Production and Operation Management

Unit I (6 sessions) Managing Operations Operations Management Function, Evolution, Definition, Systems view of P&OM; Operations Strategies for Competitive Advantage;

POM Definition
Production/operations management is the process, which combines and transforms various resources used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organization. Production and operation management is concerned with the conversion of inputs into outputs, using physical resources, to provide the desired utilities of form, place, possession, state or a combination thereof to the customer while meeting the other organizational objectives of effectiveness, efficiency and adaptability. Production management becomes the acceptable term from 1930s to 1950s. As F.W. Taylor s works become more widely known, managers developed techniques that focused on economic efficiency in manufacturing. With the 1970s emerges two distinct changes in our views. The most obvious of these, operations management was a shift in the service and manufacturing sectors of the economy. As service sector became more prominent, the change from production to operations emphasized the broadening of our field to service organizations. The second, more suitable change was the beginning of an emphasis on synthesis, rather than just analysis, in management practices.

HISTORICAL EVOLUTION OF PRODUCTION AND OPERATIONS MANAGEMENT

For over two centuries operations and production management has been recognized as an important factor in a country s economic growth. The traditional view of manufacturing management began in eighteenth century when Adam Smith recognized the economic benefits of specialization of labor. He recommended breaking of jobs down into subtasks and recognized workers to specialized tasks in which they would become highly skilled and efficient. In the early twentieth century, F.W. Taylor implemented Smith s theories and developed scientific management. From then till 1930, many techniques were developed prevailing the traditional view.

HISTORICAL EVOLUTION

Scope and functions of POM

Principles of POM can be applied to any organization, be it a manufacturing or service organization. Planning product design, production process selection, location layout, plant & machinery layout, capacity planning Organizing time & motion study, scheduling, material management, purchasing management Controlling- stores management, quality control, inventory management, maintenance mgt,

Following are the activities which are listed under production and operations management functions: 1. Location of facilities 2. Plant layouts and material handling 3. Product design 4. Process design 5. Production and planning control 6. Quality control 7. Materials management 8. Maintenance management.

LOCATION OF FACILITIES Location of facilities for operations is a long-term capacity decision which involves a long term commitment about the geographically static factors that affect a business organization. It is an important strategic level decision-making for an organization. It deals with the questions such as where our main operations should be based? The selection of location is a key-decision as large investment is made in building plant and machinery. An improper location of plant may lead to waste of all the investments made in plant and machinery equipments. Hence, location of plant should be based on the company s expansion plan and policy, diversification plan for the products, changing sources of raw materials and many other factors. The purpose of the location study is to find the optimal location that will results in the greatest advantage to the organization. PLANT LAYOUT AND MATERIAL HANDLING:Plant layout is a plan of an optimum arrangement of facilities including personnel, operating equipment, storage space, material handling equipments and all other supporting services along with the design of best structure to contain all these facilities . Material Handling refers to the moving of materials from the store room to the machine and from one machine to the next during the process of manufacture . It is also defined as the art and science of moving, packing and storing of products in any form . It is a specialized activity for a modern manufacturing concern, with 50 to 75% of the cost of production.

PRODUCT DESIGN Product design deals with conversion of ideas into reality. Every business organizations have to design, develop and introduce new products as a survival and growth strategy. Developing the new products and launching them in the market is the biggest challenge faced by the organizations. The entire process of need identification to physical manufactures of product involves three functions: marketing, product development, and manufacturing. Product development translates the needs of customers given by marketing into technical specifications and designing the various features into the product to these specifications. Manufacturing has the responsibility of selecting the processes by which the product can be manufactured. Product design and development provides link between marketing, customer needs and expectations and the activities required to manufacture the product. PROCESS DESIGN Process design is a macroscopic decision-making of an overall process route for converting the raw material into finished goods. These decisions encompass the selection of a process, choice of technology, process flow analysis and layout of the facilities. Hence, the important decisions in process design are to analyze the workflow for converting raw material into finished product and to select the workstation for each included in the workflow.

PRODUCTION PLANNING AND CONTROL Production planning and control can be defined as the process of planning the production in advance, setting the exact route of each item, fixing the starting and finishing dates for each item, to give production orders to shops and to follow up the progress of products according to orders. The principle of production planning and control lies in the statement First Plan Your Work and then Work on Your Plan . Main functions of production planning and control includes planning, routing, scheduling, dispatching and follow-up. Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen. Routing may be defined as the selection of path which each part of the product will follow, which being transformed from raw material to finished products. Routing determines the most advantageous path to be followed from department to department and machine to machine till raw material gets its final shape. Scheduling determines the program for the operations. Scheduling may be defined as the fixation of time and date for each operation as well as it determines the sequence of operations to be followed. Dispatching is concerned with the starting the processes. It gives necessary authority so as to start a particular work, which has already been planned under Routing and Scheduling . Therefore, dispatching is release of orders and instruction for the starting of production for any item in acceptance with the route sheet and schedule charts . The function of follow-up is to report daily the progress of work in each shop in a prescribed proforma and to investigate the causes of deviations from the planned performance.

 QUALITY CONTROL Quality Control (QC) may be defined as a system that is used to maintain a desired level of quality in a product or service . It is a systematic control of various factors that affect the quality of the product. Quality control aims at prevention of defects at the source, relies on effective feed back system and corrective action procedure. Quality control can also be defined as that industrial management technique by means of which product of uniform acceptable quality is manufactured . It is the entire collection of activities which ensures that the operation will produce the optimum quality products at minimum cost. The main objectives of quality control are: To improve the companies income by making the production more acceptable to the customers i.e., by providing long life, greater usefulness, maintainability, etc. To reduce companies cost through reduction of losses due to defects. To achieve interchangeability of manufacture in large scale production. To produce optimal quality at reduced price. To ensure satisfaction of customers with productions or services or high quality level, to build customer goodwill, confidence and reputation of manufacturer. To make inspection prompt to ensure quality control. To check the variation during manufacturing.

MATERIALS MANAGEMENT Materials management is that aspect of management function which is primarily concerned with the acquisition, control and use of materials needed and flow of goods and services connected with the production process having some predetermined objectives in view. The main objectives of materials management are: To minimize material cost. To purchase, receive, transport and store materials efficiently and to reduce the related cost. To cut down costs through simplification, standardization, value analysis, import substitution, etc. To trace new sources of supply and to develop cordial relations with them in order to ensure continuous supply at reasonable rates. To reduce investment tied in the inventories for use in other productive purposes and to develop high inventory turnover ratios.

MAINTENANCE MANAGEMENT In modern industry, equipment and machinery are a very important part of the total productive effort. Therefore, their idleness or downtime becomes are very expensive. Hence, it is very important that the plant machinery should be properly maintained. The main objectives of maintenance management are: To achieve minimum breakdown and to keep the plant in good working condition at the lowest possible cost To keep the machines and other facilities in such a condition that permits them to be used at their optimal capacity without interruption. To ensure the availability of the machines, buildings and services required by other sections of the factory for the performance of their functions at optimal return on investment.

System view of Production & Operation Management

A system is a group of interrelated items in which no item (studied in isolation) will act in the same way as it would in the system. A system is divided into a series of parts or sub systems, and any sub system is an integral part of a larger system. The system s boundary defines what is inside the system and what is outside. A system s environment is everything outside the system boundary that may have an impact on the behavior of the system. A system s inputs are the physical objects of information that enter into it from the environment and it s outputs are the same which leave it for the environment. Before understanding production system let s talk about the concept of production CONCEPT OF PRODUCTION:- Production function is that part of an organization, which is concerned with the transformation of a range of inputs into the required outputs (products) having the requisite quality level. Production is defined as the step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user. Thus production is a value addition process. At each stage of processing, there will be value addition.

PRODUCTION SYSTEM
The production system of an organization is that part, which produces products of an organization. It is that activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management. The production system has the following characteristics: Production is an organized activity, so every production system has an objective. The system transforms the various inputs to useful outputs. It does not operate in isolation from the other organization system. There exists a feedback about the activities, which is essential to control and improve system performance. Objectives of Production Management The objective of the production management is to produce goods / services of right quality and quantity at the right time and right manufacturing cost .

Classification of Production System

Production systems can be classified as Job Shop, Batch, Mass and Continuous Production systems. JOB SHOP PRODUCTION Job shop production are characterized by manufacturing of one or few quantity of products designed and produced as per the specification of customers within prefixed time and cost. The distinguishing feature of this is low volume and high variety of products. A job shop comprises of general purpose machines arranged into different departments. Each job demands unique technological requirements, demands processing on machines in a certain sequence. Characteristics:- The Job-shop production system is followed when there is: High variety of products and low volume. Use of general purpose machines and facilities. Highly skilled operators who can take up each job as a challenge because of uniqueness. Large inventory of materials, tools, parts. Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order priorities.

Classification of Production System

Advantages:- Following are the advantages of job shop production: Because of general purpose machines and facilities variety of products can be produced. Operators will become more skilled and competent, as each job gives them learning opportunities. Full potential of operators can be utilized. Opportunity exists for creative methods and innovative ideas. Limitations:- Following are the limitations of job shop production: Higher cost due to frequent set up changes. Higher level of inventory at all levels and hence higher inventory cost. Production planning is complicated. Larger space requirements.

Classification of Production System

BATCH PRODUCTION Batch production is defined by American Production and Inventory Control Society (APICS) as a form of manufacturing in which the job passes through the functional departments in lots or batches and each lot may have a different routing. It is characterized by the manufacture of limited number of products produced at regular intervals and stocked awaiting sales. Characteristics:- Batch production system is used under the following circumstances: When there is shorter production runs. When plant and machinery are flexible. When plant and machinery set up is used for the production of item in a batch and change of set up is required for processing the next batch. When manufacturing lead time and cost are lower as compared to job order production.

Classification of Production System

Advantages:- Following are the advantages of batch production: Better utilization of plant and machinery. Promotes functional specialization. Cost per unit is lower as compared to job order production. Lower investment in plant and machinery. Flexibility to accommodate and process number of products. Job satisfaction exists for operators. Limitations:- Following are the limitations of batch production: Material handling is complex because of irregular and longer flows. Production planning and control is complex. Work in process inventory is higher compared to continuous production. Higher set up costs due to frequent changes in set up.

Classification of Production System

MASS PRODUCTION Manufacture of discrete (separate) parts or assemblies using a continuous process are called mass production. This production system is justified by very large volume of production. The machines are arranged in a line or product layout. Product and process standardization exists and all outputs follow the same path. Characteristics:- Mass production is used under the following circumstances: Standardization of product and process sequence. Dedicated special purpose machines having higher production capacities and output rates. Large volume of products. Shorter cycle time of production. Lower in process inventory. Perfectly balanced production lines. Flow of materials, components and parts is continuous and without any back tracking. Production planning and control is easy. Material handling can be completely automatic.

Classification of Production System

Advantages:- Following are the advantages of mass production: Higher rate of production with reduced cycle time. Higher capacity utilization due to line balancing. Less skilled operators are required. Low process inventory. Manufacturing cost per unit is low. Limitations:- Following are the limitations of mass production: Breakdown of one machine will stop an entire production line. Line layout needs major change with the changes in the product design. High investment in production facilities. The cycle time is determined by the slowest operation.

Classification of Production System

CONTINUOUS PRODUCTION Production facilities are arranged as per the sequence of production operations from the first operations to the finished product. The items are made to flow through the sequence of operations through material handling devices such as conveyors, transfer devices, etc. Characteristics:- Continuous production is used under the following circumstances: Dedicated plant and equipment with zero flexibility. Material handling is fully automated. Process follows a predetermined sequence of operations. Component materials cannot be readily identified with final product. Planning and scheduling is a routine action.

Classification of Production System

Advantages:- Following are the advantages of continuous production: Standardization of product and process sequence. Higher rate of production with reduced cycle time. Higher capacity utilization due to line balancing. Manpower is not required for material handling as it is completely automatic. Person with limited skills can be used on the production line. Unit cost is lower due to high volume of production. Limitations:- Following are the limitations of continuous production: Flexibility to accommodate and process number of products does not exist. Very high investment for setting flow lines. Product differentiation is limited.

Concept of Operations An operation is defined in terms of the mission it serves for the organization, technology it employs and the human and managerial processes it involves. Operations in an organization can be categorized into manufacturing operations and service operations. Manufacturing operations is a process that includes manufacturing yields a tangible output: a product, whereas, a conversion process that includes service yields an intangible output: a deed, a performance, an effort. Distinction between Manufacturing Operations and Service Operations Following characteristics can be considered for distinguishing manufacturing operations with service operations: Tangible/Intangible nature of output Consumption of output Nature of work (job) Degree of customer contact Customer participation in conversion Measurement of performance.

OPERATING SYSTEM
Operating system converts inputs in order to provide outputs which are required by a customer. It converts physical resources into outputs, the function of which is to satisfy customer wants i.e., to provide some utility for the customer. In some of the organization the product is a physical good (cars) while in others it is a service (hospitality). Bus and taxi services, tailors, hospitals and builders are the examples of an operating system. Everett E. Adam & Ronald J. Ebert defined operating system as, An operating system (function) of an organization is the part of an organization that produces the organization s physical goods and services. Ray Wild defines operating system as, An operating system is a configuration of resources combined for the provision of goods or services.

A system s model of the organization identifies the subsystems, or subcomponents, that make up the organization. A business firm might well have finance, marketing, accounting, personnel, engineering, purchasing, and physical distribution systems in addition co the operations system. These systems aren t independent but are interrelated to one another in many vital ways. We have chosen to show production/operations with major interactions between finance and marketing and lesser interactions with other functions. Decisions made in the production/ operations subsystem often affect the behavior and performance of other subsystems. Finally, we should understand That the boundaries separating the various subsystems are not clear and distinct.

Operations strategies for competitive advantage

What Is Operations Strategy? Operations strategy is the development of a long-term plan for using the major resources of the firm for a high degree of compatibility between these resources and the firm s long term corporate strategy. Operations strategy addresses very broad questions about how these major resources should be configured to achieve the desired corporate objectives. Some of the major long-term issues addressed in operations strategy include How large do we make our facilities? What type of process(es) do we install to make the products or provide services? What will our supply chain look like? What will be the nature of our workforce? How do we ensure quality?

Strategy Operations Strategy

Alfred Chandler defined strategy as, the determination of the basic long term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals . Above mentioned definition view strategy as a rational planning process, however Henery Mintzberg and many others believe that strategies can emerge from within an organization without any formal plan. According to him, it is more than what a company plans to do.. It is actually what it does. He defines strategy as a pattern in a stream of decisions or actions. So, there are deliberate (planned) and emergent (unplanned) strategies. All strategies originate from the need to satisfy the customers. Strategic planning is not static and compartmentalized process, but it is an ongoing and integrated exercise. Operation/manufacturing strategy has to be an integral part of the overall organizational strategy. Without defining the mission and objectives of the organization, checking up on the external and internal environment, performing the SWOT analysis of the organization & then deciding on the basis for competing /or key factors for success, no operations/manufacturing strategy can be formulated.

Operations Strategy at Wal-Mart

Operations Strategy
Mission

Market Business Strategy Environment Organization competencies

Competitive priorities Order qualifiers Order winners

Strategies of other functions

Operations Strategy decisions

linked

Operations strategy
Operations strategy decisions can be divided into two major categories: structural elements consisting of facility location, capacity, vertical integration, and choice of process (all are considered to be long term or strategic in nature) and infrastructural elements consisting of the workforce (in terms of size and skills), quality issues, procurement, the New product development process, planning and control, and organizational structure (all of which are often viewed as tactical because they can be changed in a relatively short time). After deciding the mission, objectives and the targeted market segment in which the company will compete, the company has to choose between the Fundamental strategic competitive options of (a) Meaningful differentiation And (b) Cost leadership.

Meaningful Differentiation
It means being different and superior in some aspect of the business that has Value to the customer. A wider product range, a functionally superior product or after sales service, are all examples of meaningful differentiation. Differentiation is a strategy to win customers and to retain them for a long time. Flexibility:- In fact today s market requires that while differentiating on one aspect one need to be equally good at other aspects. A company can t afford to concentrate at One aspect at the expense of other aspects. So the company has to be flexible in terms of: 1. Product design 2. Product range or product mix 3. Volumes 4. Quick delivery/ delivery time 5. Quick introduction of new products/designs 6. Responding quickly to the changed need of the customers or quickly attending to the customers problems. Flexibility is a part of being responsive, responsible, reliable, accessible, communicative and empathetic to the customer. These are all service quality characteristics

Cost leadership
The other fundamental strategic competitive option that a company can choose is Cost Leadership i.e. offering the product / service at the lowest price in the industry. This has to be achieved by cost reduction. Big difference between modern and traditional approach to cost reduction is in understanding the Customers. The traditional approach advocated the reduction of various costs, Investments, budgetary allocations (to hr development, training, vendor development e.t.c) and reducing inventories, but modern approach talks about elimination of the non value added steps/processes, reducing the set up time, reducing the need of inventories, improving the quality, optimal utilization of Technology, understanding customer s need and satisfying it and so forth. Thus manufacturing/operations strategies, that one should complement with the fundamental strategies, comprises of the customer oriented strategies of:Improved responsiveness, reduced price and improved quality

Cost Leadership
Improved responsiveness in terms of:1. Minimizing time to respond 2. Timely response 3. Accessibility through better locations, better geographical proximity, improved logistics and better systems of communications 4. Wider product/services option through flexible operations/ manufacturing systems, reduced throughput time/cycle time/set-up time, flexible manpower/machines, improved product design and process capabilities 5. Increased pro-activity Reduced price through:1. Overall improvements in the production-delivery value chain 2. Better designs of product/services Improved quality through:1. Better skills/knowledge and better attitudinal orientation of all production and service providers

Cost Leadership
2. Improved technology 3. Reduced complexity and confusion 4. Reduced problem generators KEY SUCCESS FACTORS Kenichi ohmae mentioned following as the key success factors for any business:1. Product performance 2. Technology leadership 3. New product introduction 4. Access to key decision makers or key influencers 5. Delivery service For a given industry one or more of these factors will be crucial. Operational Strategies are formulated, keeping one or more of these key success factors, in Mind.

Formulation of operations strategy

There are two most commonly used analyses, considered before formulating operations strategy / any strategy. 1. SWOT Analysis:- The relevant strategic plans can t be formulated or implemented without analyzing company s strengths, weaknesses, opportunities and threats. 2. Porter s five forces model:- Another analysis that could be useful in devising an appropriate operational strategy is that of Michael Porter s five forces model. It is one of the structured ways in which the industry environment is analyzed. He says that the stronger each of these five forces is, the more difficult it will be for the company to raise prices and make more profits. A strong force is equivalent to a threat and a weak force is equivalent to an opportunity.

SWOT Analysis
Mission Internal Strengths Analysis Internal Weaknesses Strategy External Threats External Opportunities

Strategy Development Process

Environmental Analysis
Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors.

Determine Corporate Mission

State the reason for the firm s existence and identify the value it wishes to create.

Form a Strategy
Build a competitive advantage, such as low price, design, or volume flexibility, quality, quick delivery, dependability, after-sale service, broad product lines.

Porter s five forces model

Five forces model for telecom industry

BENEFITS DERIVED FROM EFFICIENT PRODUCTION & OPERATIONS MANAGEMENT

The efficient Production Management will give benefits to the various sections of the society. They are: Consumer benefits from improved industrial Productivity, increased value in the product. Products are available to him at right place, at right price, at right time, in desired quantity and of desired quality. Investors: They get increased security for their investments, adequate market returns, and creditability and good image in the society. Employee gets adequate Wages, Job security, improved working conditions and increased Personal and Job satisfaction. Suppliers: Will get confidence in management and their bills can be realized with out any delay. (v) Community: community enjoys Benefits from economic and social stability. (vi) The Nation will achieve prospects and security because of increased Productivity and healthy industrial atmosphere.

Production and Operation Management

Unit II (9 sessions) Planning (Designing) the conversion System Designing Products, Services and Processes; Operations Capacity; Locating Production and Service facilities; Layout Planning

Product Life Cycle

Introduction
Best period to increase market share

Growth
Practical to change price or quality image Strengthen niche

Maturity
Poor time to change image, price, or quality Competitive costs become critical Defend market position

Decline
Cost control critical

Company Strategy/Issues

R&D engineering is critical

Internet search engines LCD & plasma TVs Sales iPods DriveDrive-through restaurants

CDCD-ROMs Analog TVs

Xbox 360

3 1/2 Floppy disks Figure 2.5

Product Life Cycle

Introduction
Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality

Growth
Forecasting critical Product and process reliability Competitive product improvements and options Increase capacity

Maturity

Decline
Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning good margin Reduce capacity

Standardization Less rapid product changes more minor changes Optimum capacity Increasing stability of process Shift toward product Long production runs focus Enhance distribution Product improvement and cost cutting

OM Strategy/Issues

Figure 2.5

Product Design
Product design is a term that refers to transforming an idea of how a product should be and the specifications of that product. Product development refers to the process of creating new products or modifying the existing ones. As the needs & requirement of customers keeps on changing new products needs to be introduced Design starts with conceptualization which has to have a basis. Providing value To customers, the ROI to the company and the competitiveness of the Company should form the basis of the product design effort. Take an example of a simple product, toothpaste which is also designed to act as a mouth freshener. This newly designed simple product needs to be placed, advertized, promoted, and priced Differently. So a product design has impact on organization s overall strategy.

Profit is the overall measure of design effectiveness.

What Does Product and Service Design Do?

 Translate customer wants and needs into product and service requirements. (marketing, operations)  Refine existing products and services. (marketing)  Develop new products and/or services. (marketing, operations)  Formulate quality goals. (marketing, operations)  Formulate cost targets. (accounting, finance, operations)  Construct and test prototypes. (operations, marketing, engineering)  Document specifications.

Reasons for Product and Service Design or Redesign

Economic (e.g., low demand, excessive warranty claims, the need to reduce costs). Social and demographic (e.g., aging baby boomers, population shifts). Political, liability, or legal (e.g., government changes, safety issues, new regulations). Competitive (e.g., new or changed products or services, new dvertising/promotions). Cost or availability (e.g., of raw materials, components, labor). Technological (e.g., in product components, processes).

Phases in Product Design and Development

Idea generation. Product development begins with idea generation. Ideas can come from a variety of sources. Feasibility analysis. Feasibility analysis entails market analysis (demand), economic analysis (development cost and production cost, profit potential), and technical analysis (capacity requirements and availability, and the skills needed). Also, it is necessary to answer the question, Does it fit with the mission? It requires collaboration among marketing, finance, accounting, engineering, and operations. Product specifications. This involves detailed descriptions of what is needed to meet (or exceed) customer wants, and requires collaboration between legal, marketing, and operations. Process specifications. Once product specifications have been set, attention turns to specifications for the process that will be needed to produce the product. Alternatives must be weighed in terms of cost, availability of resources, profit potential, and quality. This involves collaboration between accounting and operations.

Phases in Product Design and Development

Prototype development. With product and process specifications complete, one (or a few) units are made to see if there are any problems with the product or process specifications. Design review. Make any necessary changes, or abandon. Involves collaboration among marketing, finance, engineering, design, and operations. Market test. A market test is used to determine the extent of consumer acceptance. If unsuccessful, return to the design review phase. This phase is handled by marketing. Product introduction. Promote the product. This phase is handled by marketing. Follow-up evaluation. Determine if changes are needed, and refine forecasts. This phase is handled by marketing.

DFM
A good product design would be such that it makes many or all the manufacturing related functions to be done in less time. The idea behind DFM effort is to modify the existing product s(and it s component s) design or have a new product designed in such a way that the process of manufacturing becomes easier, quicker and less expensive, without compromising the quality and other deliverables. DFM principals for assemblies:- Standardize wherever possible 1. Minimize the number of parts:(a) Reduce the absolute requirement of the variety of parts (b) Combine parts where ever possible 2. Standardize designs (a) Parts, modules, sub assemblies, manufacturing processes and systems may be standardized (b) Where the parts are not the same, see if they can be similar (c) Apply group technology , concept of families of parts (d) Wherever possible use standard catalog components

DFM
3. Minimize number of operations in the assembly 4. Modify the parts with simplification of assembling in mind 5. Use modules 6. Minimize newness i.e., minimize:(a) New parts (b) New processes (c) New suppliers (d) New machines 7. Use POKA YOKE or fool proofing:- Design in such a way that the parts can t be assembled incorrectly. The DFM concept emphasizes simplicity and standardization everywhere. It attempts to strike an optimal balance between change and standardization.

Service design
Service (System) design involves development or refinement of the overall service package:  The physical resources needed.  The accompanying goods that are purchased or consumed by the customer, or provided with the service.  Explicit services (the essential/core features of a service, such as tax preparation).  Implicit services (ancillary/extra features, such as friendliness, courtesy). Differences between Service Design and Product Design 1. Products are generally tangible; services are generally intangible. Consequently, service design often focuses more on intangible factors (e.g., peace of mind, ambiance) than does product design. 2. In many instances services are created and delivered at the same time (e.g., a haircut, a car wash). In such instances there is less latitude in finding and correcting errors before the customer has a chance to discover them. Consequently, training, process design, and customer relations are particularly important. 3. Services cannot be inventoried. This poses restrictions on flexibility and makes capacity issues very important. 4. Services are highly visible to consumers and must be designed with that in mind; this adds an extra dimension to process design, one that usually is not present in product design.

Service design
5. Some services have low barriers to entry and exit. This places additional pressures on service design to be innovative and cost-effective. 6. Location is often important to service design, with convenience as a major factor. Hence, design of services and choice of location are often closely linked. 7. Service systems range from those with little or no customer contact to those that have a very high degree of customer contact. Here are some examples of those different types: Insulated technical core; little or no customer contact (e.g., software development). Production line; little or no customer contact (e.g., automatic car wash). Personalized service (e.g., haircut, medical service). Consumer participation (e.g., diet program, dance lessons). Self-service (e.g., supermarket). If there is little or no customer contact, service system design is like product system design. 8. Demand variability creates waiting lines or idle service resources.

Service design
Demand variability Reducing consumer choices makes service more efficient, but it can be both frustrating and irritating for the customer. An example would be a cable company that bundles channels, rather than allowing customers to pick only the channels they want. Standardizing or simplifying certain elements of service can reduce the cost of providing a service, but it risks eliminating features that some customers value, such as personal attention. Incorporating flexibility in capacity management by employing part-time or temporary staff may involve the use of less-skilled or less-interested people, and service quality may suffer.

Phases in the Service Design Process

Conceptualize Idea generation (a) Assessment of customer wants/needs (marketing) (b) Assessment of demand potential (marketing) Identify service package components needed (operations and marketing) Determine performance specifications (operations and marketing) Translate performance specifications into design specifications Translate design specifications into delivery specifications

Service Blueprinting
Establish boundaries for the service and decide on the level of detail needed. Identify and determine the sequence of customer and service actions and interactions. A flowchart can be a useful tool for this. Develop time estimates for each phase of the process, as well as time variability. Identify potential failure points and develop a plan to prevent or minimize them, as well as a plan to respond to service errors.

http://www.baskent.edu.tr/~kilter

55

Characteristics of Well-Designed Service Systems

Being consistent with the organization mission. Being user friendly. Being robust if variability is a factor. Being easy to sustain. Being cost-effective. Having value that is obvious to customers. Having effective linkages between back-of-the-house operations (i.e., no contact with the customer) and front-of-the-house operations (i.e., direct contact with customers). Front operations should focus on customer service, while back operations should focus on speed and efficiency. Having a single, unifying theme, such as convenience or speed. Having design features and checks that will ensure service that is reliable and of high quality.

Challenges of Service Design

There are variable requirements. This creates a need for a robust design that will accommodate a range of inputs and perhaps a range of outputs. Services can be difficult to describe. By their very nature, verbal descriptions can be somewhat imprecise. Customer contact is usually much higher in services. Service design must take into account the service-customer encounter. There can be a relatively large number of variables to deal with in the servicecustomer encounter.

Guidelines for Successful Service Design

Define the service package in detail. A service blueprint may be helpful for this. Focus on the operation from the customer perspective. Consider how customer expectations and perceptions are managed during and after the service. Consider the image that the service package will present both to customers and prospective customers. Recognize that designer familiarity with the system may give them a quite different perspective than that of the customer, and take steps to overcome this. Make sure that managers are involved and will support the design once it is implemented. Define quality for both tangibles and intangibles. Intangible standards are more difficult to define, but they must be addressed. Make sure that recruitment, training, and reward policies are consistent with service expectations. Establish procedures to handle both predictable and unpredictable events. Establish systems to monitor, maintain, and improve service.

Process Design
Process design is the design of processes for desired physical and/or chemical transformation of materials. Process design is central to chemical engineering and it can be considered to be the summit of chemical engineering, bringing together all of the components of that field. Process design can be the design of new facilities or it can be the modification or expansion of existing facilities. The design starts at a conceptual level and ultimately ends in the form of fabrication and construction plans. Process design is distinct from equipment design, which is closer in spirit to the design of unit operations. Processes often include many unit operations. The activity of determining the workflow, equipment needs, and Implementation Requirements for a particular process. Process design typically uses a number of Tools including flowcharting, process simulation software, and scale models.

Process Design
The chapter/topic starts off by distinguishing between product or service design on one hand, and process design on the other. It then goes on to make some general points about design, whether it be of products, services or processes. Finally, it looks at how product/service design and process design are related by using the product-process matrix. What is design? In the introduction to this chapter the point is made that our general image of a designer is closer to a fashion designer or a motor car designer than an operations manager. The chapter generally then goes on to explain how the word design , in its broadest sense, is right at the heart of operations management. However, many of the qualities we associate with fashion and motor car designers are also necessary for operations management designers . We expect fashion designers to show flair and creativity but we also expect them to be able to understand the way fashion trends are moving. If we substitute the way the market is moving for the way fashion trends are moving then we can see similarities between the two types of designer. Both have to reconcile their own creative ideas (what they would like to do) with what is commercially viable (what the market/customers wants them to do).

Process design
There is no simple definition of design. But design,  must reflect the needs of customers;  applies to products, services and processes;  can be managed as an operations transformation process in is own right; &  starts with something very abstract (a concept) and ends with something very specific (the final design). Product/service design and process design are interrelated The relationship between designing products and services and designing the processes that make them is an important point to consider. The chapter makes the general point that while it is possible to separate product design and process design in manufacturing, it is impossible in practice to separate service design and process design. This is because many services (especially high visibility services) are such that the service and the process are the same thing. Even in manufacturing industries, there has recently been considerable effort put into examining the overlap between product and process design. There is a growing recognition that the design of products has a major effect on the cost of making them. Many of the decisions taken during the design of products (for example, choosing the material from which the product is going to be made, or the way in which the various components are fastened together) will all define much of the cost of making it.

Process Design
Simulation in design Simulation can be used to help the design process. This is becoming increasingly important and widespread as computing power increases. Simulation can give an insight into how a potential process or product might work in practice which cannot be gained in any other way. A famous example of how simulation aids design was the victory of Team New Zealand in the America s Cup in 1995. The America s Cup is the most famous sailing race in the world and takes place between a yacht representing America and one representing the rest of the world. In 1995 the New Zealand boat was challenging the American team. It made extensive use of thousands of simulations to perfect the design of its hull and keels (both vital to the performance of the yacht). This enabled them to explore alternative designs before they built the yacht itself. This process was so successful that they eventually beat the American boat 5-0. However, when discussing their success, the design team were the first to point out that simulation can only make a good design better. It cannot create a good design in the first place. The input into the simulation exercise is the design experience from a human designer. The better the input from the designer, the better the eventual design will be.

Process Design
Environmentally sensitive design Volume-variety and design There are 4 V s of design, volume, variety, variation and visibility. The first two of these volume and variety are particularly important when considering design issues in operations management. Not only do they usually go together (high variety usually means low volume, high volume normally means low variety) but together they also impact on the nature of products and services and processes which produce them. The volume and variety of an operation s activities are particularly influential in determining the way it thinks about its performance objectives. The definitions of quality, speed, dependability, flexibility and cost, all are influenced by the volume-variety position of the operation.

 Quality Quality in a low volume-high variety process such as an architects practice, for example, is largely concerned with the final aesthetic appearance of the building and the appropriateness of its detailed design. In an exceptionally high volume-low variety process, such as an electricity supply company, quality is exclusively concerned with error-free service electricity must be constantly available in the correct form (in terms of voltage, frequency, etc.). The meaning of quality has shifted from being concerned primarily with the performance and specification of the product or service towards conformity to a predefined standard, as we move from low volume-high variety operations through to high volume-low variety operations.

Speed Speed for the architects practice means negotiating a completion date with each client, based on the client s needs and the architects estimates of how much work is involved in each project. Speed is taken to its extreme in the electricity utility where speed means literally instant delivery. No electricity company could ask its customers to wait for their delivery of electricity. Speed therefore means an individually negotiated delivery time in low volume-high variety operations, but moves towards meaning instant delivery in some high volume-low variety operations.

 Dependability Dependability in processes such as the architects practice means keeping to each individually negotiated delivery date. In continuous operations, dependability often means the availability of the service itself. A dependable electricity supply is one which is always there. So dependability has moved from meaning on-time delivery in low volume-high variety operations to availability in high volume-low variety operations. Flexibility Flexibility in low volume-high variety processes such as the architects practice means the ability to design many different kinds of buildings according to its clients various requirements. With the electricity company s process, the need for product flexibility has disappeared entirely (electricity is electricity, more or less) but the ability to meet almost instantaneous demand changes through volume flexibility is vital if the company is to maintain supply. Flexibility has moved from meaning product flexibility in low volume-high variety operations to volume flexibility in high volume-low variety operations.

 Cost Cost, in terms of the unit cost per product or service, varies with both the volume of output of the operation and the variety of products or services it produces. The variety of products or services in lowvolume operations is relatively high, which means that running the operation will be expensive because of the flexible and high skill levels employed. Further, because the volume of output is relatively low, a few products or services are bearing the operation s high cost base. Also, and more significantly for the operation, the cost of each product or service is different. At the other end of the scale, highvolume operations usually produce similar products or services, output is high, so that whatever the base cost of the operation, it is shared among a high number of products or services. Cost per unit of output is therefore usually low for operations such as the electricity utility but, more significantly, the cost of producing one second of electricity is the same as the next second. Cost is relatively constant.

Documentation in process design

Process design documents serve to define the design and they ensure that the design components fit together. They are useful in communicating ideas and plans to other engineers involved with the design, to external regulatory agencies, to equipment vendors and to construction contractors. In order of increasing detail, process design documents include: Block Flow Diagrams (BFD): Very simple diagrams composed of rectangles and lines indicating major material or energy flows. Process Flow Diagrams (PFD's): Typically more complex diagrams of major unit operations as well as flow lines. They usually include a material balance, and sometimes an energy balance, showing typical or design flow rates, stream compositions, and stream and equipment pressures and temperatures. Piping and Instrumentation Diagrams (P&ID's): Diagrams showing each and every pipeline with piping class (carbon steel or stainless steel) and pipe size (diameter). They also show valving along with instrument locations and process control schemes. Specifications: Written design requirements of all major equipment items.

Process Design
Process designers also typically write operating manuals on how to start-up, operate and shut-down the process. Documents are maintained after construction of the process facility for the operating personnel to refer to. The documents also are useful when modifications to the facility are planned. A primary method of developing the process documents is process flow sheeting.

Design Considerations Designs have objectives and constraints, and even a simple process requires a trade-off among such factors. Objectives that a design may strive to include: Throughput rate Process yield Product purity

Process Design
Constraints include: Capital cost Available space Safety concerns Environmental impact and projected effluents and emissions Waste production Operating and maintenance costs Other factors that designers may include are: Reliability Redundancy Flexibility Anticipated variability in feedstock and allowable variability in product.

Process Design
Sources of Design Information Designers usually do not start from scratch, especially for complex projects. Often the engineers have pilot plant data available or data from full-scale operating facilities. Other sources of information include proprietary design criteria provided by process licensors, published scientific data, laboratory experiments, and input. Computer Help The advent of low cost powerful computers has aided complex mathematical simulation of processes, and simulation software is often used by design engineers. Simulations can identify weaknesses in designs and allow engineers to choose better alternatives. However, engineers still rely on heuristics, intuition, and experience when designing a process. Human creativity is an element in complex designs.

Operations Capacity
Capacity can be defined as a measure of an organization s ability to provide customers with services or goods in the amount requested at the time requested. Capacity can be defined as the max capability of a production unit to produce in a specific period. this is expressed in terms of output per unit of time. Need: it is the first step when an organization decides to produce more or a new product. Once the capacity is evaluated then the need for new facilities are determined Capacity planning is deciding on the maximum output rate of a facility Location analysis is deciding on the best location for a facility Capacity planning and location analysis decision are often made simultaneously because the location of the facility is usually related to its capacity. When a business decides to expand, it usually also addresses the issue of where to locate. These decisions are very important because they require long-term investments in buildings and facilities, as well as a sizable financial outlay.

Forms of capacity
Utilization:- capacity utilization is a measure that should indicate to what degree the potential capacity is being used. Only productive hours are of interest for capacity planning purposes. This means that the hours available in a day must 1st of all be adjusted for the machine break downs, absenteeism and other losses of time. This is generally known as utilization. Utilization = Number of direct productive hours/day Total number of scheduled hours/day Due to normal variation and skills and speed, different operators can produce a different number of units of the same item per hour. Also, different items require varying amount of work per piece. Since it is of interest to know the quantity that can be produced per hour, given a certain level of capacity that is needed to ensure a certain output rate, the way in which capacity and resources usages are measured must be standardized. For this the company must find out what amount of standard hours of machine and labor are required through work study. The use of standard hours has 2 effects. 1st it provides a way of measuring output in hours instead of units. These hours represent the normal hour needed for manufacturing. 2ndly based on observations of past events, an efficiency factor that relates the actual number of direct hours used to standard hour work content of the output can be derived as:-

Standard hours processed /day Actually used direct hours/day The efficiency factor can be recorded for an individual operator, a work center, a work center, a department or the plant as a whole. It s significance is of 2 fold. 1st it indicates, if observed over time, changes in productivity. That is, an increased efficiency indicates that the same out put has been achieved with a lower input. 2ndly, it helps to estimate future available capacity, measured in standard hours. Tot no of std hours/day = tot no. of hrs / day X Utilization factor X Efficiency factor Let s consider an example of a work station with 2 employees/shift. In an 8 hr, 2 Shift operation, with utilization factor of 90% and an efficiency factor of 105%, the Total expected number of standard hours that can be produced per day is????? 1st of all let s calculate tot no of productive hours/day, which will be:Tot no of hrs/ day X utilization factor = 2(shifts) X 2 (emps) X 8 (hrs) X 0.9(uti factor) Now, Tot no of std hours/day = productive hrs/day X efficiency factor, i.e., 2(shifts) X 2 (emps) X 8 (hrs) X 0.9(uti factor) X 1.05 = 30.2 standard hrs / day The required capacity for the work center for a particular day can be calculated & Expressed by multiplying the scheduled number of parts to be manufactured by their standard hourly content: Req capacity / day = (Scheduled no of units / day) X (standard hours / unit)

Efficiency

Design capacity
The design capacity of a facility is the planned rate of output of goods or services under normal conditions. (E.g., a plant manufactures 300 cars a day / 100 tons of Cement a day, a transport organization has a capacity to carry 200 passengers/hr) The design capacity should reflect management s strategy for meeting demand. Ex:- A Co. is producing 32 units/hr on 1 of it s production line. Now the mgmt is Planning to expand their capacity to satisfy the increasing demand. The operation Mrg. Has conducted survey & the outcome of the survey is as follows:
Number of units per hour 0 < 40 Probability (% of chance) Cumulative Probability 0.10 0.10 40 < 80 0.35 0.45 80 < 120 0.40 0.85 120 < 160 0.13 0.98 160 < 200 0.02 1

The operation mgr is considering 2 alternatives for deciding how much capacity to Install. What capacity is required to (a) meet 85% of the estimated peak hourly Demand & (b) accommodate 110% of the estimated average demand plus a 25% For growth.

Solution
(a). From the cumulative probability given, 85% of the estimated demand is less Than 120 units per hour. Therefore:No. of Production line required = Tot capacity (required)/Line capacity; = 120/32; 3.75, say approximately 4 lines (b). Average demand can be found by E(x) = {XP (x)}, where X is the mid point of Each class interval given in the problem. Now E(x) = 20 (0.10) + 60(0.35) + 100(0.40) + 140(0.13) + 180(0.02) ; 88 units Therefore base level capacity is (110/100) X 88 = 97 units / hr Add to this 25% allowance: 97 + 0.25 X 97 = 121 units / hr, Hence No. of lines required = total (required) capacity/ Line capacity = 121/32 = 3.8 say 4 lines. So by installing 4 lines the prod mgr can satisfy both the requirements.

System Capacity
System capacity can be defined as the maximum output of a specific product or product mix that the system of workers and machines is capable of producing as an integrated whole.
Design capacity (say 1200 units) Reduced by long range, less controllable effects such as product mix & long run market conditions, tight quality specifications and inherent imbalances in the resources System capacity ( say 1000 units) Reduced by short term effects like actual demand, managerial performance (scheduling, staffing, strategy & control). Worker inefficiency like skill and effort level. Machine inefficiencies like wear & tear, scrap loss and break down. Actual output (say 970 units)

Relationship between capacities and outputs System efficiency = Actual output/System capacity Tanks: Mixing heating Moulding cooling actual output Capacity in kg/min 48 50 43 48 40kg/min

System Capacity
Solution: (a) system capacity = the limiting capacity in the given system is 43 kg/min. therefore the system capacity is 43 kg/min. (b). System efficiency = Actual output/system capacity: = 40/43 = 93%

Determination of Equipment requirements

Suppose we know actual requirement from a system and we need to know the amount or size of the equipment required to deliver the output, then we have to work backwards by allowing the normal system efficiencies. Capacity limitations are often stated in terms of equipment efficiencies or an amount of scrap loss. Say for example the scrap loss is 5%. And then the system efficiency is only 95%, and the required system capacity is determined by dividing 0.95 into the actual output required. By dividing this system capacity by the individual machine capacity gives us the number of machines required.

Q. A turning department wants to install enough semi automatic lathes to produce 2,50,000 good components per year. The turning operation takes 1.5 per component. But it is observed that the output of lathes will have 3% defectives. How many lathes will be required, if each one is available for 2000 hours of capacity per year? Required system capacity = Actual good comps required/system efficiency = 250000/0.97 = 2,57,732 comps/year = 257732 comps per year/2000 hrs per year = 129 units/hr Individual lathe capacity = 60 mins per hr/1.5 mins per comps = 40 comps/machine hr No. of lathes required = 129 units per hr/40 units per machine hr = 3.2 machines = now the firm can go for 3 or 4 lathes.

Locating Production and Service facilities

A plant is a place where men, material, money, machinery and equipment, e.t.c are brought together for manufacturing products. Plant location decisions are crucial because they commit organizations to long lasting financial, employment, and distribution patterns (along with others). This decision deserves a very careful attention of finance, marketing, and other managers, as well as that of the operation managers who manage the facilities. But location decisions may not always be cast in concrete . Relocation opportunities arises when alter their product lines, as labor or material requirements changes, or as market condition changes. So the management should always be alert to the advantages of expanding or closing the existing facilities, or developing new ones. Plant decision is not a static decision, that can be made and forgotten. Location planning for units dealing with goods and services Define the location objectives Identify the relevant decision criteria (qualitative/quantitative) Relate the objectives to the criteria using appropriate models (BEA, Eco Cost Mod) Do field research to generate relevant data & use the models to evaluate alternate locations Select the location that best satisfies the criteria

Issues in Facility Location

Proximity to Customers Business Climate Total Costs Infrastructure Quality of Labour Suppliers Other Facilities Political Risks Government Barriers Trading Blocks Environmental Regulation Host Community Competitive Advantage

Factors of location
Primary factors 1. Availability of raw materials 2. Nearness of market for the finished product 3. Availability of fuel and power 4. Transport facilities 5. Availability of labor 6. Availability of water (for paper & chemical inds) and other resources required Secondary factors 1. Soil and climate 2. Industrial atmosphere 3. Financial and other aids 4. Availability of facilities like housing, schools, hospitals and recreation clubs 5. Momentum of an early start 6. Special advantage of the place(subsidies, tax holidays) 7. Personal factors. 8. Historical factors 9. Political stability

Rural Vs urban locations

Selecting the site in an urban location Advantages:1. Good transport facilities for the company and it s employees 2. Good market for products manufactured 3. Availability of a good mix of labor(skilled/semi skilled/trained/experienced) 4. Power is easily available, service of trained professionals 5. Good medical facilities, availability of readily built building for rent 6. Availability of Maintenance and other facilities Disadvantages:1. Cost of land, construction cost, and Local taxes, these are normally very high 2. Expansion in the same area may be a problem, due to many constrains 3. labor cost is very high and labor union problem may exist, which may strain employee employer relationships

Rural Vs urban locations

Selecting a site in Rural/sub-urban area Advantages 1. Availability of land at a reasonable price, making even future expansion easy 2. Reasonable unskilled labor is available and labor union has minimum or no influence 3. Municipal/other regulation & taxes are very reasonable (seldom burdensome) 4. Government will give subsidies, incentives and tax holidays Disadvantages:1. Transport facilities may not be as good as in the urban areas 2. Difficult to find skilled labors and managers, as well as ancillary services 3. Availability of continuous power, good hospitals, good schools, financial institutions and banks might be a problem

Cost analysis (comparative cost analysis):- In this method all the costs involved in establishing and operating the plant are listed and total cost is calculated. Based on the total cost the location decisions are being made.
Factors (Cost of) Land Building Water Power Labor Freight (In coming + out going) Fuel Raw mat & other supplies Taxes Total cost Community facilities, community attitude Housing facilities Cost of living Community size Location 1 (cost in Rs.) 100000 1200000 5000 15000 140000 280000 40000 140000 4000 1924000 Good, all right Very good High Small Location 2 (cost in Rs.) 90000 1300000 6000 17000 120000 260000 35000 130000 2000 1960000 Excellent, Encouraging Good Normal Medium

Location analysis

Considering cost alone location 1 is better, but considering cost plus facilities, location 2 can be recommended

ROR (Rate of return analysis)

This analysis is based on the rate of return on the total investment. In this analysis location decision is made based on higher rate of return from the various Alternatives From the following data, select the most advantageous location for setting up a plant to manufacture electric and electronic products.
Particulars Tot initial investment Site X 200000 Site Y 200000 300000 40000 80000 30000 25000 40000 Wants business Excellent Site Z 200000 250000 75000 90000 20000 20000 30000 Indifferent good

Tot expected sales for 250000 the period Distribution expenses Raw material expense Power & water supply expenses Wages & salaries Other expenses Community attitudes Employee housing 40000 70000 40000 20000 25000 Indifferent Poor

ROR (Rate of return analysis) solution

Particulars Tot expenses (add amts in 3rd to 7th rows) ROR= (tot sales tot expenses) X (100)/ (tot investment) Site X Rs. 195000 27.5% Site Y Rs. 215000 42.5% Site Z Rs. 235000 7.5%

Rate of return of site X = (250000 195000) X (100) / 200000: = 27.5% Rate of return of site Y = (300000 215000) X (100) / 200000: = 42.5% Rate of return of site Z = ( 250000 235000) X (100) / 200000: = 7.5% Site Y has higher rate of return and it has good housing facility and community wants business. Hence it is the ideal site to start industry.

Locational Break-Even Analysis Example

Three locations: Fixed Variable City Cost Cost Akron $30,000 $75 Bowling Green $60,000 $45 Chicago $110,000 $25 Selling price = $120 Expected volume = 2,000 units Total Cost $180,000 $150,000 $160,000

Total Cost = Fixed Cost + Variable Cost x Volume

Locational Break-Even Analysis Example

$180,000 $160,000 $150,000 $130,000 $110,000 $80,000 $60,000 $30,000 $10,000 | 0

Annual cost

Akron lowest cost

| |

Bowling Green lowest cost

| | |

Chicago lowest cost

|

500

1,000

1,500

2,000

2,500

3,000

Volume

Factor-Rating Method
Popular because a wide variety of factors can be included in the analysis Six steps in the method Develop a list of relevant factors called critical success factors Assign a weight to each factor Develop a scale for each factor Score each location for each factor Multiply score by weights for each factor for each location Recommend the location with the highest point score

Factor-Rating Example
Critical Success Factor Labor availability and attitude People-to car ratio Per capita income Tax structure Education and health Totals Weight Scores (out of 100) France Denmark Weighted Scores France Denmark

.25 .05 .10 .39 .21 1.00

70 50 85 75 60

60 60 80 70 70

(.25)(70) = 17.5 (.05)(50) = 2.5

(.25)(60) = 15.0 (.05)(60) = 3.0

(.10)(85) = 8.5 (.10)(80) = 8.0 (.39)(75) = 29.3 (.39)(70) = 27.3 (.21)(60) = 12.6 (.21)(70) = 14.7 70.4 68.0
Table 8.3

Locating service facilities

Because of the variety of service firms and the relatively low cost of establishing a service facility compared to one for manufacturing, new service facilities are far more common than new factories and warehouses. Services typically have multiple sites to maintain close contact with customers. The location decision is closely tied to the market selection decision. Market affects the number of sites to be built and the size and characteristics of the sites. Whereas manufacturing location decisions are often made by minimizing costs, many service location decision techniques maximize the profit potential of various sites.

Cost vs Response TIme

Hi
Local FG Mix Regional FG

Cost

Local WIP Central FG Central WIP Central Raw Material and Custom production

Low Low

Custom production with raw material at suppliers

Response Time

Hi

Layout Planning
Plant layout refers to the arrangement of physical facilities such as machinery, equipment, furniture etc. with in the factory building in such a manner so as to have quickest flow of material at the lowest cost and with the least amount of material handling in processing the product from the receipt of material to the shipment of the finished product. Plant layout is an important decision as it represents long-term commitment. An ideal plant layout should provide the optimum relationship among output, Floor area and manufacturing process. It facilitates the production process, Minimizes material handling, time and cost, and allows flexibility of operations, Easy production flow, makes economic use of the building, promotes effective utilization of manpower, and provides for employee s convenience, safety, comfort at work, maximum exposure to natural light and ventilation. It is also important because it affects the flow of material and processes, labor efficiency, supervision and control, use of space and expansion possibilities etc

Plant Layout objectives

a) Proper and efficient utilization of available floor space b) To ensure that work proceeds from one point to another point without any delay c) Provide enough production capacity. d) Reduce material handling costs e) Reduce hazards to personnel f) Utilize labor efficiently g) Increase employee morale h) Reduce accidents i) Provide for volume and product flexibility j) Provide ease of supervision and control k) Provide employee safety and health l) Allow ease of maintenance m) Allow high machine or equipment utilization n) Improve productivity

Types of layout
In case of manufacturing unit, plant layout may be of four types: (a) Product or line layout (b) Process or functional layout (c) Fixed position or location layout (d) Combined or group layout Product or line layout:- Under this, machines and equipments are arranged in

one line depending upon the sequence of operations required for the product. The materials move form one workstation to another sequentially without any backtracking or deviation. Under this, machines are grouped in one sequence. Therefore materials are fed into the first machine and finished goods travel automatically from machine to machine, the output of one machine becoming input of the next, e.g. in a paper mill, bamboos are fed into the machine at one end and paper comes out at the other end. The raw material moves very fast from one workstation to other stations with a minimum work in progress storage and material handling.

Types of layout
The grouping of machines should be done keeping in mind the following General principles. a) All the machine tools or other items of equipments must be placed at the point demanded by the sequence of operations b) There should no points where one line crossed another line. c) Materials may be fed where they are required for assembly but not necessarily at one point. d) All the operations including assembly, testing packing must be included in the line Advantages: Product layout provides the following benefits: a) Low cost of material handling, due to straight and short route and absence of backtracking b) Smooth and uninterrupted operations, and Continuous flow of work c) Lesser investment in inventory and work in progress

Types of layout
d) Optimum use of floor space e) Shorter processing time or quicker output f) Less congestion of work in the process g) Simple and effective inspection of work and simplified production control h) Lower cost of manufacturing per unit Disadvantages: Product layout suffers from following drawbacks: a. High initial capital investment in special purpose machine b. Heavy overhead charges c. Breakdown of one machine will hamper the whole production process d. Lesser flexibility as specially laid out for particular product. Suitability: Product layout is useful under following conditions: 1) Mass production of standardized products 2) Simple and repetitive manufacturing process 3) Operation time for different process is more or less equal 4) Reasonably stable demand for the product & Continuous supply of materials

Types of layout
Process layout: In this type of layout machines of a similar type are arranged together at one place. E.g. Machines performing drilling operations are arranged in the drilling department, machines performing casting operations be grouped in the casting department. Therefore the machines are installed in the plants, which follow the process layout. Hence, such layouts typically have drilling department, milling department, Welding department, heating department and painting department etc. The work has to be allocated to each department in such a way that machines are chosen to do as many different job as possible i.e. the emphasis is on general purpose machine. The work, which has to be done, is allocated to the machines according to Loading schedules with the object of ensuring that each machine is fully loaded.

Types of layout
The grouping of machines according to the process has to be done keeping in mind the following principles:a) The distance between departments should be as short as possible for avoiding long distance movement of materials b) The departments should be in sequence of operations c) The arrangement should be convenient for inspection and supervision Advantages: Process layout provides the following benefits a) Lower initial capital investment in machines and equipments. There is high degree of machine utilization, as a machine is not blocked for a single product b) The overhead costs are relatively low c) Change in output design and volume can be more easily adapted to the output of variety of products d) Breakdown of one machine does not result in complete work stoppage e) Supervision can be more effective and specialized f) There is a greater flexibility of scope for expansion.

Types of layout
Disadvantages: Product layout suffers from following drawbacks a. Material handling costs are high due to backtracking b. More skilled labor is required resulting in higher cost. c. Time gap or lag in production is higher d. Work in progress inventory is high needing greater storage space e. More frequent inspection is needed which results in costly supervision Suitability: Process layout is adopted when 1. Products are not standardized 2. Quantity produced is small 3. There are frequent changes in design and style of product 4. Job shop type of work is done 5. Machines are very expensive

Types of layout
Fixed Position or Location Layout In this type of layout, the major product being produced is fixed at one location. Equipment labor and components are moved to that location. All facilities are brought and arranged around one work center. This type of layout is not relevant for small scale entrepreneur. Advantages: Fixed position layout provides the following benefits a) It saves time and cost involved on the movement of work from one workstation to another. b) The layout is flexible as change in job design and operation sequence can be easily incorporated. c) It is more economical when several orders in different stages of progress are being executed simultaneously. d) Adjustments can be made to meet shortage of materials or absence of workers by changing the sequence of operations.

Types of layout
Disadvantages: Fixed position layout has the following drawbacks a. Production period being very long, capital investment is very heavy b. Very large space is required for storage of material and equipment near the product. c. As several operations are often carried out simultaneously, there is possibility of confusion and conflicts among different workgroups. Suitability: The fixed position layout is followed in following conditions 1. Manufacture of bulky and heavy products such as locomotives, ships, boilers, generators, wagon building, aircraft manufacturing, etc. 2. Construction of building, flyovers, dams. 3. Hospital, the medicines, doctors and nurses are taken to the patient (product).

Types of layout
Combined layout Certain manufacturing units may require all three processes namely Intermittent process (job shops), the continuous process (mass production shops) and the representative process combined process [i.e. miscellaneous shops]. In most of industries, only a product layout or process layout or fixed location layout does not exist. Thus, in manufacturing concerns where several products are produced in repeated numbers with no likelihood of continuous production, combined layout is followed. Generally, a combination of the product and process layout or other combination are found, in practice, e.g. for Industries involving the fabrication of parts and assembly, fabrication tends to employ the process layout, while the assembly areas often employ the product layout. In soap, manufacturing plant, the machinery manufacturing soap is arranged on the product line principle, but ancillary services such as heating, the manufacturing Of glycerin, the power house, the water treatment plant etc. are arranged on a functional basis.

Types of layout
Traders (In Trading business, including different retail outlets) When two outlets carry almost same merchandise, customers usually buy in The one that is more appealing to them. Thus, customers are attracted and kept by good layout i.e. good lighting, attractive colors, good ventilation, air conditioning, modern design and arrangement and even music. All of these things mean customer convenience, customer appeal and greater business volume. The customer is always impressed by service, efficiency and quality. Hence, the layout is essential for handling merchandise, which is arranged as per the space available and the type and magnitude of goods to be sold keeping in mind the convenience of customers. There are three kinds of layouts in retail operations today. 1. Self service or modified self service layout 2. Full service layout 3. Special layouts

Types of layout
Services centers and establishment Services establishments such as motels, hotels, restaurants, must give due attention to client convenience, quality of service, efficiency in delivering Services and pleasing office ambience. In today s environment, the clients look for ease in approaching different departments of a service organization and hence the layout should be designed in a fashion, which allows clients quick and convenient access to the facilities offered by a service establishment. FACTORS INFLUENCING LAYOUT Factory building: Nature of product: Production process: Type of machinery: Repairs and maintenance: Human needs: Plant environment:

Production and Operation Management

Unit-III (7 sessions) Organizing the conversion System Job design, Production and Operations standards, and work measurement; Project Management.

Job Design
The operations manager uses job design techniques to structure the work so that it will meet both the physical and behavioral needs of the human worker. Work measurement methods are used to determine the most efficient means of performing a given task, as well as to set reasonable standards for performing it. People are motivated by many things, only one of which is financial reward. Operations managers can structure such rewards not only to motivate consistently high performance but also to reinforce the most important aspects of the job.  Job design is the function of specifying the work activities of an individual or group in an organizational setting.  The objective of job design is to develop jobs that meet the requirements of the organization and its technology and that satisfy the jobholder s personal and individual requirements.

Decisions in Job Design

Who Mental and physical characteristics of the work force What Where Geographic locale of the organization; location of work areas When Time of day; time of occurrence in the work flow Why Organizational rationale for the job; objectives and motivation of the worker How Method of performance and motivation

Tasks to be performed

Ultimate Job Structure

Behavioral Considerations in Job Design

Degree of Specialization

Job Enrichment (vs. Enlargement)

Job enlargement generally entails adjusting a specialized job to make it more interesting to the job holder. A job is said to be enlarged horizontally if the worker performs a greater number or variety of tasks, and it is said to be enlarged vertically if the worker is involved in planning, organizing, and inspecting his or her own work.

Work Methods
A Production Process

Workers Interacting with Other Workers

Ultimate Job Design

Worker at a Fixed Workplace

Worker Interacting with Equipment