Chapter 5 Productivity Improvement Techniques

Chapter 5 Productivity Improvement Techniques L E A R N I N G O U T C O M E S After reading this chapter, you will be able to: LO 5.1 Understand the industrial engineering techniques and economic analysis for product improvement techniques LO 5.2 Analyse the behavioural techniques for productivity improvement LO 5.3 Measures to improve productivity introduction There are various techniques for productivity improvement. These techniques are based on collecting information and increasing the effectiveness of work. The productivity improvement techniques can be classified in two categories: 1. The industrial engineering techniques and economic analysis 2. Behavioural techniques L e a r n i ng Out c O m e 5.1 industrial engineering TeChniqueS AnD economic AnAlySiS It is always the endeavour of any business organisation, may be manufacturing or service unit, to find new, easy, simple and cost-effective ways of producing goods or services. In this process, the streams of work study and industrial engineering have played a big role in the shape of developing simplification, job design, job enrichment, value analysis/engineering, method analysis, operations analysis, etc. Initially, these streams were perceived against the labour class, as their focus was to measure the efficiency of workers. But with the spread of awareness towards the only goal of these streams, i.e. how to increase productivity with the help of work measurement, method study and industrial engineering, this perception has been changing now and more importance has been attached to these branches of industrial studies. Industrial Engineering is the latest branch added in the work systems, which takes care of most of the productivity improving methods in the context of simplicity, cost-effective ways, less use of efforts and better technology savvy, i.e. ergonomic methods. Industrial Engineering has been referred to as that branch of engineering that deals with design, improvement and installation of integrated systems of people, materials, equipment and productivity. The important techniques in the industrial engineering techniques and economic analysis are as follows: Work simplification 55

Management Work study Pareto analysis Just in time method Management through value analysis Cost-benefit analysis Zero-based budgeting Cost-productivity allocation Work Study Work study is a term for those techniques, particularly method study and work measurement, which are used in the evaluation of human work in all its contexts and lead systematically to the detailed investigation of all the factors affecting the efficiency and economy of the situation under consideration, in order to effect improvement. Work study is a stream that deals with finding new ways of performing a job, better use of equipment and tools, simplifying the design and standardisation of work methods. The techniques that resulted into simplified methods of doing jobs, easier job designs, better value addition at lesser cost and overall higher productivity constitute the new discipline named as work study. Work study, in general, has further been divided into two disciplines, as shown in Fig. 5.1, Method Study and Work Measurement. Work Study Method Study Analysis Work Measurement Motion Study Micro Motion Study Memo Motion Study Direct Time Study Synthesis Method Analytical Estimating Predetermined Motion Times System Work Sampling 56 Figure 5.1 Work study and its disciplines Method Study Method study is also known as method analysis. Method study is a systematic technique of observing, recording with certain scientific tools and critically evaluating and examining the present methods of doing a job or task, so as to develop improved, simpler, cheaper and more effective methods. The scope of method study includes all types of work processes, working environment, tools and equipment to perform the job. Work Measurement Work measurement evaluates the contents of a job and the time taken by a worker to perform that job against predefined level of performance. Work measurement is possible only after the standardization of job. Work measurement can be referred to as establishing the job contents by determining the time required to complete a job against a predefined standard of performance by a qualified and normal worker. Objectives of Work Study Work study has gained lots of importance in the light of growing competition. Work study has the following objectives: Systematic analysis of present methods of doing a job. Measuring the job content with respect to time for a qualified worker and thus to establish standard time.

Optimum use of men, machine, material and methods to achieve best quality at minimum cost. Increase in productivity and thus the morale of manpower. Improving the overall efficiency in the organisation. Significance of Work Study Productivity can only be increased in the long run if the employees and workers are hard-working and conscious about the importance of productivity. Managers must be concerned about minimizing the cost and should try to find out ways to maximize production in minimum time span, of course with better quality every time. All this can only be possible with the implementation of the principles and techniques of work study. Work study has, now-a-days, been termed Industrial Engineering also. Productivity Work Study Leads to Higher Productivity Work study is a branch developed through time and motion study and initiated by F.W. Taylor and Gilbreth Couple, respectively. Motion study ultimately leads to method study involving men, materials, machinery and methods, while time study or work measurement evaluates the effectiveness of the worker in terms of time. Both studies further lead to work design as shown in Fig. 5.2. Figure 5.2 Work Design-Synthesis of Time and Motion study, Manning and Evaluation Work study mainly involves time study and method study. It tries to find out better ways to perform the job in lesser period of time. It tries to set the standards for performance with respect to time and improves the productivity as shown in Fig. 5.3. Both the techniques method study and work measurement, greatly contribute to the development of simpler and cost-effective methods in such a manner so as to increase productivity in the business organisation. Advantages of Work Study Work study increases productivity, reduces the time taken to perform the job, and thus overall viability of any business. The benefits of work study are listed below. Production efficiency increases due to work study. Higher productivity has been made possible. Better and smooth materials and product flow. Better layout and reduced material handling. Lesser cost of production due to less time per job, which is the ultimate result of work study. Manpower efficiency increases, hence worth and confidence of worker improve. Benchmarked and standard performance levels are established due to method study and work measurement. Better job satisfaction and incentive scheme are possible due to work study. Work study tries to find out the better method of performing the job with respect to simplicity, ease and productivity. 57

Management Figure 5.3 Flow chart of work study methods aiming to higher productivity 58 Illustration The activities of time utilisation, both for man and machine, are given in the following table. Investigate the scope of rearranging the activities to have a better utilisation of man and machine time. Activities Duration in minutes 1. Fixing the load 2. Clamping the load 3. Starting machine 4. Adjustment of lubricant flow 5. Running time of machine 6. Machine stopping 7. Clearing of machine parts 8. Unclamping load 9. Unloading part 10. Inspection of the part 11. Packing the part 6.00 3.00 0.10 0.10 12.40 0.10 0.30 0.30 0.30 0.30 0.30 Total 23.20

Solution The activities where either man or machine or both are busy are identified. It is evident at that serial number 1,2,3,4,6,7,8 and 9 are the ones where both man and machine are busy together. At activity No. 5, only machine is busy, whereas at No. 10 and 11, only man is busy. The total time of the cycle is 23.20 minutes. Out of this time, machine is busy for 22.60 minutes and the man is busy for 10.80 minutes. Hence, 10. 80 Utilisation time of man = 100 = 42.10% 23. 20 22. 60 Machine time utilisation = 100 = 97.41% 23. 20 We can see that the activities 10 to 11 can be done, when machine is running in another cycle during activity no. 5. In that case, the idle time for man will be reduced by 0.60 minutes and that for machine will be reduced by 0.60 minutes also. The total duration of the cycle will then become 22.60 minutes, and the man will now be busy for 10.80 minutes and machine is busy during the whole cycle. Hence, 22. 60 Machine utilisation time = 100 = 100% 22. 60 10. 80 Man utilisation time = 100 = 47.79% 22. 60 Thus, the new sequence reduces the idle time both for man and machines. Productivity Method Study Method study is a systematic approach to job design. It can be defined as the systematic recording and critical examination of existing and proposed methods of doing work, involving easier and more effective methods and reducing costs. There are certain situations and factors prevailing in the organisation, which instigate to conduct method study. These are listed below: When production cost is high and management wants to reduce cost due to high competition. Due to generation of high cost and quantity of scrap and waste. Frequent and high level of materials movement and workers. Numbers of production problems are too much. Quality complaints increase beyond limit. High cost of production and difficult to meet competition. Poor workmanship and working conditions. Safety of workers and machines. Increase in overheads due to excessive overtime. The above factors create a situation where it becomes necessary to apply method study for survival and meeting the competition. Objectives of Method Study The objectives of method study are listed below. To analyse existing and suggested method of doing a task or work. To find out new suggested method, how it is better to increase productivity and to reduce cost. Increase in productivity and reduction in cost is achieved by way of reducing material handling and movements, thus reducing fatigue to workers. To achieve optimum utilisation of inputs. To develop new methods and, thus, standards of performance. The above objectives must be achieved with detailed analysis and by implementation of method study. 59

Management Significance of Method Study Method study has got lots of advantages. It helps in increasing the overall profitability of the organisation by enhancing productivity. It provides the following: Work/job/tasks are made simple. Provides cost-effective methods. Less fatigue to the workers/operators. The quality of product is improved. Better design of workplace and equipment. Better environment for working. Improved work flow due to smooth and cost-effective material handling. Better utilisation of resources, particularly of manpower. Safer work conditions and better job satisfaction. Due to reduction in unproductive motions, production cycle time is reduced. Less wastages and scrap generation. Overall higher productivity is achieved. All the above benefits increase the importance of method study. 60 Procedure of Method Study The procedure of method study involves the following six steps: 1. Selection of work to be studied Generally, operations consist of different discrete jobs or activities and it is required to select those jobs to be studied that will give the best returns for the time spent. 2. Recording the present method Method study employs formal techniques to record the sequence of activities, the time relationship between different tasks, the movement of materials and the movement of staff. 3. Critical examination of the facts It is used to critically examine the current method by considering those facts. 4. Development of the most practical, economic and effective method The purpose is to identify possible actions for improvement and to subject these actions to develop a preferred solution. 5. Installation of new method It needs project managing the changes and understanding of the changes involved by all persons concerned. 6. Maintenance of new method and periodic checking It means monitoring of the new method. Periodic checking of the new method leads to ensuring that overall efficiency is improved. Recording Techniques of Method Study There are two types of recording techniques, which are as follows: Process charts Process mapping Process Charts The charting of work flows, working processes, systems and procedures is a way of recording the different aspects of a work situation for the purpose of analysis. Process charts are one of the simpler forms of workflow charting. A variety of process charts has been designed according to the needs of a particular level or stage of analysis. Symbols used in process chart The different kinds of process charts share a common set of symbols as shown in Table 5.1. These symbols are linked together in a vertical manner representing the key stages in a process. The simplest form of process chart is known as an outline process chart, which records an overview, i.e. outline of a process. It is useful to identify key areas of concern before recording (part of) the process in more detail. In a full process chart, it is common to chart the process from the material being processed, the worker carrying out the work or, less commonly, a piece of equipment.

Table 5.1 Common Symbols for Various Activities in Process Charts Universal Symbol Activity Activity Description Productivity Operation Inspection Working on a job to add some value; it includes change of shape, characteristics (physical or chemical), assembly, etc. Checking the product for quality and conformance to prespecified characteristics. Storage Keeping the product at a pre-decided and safe place. Transportation Changing the place of the product form one point to another. Combined Operation and Inspection When two activities are done simultaneously at a time, e.g., production of goods with quality at source as a concept. A worker produces the product with self-inspection. Delay Sometimes, the product or machine has to wait for next operation or next job. Process charts may also be used at a micro level of analysis. Types of process charts Method study records the data related to the present method with the help of process charts. There are various types of process charts, which are listed as under. Outline process chart It records the process flow in totality, but only the main steps in the sequence of the process. It takes into account mainly operations, storage, transportation, delay, inspection and also the combinations. The symbols used in recording are followed universally. Process chart Process chart is also known as operation process chart. It is a graphical plot of the points, where material/jobs are processed or operated upon. The inspections, time taken for processes and information required are also represented in the process chart. Flow chart In flow charts, the representations of events are recorded in the sequence of actual process. All the operations, delays, transportations, inspections, storage, etc. are shown in these charts. Flow charts are further categorised into the following: Man utilisation process chart Machine utilisation process chart /Product process chart Multiple activity chart Here, the multiple activities of more than one out of man, machine, material and product are recorded on a graph with the same scale. Two limbs/hands process chart The activities of a work with both hands or more than one limbs of the body are recorded in a time sequence. Man-machine chart This chart is also known as worker-machine chart and it demonstrates the various activities like operation, delay, transportation, etc. through various symbols. It shows the utilization of man and machine in a complete production cycle. Flow diagram It shows the relative position and sequence of operations performed over the machines and equipment, aisles and displays the exact path followed by the job on the various work centres. String chart It is a plan, where the string is used to measure the path of workers, materials in the equipment for the sequence of events. SIMO cycle chart The both handed motion in a process is simultaneously shown through SIMO cycle chart. The therblig is used for both hand movements. 61

Management Process Mapping Process mapping is a modern version of process chart. A process map bridges the gap between a traditional process chart and a computer system flow chart. It acts as a basis for process improvement or re-engineering. A process map requires deep observation and focused interviewing skills of the mapper to ensure that the map represents a true and exact reflection of the process. 62 Motion Study Motion study is a technique to study the existing number of movements in completing a job and eliminating the wasteful and non-productive motions from the existing motions, so as to reduce fatigue, to increase the productivity of the task and labour and to reduce production cycle time. Motion Study is further divided into two categories: Micro-motion Study Memo-motion Study Micro-Motion Study In micro-motion study, the analysis of minute and short activities in production cycle, which are highly productive in the long run due to rapid movements and of repetitive nature, is done. Micromotion study is very useful for repetitive jobs, assembly of small parts and components, e.g. assembly of computers, garment and toys manufacturing. The following objectives are achieved due to its utility in job-study and analysis: To develop the relation between the job components. To install a long-term method of doing a job and recording the same. To study and develop the relation between the job and the machine. To develop the interrelationship amongst the group members. To improve the productivity and reduce fatigue by removing unnecessary and wasteful movements. Micro-motion study is conducted by preparing a motion picture of operations in a sequence, analysing and evaluating the film with the help of various charts, symbols and diagrams. It is conducted with the help of SIMO chart and Therbligs and micro clock. The job is analysed by breaking down into micro-motions of the worker/operation in the control of three parts: When to start the motion? What is the nature of the motion? When to finish the motion? Micro-motions are also known as Therblig. Certain movements of a worker or operator are/ may be denoted by the following symbols or abbreviations: Searching Æ Sr Æ Finding out and searching for a job. Grasping Æ G Æ Picking up an object. Selecting Æ St Æ Deciding to pick up an object. Holding Æ (H) Æ Keeping the article in hand after picking up. Releasing Æ (R) Æ Releasing the job from hand. Inspecting Æ (In) Æ Examining and checking the job for conformance. Planning Æ (P) Æ Planning before actual physical movement. Assembling Æ (A) Æ Joining two objects together. Delaying Æ (D) Æ When the operation has to be delayed due to avoidable or unavoidable reasons. There are many more Therbligs other than mentioned above. There must be a specified objective behind any movement or motion. Any motion must be associated with economy, ease and minimum fatigue. The basic principles of motion are: Effective use of operator, machine and tools. Layout should be such that movement is not hindered. Safety of operator, machine and tools. Different scientists have developed various categories of principles related to motion and their economy.

Memo-Motion Study Memo-Motion study is another type of micro-motion study, where the film is made in slowmotion using a special type of camera with varying speed like sixty, ninety, and one hundred twenty frames per minute. The various applications of memo-motion study are as under: To study the material flow. To work out to add new activities, motions or works, if required. To develop man-machine relationship. To regulate various activities in a task. These types of memo-motion study are comparatively of low-film cost and allow reviews of sequence of activities. This study can be applied only in the reach of motion-picture camera at a single place. Productivity Work Measurement Work measurement is another important technique of work study. It measures the jobs, tasks or sub-tasks in a selected work in terms of time taken to complete that job. This helps in increasing the productivity of a worker by measuring the speed of doing a job and thus establishing the rating of that worker. The measurement of job performance is always done against a pre-defined standard of performance of a qualified worker. A qualified worker is defined as the one who has the necessary physical and mental characteristics, also has the required skill and knowledge to perform the given task to the normal standards of safety and performance in terms of output and quality. Here, in the definition of a qualified worker, the following standard elements are taken into account: Time standard Work standard Labour standard Production standard All the above standards are predefined and are measured for a normal pace of performing a job with normal output in terms of quantity and quality. Objectives of Work Measurement Work measurement is conducted in any business organisation with the following objectives: Better man-job fit, i.e., suitable and qualified worker deployed on different jobs. Better and reliable labour performance can be achieved. To develop the criteria to control the labour cost. Better planning and control of various operations. To develop a sound and fair incentive scheme. If the work measurement technique is applied in an organisation in a fair manner, the overall performance of business can be improved to a great extent. Significance of Work Measurement As it is very clear that if the objectives mentioned are achieved with the help of work measurement, the business performance can be improved to a great extent and can meet competition in a better way. Work measurement helps the operations in the following ways: The various alternatives developed in method study can be measured with respect to time taken and overall efficiency. Realistic work schedules can be prepared. Fair and standard performance levels can be set to measure the efficiency of a worker or a group of workers. Normal and standard working conditions can be defined. The development of fair incentive scheme is made possible. It helps in cost calculation to find out the cost or price of a product or service, particularly labour overhead. Helps in committing the delivery schedules. Thus, work measurement helps the business not only to survive, but also to meet competition in a more effective way. 63

Management Recording Techniques of Work Measurement Following are the main techniques: Rating Allowances Standard Time Per Unit 64 Rating Direct observation techniques include a process for converting observed times to times for the qualified worker working at a defined level of performance. The commonest of these processes is known as rating. Rating technique involves the observer making an assessment of the worker s rate of working relative to the observer s concept of the rate corresponding to standard rating. It is based on the factors like effort, dexterity, speed of movement, and consistency. The assessment is made on a rating scale, the 0 100 scale. The rating is then used to convert the observed time to the basic time using the simple formula: Basic time = Observed time Observed rating/standard rating Rating is a subjective assessment, and different observers may rate differently. Allowances The practice to make an addition to the basic time is commonly referred to as an allowance, which allows the worker to recover from fatigue and for personal needs. The amount of the extent of the allowance depends on the nature of the work and the working environment. Hence, work design should include the design of an effective work-rest regime. The addition of allowances should never be used to compensate for an unsafe or unhealthy working environment. In many cases, there are small amounts of work that may occur irregularly and inconsistently and an additional allowance in such a case is known as a contingency allowance. Types of allowances There are basically four types of allowances: 1. Relaxation allowance: It is an addition to the basic time intended to provide the worker with the opportunity to recover from the physiological and psychological effect of carrying out specified work under specified conditions. It is of two types: Constant allowance: Personal Basic fatigue Variable allowance: Standing allowance Abnormal position Use of muscular force or energy Bad light Atmospheric condition Close attention Noise level Mental strain Monitoring Tediousness 2. Contingency allowance: It is a small allowance of time, included in a standard time to meet the legitimate but unexpected items of works or delays. 3. Personal allowance: Generally, it is given to an operator for his personal needs. 4. Policy allowance: These are given in certain contingencies outside the work place, e.g. collection of pay, etc. Standard Time Per Unit For determining standard time per unit, the steps involved are: Measure each element: observed time Defined level of performance: % rating Obtain normal time = OT % rating

Add allowances Standard time/unit = NT+ (NT % allowances) Standard output = Time (taken) available (mts) Standard time per unit Productivity Illustration How many working minutes do you expect would take a worker to produce a part for which the time standard is 10 minutes, if the allowance of this work is 25% of the normal time and the worker is rated at 80%? Solution Here, we have to calculate the actual time. Now Standard Time = Normal time (1 + Allowance) 10 Normal time = = 8 minutes 1. 25 Normal time = 10 = Normal time (1 + 0.25) = 8 minutes = Actual time = Actual time = 8 100 80 Actual time Performance ratings 100 Actual time 80 100 Normal time 100 80 = 10 minutes Steps in Work Measurement The various steps in work measurement are listed below. Breaking the job into subtasks or small elements. Recording the observed time for each element by any of the study. Converting observed time for each element into normal time by applying rating factor. Assessing and adding all types of relaxation allowances such as for personal needs, physical and mental fatigue, thus to reach work content. Finding the frequency of occurrence of each element in the work and multiplying the work content by its frequency, thus reaching to work content of the whole job. Adding contingency allowance in work content of the job to reach at standard time of the job. The standard time is derived from observed time in a step-by-step procedure as shown in Fig. 5.4. Figure 5.4 The flow chart of calculating standard time 65

Management Calculation of Normal, Standard and Allowed Time to do a Job The details of various allowances are described in the other paragraphs but are added one by one normal time or basic time, then reaches to standard time and total allowed time for a job as shown in Fig. 27.5. Figure 5.5 Allowed time calculation 66 Work Measurement Techniques There are different work measurement techniques like Predetermined Motion Time Systems, Analytical Estimating, Activity sampling, etc. These are explained below. Time Study Time study is a systematic process of directly observing and measuring human work to establish the time required for completion of the work. It follows the basic procedure of systematic work measurement of: Analysis Measurement Synthesis The observer first undertakes a pilot study to identify suitable elements, which can be clearly recognized on subsequent occasions and are convenient, in terms of their length, for measurement. Subsequent studies are taken during which the observes times each occurrence of each element. This assessment of rating is used to convert the observed time for the element into a basic time a process referred to as extension. A time study observer should be properly trained in the technique and especially in rating. Time study involves the use of specific control mechanisms to ensure that timing errors are within acceptable limits. Time study is a very flexible technique, suitable for a wide range of work performed under a wide range of conditions. It is a direct observation technique; it considers specific and special conditions but it does rely on the use of subjective process of rating. Steps in Taking a Time Study The time study consists of the following steps: Select: The job to be studied.

Record: All the relevant data regarding the job method of work. Measure: Each element in terms of time over a sufficient number of cycles of the activity. Examine: The recorded data and the element times critically so that unproductive or random elements are separated out from productive elements. Rating: The operator s effective speed of work relative to the observer s concept of normal pace or speed is called rating and it is denoted as below: Performance rating = Observed pace Normal pace 100 Productivity Synthesis Method Synthesis method is a technique to arrive at a time needed to perform or complete a job at a defined level of performance by summing up or synthesizing the time values of all the elements obtained through work measurement calculations of other similar job/ task elements or from standard data of studies already conducted. The standard data is normal time values of similar and different elements of a job. These time values of different standard elements are compiled in the form of catalogue. Different elements like turning, shaping or drilling are involved in various jobs. If the new job contains one or many similar jobs, then different standard time values can be taken from previously organised studies or from the listed values in the catalogue. Advantages Synthesis method is superior to many other methods, which are already explained. The various advantages of this method are: Reliable as standard data taken from a large number of time studies. Economical and less costly as previous standard time values from other studies are considered. This method can provide easy and quick cost estimation for even new jobs. This method helps in quoting and estimating prices, committing delivery schedules for tenders and bids. It helps in calculating the overall production time. It is used in devising incentive schemes. Analytical Estimating Analytical estimating is a systematic work measurement technique. It is an enhancement of estimating, in which the time needed to perform each component of a task at a defined rate of working is estimated from knowledge and practical experience of the work and/or from synthetic data. For this the whole job should be divided into smaller individual tasks. The Way of using Analytical Estimating Analytical estimating is generally used for assessing work over a reasonably lengthy period of time, for which it may be difficult and expensive to collect the information required by using other measurement techniques. In some cases, the presence of an individual performing work measurement in the workplace could be unacceptable. In that case, analytical estimating is an appropriate method to use. Advantages and Disadvantages The advantage of using analytical estimating is its speed of application and low cost. The second advantage is by using trained and experienced personnel, process and measurement data can be assembled and applied quickly. The use of experienced judgement for determining the time necessary to perform a task is the technique s weakness. The technique should be used when a more precise and accurate alternative is required, otherwise effectiveness decreases. 67

Management Predetermined Motion Time Systems (PMTS) Predetermined motion time systems (PMTS) are work measurement systems based on the analysis of work into basic human movements, categorised according to the nature of each movement and the conditions under which it is made. The first PMTS were designed to provide times for detailed manual work. Higher level systems have been devised, by combining fundamental movements into common, simple manual tasks. Such higher level systems are designed for faster standard setting of longer cycle activity. PMTS have the inability to provide data for movements made under unnatural conditions or for mental processes. The advantage of PMTS is that they require a detailed description of the working method. Many PMTS are proprietary systems. One of the major PMTS systems is MTM (Methods-Times Measurement), which is actually a family of systems operating at different levels and applicable to different types of work. MTM1 the highest-level or most detailed member of the family was developed in the 1940s by analysing large numbers of repetitive cycles of manual work on film. MTM2 is quicker to apply, but more suited to longer-cycle work. 68 Activity Sampling Activity sampling is a statistical method for collecting data. It is a technique in which a large number of observations are made over a period of time. It is generally used for collecting information on the percentages of time spent on activities. It enables lengthy activities or groups of activities to be studied economically. Fixed and Random Interval Sampling Activity sampling can be done at random intervals or fixed intervals. In random activity sampling, the intervals between observations are selected at random, e.g. by using random numbers. In fixed interval activity sampling, the same interval exists between observations. A fixed interval is applicable where activities are performed by a person or a group of people having a degree of control, while random intervals are applicable for a series of automated tasks or activities as part of a process, to be performed in a pre-established regular pattern. Confidence Levels Activity sampling conforms to the binomial distribution a calculation to determine how many observations will be needed to operate within specified limits of accuracy.the formula for the number of observations is, N = 4 p ( 100 - p) L2 where p is the estimated % time spent on the activity and L is the limit of error, expressed as a % After this, observations can begin and activities are recorded at the agreed time intervals. Finally, calculation can be done to determine the error rate as follows: Error rate = ± 2 (p (100 p)) Number of Observations In the case of work sampling method, a large number of random observations are made to determine the steps in its normal performance. It provides more operational detail and reduces error. Illustration The following are the results of a work sampling study which took place over a 300-hour period during which the worker was observed while processing 27000 parts. No. of Observation Working 1600 Non-working 400

The worker when working was rated at 80% of normal performance. For this type of work, the usual allowances should be 10% of the total workday (8 hours). Find the standard number of units of the worker should process per hour. Solution During the period of observation, the percentage time for working and idle state can be calculated in the following way: State No. of observation % of age Working 1600 1600/2000=80 Idle 400 400/2000=20 Total 2000 Now actual working hours out of 300 hours So Normal Time = = 80% of 300 = 80 300 100 = 240 hours Actual time Performance ratings 100 Productivity So Normal Time = 240 80 100 Allowance are 10% of 8 hours day = 48 minutes 48 300 Hence, the allowance in 300 hours = 8 = 30 hours Hence, standard time = 192 + 30 = 222 = 192 hours = 1800 minutes Standard number of units produced per hour = 27000 222 = 122 parts per hour. Work Simplification This method is based on the realisation that the people who actually do a job are often the best people to improve it. It is always considered as a better practice to train workers to think creatively about their jobs and then give them incentives to make improvements. Work simplification consists of three elements: 1. Philosophy 2. Pattern 3. Plan of action This method is based on the principle that people know best how to do their own jobs and therefore should be involved in job improvement. Human resources should be trusted by management, and workers themselves should want to be involved in job improvement. They should be trained. To ensure success in work simplification, it is essential to build trust in the organisation and to demonstrate management commitment to the philosophy. Steps in work simplification: 1. Select a process or job or task to improve 2. Find and record all the facts 3. Make a process chart 4. Challenge every detail, asking all possible questions; list possibilities and improve necessary details 5. Develop the preferred method 6. Introduce it and check results 69

Management Check Your Progress Discuss the significance of work-time study for a manufacturing firm for productivity improvement. pareto Analysis Pareto analysis is named after an Italian economist who demonstrate the principle, often called the 80/20 rule, which describes that 80 percent of the results come from 20 percent of the effort. It is a useful tool for productivity analysis as it concentrates attention on the most important few issues or problems and helps establish priorities. The principle is used in many production and management areas: marketing, quality control, stock analysis, purchasing, sales analysis, waste reduction processes and so on. Steps in Pareto Analysis 1. List the items (products or processes) to be analysed in ascending order of use, cost or occurrence. 2. Determine total use, cost or occurrence. 3. Express the individual use, etc., as a percentage of the total. 4. Produce a cumulative column for step 3. 5. Divide the cumulative percentage column into three groups, say 70 percent, 20 percent and 10 percent. Pareto analysis is sometimes called ABC analysis A being the expensive 70 percent, B the moderate 20 percent and C the low-cost 10 percent. 6. Repeat steps 1 to 4 for the items studied. The previous steps have all related to cost; we now need to relate the ABC aspects to the percentage of items contained in each category. 7. Compare the cumulative percentage use/cost/occurrence column with the cumulative percentage item column. 70 Just in Time JIT can be defined as an integrated set of activities formulated to achieve maximum production using minimal inventories. It includes the timing of production resources. In general, JIT philosophy is applicable to any type of organisation, but the practice elements are applicable mainly to repetitive manufacturing operations like the production and assembly of automobiles or appliances. JIT includes a variety of techniques; it is much more than a combination of management practices. Successful implementation of a JIT system requires an attitude that is different from the typical attitudes underlying traditional business practices. JIT involves the elimination of waste and excess by acquiring resources and performing activities only as customers need them at the next stage in the process. For example, inventory buffers are considered an evil because of hiding problems like defective parts, production bottlenecks, long machine set-ups, etc. There are certain elements that lead to successful JIT systems. These elements can be divided into two broad categories, including attitude and practice. While the elements of attitude can be adopted by any firm, the elements of practice are mainly applicable to repetitive manufacturing companies. From an accounting perspective, the companies would normally use the process cost accumulation method. A few more techniques in inventory control systems were propagated because of just-in-time such as lean production system. Fundamental Concepts of JIT The major fundamental concepts of JIT are as follows: JIT manufacturing JIT purchasing Elimination of waste Pull system Kanban system Push system Lean management Big JIT Little JIT Throughput time/manufacturing cycle time The above fundamental concepts of JIT are explained in the different sections of this chapter.

Elements of JIT JIT has many components and systems which work towards the successful implementation. The main elements of JIT are as follows: Smooth flow of work Elimination of waste Continuous improvement Eliminating items that do not add value Simple systems Product layouts to minimize moving materials and parts Quality at the source Fail-safe tools and methods Preventative maintenance Good housekeeping Reduction of set-up time Cross-trained employees A pull system The above tools make JIT the full system which can work practically and reduce the inventory and production cost. Productivity Benefits of JIT Systems JIT has got a lot of advantages and is helpful in meeting the competition by reducing the cost. The main benefits of JIT system are as follows: Reduced inventory levels High quality Flexibility Reduced lead times Increased productivity Increased equipment utilisation Reduced scrap and rework Reduced space requirements Pressure for good vendor relationships Reduced need for indirect labour The above benefits of JIT are multifold in nature and as a philosophy, it inculcates the spirit of increasing the profitability and productivity of the company and the individual together. Characteristics/Useful Practices of JIT JIT system also incorporates various types of practices. It has got utility in increasing the efficiency in purchasing, flexibility in production and distribution, measurement and accounting. The utility of JIT in these practices is explained below. Just-in-time purchasing: Purchasing should be done just before the use of that item, component or material to reduce investment in inventory for a longer period of time. Focused vendors/manufacturers: The company following JIT practices should have loyal, focused and fully devoted manufacturers and vendors, so as to maintain dependability on them. Cellular manufacturing: Cellular manufacturing is another practice which facilitates JIT as the immediate purchase or production of high quality requirements is possible because of availability of skilled labour, required machinery and better quality raw materials. Just-in-time production: Just like just-in-time purchasing, just-in-time production also follows the same principle of producing just before the requirement. Just-in-time distribution: In factory, distribution of parts and components spreads the philosophy of just-in-time to all levels of workforce and also reduces unnecessary wastage at different workstations. Simplified accounting: As the inventory in stock yard as well as work in process is just sufficient for working and operations, so accounting of JIT operations also becomes very easy and simple. 71

Management Process-oriented performance measurements: In JIT, the measurement of output, manpower and the utility of all resources should be process-oriented. The requirement of goods can be fulfilled by the immediate processing of orders as followed in JIT. Pull system of material supply: The customer demand initiates the production or purchase of the item. The details have been covered elsewhere in this chapter. Consistent superior quality: The basic essential requirement of JIT system is to minimize and eliminate the scrap and wastage to maintain the constant cycle time and consistent supply of products. Small lot/ batch size: JIT minimizes investment in inventory. The lot size reduces to the level of order. This has been covered in other sections also. Workcentre balancing: JIT can only be applied if each individual workcentre is loaded with uniform quantity and is properly balanced. Specialized jobs for different workcentres are allotted. Standard components and standard work procedures: Minimum variety but of standard size and quality increases demand and reduces inventory. Similarly, if standard procedures are followed, then different requirements of different methods will not be able to build extra inventory. Flexible workforce: As per the changing demand of the products of different varieties, the workers can operate on the machines for different products with a higher degree of flexibility and can adjust to the changing demands of the market. Production line flow: If the production is taken in a line without repetition of processes and zig-zag line, the frequency of set-ups can be reduced. If mass production is needed, setups can be removed totally. Automated production: JIT helps in automated production. JIT reduces inventory cost. The bigger investment thus can be made in automation, but carefully. Thus, better profits result. Preventive maintenance: JIT requires smooth and continuous production flow, i.e. no machine breakdown. This can only be possible if proper preventive maintenance is in place in the factory. The above characteristics and practices are useful in cutting the cost of production while JIT is equally responsible for producing on-time and qualitative products and services. 72 Kanban System Kanban is a Japanese word meaning card. JIT production control system is a manual system in which Kanbans or cards can be used to authorize production and the movement of materials and products within the plant. Such Kanbans are obtained from demand downstream, thus inventory is pulled rather than pushed through the plant. In general, the demand-pull concept can be applied to a large number of firms, but the Kanban type inventory control system is mainly applicable in repetitive assembly manufacturing. For example, automobiles, log-loaders, washing machines, TV sets. JIT production implies continuously reducing the time required to perform the needed machine set-ups and operations, hence reducing down time and production lead time to the minimum possible. Correcting defects with occurrence and focus on small or zero WIP inventories are closely connected. Zero inventories show that there are no inventory buffers for replacing defective parts. The main advantages are increase in productivity, reduced costs and making problems highly visible for quick correction. Different devices like warning bells, timers, electric eyes and alignment templates can also be used to prevent problems from occurring. But preventive maintenance is also necessary for no inventory buffers, because a machine breakdown can lead to downtime for the entire plant. This system minimizes the waste as shown in Fig. 5.6. Determination of the Number of Kanbans Required For the purpose of determining the number of Kanbans, the following points should be considered: For implementing a Kanban system, determine the number of Kanban cards (or containers) needed. Each container or card represents the minimum production lot size.

Figure 5.6 Minimizing waste: Kanban production control systems An accurate determination of the lead time required to produce a container is a key aspect for determining the number of Kanbans required. Side bar shows space is a very important consideration. This process saves space requirements. Example of Kanban Card Determination: Problem Data A switch assembly is assembled in batches of 4 units from an upstream assembly area and transferred in a special container to a downstream control-panel assembly operation. The control-panel assembly area requires 5 switch assemblies per hour. The switch assembly area can produce a container of switch assemblies in 2 hours Safety stock has been set at 10% of needed. Example of Kanban Card Determination: Calculations k = Expected demand during lead time + Safety stock Size of the container = DL ( 1 + S ) C = 5 ( 2 )( 1. 1 ) = 2.75, or 3 4 The JIT Attitude JIT is a philosophy and, if followed in its true spirit, can bring miracles in the production function in particular and business in general. Various elements related to JIT attitude are discussed in the following paragraphs. Cooperation with a Value Chain Perspective An organisation s value chain comprises the related set of value-creating activities required to produce, distribute and service a product from the initial raw materials supplier to the final consumer. A company s value chain is part of a larger value system that includes the value chains of suppliers, distributors and buyers. In the value chain, primary activities include inbound logistics, operations, outbound logistics, marketing and sales and customer service. Inbound logistics refers to activities like transportation, receiving, inspection and materials handling, while outbound logistics means activities such as processing customer orders and outbound transportation. Marketing and sales activities represent advertising and sales promotion. At last, customer service means activities like customer training, maintaining spare parts and repair service. 73

Management The value chain and value system concepts clearly recognize the interrelationships within the economic system. Recognising and utilising these interdependencies is crucial as JIT systems depend on high levels of cooperation among everyone concerned with the value chain. Traditional systems focus on the value added by production activities, while the value chain system also involves the value added by vendors, distributors and customer service personnel. As JIT system eliminates waste and excess, the value chain team must ensure a smooth, efficient flow of output. Respect for People at all Levels JIT system requires that employees, customers, vendors and management and all individuals have a high regard for each other. Traditional management systems generally create adversarial relationships between employees and management because of authoritarian supervisors. In the case of a JIT system, employees are cross trained and empowered to make decisions. Respect builds the trust between employees and management, which is required to successfully implement different programmes. Such programmes help employees grow and remain bonded with the organisation, and result in more knowledgeable employees, fewer layers of management, minimum labour turnover, higher quality and lower costs. Quality at the Source (Jidohka) Jidohka means identifying and correcting problems as they occur. The Japanese refer this concept as jidohka. JIT system is responsible for quality, and employees use statistical control charts and different techniques to monitor quality of their own work. Jidohka also involves frequent automated inspection known as autonomation. This makes inspection part of the production process, so that defective part is not moved to the next stage in the process. It stops the production line and corrects the problem at the source of the problem. Check Your Progress Discuss the significance of JIT approach for productivity improvement. 74 Simplification or Just enough resources JIT systems aim to achieve zero work in process inventory buffers such that products flow continuously through the entire system. JIT also has the purpose of zero ending finished goods inventory. It shows that JIT is a demand pull system rather than a push system. Customer orders drive production. The process initiates from the customers who place demands on the sales force, then on the production facilities, and, in turn, place demands on upstream activities throughout the system. JIT system concept is much broader than an inventory control or production scheduling method. JIT system focuses on simplification and zero excess (waste) in various areas of business, to acquire just enough resources including vendors, human resources, and capacity. This differs from the traditional systems where excess resources are planned just-in-case (JIC) they are required. JIT is based on the fact that excess of any kind hides problems like low quality raw materials and unreliable vendors, employees and equipment. Management Through value Analysis This is an important technique for productivity improvement through waste reduction. It is based on value analysis. Every product can be broken down into its components and each component analysed in terms of its value to the whole. The main criteria of value in such analyses are worth, desirability and utility. The main objective of value analysis is to achieve many small savings or improvements in efficiency which will collectively be significant. Its usefulness has been demonstrated in manufacturing and many other fields as well. Substantial cost reductions have been achieved in hospital administration, banking, construction and also in public services and government. Value analysis is an organised, creative approach for identifying and eliminating unnecessary costs in a product or service. All costs connected with a product (or service) in its design, material, manufacturing process, and particularly its specifications and requirements, are analysed for the value each contributes. Thus, value analysis is an approach to cost reduction, which emphasises function rather than method; identifies excessive or unnecessary costs; improves the value of the product or service; provides the same or better performance at a lower cost; and reduces neither quality nor reliability. For the purpose of analysis an organisation can be broken down into eight main functioning areas: