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A manufacturing unit is a place, where men, materials, money, machinery and equipment etc are brought together for manufacturing the products. The selection of location of a manufacturing unit is an important phenomenon for the success of an enterprise and requires thorough analysis. So, it is an important strategic level decision making for an organization.
Location Theories
The facilities are located in a particular area or region depending on many parameters, factors and issues. Industrialization or centralization of facilities takes place in a area due to certain factors has been explained by two different theories propagated by Alfred Weber and Andreas Predohl.
(I) Alfred Weber, a German economist and sociologist, has put forth few guidelines in this regards. He simply classified the locational factors into primary and secondary categories. In primary factors materials, labour and agglomeration are responsible for industrialization in different locations. The materials are required in each and every type of industry to produce the goods or services, therefore the cost of transportation of these materials must be at minimum. Similarly the availability of labour of required skill level is another criterion to produce the goods of desired quality. The third aspect of Agglomeration is the concept of clustering where a particular type of industrial units is established with a view and perception of getting most of the required facilities readily available in a relatively small area. Deglomeration (just opposite of agglomeration) occurs when companies and services leave because of the diseconomies of industries excessive concentration. The secondary factors such as easy communication, cheap bank credits and insurance constitute the agglomeration. If these factors are not suitable to the companies then these issues act as deglomerating factors. (II) Andreas Predohl also pointed out that the companies relocate their plants and facilities considering the new advantages and disadvantages because of changing business environment, industrial modifications in geographical regions in global business conditions and thus making the hubs for a particular industry. Predohl could not point out the reasons of relocation of the plants and facilities in his theory.
There can be various environment types where facilities and clients are located, like continuous and discrete environment. Certain constraints related to environment are possible, such as governed as subset of upper environments, face the dynamic problems which includes time
Possible locations of facilities are analyzed as a subset of the global environment. The facilities are shown in the environment by points (vertices), lines, paths and cycles. The possible constraints are related to facility capacities, price and cost involved in locating the facility at as many as n facilities with a client coverage radius.
3) Clients
The clients locations are subset of environment in which the possible constraints is that every client has some demand and the facility has to meet that demand with the minimum possible cost.
4) Objective function There are different objectives for facility locations, which are listed as below:
Minimize number of newly located facilities Maximize number of covered clients and to satisfy the maximum demands Maximize average coverage distance
Aspects of Facility Location The following aspects of the facility locations must be addressed properly to optimize and strategize the location to gain competitive advantage: The type of facilities needed at location. The availability, ease and cost at the location. The capacity (size) of each aspect in the facility Its layout for smooth flow of material including work in process, information and manpower Need for selecting a suitable location The need for selecting a suitable location arises because of following situations Newly business has been started. Expansion of the existing business. Lease of the land has been expired. To minimize the cost by changing the location.
Availability of Raw materials Nearness to the market Availability of Power Transport facilities Suitability of climate Government policy Competition between states
Step 3: Selection of the locality or community Availability of skilled labour Civic amenities for workers Existence of complementary and competing industries Finance and research facilities Availability of water and fire-fighting facilities Local taxes and restrictions
Step 4: Selection of the site Soil, size and topography Disposal of waste
Location Models
Various models are available which help to identify the ideal location. Some of the popular models are: Factor Rating Method Point Rating Method Break-even Analysis Qualitative Factor Analysis Centre of Gravity Method
4 5 6 7 8 9 10
customers Proximity to suppliers Adequacy of water Receptivity of community Quality of educational system Access to rail and air transportation Suitability of Climate Availability of power Total score
5 1 5 4 3 2 2
2 3 4 1 10 7 6
4 3 3 2 8 9 4
10 3 20 4 30 14 12 149
20 3 15 8 24 18 8 144
Future Availability of Fuel Transportation Flexibility and Growth Adequacy of water supply Labour availability Pollution regulations Site topography Living conditions Total Score
Break-even Analysis
Illustration: Potential Locations A,B and C have the cost structures shown for producing a product expected to sell at Rs. 100 per unit. Find the most economical location for an expected volume of 2,000 units/year. Also determine the range of annual volume of production for which each of the locations A, B and C would be most economical. S. No. Location Fixed Cost/year (Rs.) Variable Cost per unit (Rs.) 1 A 25,000 50 2 B 50,000 25 3 C 80,000 15 To determine the most economical location for an expected annual volume of production of 2,000 units, calculate the total cost of production at each of the location for the annual production volume Q= 2,000 nos. Total Cost=Fixed cost per annum + (Variable cost per unit x Quantity Produced)
Total Cost at Location A, TCA= FCA+ (VCA x Q) =25000+ (50 x 2000) = Rs. 1,25,000 TCB=50000+ (25 x 2000) = Rs. 1,00,000 TCC=80000+ (15 x 2000) Rs. 1,10,000 So, Location B is best location. Graphical method
1 2
0.35 0.25
B 40 80
C 60 80
D 30 60
B 14.0 20.0
C 21.0 20.0
D 10.5 15.0
Supply 3 Labour 0.20 60 70 60 50 Availability 4 Cost of 0.05 80 70 40 80 Living 5 Environment 0.05 50 60 70 90 6 Markets 0.10 70 90 80 50 Total Score 1.00 Location C is preferred because of the highest weighted score.
1 2 3
A B C
S. No. 1 2 3 Step- I
Showroom Location A B C
To begin, first identify the existing facilities on a two-dimensional plane and determine their co-ordinates.
(700,900) C
1000 900 800 700 600 500 400 300 200 100 0 (150,250) A
(413.64, 603.41)
B (300,550) *
100 200 300 400 500 600 700 800 900 1000
Fig 10.2 Coordinates of New Location Step-II It also requires volume information on the business activity at the existing facilities.
S.No 1 2 3 Step-III
Showroom location A B C
Now compute the new co-ordinates using the formulae : X- co-ordinate of COG = djx Qj Qj Y-co-ordinate of COG = djr Qj Qj X- Co-ordinate of COG = 150 x 1200 + 300 x 1500 + 700 x 1700 1200 + 1500 + 1700 =180000 + 450000 + 1190000 4400 = 18200 = 413.64 44 Y-Co-ordinate of COG = 250 x 1200 + 550 x 1500 + 900 x 1700 1200 + 1500 + 1700
=300000 + 825000 + 1530000 4400 =2655000 = 603.41 4400 So, New Co-ordinates of a mobile ware house is D (413.64, 603.41)
Facility Layout
The plant layout planning includes decisions regarding the physical allocation of the economic activity centers in a facility. An economic activity center is any entity occupying space for economic or commercial purpose. The objective of plant layout planning is more effective work flow at the facility, allowing workers and equipment being more productive. It involves a judicious arrangement of production facilities so that workflow is direct and smooth. Plant Layout is a technique of locating machines, processes and plant services within the factory so as to achieve the right quantity and quality of output at the lowest possible cost of manufacturing. It is the positioning of machineries and equipment of a plant for economic and better quality production. The plant layout process starts at an aggregate level, taking into account the different departments. As soon as we get into the details, the different issues arise and the original configuration may be changed through a feedback process.
5. To maintain the flexibility in designing the facility layouts considering the changes over short and medium terms in the production process and volumes. 6. To ensure proper and efficient utilization of available floor space, labour, machinery and equipment. 7. To ensure minimum delay in work proceeds from one point to another. 8. To reduce material handling costs as well as maintenance requirements. The layout should facilitate easy maintenance. 9. To match the requirements of required production capacity both in short and long term. 10. The layout should be such that supervision must be easy and coordination and communication with the manpower should be effective. 11. To increase in overall productivity of the organization. These objectives can only be achieved by taking care of following important facts: By reducing the congestion. By the elimination of unnecessary occupied areas. By reducing the administrative and indirect work. By improving the supervision for better adjustment to the changing conditions. With better utilization of the workforce, equipments and services. By reducing material handling activities and stock in process by reducing number of parts and quality risks. By reducing health hazards and increasing workers safety. By reducing delays and manufacturing time to increase the production capacity. To maintain a balance among these factors.
The facility layout must supplement the specified objectives of the company and should meet the
respective criteria to evaluate the process design. The space required for any process corresponding to the technology adopted. Amount of space required between the two machines for avoiding any mishaps. The space required by the operator to handle the job and machine. The optimum distance to be travelled by the job between the elements of layouts so as, it should be sufficient for neither the job waiting for operation nor the time be insufficient that job may not be completed particularly in case of assembly lines. Processing requirements for number of operations and flow of jobs required in layout. Nature of products and type of production system also determines the type of facility layout. Interdependency of the work operations for manufacturing service operations also affects the relative position of work centers/ service centers. Material requirements for processing and storage during transit between the operations as well as storage requirements for raw material and finished products determine the type and space for layout.
Type of industry and type of transformation process determines the layout as it depends on
whether the production system is mass, continuous, process, intermittent or project type.
The location of the facilities also influences the layout because of size availability, available
If all these principles are considered while designing the layout, the very basic principles of production i.e. cost minimization, profit maximization and bulk production can be achieved and supplemented by facility layout.
resources up to 20 to 25 percent and can helpful an increasing the productivity by 30 to 35 percent by reducing the travelling distance of job, worker and faster dissemination of information along with the reducing of idle waiting of job, machinery and worker. In the above paragraph of objectives of layout, highlight the important role played by efficient layout designs which is explained as below: If the layout is properly designed, the efficient material can reduce the manufacturing cost to substantial amount. The space available is effectively used by better designed layout systems, particularly when the facilities are established in urban and semi-urban areas. Better monitoring of quality of the product or service produced is possible if the quality control department easily supervise all sections of production unit. That is possible only by effective layout design. The assembly line is more productive if layout design takes care of balancing the line, where neither the job nor the worker waits for each other. The execution of orders can be faster because of reduced cycle time if the layout design minimizes the distance between two work stations. Supervision by the manager and supervisors becomes easy if compact layout is designed. Better utilization of labour and all other inputs is possible because of efficient layout. Employees and workers morale will be raised to higher level because the productivity, hence the incentive, will be increased due to better layout. Less number of accidents and better safety is ensured by layout designs.
The above points signifies the importance of better layouts in terms of higher productivity and efficiency, so better incentives, working conditions and high morale of whole of the organization.
sources, etc. This all has been facilitated by industrial research which has even changed the products and services along with above mentioned changes. Few of technological changes are listed as below: o o o o o o Machines replace labour because of automation. New sources of power and energy have been developed. Processes have been improved. Materials composition and quality have become conducive to the process. Designs of product and process have changed. Information Technology has change the overall production scenario.
Layout Facilitates better Efficiency Because of the dynamic environment and competition, the improvement in efficiency and productivity is always required. So, the layout has to be change from time to time to take care of the following: o o o o o o Higher material handling costs. Congestion near the machinery and operators place. Slow processing of the jobs. Changing the quality of materials. Longer production cycle time. Change in customer needs.
Production Process Routings and Flows - This the major aspect facilitated by efficient layout planning, which increases the easy flow of job and information. Material Handling Methods and Equipment Requirements The main focus of layout is to decrease material handling and effective utilization of equipment and machinery. Product Mix and Volumes As each machine is capable to perform many operations as well as to produce multiple number of products in variable quantities, the product mix must be suitable to be produced as per the requirements of markets and the layout. Sales Growth Plan In the time of peak demands, seasonal and cyclic variations, and the layout should be in a position to meet the variable demands. Capacity Planning In the long run the demand of a product may increase, so the capacity of not only the machinery and equipment, but the whole facility should be capable to increase its capacity by adding the additional space for latest technology. Traffic, Aisles and Safety Requirements Facility Layout planning should takes care the aspect of minimum congestion because of the movement of job, machinery and worker to ensure the safety of each concerned.
Special Manufacturing Process Requirements Many a times, special processes and special machinery is to be annexed with the existing system while planning the layout not only for present but for the future also. Workforce and Supervisory Requirements Easy movements of workers and the supervisor should ne the aim of layout planning. Process Flexibility and Agility Requirements The layout should be capable to handle the changes in technology and so the process to manufacture the goods and to provide the services. Work-in-Process Flow and Storage Requirements The facility layout planning must take care of smooth flow of work in process and their storage if any delay. Part Size and Storage Requirement Characteristics The layout must be such that all the parts of any size must be accommodated while being operated as well as during material handling and storage. Building and Property Design Constraints The layout of shop floor, office building and the whole facility has to be considered while planning the facility for efficient production of goods and services.
Continuous flow: The correct operations flow is reached through the layout design and the equipment and machinery specifications. e.g. the different petroleum products come out while processing the crude oil in oil refineries. Repetitive flow (assembly line): The correct operations flow will be based in a line balancing exercise, in order to avoid problems generated by bottle necks. e.g. Car assembly or Computer assembly is an extension of product layout. The plant layout should be based in allocating a machine as close as possible to the next one in line, in the correct sequence to manufacture the product. A line layout for products is given below in figure:
Dispatch
Heat Treatment
Turning Shaping Grinding Heat Treatment Plating/ Painting
Raw Material and semi finished goods moving from one point to other points.
Early and easy identification of faults at the point of occurrence itself is possible as each workstation takes care of one operation only.
Time gap or lag in production is higher because of the movement of materials is required to distantly placed departments. Work in Progress inventory is high, so greater storage space is needed. Higher quality and production control costs are involved as more frequent inspections are required. More floor space is required due to more space needed to adjust the work in progress.
2- The layout is flexible as change in job design and/ or operations sequence can be easily incorporated. 3- It is more economical, when several operations on the job itself in different stages of progressive process can be executed simultaneously. 4- The better utilization of men and machine is possible because of all the operations are being done at the same place and the versatility of both men and machine can be utilized there itself. 5- As the workers work on the big project and they see the whole work being done they feel sense of pride as well as belongingness of the product. 6- Investment involved in the layout as in case of product and process layouts is avoided and is negligible in this case.
Real Work Cells: The grouping of workers and equipment is a fact. At the same time for identifying family of products and grouping of equipment, its essential to perform an internal layout of the cell (by product, by process or a combination of both, but generally by product). Virtual Work Cells: Identifying and dedicating certain equipment to the production of certain families of outputs, but without grouping them physically within the cell. The only issue is the identification of equipment and families of products, without performing an internal layout of the cell. Residual Work Cells: These are used when there is a specific item that has not been associated to any family or specialized equipment and can not be included within a work cell due to its general use.
SPA-Main Assembly
5 3 3 1 2 1
SPA # 3 Part C
2 3
Part Y
3 2
2 1
Part B
1 4
Part X
SPA # 1
SPA # 2
The following steps are used in implementing and maintaining this layout: Select product families. Determine work cells. Detail the work cells internal organization or layout. For product grouping (The products to be produced at the same work cell), we need to determine the condition that allows such grouping. Once product families are determined, creating a work cell for each family might be the best solution. Although it is not always like that (sometimes its even impossible). Approaches used to identify families and work cells:
Classification and codification of all items to be manufactured and comparison among them are to be done to define families. After that, its required to identify the cells and equipment to manufacture the products of those families. Work cells are created by grouping of equipment. In this case, we still need to define the families. Definition of families by similar manufacturing routes. Simultaneous identification of families and cells, based on the similarity of products and their needs of equipment and vice versa. A component that does not use all machines within its work cell can be accepted, same is the case with a machine that does not process all components in its group. However, its essential to avoid that component or machine which interacts with other machine or component outside of its cell. If its not possible to avoid this situation, the solution will be duplicating the piece of equipment, or process the item in more than one cell. Sometimes a residual cell might be needed to absorb a component like this or to include a general type of equipment that we can not duplicate. In general, the steps to follow to reorganize the layout will be: Incompatible equipment must be located in separate cells. Each component should be produced only in one cell. Each type of equipment should be located only in one cell. Investment in duplicating equipment should be minimized. The work cell should be limited to a reasonable size.
Advantage of Cellular Layout: There are very important benefits of using this layout.
Lower production cost as the specific cells are responsible to produce the components, so not much movement of material from one place to another takes place. Better supply of work in progress as the product layout is followed in a particular cell. Prompt customer services as the bigger quantities can be produced because of the multiple numbers of cells are allocated to produce the bigger quantities of components simultaneously. Better flexibility of process layout as change in product mix or capacity can easily be adjusted due to multiple number of similar machines in different cells. Better efficiency of product layout as the movement of material is automatic on the mechanical material handling equipments and to run the line not much manpower is required.
Gear Cutting
Soft Finishing
Hardening
Final Testing
Heat Treatment
Raw Material
Process Layout
Carbide Cutter
Figure: Combined or Hybrid Layout To summarize in each and every case for designing the layout, the criteria of minimum cost, ease of operation and technical feasibility are followed. In totality the desired volume and quantity of the products should have been produced at minimum cost by the layout to be followed.
In the age of information technology various computerized programs have been developed from time to time in order to help devise good process layout. Among these, the most widely used technique is Computerized Relative Allocation of Facilities Technique (CRAFT). Example: Hospital layouts are designed through this technique, because the relative position of various departments in the hospital cannot be changed such as Anesthesia Department and Surgery/ Operation Theaters should be close to each other. Similarly, the relative location of Gynae and Pediatrics Departments should also be very close. CRAFT tries to improve the relative placement of the departments as measured by total material handling cost for the layout. It makes improvements by exchanging pairs of departments in an iterative manner until no further cost reductions is possible. The program calculates the effect on total cost by exchanging departments; if this yields a reduction, the exchange is made, which constitutes iteration.
Characteristics of CRAFT: Following are the main characteristics In the CRAFT, the optimum final layout will depend upon the initial position of layout. So it is based on the starting conditions. Various combinations of square modules are used to depict the department. This allows multiple departmental configurations, but, many a times results in strange departmental shapes that have to be modified manually to obtain a realistic layout. CRAFT can not be a guarantee for optimal solution every time. To handle multi-story layout problems, a modified version has been developed known as SPACECRAFT.
Those areas which are in direct contact with the customer are required to be made more attractive. The presence of the customer creates the work flow.
The work load forecast and the activities planning are more accurate in the manufacturing environment. While in the service industry, there is seasonal and heterogeneous demand and the execution time can be variable. The services are intangible and adjustment between demand and production can not be done through inventory management. Queues are formed by people and having higher implications for the layout.
Allocate the daily consumption products and impulsive purchase and high profit margin products at prominent places and at the periphery. Eliminate aisles to have customers thorough and complete look on the products displayed on the shelves. Allocate the attractive products on both the sides of row and disperse them to increase the exposition of adjacent products. End row can be used as a place for exposition. Create the business image through a careful selection in the first section where the customers are getting into the facility.
Work Study
It 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 standardization 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 27.1 i.e., Method Study and Work-Measurement.
Work Study
Method Analysis
Work Measurement
Method Study This is also known as methods 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 pre-defined level of performance. The work-measurement is possible only after the standardization of job. The work measurement can be referred to 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.
It is also known as Method Analysis or Operations Analysis. It is a technique of systematic recording, critical examination and evaluation of existing and proposed ways of doing work, so as to develop and implement simpler, effective and less costly methods. Work Measurement It is to measure the work time and thereby establishing the time for a qualified worker to performance a task at predefined pace of doing the same. Motion Study It is also known as Motion Analysis. It is a study of motions (manual or body) used to perform a task. This includes all types of activities performed by right hand or left hand or any other part of body. Work-Design It is an analysis of present work methods in order to devise simplified, easier, effective and more cost efficient methods to achieve the basic purpose of work design. Work Simplification It is improving present work methods or work flow patterns and to train the worker/ operator to make the work/ task simpler at reduced cost. Here the application of common sense is more important. Industrial Engineering It is a discipline of engineering that involves designing, improving, getting acceptance and installing the better systems related to men, materials, methods and machinery to improve productivity and efficiency.
Objectives of Work-Study
The work-study has gained lot of importance in the light of growing competition. The work study has following objectives: Systematic analysis of present method 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 man, machine, material and methods to achieve best quality of minimum cost. Increase of productivity and thus the morale of manpower. Thus improving the overall efficiency in the organization.
Work study is a branch developed through time and motion study and initiated by F.W. Taylor and Gilbreth Couple respectively. Motion study ultimately lead 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.
Time Study (F.W. Taylor) Work Measurement Improving through effective utilization of men, materials, machinery and methods
Work Design
Method Study
Fig 27.2 Work Design-Synthesis of Time and Motion study, Manning and Evaluation Both studies further lead to work design as shown in figure 27.2 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.
Work Study
Method Study
Work Measurement
1. Selecting the task/ work 2. Recording working and idle time in present working
It tries to set the standards for performance with respect to time and improves the productivity as shown in figure 27.3 Both the techniques- Method Study and Work Measurement greatly contribute to development of simpler and cost effective methods in such a manner to increase the productivity in the business organization. Advantages of Work-Study Work Study increases the productivity, reduces the time taken to perform the job and thus overall viability of any business. The following benefits of work-study are listed as 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.
The work study tries to find out the better method of performing the job with respect to simplicity, ease and 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. Factors and Situations Responsible to Organize Method Study There are certain situation and factors prevailing in the organization, which instigate to conduct Method Study. These are listed as below: When production cost is high and management wants to reduce 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. Quantity complaints increase beyond limit. High cost of production and difficult to meet competition. Poor workmanship and working conditions are factors of conducting Method Study. Safety of workers and machines. Overheads increases due to excessive overtime.
The above factors create a situation, which method study becomes the necessity for survival and meeting the competition. Objectives of Method Study Method Study aims to many objectives, which are listed as below: To analyze existing and suggested method of doing a task or work. To find out new suggested method, how it is better to increase the productivity and to reduce the cost. The increase of productivity and reduction of cost is achieved by the way of reducing material handling and movements, thus reducing fatigue to workers. To achieve optimum utilization of inputs. To develop the new methods and thus standards of performance.
The above objectives must be achieved with detailed analysis and implementation of method study. Significance of Method Study The method study has got lot of advantages. It helps in increasing the overall profitability of the organization by enhancing the 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 utilization of resources, particularly of man-power. 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.
3.) Critical examination of the facts It is used to critically examine the current method by considering:
The purpose is to identify possible actions for improvement and to subject these to develop a preferred solution.
5.) Installation of new method It needs project managing the changes and understanding of the changes involved by all concerned persons. 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 improving.
Inspection
Storage
Transportation
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. Sometimes the product or machine has to wait for next operation or next job.
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 first step 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 of the material being processed, the worker carrying out the work or, less commonly, a piece of equipment. Process charts may also be used at a more micro level of analysis.
Outline Process Chart It records the process flow in totality, but only the main steps in the sequence of process. It takes into account mainly operations, storage, transportation, delay, inspection and also the combinations. The symbols used in recording are followed universally and are given below: Process Chart This 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 these 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. These are further categorized into the following: Main utilization process chart. Machine utilization process chart Material/ 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 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 may also be 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 the sequence of operations performed over the machines and equipment, aisles and display the exact path followed by the job on the various work-centers. 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.
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 who has the necessary physical and mental characteristics, also has 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 Labor standard Production standard
All 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 The work measurement is conducted in any business organization with the following objectives: Better man-job fit i.e., suitable and qualified worker deployed on different jobs. Better and reliable labor performance can be achieved. To develop the criteria to control the labor 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 organization in a fair manner, the overall performance of business can be improved to a greater extent.
Significance of Work Measurement As it is very clear that if above objectives are achieved with the help of work measurement, the business performance can be improved to a greater extent and can meet the competition in a better way. The work measurement helps the operations in the following way: 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 the labor overhead. Helps in committing the delivery schedules.
Thus the work measurement helps the business not only to survive, but also to meet the competition in more effective way.
(I) 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 x observed rating/standard rating Rating is a subjective assessment, and different observers may rate differently.
(II) 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 an 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 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: 1) Constant allowance: Personal Basic fatigue 2) 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 small allowance of time, included in a standard time to meet the legitimate and expected items of works or delays. 3) The 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 / unit= NT+ (NT x% allowances) Time (taken) available (mts.) ----------------------------------Standard time per unit
Standard output =
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 10 =Normal Time (1+Allowance) =Normal Time (1+0.25) =8 minutes Actual Time x Performance Ratings Normal Time= 100 Actual Time x 80 = 100
The purpose of the measurement; The level of details required; The time available; The existence of available predetermined data; The cost.
In certain cases, techniques which derive times quickly may provide less detail and vice a versa. The results obtained from work measurement serve as the basis of the planning and scheduling of work, manpower planning, work balancing in team working, costing, labor performance measurement, and financial incentives. 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:
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 observer 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 the subjective process of rating.
100
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 the
fatigue, to increase the productivity of the task and labor and to reduce production cycle time. MotionStudy is further divided into two categories: Micro Motion Study Memo Motion Study
Micro-Motion Study In this 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? The micro-motion 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 machine. To develop the inter-relationship amongst the group members. To improve the productivity and reduce the fatigue by removing unnecessary and waste movements.
The micro-motion study is conducted by preparing a motion picture of operations in a sequence, analyzing and evaluating the film with the help various charts, symbols and diagrams. The micro-motion study is conducted with the help of SIMO chart and Therbligs and micro clock. The job is analyzed by breaking down into micro-motions of the worker/ operation in the control of three parts: When the start the motion. What is nature of 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:
SearchingSr Finding out and searching for a job. Grasping G Picking up an object. Selecting St Deciding to pick up an object Holding (H) Keeping the article in hand after picking up. Releasing (R) Releasing the job from hand. Inspecting (In) Examining and checking the job for conformance
Planning (P) Planning before actual physical movement. Assembling (A) Joining two objects together Delaying (D) When the operation has to be delayed due to avoidable or unavoidable reasons. There are many more Therbligs other than mentioned as 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 must not be hindered. Safety of operator, machine and tools.
Different scientists have developed various categories of principles related to motion and their economy. Memo-Motion Study It is another type of micro-motion study, where the film is made in slow-motion using a special type of camera with varying speed like sixty, ninety, one hundred twenty frames per minute. The various applications of memo-motion study are as under: To study the materials 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. 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. Assess and add 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 multiply the work content by its frequency thus reaching to work content of the whole job. Add contingency allowance in work content of the job to reach at standard time of the job.
Rating Factor
Add Relaxation
Multiply by
Add contingency
The standard time is derived from observed time in a step by step procedure as shown in above fig 27.4. 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 on normal time or basic time, then reaches to standard time and total allowed time for a job as shown in below fig 27.5
Apply Work Rating (R) Variation Allowance (WCA) Calculation of Relaxation Actual Allowed Allowance Time for (RA) performing a job Contingence Allowance (CA) Special Allowance (SA)
Policy
2.) 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 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 work place could be unacceptable. In such cases, analytical estimating is an appropriate method to use.. Advantages & 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. Technique should be used when a more precise and accurate alternative is a feasible and economic alternative otherwise effectiveness decreases.
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 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 as below:= 4 x p x (100 - p) Where p is the estimated % time spent on the activity and L is the limit of error, expressed as a % After this the 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 x (p x (100 - p))
Number of observations
In 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 1600 400
Working Non-working
The worker when working was rated at 80% 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 and hour. Solution During the period of observation the percentage time for working and idle state can be calculate in the following way: No. of observation State Working Idle Total % of age
1600/2000=80 400/2000=20
Now Actual working hours out of 300 hours = 80% of 300 = 80 x 300 = 240 hours
100 Actual Time x Performance Ratings So Normal Time = 100 240 x 80 So Normal Time = 100 Allowance are 10% of 8 hours day=48 minutes Hence the allowance in 300 hours = 48 x 300 = 1800 minutes 8 = 30 hours Hence then standard time = 192 + 30 = 222 Standard number of units produced per hour 4. Synthesis Method It 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 job. These time values of different standard elements are complied in the form of catalogue. The different elements like turning, shaping or drilling are involved in various jobs. The new job congaing one or many similar jobs, then the different standard time values can be taken from previously organized studies or from the listed values in the catalogue. 27000 = 222 = 1222 parts per hour.
Advantages Synthesis Method is superior to many other methods, which are already explained. The various advantages of this method are: 1) 2) 3) 4) Reliable as standard data taken from 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. 5) It helps in calculating the overall production time. 6) It is used in devising incentive schemes.
Productivity
In general terms Productivity means the total output produced by the given inputs with the help of limited resources. Specifically speaking it means "volume of production" or "total sales value of production" per person employed. The first of these does not have much meaning in comparing the manufacture of similar products under widely different economic circumstances. Productivity may also be defined as physical units of output per many-day can be as high in factories in underdeveloped countries as anywhere else, where simple operations are involved, even in highly advanced technological fields. The rise in productivity, defined thus, result mainly from technical change and from economies of scale; and that the resulting economic gains are not distributed either to the operatives in the form of increased wages (since these are set by the general pattern of wages in the country), or as increased profits to the investor, but to consumers. The second definition does not give a usable or meaningful measurement in economic terms, since it includes the intrinsic value of the raw material, which may be very high or very low and may have to be imported.
Various perspectives of Productivity
We can not summarize the term productivity into a single definition .The definition of productivity varies according to the aspect being studied. G. D. Sardana and Prem Vrat (1987) have compiled 20 definitions of productivity relevant to the business. Generally, productivity is considered as an output-input relationship which is mostly concerned with a production system. It means an organization can be treated as a physical system. This concept is based on the model of causality which states that an input causes an output. But, in general there can be other economic as well as non-economic performance outputs, like acquiring a share of the markets, new product introduction, completion of schedules, societal goals, etc. These also utilize the input resources and should be in a model to measure productivity. Similarly, factorial productivity measures input factors such as labor, capital, etc. In general, measurement of productivity should be based on following issues: Reallocation of Resources: If resources can be reallocated properly and efficiently then it can lead to better productivity and also higher morale of employees. Identification of the potential areas of improvements: The purpose of measuring and enhancing the productivity is to find the areas, where improvement can be done. There can be so many areas like motivation, morale, leadership, working conditions, incentives, job enrichment, etc. Analysis of preplanned targets: Productivity and its measurement can be a basis on which achieving preplanned targets can be checked and analyzed. If there is any deviation then it will help in setting new targets.
Sardana and Prem Vrat use a broad definition of productivity that tells the observer how the measured organization is doing as a whole.
Types of Productivity Productivity can be classified on the basis of different inputs used. Basically there are following types of productivity. 1) Partial productivity: In this type of productivity the resource inputs are aggregated to find the ratio of output to one class of input among various factors of production. Examples of these are Labour productivity: Inputs are aggregated in terms of direct labour cost. These will affect the wage rate as well as changes in the labour mix. Direct labour cost productivity: The inputs are aggregated in terms of direct labor cost. Direct cost productivity: In this all items of direct cost associated with resources used are aggregated on a monetary value basis. Raw material productivity: It is calculated by dividing the product with the material consumed. Capital productivity: Resource inputs may be the charges during the period to depreciation. In other words, the inputs may be the book value of the capital investment. 2) Total factor productivity: This type of productivity is the ratio of net output to the sum of the associated labor and capital inputs. The net output means the output minus intermediate goods and services either purchased or produces in house, which were output for initial process but have acted as input for the final transformation process. 3) Total productivity: It means the ratio of total output to the sum of all input factors. Thus the total productivity measure reflects the joint impact of all inputs in procuring the output. Labor Productivity The productivity has many components such as capital, materials, power and energy, and labor. Labor productivity is very important part of productivity, which can be measured by the following formulae:
Output in a given period of time Labor Productivity (LP) = Labor hours used in that period of time
Here the output is measured in terms of labor used to produce that output. Another measure of labor productivity can be just reverse of the above i.e.
Labor hours used Labor Productivity (LP) = Output produced by the labor LP can also measured as the ratio of value addition to the wages provided i.e., Value Addition for the product Labor Productivity (LP) = Wages given to add that value
Measurement of productivity, partial productivity or labor productivity is possible only when both numerator and denominator are of same units i.e., either in momentary value or man -hours. The measurement formula must be selected very carefully to arrive at realistic indication of effectiveness of any input/ resource.
Scope of Productivity
Broadly speaking the purpose of business is to create new customers and to sustain existing customers. Business is not only about making profits. In a broader sense, the first valid purpose of business is to satisfy the needs of customer otherwise it is very tough for a company to survive in a global competitive world. It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or service converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance-especially not to the future of the business and to its success. What the customer thinks he is buying, what he considers value, is decisive-it determines what a business is, what it produces, and whether it will prosper. And what the customer buys and considers value is never a product. It is always utility, that is, what a product or service does for him. A business converts economic resources into valuable output. It may do so well or poorly. At this level, productivity is the balance between all production factors that will give the greatest return for the least effort. Productivity at the organizational level is considered separately from productivity at lower levels. The customer buys utility and productivity associates outputs with inputs. Productivity, at the organization level, may be considered a measure of how well the company satisfies the customers' utility. Therefore, productivity measurement shows how well a company is doing. This does not, however, tell anything about why the company is performing the way it is. To discover why, productivity must first be examined at lower levels such as the work group, which are best suited for using productivity measures as an indication of change. The concept of productivity is often vaguely defined and poorly understood, although it is a widely discussed topic. Different meanings, definitions, interpretations and concepts have emerged as experts working in various areas of operations have looked at it from their own perspectives. But a different view is that the terms `performance' and `productivity' are used differently. Productivity is a fairly specific concept while performance includes many more attributes.
Measurement of Productivity
The productivity is a common measure of how well a company, industry, or firm using its resources. A productivity of production system is analogues to the efficiency of a machine. As it is desired to increase the efficiency of a machine, it is also to raise the productivity within the available resources. Productivity may be defined as a ratio between output and input. Output means the number of items produced and inputs are various resources like 6Ms. Productivity = Output Input Productivity what we call is a relative measure. Productivity comparison can be made by two ways: 1.) Company can compare with itself with similar operations within the company 2.) It can use industry data when such data are available.
Illustrations
Questions.1: A company is making 6000 batteries in a month by engaging 22 persons working for 24 days in a month in a shift of 8 hours per day. Calculate the productivity in terms of labour input? Solution: Quantity of standard price Productivity = Labour cost
6000 = 4224
Question.2: If 200 pieces are produced at a standard price of Rs. 600 each, with a labour cost of Rs.5000, material cost of Rs.18,000 & overhead of Rs.11,000. Calculate the multifactor productivity?
Solution: Productivity =
120000 = 34000 Question.3: Find the partial productivity and total productivity for M/S ABC company for which the following data is available:= 3.53
Assume the above values are in constant rupees with respect to a base period.
Net Output = Output (Material Input + Capital Input + Energy Input + Other Expenses Input)
15000
14250
= 1.05
Question.4:
Products X and Y are being manufactured by a company using materials A and B. Both materials are equally suitable. Product X is expected to sell at Rs.75 per unit and product Y at Rs.35 per unit. The operating data is given below:
Particulars
Material A
Material B
Output
X Y
1000 kg
Labour usage
300 man-hours
250 man-hours
1000 kwhr
1500 kwhr
Rs.22
Rs.33
Rs.10
Rs.10
Rs.2.0
Rs.2.0
Compare the productivity of material, labour and electrical energy in using materials A & B. Comment on the relative advantage of using either of the materials.
Solution:
= Output of product in units X rate/unit of X + output of Y in units X rate/unit of Y = 200 x 75 + 300 x 35 = 15,000 + 10,500 = 25,500
S. No. 1.
Productivity
Material A
Material B
Productivity of Raw Materials = Sales value 25,500/1000 x 22 = 1.16 of output/Value of Raw Material Used Labour Productivity = Sales output/Value of labour used value of 25,500/300 x 10 = 8.5
37,000/1,000 x 33 = 1.12
2.
37,000/250 x 10 = 14.80
3.
Productivity of Energy = Sales value of 25,500/1000 x 2 = 12.75 output/Value of electrical energy used
37,000/1500 x 2 = 12.33
Comments:
The productivities of (1) and (3) are nearly the same using either material A or B. If labour is the key factor, use of material B is better as it yields higher productivity 14.8 > 8.5
Capacity utilization Regulations imposed by the government Production volume Investment Skills of the workers Life of the plant and machinery Research and development Work ethics Energy cost
Forecasting
Forecasting refers to establishing the future trends and expectations by the analysis of past data, or the formation of opinions. The aim behind forecasting is to minimize the threats and challenges and to explicit the maximum benefits out of opportunities predicted. The Forecasting is an essential element of capital budgeting. The Capital budgeting requires the commitment of significant funds today in the hope of long term benefits. The role of forecasting is the estimation of these benefits.
Utility of a Forecast
The forecast has any real utility, when it is not totally reliable e.g., suppose an astrologer predicts that we will be killed, when we leave the house. If we know that the predictions are one hundred percent accurate, then we would be unable to alter the forecast. In other words, predictions only become useful when they are not completely reliable. The paradox exists only when we want the
future to be different than the prediction and when we believe that there is no way for us to adapt to or affect the forthcoming changes. The objective of forecasting is to be as accurate as possible. In the case of business demand forecasting, a more accurate forecast enables us to plan our resources in a more ecological and economical way fashion. We can minimize waste by adapting to our expectations of the future. In demand forecasting, the degree of over- and under-utilization of our resources is proportional to the difference between the actual and forecasted values. The usefulness of a forecast is not only the accuracy of quantification in a particular dimension, it also explains the complex relationships among many aspects such as the type of information being forecast, the confidence in the accuracy of the forecast, the magnitude of dissatisfaction with the forecast, and the versatility of ways that one can adapt to or modify the forecast. Each forecasting situation must be evaluated individually for its usefulness. One must strive to develop forecasts that are of maximum usefulness to planners. This means that each situation must be evaluated individually and type of forecasts that is most appropriate to the particular application.
A forecast is useful for the future time for which it is valid. In business terms, the demand forecast is made for three ranges of time horizons. On the basis of these time horizons, three types of forecasts are explained as under: 1. Long Range Demand Forecasts: This type of forecast is made for a time period more than three years and is useful for strategic planning, product planning, capacity and expansion planning, facility location, planning for research and development, etc. These type of forecasts impact the overall viability of the business in long run with respect to its competitors. 2. Medium Range Demand Forecasts: This forecast covers the time span of generally from three months to three years. These forecasts are applicable to production and layout planning, production control, aggregate planning, sales and marketing plans, annual, quarter or half yearly cash budgeting and other working and operating plans related to cash credit limits and working capital. 3. Short Range Demand Forecasts: These demand forecasts have validity for the time period ranging from one day to three months but may go up to one year in certain cases. These forecasts cover day to day purchase planning, inventory plan, job scheduling, workforce and employee planning, job assignment, etc. These type of plans generally made on weekly, monthly or quarterly basis.
Meaningful: The information provided by forecasts can be meaningful only if it is with full details of units such as rupees or quantity of demand in kilograms or metric tonnes as well as thereby quantity and specifications of machines and manpower required. These above issues if well taken then the forecasts can serve the purpose in better way.
Strategic Planning of any business and the demand of its products can only be possible to determine through long term forecasting of the business, technological and economical situations, those would be prevailed in the long term.
Product Planning is to plan about the number of products to be supplied in the target market with respect to its competitors to capture the desired market share. This is also possible only when the organization can predict about long term demand for its potential products.
Capacity and Expansion Planning depends upon the market requirements in the long run to install the capacity of the process and technology so that the market and customer needs can be met appropriately.
Facility Location also impacts in the long term as the proximity of the production facility near to the customer base is an essential feature for the business viability.
Planning for Research and Development depends on long term possibilities to satisfy the customer in a better way. The research can decide about the possible features that should be in the product or service in a long term that customer will expect.
Production and Layout Planning is of the nature of medium term forecasts as any process or technology cannot be changed very frequently and any set up related to layout should be viable enough to meet the market demands atleast during the medium range of production planning and control.
Aggregate Planning describes the need of materials and labor for the required output planned for medium range. This is dependent on the accuracy of medium range forecasts. All Sales and Marketing Plans depend on the medium range forecasts, so this objective can only be met with accurate forecasts. Annual, Quarter or Half Yearly Cash Budgeting is possible when the company can determine the demand during the corresponding time period. All working and operating plans related to cash credit limits and working capital is the outcome of medium range or annual demand forecasts.
Purchase Planning in any organization has to be done on weekly, monthly or quarterly basis to fill the gap of inventory and materials to produce the desired level of quantities of the product. Inventory Plan is also the part of short range demand forecasting objectives in which the output is matched with the Materials Requirement Planning (MRP). Job Scheduling should meet the objective of flexible plants. The flexibility of changing the production setup and assigning the jobs to different possible machines and work center is the part of short term demand forecasting objectives. Workforce and Employee Planning determines the required manpower of a particular skill level as per the forecasting demand for a week, month or quarter or even for a year.
Forecasting Procedure
The demand forecasting process involves number of systematic and sequential steps to make the forecasts more practical and accurate. These steps are as follows: Identify the need of forecast i.e. why the forecast is required, what objectives will the forecasts achieve are the questions to be answered in the first step. Identifying the products or services for which the demand is to be forecasted. It may be a group of product or services. The determination of time frame for a forecast is the next step to be evaluated. The suitable method or technique for the demand forecast has to be fixed up as per the nature of product or services. The data is collected and processed as per the method or technique select as above and also analysed by identifying any assumption or hypothesis before reaching to the final forecast. The formulation of final forecast by using the identifying technique. Evaluating the forecast with respect to the real demand and finding pout the gap if any between the two and then further adjusting the forecasts with the suitable correction factor. The various techniques are used for demand forecasting, but can be categorized into the two i.e. quantitative and qualitative methods.
paragraphs and shown in figure 11.1. The forecasting techniques are the methods and process to reach to the final forecast of the demands in future periods of times while the forecasting routes follow different paths i.e. the data and information flow is either top to down or from bottom to upwards. Here the technique is only a method, while route shows only the path of flow.
Forecasting
Techniques
Routes
Quantitative
Qualitative
Delphi Method Expert Judgment Scenario Writing Intuitive Approaches Consumer Survey Method Sales Force Composite Method
In these types of forecasting methods, the past times are the best indicators of future trends. By reviewing historical data over a time period, we can better understand the pattern of past behavior of a variable and better predict the future behavior. A time series is a set of observations on a variable measured over successive periods of time. The objective of time series methods is to discover a pattern in the historical data and then extrapolate the trend into the future. The forecast is based solely on past values of the variable and/or past forecast errors. Time series forecasting methods are based on analysis of historical data. Time series refers to a set of observations measured at successive times or over successive periods. Here, the assumption is made that past patterns in data can be used to forecast future data points. Components of Time Series Demand In time series, there are certain elements required to be taken care to precast the demand: 1. Average: The mean of the observations over time period 2. Trend: Trend Component It represents a gradual shifting of a time series to relatively higher or lower values over time. Trend is usually the result of changes in the population, demographics, and technology and consumer preferences. 3. Seasonal influence: Predictable short-term cycling behavior due to time period of the day, week, month, season, year, etc. 4. Cyclical movement: Unpredictable long-term cycling behavior due to business cycle or product/service life cycle. It represents any recurring sequence of points above and below the trend line lasting more than one year. We assume that this component represents multiyear cyclical movements in the economy. 5. Irregular Component: There is an effect of various unpredictable variables. This effect may be irregular in its nature. It is the catch-all factor that accounts for the deviation of the actual time series value from what we would expect based on the other components. It is caused by the short-term, unanticipated and nonrecurring factors that affect the time series. 6. Random error: Remaining variation if any that cannot be explained by the above mentioned components Various Time series method are listed as below and shown in figure 11.2
Moving Averages
Exponential Smoothing
1. Moving Averages (simple moving average and weighted moving average): The forecast is based on arithmetic average of a given number of past data points 2. Exponential Smoothing (single exponential smoothing and double exponential smoothing): This is a type of weighted moving average that allows inclusion of trends, etc. 3. Multiplicative Seasonal Method: It is a method where seasonal effects in forecasting the demand are considered. The variation can range between seasons, months, weeks, days in the week and even variation during a single day or hour. (a) Moving Averages
The Moving Averages Methods are the parts of Time Series Methods, which have been further divided into simple moving and weighted moving average methods.
(i) Simple Moving Average Method Moving average techniques forecast demand by calculating an average of actual demands from a specified number of prior periods. Each new forecast drops the demand in the oldest period and replaces it with the demand in the most recent period. In this way, the data in the calculation moves over time simple moving average: At = Dt + Dt-1 + Dt-2 + ... + Dt-N+1 N Where N = total number of periods. The average forecast for period t+1: Ft+1 = At Key Decision: N - How many periods should be considered in the forecast? There is always a need to make a balance between smoothing and responsible.
Trade-off: Higher value of N - Greater smoothing, Lower responsiveness Lower value of N - Less smoothing, More responsiveness There are certain features to be considered which are as follows: The more periods (N) over which the moving average is calculated, the less susceptible the forecast is to random variations, but the less responsive it is to changes A large value of N is appropriate if the underlying pattern of demand is stable A smaller value of N is appropriate if the pattern is changing or if it is important to identify short-term fluctuations. (ii) Weighted Moving Average Method This method involves selecting weights for each of the data values and then computing a weighted mean as the forecast. A weighted moving average is a moving average where each historical demand may be weighted differently average: At = W1 Dt + W2 Dt-1 + W3 Dt-2 + ... + WN Dt-N+1 where: N = total number of periods in the average Wt = weight applied to period t's demand Sum of all the weights = 1 Forecast: Ft+1 = At = forecast for period t+1 (b) Exponential Smoothing It is a special case of the weighted moving averages method in which we select only the weight for the most recent observation. The weight placed on the most recent observation is the value of the smoothing constant. It has been further divided into two categories i.e. Single and Double Exponential Smoothing. (i) Single Exponential Smoothing The weights for the data values are computed automatically and become smaller at an exponential rate as the observations become older. Exponential smoothing gives greater weight to demand in more recent periods and less weight to demand in earlier periods average: At = a Dt + (1 - a) At-1 = a Dt + (1 - a) Ft Forecast for period t+1: Ft+1 = At where: At-1 = "series average" calculated by the exponential smoothing model to period t-1 a = smoothing parameter between 0 and 1 The larger the smoothing parameter, the greater the weight given to the most recent demand
When a trend exists, the forecasting technique must consider the trend as well as the series average. Ignoring the trend will cause the forecast to always be below (with an increasing trend) or above (with a decreasing trend) actual demand. Double exponential smoothing smooth (averages) both the series average and the trend forecast for period. Forecast for the period t+1: Ft+1 = At + Tt Average: At = aDt + (1 - a) (At-1 + Tt-1) = aDt + (1 - a) Ft Average trend: Tt = B CTt + (1 - B) Tt-1 Current trend: CTt = At - At-1 Forecast for p periods into the future: Ft+p = At + p Tt Where: At = exponentially smoothed average of the series in period t Tt = exponentially smoothed average of the trend in period t CTt = current estimate of the trend in period t a = smoothing parameter between 0 and 1 for smoothing the averages B = smoothing parameter between 0 and 1 for smoothing the trend
Multiplicative Seasonal Method What happens when the patterns try to predict display seasonal effects? What is seasonality? - It can range from true variation between seasons, to variation between months, weeks, days in the week and even variation during a single day or hour. To deal with seasonal effects in forecasting two tasks must be completed:
1. A forecast for the entire period (i.e., year) must be made using whatever forecasting technique is appropriate. This forecast will be developed using whatever smoothing factor. 2. The forecast must be adjusted to reflect the seasonal effects in each period (i.e., month or quarter)
The multiplicative seasonal method adjusts a given forecast by multiplying the forecast by a seasonal factor. Step 1: Calculate the average demand per period for each year (y) of past data by dividing total demand for the year by the number of periods in the year Step 2: Divide the actual demand Dy,t for each period (t) by the average demand y per period (calculated in Step 1) to get a seasonal factor fy,t for each period; repeat for each year of data Step 3: Calculate the average seasonal factor t for each period by summing all the seasonal factors fy,t for that period and dividing by the number of seasonal factors Step 4: Determine the forecast for a given period in a future year by multiplying the average seasonal factor t by the forecasted demand in that future year.
2) Trend Projection Methods Equation for Linear Trend Tt = b0 + b1t where Tt b0 b1 t = trend value in period t = intercept of the trend line = slope of the trend line = time
Note: t is the independent variable. Computing the Slope (b1) and Intercept (b0) b1 = tYt - (t Yt)/n t2 - (t)2/n
b0 = (Yt/n) - b1t/n = Y - b1t where Yt = actual value in period t n = number of periods in time series
In Regression Analysis one or more independent variables can be used to predict the value of a single dependent variable. The time series value that we want to forecast is the dependent variable. The independent variable(s) might include any combination of the following: Previous values of the time series variable itself Economic or demographic variables
Time variables There are two types of models used in Regression Analysis:
An autoregressive model is a regression model in which the independent variables are previous values of the time series being forecast.
A causal forecasting model uses other time series related to the one being forecast in an effort to explain the cause of a time series behavior.
Yt = value of the time series in period t x1t = value of independent variable 1 in period t x2t = value of independent variable 2 in period t xkt = value of independent variable k in period t In forecasting sales of refrigerators, we might select the following five independent variables: x1t = price of refrigerator in period t x2t = total industry sales in period t - 1 x3t = number of new-house building permits in period t - 1 x4t = population forecast for period t x5t = advertising budget for period t The n periods of data necessary to develop the estimated regression equation would appear as:
Period (t)
Time Series Value of Independent Variables (Yt) (x1t) (x2t) (x3t) . . (xkt)
Y1
x11
x21
x31
xk1
2 . . n
Y2 . . Yn
x12 . . x1n
x22 . .
x32 . . . .
. . . .
. . . .
xk2
x2n x3n
xkn
1) Delphi Method In the Delphi Method, the following features are important: Advantages: The participants act both as expert and respondent. Delphi method is used for long range forecasts. This method can be used for demand and sales forecasts for new products also. Disadvantage: It may not be highly accurate as it involves opinion and no quantitative technique. This process generally involves long time period to forecast. The accuracy of questionnaire is very important otherwise vague and ambiguous results may appear and lead to false findings. It is an attempt to develop forecasts through group consensus. Group size generally ranges from 7 to 10. The goal is to produce a relatively narrow spread of opinions within which the majority of the panels of experts concur.
2) Expert Judgment Expert Judgment method has the following features: Advantages: The experts of various business fields of same industry get together, work on past trends, analyze and present their opinions individually and then coordinating team club together all the opinions and present the summarized conclusion as final forecast. Experts individually consider information that they believe will influence the variable; then they combine their conclusions into a forecast. No two experts are likely to consider the same information in the same way.
The rich and vast experience can create the accurate forecast to provide business viability and stability. These forecasts may even be applied to technological changes. New products demand forecasting can also be done by this method. Experts even can modify existing forecasts by taking unusual events into account. Disadvantages: It is very costly method as vast experienced people as experts are involved. Ego of varying natured experienced people may sometime delay in reaching the conclusion. Many a times, it is very difficult to club together all experts due to their busy schedule.
3) Scenario Writing The following procedure is followed in this method: Advantages: Most of the situations and possibilities are taken into account. It is a well balanced method to forecast in terms of accuracy and cost. Disadvantages: Long procedure and lengthy time to reach to the final forecast. It may also be possible no assumed scenario matching with the real situations. This procedure involves developing several conceptual scenarios, each based on a welldefined set of assumptions. The decision maker must decide how likely each scenario is and then make decisions accordingly.
4) Intuitive Approaches In this approach following procedure is adopted: Advantages: Many a times very fruitful results may appear due to working on all ideas even may or may not be relevant. It is a participative approach and easy to reach to the consensus. Disadvantages: Always it may not be possible to find out accurate forecast. May take long time because to work upon even on vague and irrelevant ideas. A committee or panel seeks to develop new ideas or work on complex circumstances through a series of brainstorming sessions. Individuals are free to present any idea without being concerned about criticism or relevancy.
In this method, the demand queries are directly enquired from the customer and consumers and the procedure is described in the following points: Advantages: The questionnaire related to past and future demands is formulated by the experts of that industry. The consumer directly participates in the survey. The survey replies are critically analyzed by the marketing and production experts.
As consumers participates directly so no chance of communication gap. Real expectations of consumers with respect to quantity as well as attributes in the products are taken into account, so the quantity and quality demands can be met with. Disadvantages: Many a times, customer may not be known what he wants. This method is not suitable for new products. Customer may not know all the usable features of the products. This method is very costly due to involvement of large number workforce.
6) Sales Force Composite Method In this method, the opinion of sales people who are directly interact with the customers comes into picture with following features: The direct involvement of sales people who deals with the customer. The opinion of sales and marketing people is taken together at all levels. Opinions may be summarized through statistical tools.
Advantages: No communication gap like consumer survey method as each and every sales person is involve directly. The forecasts made are accurate as directly involved people opinion is taken into account. It is less costly method as sales force need not to take opinion of the consumers a fresh because they are already in touch with the customers and their requirements. Disadvantages: In this method the forecasts for new products may not be possible. Extra work load may be perceived by the sales force.
(A) Top-Down route is used where international and national events affect the future behaviour of local variables.
(B) Bottom-Up route is used where local events affect the future behaviour of local variables.
Forecast Accuracy
During the process of making the business forecast, the following errors and deviations have to be calculated through statistical measures:
1) Mean Squared Error (MSE) It is the average of the sum of all the squared forecast errors.
2) Mean Absolute Deviation (MAD) It is the average of the absolute values of all the forecast errors. One major difference between MSE and MAD is that the MSE measure is influenced much more by large forecast errors than by small errors.
There are two aspects of forecasting errors to be concerned about - Bias and Accuracy Bias - A forecast is biased if it errs more in one direction than in the other. - The method tends to under-forecasts or over-forecasts.
Accuracy - Forecast accuracy refers to the distance of the forecasts from actual demand ignore the direction of that error.
Project Management
The project management may be referred to the activities such as planning, coordinating, organizing and implementing and controlling related to initiating and completing the new idea having long term impact. The successful management of a project is that it should be completed on time within the specified budget and must perform as per planning and to the satisfaction of the customer. The efficient management of the project can only be secure with the efficient manpower, so all the basic principle of general management are also applied to project management. The only difference in the approach of project management is related to its task orientation in which task must be completed in specified time and cost with the stated performance objectives. The project management and its elements are explained with the help of block diagram in the figure 9.2
Project plan Resources: Project Team Project Manager Management Information System (MIS) Internal Management, Managers and Executives, Human Resource at all levels, Project schedule Project Supervisor Procurement and Inventory
Project Execution
Project Executives
Figure 9.2 Elements of Project Management External Project Workers Suppliers, Agencies and Contractors
The various elements of project management work in synchronization to bring the better results of the project execution. The project team consisting of personnel at all levels work together to initiate a project with the initial step of planning the various activities of the project with the complete details of MIS within the specifications of time, budget, performance and targets. The various resources are categorized into external and internal and both are very important for the efficient project execution. The information related to various departments and functions of the company is also an important input to make the project worthwhile and viable. The external resources like suppliers, agencies and contractors can increase the pace of the project to a greater extent.
Planning Projects
In planning the projects, the following points are to be taken care: Tasks: Develop internal and external resource requirements and time-phase them to the project activities Means of Task Accomplishment: Activity descriptions, milestone charts, cash flow charts, CPM/PERT, engineering designs, time and cost estimates, material delivery plans, and so on. Timing of Tasks: Before project is begun, the timing of the tasks must be flexible and could be modified as required during project activities.
Scheduling Projects
While scheduling the projects, the following terms are to be considered: Tasks: Develop/revise detailed guides for each resource indicating quantity, quality, and timing Means of Task Accomplishment: Milestone charts for departments, subcontractors, and suppliers; cash flow schedule; CPM/PERT: begin-activity and complete-activity dates, and updated activity slack Timing of Tasks: Slightly before project is begun and continued throughout project.
Controlling Projects
In controlling the projects, the main points are emphasized as follows: Tasks: Sense noncompliance of resources with schedules, standards, and budgets; take corrective actions, shift resources, develop alternatives Means of Task Accomplishment: Department budget reports, activity cost reports, quality compliance reports, time performance reports Timing of Tasks: During the project, the main important issue is to control the timing of initiation and completion of the activity.
The Project: Decision about which project and nature of the project is to be taken. The idea to be implemented as a project to achieve business viability is important in this decision. The Key Person: Here the decision about key person i.e. Project Manager is important, who is responsible for initiating and completing the project. The Team: In this decision, manpower is finalized for working and responsible as members of the project team. How to fit the project tasks suitable to skill level of the staff and workers is very important in this decision? The Project Resources: Here the decisions about organizing, managing and controlling all the inputs required for the projects are taken i.e. what will be the project resources. Winding up the Project: Here the decision about the time and stage of completion or terminating the project in between i.e. when to wind up the project and if terminating in between then why are the key issues? Resettlement of Team Members: Resettlement of the project team after completion of the project is the key decision and very important for longevity of the team members from one project to another.
The above decisions are very crucial for the successful implementation of the project.
In any business the project is the basic and starting point, by the virtue of which any profit venture starts and takes the bigger shape in terms of benefits to the mankind, profits to the stakeholders and products and services to the customers for satisfying their needs. Any organization initiates its first venture and thereafter the expansions and diversifications only through the newer projects. The need of projects also
arises due to ever changing technology, business environment and ever increasing demand of newer products and better services. The efficient project management ensures the following: Reduction of number of tasks and their simplifications. Elimination of overlapping of tasks. Maximum utilization of internal and external resources. The projects erected able to meet the customer requirements in terms of providing what they need. The tasks and works completion on time within estimated costs.
The scheduling is an important challenge in terms of project completion as well as timely production of the goods and the services. The delay in project completion may make the whole project unviable as large sum of money in contingency head can inflate the overall project. So the scheduling of starting and completing a project on or before time is also the outcome of efficient project management.
Project Organization
In any organization, the hierarchical chart can easily demonstrate the authority and responsibility of the manpower involved. The project manager or head shown in any organizational chart as shown figure 9.4, is also a responsible and authoritative executive in the management of an organization and is placed in parallel to top executive in any business function.
Project Coordinator
Manager (Engineering)
Manager (Implementation)
Manager (Procurement)
Internal Team
Networking Team
Supplier
Internal Team
The organization structure for the project team as shown in above figure very clearly indicates the hierarchical responsibility and line of command. In this structure various managers combine together with the internal and supplier teams work in synchronization for the project with the objectives of minimum cost and time with the best possible performance of the equipment installed. Basically the Project General Manager works in close coordination with the Chief Executive Officer of the organization.
Though lot of activities, functions and decisions are to be taken by the project manager in due course of project completion, but few major duties and responsibilities which a project manager has to fulfill and discharge are given below separately:
To supervise and coordinate all the project activities. To ensure that the task is performed to the maximum efficiency. To chalk out an organizational structure to enable the smooth flow of the task and information. To suggest policies and amendments to reform the nature of work and to make the work completion easier. To participate in meetings, site visits and workshops to make any contingent plan if required. To prepare bids and tenders for the potential clients to promote the business. To provide complete information to the finance and accounts department and auditors to remove the difficulty if any. To identify and organize all the resources required for the completion of project on time. To prepare and present the status reports to higher authorities for their approval.
To deliver the performance with objective success rate. To exploit the best of potential from the colleagues and subordinates. To maintain confidentiality of the work and documents, wherever required. To motivate the subordinates for easy and smooth communication among employees and with authorities. He should have the capability to solve the contingent and emergent problems of his team members. To inculcate the team spirit which can not only defined but also brings the success to the company and sense of pride to the employees.
These abilities of the project manager not only make the project successful, but also open the doors for growth of his team members.
Gantt Chart
Gantt chart is used to organize and justify actual and intended use of resources within a time schedule. In these charts, time is shown horizontally with activity listed on vertical axis. The management has to use the Gantt chart for trial-and-error schedules to get the impact of different possible configurations.
There are a number of different types of Gantt charts, but the most common are the load chart and schedule chart. A load chart indicates the engaged and idle times for machines or workstations; this shows the start and finish time of jobs. It also indicates the expected idle time. The Gantt chart for airport construction project is shown in figure 9.9 as below. This figure helps the planner to carry on the exercise of scheduling and rescheduling of activities till the optimum combination is achieved. A schedule chart is used to monitor job progress and it finds out the gap between planned and actual performance if any. The Gantt chart uses both load and schedule charts in combination to work out the optimum solutions.
Time Time
Phases of Project
Q1 F
Q2 M
Q3 A
Q4 N
Relationship between activities Project duration Critical path Slack for non critical activities Crashing (cost / time trade-offs) Resource usage
Requirements for CPM Description of Project activities Precedence relationship among various activities Estimate of each activitys time duration
CPM Process
OUTPUTS Critical time duration of project Identification of critical path and critical activities Slack for each activity
Objectives of CPM
Critical path method in project management has its own place and serves many purposes which are listed as below: CPM helps objectively and logically to plan, schedule and control project activities. Projects can be planned with a long term perspectives. Review of periodic reports in due course of project completion becomes easy. CPM helps in finding out the crucial activities in project in an analytical way. The objectives can be very well achieved, if the project manager understands and implements the whole projects in a systematic and logical manner.
CPM Terminology
In the CPM, various terms are used. Different terms are explained as below:-
1. Activity A task or a certain amount of work required in the project Requires time to complete Represented by an arrow 2. Dummy Activity Indicates only precedence relationships Does not require any time of effort 3. Event Signals the beginning or ending of an activity Designates a point in time Represented by a circle (node) 4. Slack or Float The slack time is the maximum possible time by which an event can be delayed without increasing the time duration of critical path or completing the whole project. The slack is also known as float for delaying the activity without increasing the project completion time. 4. Network Shows the sequential relationships among activities using nodes and arrows A connected sequence of activities leading from the starting event to the ending event 5. Critical Path The longest path, with respect to time, determines the project duration 6. Critical Activities All of the activities that make up the critical path 7. Earliest Start (ES) The earliest that an activity can begin; assumes all preceding activities have been completed 8. Earliest Finish (EF) EF = ES + activity time 9. Latest Start (LS) The latest that an activity can begin and does not change the project completion time
Steps in CPM
Sequential steps required for CPM are as under: Draw the CPM network A graphic view of the relationships among the required activities Analyze the paths through the network Determine the length of each path (the time required to complete each path) Starting at the beginning of the network and working toward the end (from left to right), determine the ES and the EF for each activity Path analysis (continued) Identify the critical path(s) (the longest path[s] through the network) The critical path(s) determines how long the project will take Determine the slack for each activity Working from the end of the project network (from right to left), find the LF and the LS for each activity Compute the activitys slack Slack = LS - ES = LF - EF Slack is the maximum amount of time that an activity can be delayed in its completion before it becomes a critical activity, i.e., delays completion of the
project.
Illustration
Draw the precedence diagram and find out the critical path along with the slack and float times by finding out earliest start and finish times, latest start and finish times of various events. The details of constructing a sports complex are given below in the table 9.2:
ACTIVITY
DETAILS
TIME (WEEKS)
A B C D
Location finalization after its survey Planning layout and construction planning Choose administrative and sports staff Interviewing and Selecting administrative and sports staff
Finalization of gym equipment and other B sports items Construction of complex Adding required utilities B F
F G H
48 10 2
Procuring the equipment and items for the E & F complex Installation of Equipment and related F & H
Solution:
I. Draw the precedence diagram for CPM network as shown in figure 9.11:
H1 2 H2 8
B
1
5 F
A 6
START C 8 3
4 48
6
2 I2 9 4 J1 3 7
G 10
J2 3
10
D 4 4
J3 3
K
11
FINISH
The graphical view of the relationships among the required activities and events along with the duration activity has been shown in the above figure by analyzing the various paths to complete the whole project the network paths are given in the table below.
Path. No. 1 2 3 4 5
Path
26 69 67 73 (Critical path) 17
In the table 9.3 the length of each possible path to complete the project is given. The path number 4 i.e. A-B-F-G-J-K is critical path as it takes longest time duration to complete the project as shown in figure 9.12:
FIGURE
10 15 6 10 0 6 0 6 A 6 START C 8 0 8 B 4 6 10 E 5 F 48 10 58 10 58 G 10 57 62
H1 2 H2 6 I2 2 58 68 58 68
58 60 62 64 4 I1 60 64 5 64 68
3 J1 J2 3 68 71 68 71
The Earliest Start (ES) and Earliest Finish (EF) times are calculated by starting at the beginning of the network and working toward the end (from left to right) as shown in figure 9.12. If the working is done from the end of the project network (from right to left), the Latest Start (LS) and Latest Finish (LF) for each activity can also be calculated as shown in table 9.4:
Activity
Duration
ES
LS
EF
LF
Slack
(LF EF)
A B C D E F G H I J K
6 4 8 4 5 48 10 2 4 3 2
0 6 0 8 10 10 58 58 60 68 71
0 6 56 64 57 10 58 62 64 68 71
0 0 56 56 47 0 0 4 4 0 0
6 10 8 12 15 58 68 60 64 71 73
6 10 64 68 62 58 68 64 68 71 73
0 0 56 56 47 0 0 4 4 0 0
Now for determining the slack for each event, the following formula is to be applied: Slack = LS - ES = LF - EF Slack is the maximum amount of time that an event can be delayed before the corresponding activity becomes critical i.e., without any delay in completion of the project. The values of Slack in various events have been calculated and shown in above table.
The technique is based on the assumption that an activitys duration follows a probability distribution instead of being a single value. The probabilistic information about the activities is translated into probabilistic information about the project.
PERT Terminology
Three time estimates are required to compute the parameters of an activitys duration distribution: Pessimistic Time (tp ) The time, the activity would take considering the things may not go well.
Most Likely Time (tm ) The consensus- the best estimate of the activitys duration.
Optimistic Time (to ) The time, the activity would take considering the things will go well.
The following are the probability distribution parameters: o Mean or Expected Time (Te) Expected time is the most probable time by which the project will be completed. In this the weightage of most likely time is four times the weightage of pessimistic or optimistic time. Te = ( to + 4tm + tp ) / 6
Standard Deviation or Variance (Vt ) Standard deviation is the variance of time can be calculated by the following formula: Vt = [( tp to ) / 6 ]2
Steps in PERT
Identify and decide about the tasks and activities to be completed and the events for their start and finish to complete the project. The accurate sequence of activities in terms of which activities can be started independently and which activities depend on the completion of some other activities. Draw the network. Analyze the paths through the network and find the critical path. The length of the critical path is the mean of the project duration probability distribution which is assumed to be normal. Calculating the standard deviation of the project duration by probability distribution and is computed by adding the variances of the critical activities (all of the activities that make up the critical path) and taking the square root of that sum
Probability computations can now be made using the normal distribution table.
Activity No.
Description
Variance (Hours)
Manufacturing a Chassis Manufacturing the Engine Loading the Chassis on conveyor belt Fitting the steering wheel in the chassis Joining the main body with the chassis Shifting from manufacturing shop and assembling the engine with the chassis Assembling the engine with the chassis on conveyor belt Painting and finishing the car After assembling engine, adding the other parts like suspension, wheels, etc. After painting and finishing outer parts, adding the other parts like suspension, wheels, etc.
----A
18 65 1.5
20 70 2
22 73 2.5
20 69.67 2
D (3-4)
2.5
3.5
0.03
E (3-5)
0.11
F1 (2-6)
7.5
6.92
0.06
F2 (3-6)
7.83
0.25
G (6-7) H1(6-8)
F F
45 18
48 20
50 22
47.83 20
0.69 0.44
H2(7-8)
16
18
19
17.83
0.25
I1(4-9)
Inspection of assembled steering D wheel in the chassis Inspection of main body in the assembly Inspection of other parts of assembly and final finish Branding and preparing the final documents Dispatch to the stockyard E
15
16
16.5
15.92
0.06
I2(5-9)
10
0.11
I3(8-9)
6.5
7.08
0.06
J(9-10)
2.5
3.5
0.03
K(10-11)
0.5
1.5
0.03
Path
Expected Time (Hours) 41 44.92 106.57 60.91 153.33 (Critical Path) 107.67
A-C-F2-G-H2-I3-J-K Table 9.6 Finding out Critical Path A-C-F2-H1-I3-J-K B-F1-G-H2-I3-J-K B-F1-H1-I3-J-K
Probability that the project will be completed within hours Vpath = V(B) + V(F1)+ V(G) + V(H2)+ V(I3)+ V(J)+ V(K) = 2.67 + 0.06 + 0.69 + 0.25 + 0.06 + 0.03 + 0.03 = 3.79
= (3.79) = 1.95
Probability of Completion by a Specific Date The critical path as shown in above table at path no. 5 takes 153.33 hours i.e. 154 hours. This is the expected time calculated by critical path and also most likely time by which a car can be manufactured and assembled on an assembly line. In this example, this value (T) i.e. mean value of time. The following formula is to be applied to find Z:
Z =DT ------
Where D = A specific date or time period for completing a project T = Expected Mean Value of time by which the project is completed. = Standard Deviation from the mean in Normal Distribution
To calculate the probability completion of car assembly can be shown in the table below:
S. No.
1 2 3
(150 154) / 1.95 = - 2.05 (153 154) / 1.95 = - 0.513 (156 154) / 1.95 = - 1.03
Table 9.7 Probability of Completing the assembly within the specified duration
To demonstrate the calculation in table 9.7 at S. No. 1, we calculate the probability of the car to be assembled within 150 hours:
Similarly for other specified durations the values of Z can be calculated and corresponding value of Probability can be seen from the Standard Normal Distribution table.
1 A 0
D E F2
4 I1 5 I2
9 J
B F1
G H1
7 H2 8
I3
10 K
11
Activities are assumed to be independent. It is assumed that there is a precise breaking point where one activity ends and another begins. Initially-critical activities might not receive the attention they deserve until it is too late. Activity time estimates might be biased. The cost of CPM/PERT might not be justified by the value of the information it provides. Personnel might not understand the statistical underpinnings of PERT.
When to Use CPM and PERT When there is complete certainty about time consumption of various activities, the Critical Path Method is best used in those types of projects. For example, the bridge construction projects implemented by the many years experienced Construction Company, because of past experience the time estimates are quite accurate for each activity. For projects that have a higher degree of uncertainty, such as Research and Development Projects for improving the manufacturing of existing products, use of the PERT Network is recommended. Similarly most software projects will face a high-degree of uncertainty.
S. No. 1
CPM CPM is a deterministic tool, with only single time estimate of various activities.
PERT PERT is a probabilistic tool used with three time estimates for completion of task or activities in the project.
In CPM, clear estimates of time and costs are made explicitly on various activities in the critical path and a tradeoff between cost and time is achieved. Therefore CPM can control both time and cost.
PERT is basically used for planning and control of time but in this also cost control is possible by reducing the time of the activity through research and development efforts.
CPM is best suited for routine projects and the estimate of duration can be accurately calculated.
PERT is more suitable for R & D related projects where time and cost estimates are uncertain.
In this case more involvement of the deterministic factor, so values or outcomes may be exact.
The probability factor is major in PERT outcomes, so are generally on estimate basis and may be unrealistic.
PERT and CPM have their applications in the extended forms also and allow the user to analyze other resources also along with time and money. The user has to trade off all the resources and their costs. He has to analyze various schedules of deployment of resources and has to balance the optimum use of all the resources.
Advantages
Both the techniques are very useful in scheduling and monitoring the big projects of longer duration. The concept of both the techniques are not very difficult to understand and not very tedious and complicated. The techniques establish the relationship among the activities and integrate all of them. The critical path and slack time put sufficient emphasis where the tight control is required and where some leverage can be provided. Control the time and cost factors. Both the techniques can be implemented mostly to all the projects of varying nature. Disadvantages The activities if not clearly defines and explained can create lot of ambiguity. The relationship between the activities is important to be established otherwise chaos can be created. Estimate of time is subjective and so slack time is difficult to estimate. Critical path becomes the only point of emphasis and the activities on other paths may be ignored in spite of their importance. If the disadvantages are taken care fully, both the techniques can be proved ideal for project formulation and implementation.