed position layout. (1) Process Layout : In a process layout, similar machines and services are located together. Therefore, all drills will be located in one area of the plant. Process layout is normally used when the production volume is not sufficient to justify a product layout. Advantages of Process Layout : a. Machines are better utilized, fewer machines are required. b. A high degree of flexibility in terms of task allocation to machines exists. c. Comparatively low investment in machines is required. 185

12 d. The diversity of tasks offers a more interesting and satisfying occupation for the operation. Limitations of Process Layout : a. Materials handling cost will be high b. Production planning and control systems are more involved. c. Large amount of in-process inventory will results d. Space and capital are tied up by work in process e. Higher grades of skill are required. (2) Product Layout : Product layout is used when machines and auxiliary services are located according to the processing sequence of the product. The product layout is selected when the volume of production of a product is high such that a separate production line to manufacture it can be justified. In a strict product layout, machines are not shared by different products. Therefore the production volume must be sufficient to achieve satisfactory utilization of the equipment. Advantages of Product layout : (i) The flow of product will be smooth and logical in flow lines. (ii) In-process inventory is less. (iii)throughput time is less. (iv) Material handling cost is minimum (v) Operators need not be skilled (vi) Simple production planning and control systems are possible (vii) Less space is occupied by work in transit and for temporary storage. Limitations of Product Layout : (i) A breakdown on one machine in a product line may cause stoppages of machines in the downstream of the line. (ii) A change in product design may require major alterations in the layout. (iii)comparatively high investment in equipments is required. (3) Group Layout : A group layout is a combination of the product layout and process layout. It combines the advantages of both layout systems. The basic aim of a group technology layout is to identify families of components that require similar processing on a set of machines. In turn, these machines are grouped into cells. Each cell is capable of satisfying all the requirements of the component family assigned to it. In a group technology layout, the objective is to minimize the sum of the cost of transportation and the cost of equipments. So, this is called as multiobjective layout. (4) Fixed Position layout : A fourth type of layout is the static product layout or layout by fixed positions, in which the physical characteristics 186

13 PRODUCTION & OPERATIONS MANAGEMENT of the product dictate as to which type of machines and men are to be brought to the product. The ship building industry commonly employs a static product layout. Since, the static product layout is not justified except in unusual situations, it has limited scope. Q. Explain Materials Handling Systems. Also explain its principles. Ans. Material Handling System : In addition to designing of the layout for a factory system, the development of materials handling system to move materials from one stage of production to another is very important. Materials handling includes moving, packaging and storing all the materials used by a firm. The materials handling system is judged by how well it serves the production process and how economical it is. With the development of technology, a variety of materials handling equipments has been developed to economize costs, lessen the monotony and effort of the workers, improve the safety for men and materials and improve the overall productivity. Such equipments range from hand trolleys to automatic devices for handling a variety of products and materials. Unit Load Concept : The materials are shipped from a given source to a given destination in vetches consisting of certain number of pieces or certain quantity in each trip. Again, for the purpose of handling within a given work area, loading to a material handling equipment and unloading from a material handling equipment, there must be a limit on the number of pieces in the case of discrete items or a limit on the quantity of materials in the case of continuous materials to be picked and placed simultaneously while loading and unloading the materials. In this process, the batch of materials which are placed at particular destination should retain its original shape and size before picking. The optimal shape and size of the bulk of material which will retain its original shape and size even after unloading is called as unit load. Materials Handling Principles : materials handling are listed below: Some of the important principles of 1. All materials to be handled mechanically from the inbound raw materials stage to the outgoing finished goods stage. 2. Heavy loads must be handled mechanically 3. Avoid mixing materials which require future sorting. 4. Transfer of materials from one container to another should be done mechanically. 5. Hot and hazardous materials must be handled mechanically. 6. Unit load concept must be followed. The larger the size of the unit load, the greater the economy. 7. Use of overhead space for conveyers and for stocking materials to be stored must be encouraged. 8. Materials are to be moved in a straight line to the extent possible. 187

14 Minimum number of changes in the direction while moving materials is preferable. 9. Avoiding floor contact of materials is preferable. Pallets can be used for this purpose. 10.Pick and place of materials within operations and in transit should be infrequent. Classification of Materials Handling Equipments : The materials handling equipments can be classified into the following categories: (A) Fixed Path Equipments (B) Variable Path Equipments (C) Auxiliary Equipments (A) Fixed Path Equipments : below: (1) Conveyers : (i) Belt Conveyer (ii) Roller Conveyer (iii)screw Conveyer (iv) Bucket Conveyer (v) Pneumatic Conveyer (vi) Gravity Conveyer (2) Cranes and Hoists : (i) Overhead traveling Crane (ii) Gantry Crane (iii)jib Crane (iv) Hoist (v) Stacker Crane (vi) Monorail The fixed path equipments are as listed (B) Varied Path Equipments : The equipment that can be included in this category are listed below: (1) Lift Truck (2) Platform Truck (3) Hand Stacks (4) Tractors (5) Hand Trolleys (C) Auxiliary Equipments : categories: (1) Pallets, skids (2) Containers (3) Lift Truck attachments These can be classified into the following 188

15 PRODUCTION & OPERATIONS MANAGEMENT (4) Loaders and unloaders (5) Ramps Q. Write a short note on Line Balancing. Ans. Introduction : Many differences exist in the management of production activities in make-to-order and make-to-stock firms. In make-to-order situations, due dates are important, and hence the sequencing of customer orders at various machine centres is an essential function. This involves both planning and control of activities. Make-to-stock products are generally highvolume consumer goods, such as telephones, automobiles, wrist watches, etc. The manufacture of standardized, high-volume items, which involves flow shops requires control for effective production. A flow shop consists of a set of facilities through which work flows in a serial fashion. The same operations are performed repeatedly in every work station, thus requiring lower-level skilled workers. The flow shop generally represents a mass production situation and hence the operations are carried out very efficiently e.g. when an operator has to install a gear box on an automotive assembly or assembling cooling system on a washing machine. In flow shops, items enter the finished goods inventory one after another, Often in the same order of the inputs for these goods, leaving very low inprocess inventories. Since the items are mostly make-to-stock, forecasting is a difficult job, and hence the finished goods levels in terms of anticipation inventories are very high. For the same reason, raw materials are carried at higher inventory levels. Machines in flow shop tend to have a special-purpose design, and hence the initial investment level is generally high for heavy automated plants. The production control system of continuous production is called flow control. Specialization, high volume, division of labour and efficiency are built into the design of assembly lines. The main objective of flow control in flow shop is to balance the assembly line. The assembly line is represented in the form of a precedence diagram. A sample diagram is shown in the following figure: A Sample precedence diagram (timings are in minutes) 189

16 A precedence diagram specifies the order or sequence in which the activities must be performed. Each circle is a node and the number inside each circle identifies particular operation. The number outside the circle represents the duration of the operation. Arrow indicates the direction of flow of operation. For example, activity 2 and activity 3 must be completed before taking up the activity 4. Cycle Time : Cycle time (CT) is directly related to the production rate of the assembly line. Productive Time CT = Demand per period Example : For example, if 24 assemblies are required per day, the cycle time based on an eight-hour day, would be : 8 X 60 CT = = 20 Minutes 24 Need of Line Balancing : We used line balancing technique to achieve: 1. The minimization of the number of workstations; 2. The minimization of cycle time; 3. The maximization of workload smoothness; 4. The maximization of work relatedness. An assembly line is a manufacturing process in which interchangeable parts are added to a product in a sequential manner to create a finished product. The assembly line was first used by Henry Ford and his engineers. Ford was also the very first to build factories around that concept. Objectives of Line Balancing : The objective of line balancing is to subdivide the network into several sub networks (Stations) without violating the precedence relationships and allocating operations to each station without exceeding the cycle time, i.e., the sum of the times of operations allocated to each station should not exceed the cycle time. While allocating operations to each station, the precedence relationships must be maintained. If these are followed, then we can ensure production of the specified volume of products or items using the assembly line. 190

17 PRODUCTIONS & OPERATIONS MANAGEMENT MBA 2nd Semester (DDE) UNIT II Q. Explain Product planning and selection in detail. Ans. Meaning : The planning process within an organization is dynamic and continuous. It is nothing but deciding future courses of action of the organization well in advance so that executives at different level will play their role as per these guidelines. Production Planning and Selection : The planning is considered to be an essential step in any business mainly because the end results depend on the input and the approach followed at this stage. So, the productivity of an organization can be improved by better planning efforts. Production planning and selection has two phases: (1) Planning Phase (1) Selection Phase. (1) Planning Phase: Production planning is an exercise of intelligent anticipation in order to establish how an objective can be achieved or a need fulfilled in circumstances which are invariably restrictive. The outcome of planning is either dropping the whole idea or the formulation of a new plan in-line with the objective. Production planning determines the following: (i) Optimal Schedule and sequence of operations (ii) Economic batch quantity (iii)machine assignment and dispatching priorities for sequencing. Planning phase has two categories of planning namely : (i) Prior Planning : Prior planning means pre-production planning. This includes all the planning efforts which are taking place prior to the active planning. Modules of Prior Planning : The modules of prior planning are: a) Product Development and Design : Product development and design is the process of developing a new product with all the features which are essential for effective use in the field and designing it accordingly. At the design stage, one has to take several aspects of design like, design for selling, design for manufacturing and design for usage. Product design is the collection of information regarding specification, bill of materials, drawing etc. 191

18 b) Forecasting : Forecasting is an estimate of demand which will happen in future. Since it is only an estimate based on the past demand, proper care must be taken while estimating it. c) Aggregate Planning : Given the sales forecast, the factory capacity, the aggregate inventory levels and size of work force, the manager must decide at what rate of production to operate the plant over an intermediate planning horizon. This exercise is called aggregate planning. It is a macro level exercise designed to plan by converting resource requirements of several products into common units. d) Master Scheduling : Master scheduling is the next level exercise following the aggregate planning which aims to find out a productwise planning over the intermediate planning horizon. e) Order Writing : Order writing is nothing but giving authority to one or more persons to undertake a particular job. f) Material Requirements Planning : Material requirements planning is a technique for determining the quantity and timing for the acquisition of dependent items (if exist) needed to satisfy the master production schedule. (ii) Active Planning : Active planning means the actual production planning which includes various activities directly related to the production at micro level immediately following the prior planning. The modules of active planning are: 192 a) Process Planning and routing : Process planning and routing is a complete determination of the specific technological process steps and their sequence to produce products at the desired quality, quantity and cost. It determines the method of manufacturing a product, selects the tools and equipments, analyzes how the manufacturing of the product will fit into facilities. Routing in particular prescribes the flow of work in the plant and it is related to the considerations of layout, temporary locations for raw materials and components and material handling systems. b) Material Planning : Materials planning is a process which determines the requirements of various raw materials or subassemblies by considering the trade-off between various cost components like, carrying cost, ordering cost, shortage cost, and so forth. c) Tools Planning : Tools planning determines the requirement of various tools by taking process specifications, material specifications and equipment specifications. d) Loading : Loading is the process of assigning jobs to several machines such that there is a load balance among the machines. e) Scheduling : Scheduling is the time phase of loading and determines when and in what sequence the work will be carried out. This fixes the starting as well as the finishing time for each job.

19 PRODUCTION & OPERATIONS MANAGEMENT (2) Selection Phase : Product Selection phase consists of the following steps: Create Concept Alternative Develop Concept Evalution Select Concept Types of decisions in Product Planning and Selection : In any organization, the following types of decisions are taken: (1) Strategic Decisions : Strategic decisions are taken at top level management. Some example of strategic decisions are: (i) Warehouse Location. (ii) Distribution systems (iii)building a new plant (iv) Mergers and Acquisitions (v) New Product Planning. (vi) Compensation planning (vii) Quality assurance planning (viii) R&D planning (ix) Forming new technology department (x) Dropping a product from the existing product mix. (xi) Social Responsibility planning, etc. The type of decision taken at this level is often highly unstructured in nature. (2) Tactical Decisions : Tactical decisions are taken at middle level management. Some examples of tactical decisions are: (i) Pricing a product (ii) Product improvement through value analysis. (iii)preventive maintenance policy (iv) Budget analysis (v) Short term forecasting (vi) Make or buy Analysis (vii) Credit evaluation (viii) Plant layout 193

20 (ix) Project scheduling (x) Reward system design. (xi) Buying equipments etc. The type of decision taken at this level is mostly semi-structured in nature. (3) Operational Decisions : Operational decisions are taken at bottom level management. Some examples of operational level decisions are: (i) Designing sampling plan to inspect the raw materials at stores while receiving materials from vendors (ii) Deciding price discount at salesman level in the field (iii)scheduling of maintenance manpower. (iv) Machine loading (v) Daily operator scheduling (vi) Order Entry (vii) Production scheduling (viii) Inventory Control (ix) Buying software (x) Approving loans etc. The type of decision taken at this level is mostly structured in nature. Q. Explain process planning and Selection in detail. Ans. Meaning : Process selection decisions determine the type of productive process to be used and the appropriate span of that process. For example- the managers of a fast food restaurant may be required to decide whether to produce food strictly to customer order or to inventory. The managers must also decide whether to organize the process flow as a high volume line flow or a low volume batch production process. Further more, they must decide whether to integrate forward towards the market and backward toward their suppliers. All these decisions help in defining the type of process which will be used to make the product. Production selection is sometimes viewed as a layout problem or as a series of relatively low level decisions. But, on the contrary, process selection is strategic in nature and is of utmost importance. Process selection or decisions affects costs, quality, delivery and flexibility of operations. Information required to do process planning : (i) Quality of work to be done along with product specifications. (ii) Quality of work to be completed (iii)availability of equipments, tools and personnel. (iv) Sequence in which operation will be performed on raw material (v) Names of equipments on which the operations will be performed. (vi) Standard time for each operation (vii) When the operation will be performed. 194

21 PRODUCTION & OPERATIONS MANAGEMENT Process Planning Procedure : The different steps involved are: (1) Selection of Process : A process is necessary in order to shape, form, condition and join materials and components with the help of machines and labour in order to convert raw materials into a finished product. One should select the must economical process and sequence that satisfies the product specifications. The selection process depends upon: (2) (a) Current Production Commitments : If enough work has already been allocated to more efficient equipments, the current work may also have to be passed on to less efficient machines to complete the same in time. (b) Delivery Date : An early delivery date may: (i) Force the use of less efficient machines (ii) Rule out the use of special tools and jigs as they will take time for design and fabrication. (c) Quantity to be produced : Small quantity will not probably justify the high cost of preparation and efficient set-ups. Thus, quite possible they may have to be made on less efficient machines and vice-versa. (d) Quality Standard : Quality standards may limit the choice of making the product on a particular machine etc. Selection of Material : (a) Material should be right quality and chemical composition as per the product specifications. (b) Shape and size of materials should restrict scrap. (3) Selection of Jigs, fixtures and other special attachments : These supporting devices are necessary: (a) To give higher production rate. (b) To reduce cost of production per piece. (4) Selection of cutting tools and inspection Gauges : They respectively are necessary to: (a) Reduce production time. (b) Inspect accurately and at a faster rate. Q. Explain in brief about Capacity Planning. Ans. Meaning : Production system design is the first level planning for the inputs, conversion activities and outputs of a production operation. Design decisions are very important because they are often associated with significant investment of funds. The initial outlay and operating expenses are established based on design decisions, and these in turn affect productivity of the concern in future. So they affect fixed cost and variable cost. 195

22 Capacity is a measure of the ability to produce goods or services or, it may be called as the ratio of output. Capacity planning is the task of determining the long and short term capacity needs of an organization and then determining how these needs will be satisfied. Measures of Capacity : Different types of organizations use different measures of capacity e.g. steel plant uses tone of steel produced and auto plants uses number of autos produced etc. Types of Capacity : There are various types of capacity: (1) Designed Capacity : The design capacity of a system is the rate of output of goods or services under full scale operating conditions. In other words, designed capacity is the theoretical maximum capacity that a producing unit can produce under ideal conditions. For example, a cement factory may be designed to produce 200 tons per day. The projected demand for a period anywhere from 5 to 10 years is taken as the estimate for the design capacity. (2) System Capacity : In practice, it may not be possible to achieve production to the extent of design capacity mainly because of mismatch between required resources and available resources. The maximum output of a specific product or product mix that the system of workers and equipments is capable of producing as an integrated whole is called system capacity. This may be less than that of the design capacity. The actual output may be even less than the system capacity since it is affected by short-range factors such as actual demand, equipment breakdowns and personal absenteeism or productivity. Actual Output System Efficiency = System Capacity Capacity Planning Strategies : strategies: There are two types of capacity planning (1) Long-term Capacity Strategies : Top management may have the following strategies to cope up with major changes in products and services that it can provide to customers in the long run which will have significant impact on the capacity. The major changes will altogether revise the demand and resources requirements. These are: (i) Develop new products lines (ii) Expand existing facilities (iii)construct or phase out production plants 196

23 PRODUCTION & OPERATIONS MANAGEMENT Technological obsolescence may force some industries to use phase-instrategy for introducing the next model of the same product or service to retain and/or improve its market segment. The phase-in-strategy is nothing but the planning for the next model even when the present model is moving well. (2) Short-term Capacity Strategies : In short-term planning horizon, capacity decisions are taken by considering the fluctuations in demand caused by seasonal and economic factors. The purpose of short-term capacity planning is to respond to variations in demand during the shortterm planning horizon. The following strategies can be used to cope up with the fluctuations in demand: (i) Overtime (ii) Subcontracting (iii)hiring (iv) Firing etc. Q. What do you mean by aggregate planning? List and explain various pure strategies and mixed strategies. Ans. Aggregate Planning : Demand forecast can be classified into long range, medium range and short range forecasts. Long range forecast acts as the basis for capacity planning. A company may be manufacturing several products using a set of facilities. The association between the facilities and the products is generally, many to many, i.e. a given facility is used to manufacture more than on product. Similarly, a product may need more than one facility to manufacture it. This type of association introduces complexities in scheduling. Aggregate planning is a process that follows capacity planning, and it uses medium range forecast. The plans do not necessarily have to be so detailed as to provide specific instructions for daily or weekly operations such as loading, sequencing, expediting and dispatching. Nature of Aggregate Planning Decisions : The different capacities which are generally used to manufacture products are as listed below: (1) Regular time production capacity (2) Subcontracting capacity (3) Overtime capacity (4) Hiring and firing capacity. Aggregate Planning Strategies : One can use any one or a combination of the strategies for smoothing fluctuations in demand. Generally, a mixture of strategies is preferred. There are two types of strategies: (A) Pure Strategies : If a single strategy is used to meet the demand, then it is called as a pure strategy. The pure strategies are: 1. Building and utilizing inventory through constant work force : The company can use constant work force during the planning 197

24 (B) horizon, which will result into a constant output during each period in the planning horizon. Since, the demand is not a constant quantity, there may be mismatch between the production quantity and the demand of each period. The excess production in a period can be carried as inventory for use in future periods. But, this will result in inventory cost. If this pure strategy is used, the objective is to identify a desirable constant work force which leads to the minimum total inventory cost. This pure strategy helps in having stability in the work force. This, in turn, helps in producing better quality products because of the experience gained by the work force and various other related benefits. 2. Varying the size of the work force : The company can employ varying work force such that the output matches with the demand in each period of the planning horizon. This pure strategy can be implemented through hiring and firing of employees. During periods of increased demand, the company can hire employees and during periods of decreased demands, the company can fire employees such that there is an exact match between the production quantity and the demand of each period in the planning horizon. Hiring and firing will result in some penalty to the company in terms of training cost and firing cost, respectively. But, in this strategy, the cost of inventory is zero. 3. Subcontracting : This strategy can be considered as an alternative to meet the demands of products. In this strategy, orders can be placed with a subcontractor or a set of subcontractors depending on the demands of various products. This is generally used during the peak demand periods to increase the capacity. But the usage of this strategy may grow the level of competition if the subcontractors become as competitors in future. 4. Making changes in demand pattern : To even out the fluctuations in demand of products, the company can offer some discount scheme during off-seasons or during periods with less load on some service systems. This is nothing but influencing demand pattern to match with the capacity. Examples : The telephone companies level their loads by offering evening rates. Giving off-season discounts during winter for refrigerators, air cooler, etc. Mixed Strategies : If a combination of the above pure strategies is used to meet the demand, then it is called as a mixed strategy. Several mixed strategies can be generated by taking two at a time, three at a time or four 198

25 PRODUCTION & OPERATIONS MANAGEMENT at a time or four at a time of the above pure strategies. But all these mixed strategies may not be meaningful and practicable to implement. Only a limited combinations of these strategies are used in practice. Q. Explain in detail Master Production Scheduling (MPS)? Ans. Master Production Scheduling : A master production schedule is a product-wise plan for manufacturing products. When a firm uses an MRP (Material Requirement Planning) system, the MPS provides the top-level input requirements. This gives the volume of production during various periods in the planning horizon. Aggregate planning aims at an overall plan without distinguishing products. But, master production schedule aims to prepare a product-wise schedule which is consistent with the aggregate planning. This process of generating a feasible master production schedule is known as disaggregation planning. The relationship of the MPS to other manufacturing and control activities is shown in the following figure: The aggregate planning problem provides a basis for decision making regarding specific production dates, available capacity, total demand, lead time or inventory constraints. These informations may not be sufficient for the smooth functioning of a firm. SO, we need a plan stated in terms of specific products that are to be produced in certain quantities by certain dates which is known as master production schedule/disaggregation schedule. It specifies : (1) The sizing and timing of production orders for specific items, (2) The sequencing of individual jobs (3) The short term allocation of resources to individual activities and operation Relationship of MPS to other Manufacturing Planning and Control Activities : The relationship of the MPS to other manufacturing and control activities is shown in the following figure: 199