EHU-601 : Industrial Management Unit-I 1.Introduction : 2.Concept, 3.Development, 4.application and 5.scope of Industrial Management.

Productivity : 1.Definition, 2.measurement, 3.productivity index, 4.types of production system, 5.Industrial Ownership.

Unit-II Management Function : Principles of Management Management Tools time and motion study, work simplification process charts and flow diagrams, Production Planning, Specification of Production requirements. Unit-III Inventory control : Inventory, cost, Deterministic models, Introduction to supply chain management.

Unit-IV Quality control : Meaning, process control, SQC control charts, single, double and sequential sampling, Introduction to TQM. Unit-V Environmental Issues : Environmental Pollution various management techniques to control Environmental pollution Various control acts for Air, Water, Solid waste and Noise pollution.

Industrial Management
Industrial Management is concerned with the

design, improvement, and implementation of

integrated systems of people, material, information, equipment, and energy.

It draws upon specialized knowledge and skills in the

mathematical, physical, and social sciences together with the principles and methods of engineering analysis and design to specify, predict, and evaluate the results to be obtained from such systems.

 Whereas most engineering disciplines apply skills to very specific areas, industrial engineering is applied in virtually every industry.
Examples of where industrial engineering might be used include shortening queues at a theme park, Mapping economically an operating room, distributing products worldwide, and manufacturing cheaper and more reliable automobiles.

APPLICATION OF INDUSTRIAL MANAGEMENT Applications of industrial management are summarized in the following departments of industry:

1. Managing and arranging the location of facilities 2. Design of Plant layouts 3. Management t of material handling systems 4. Supply chain management. 5. Production and Planning control 6. Quality control & Total quality management 7. Inventory & Materials management 8. Maintenance management 9. Operations management 10. Labor management

Scope of

scope of industrial management

1. Any organization must follow the Principles of Management for its survival and growth and to be economically viable. 2. These management principles are applicable to all activities in industry also. 3. Reading and learning Industrial Management will enable one to be capable of solving the problems of the organization, may be in a Production Shop, Hospital, Departmental shop, an Educational Institution or even a coffee shop. 4. knowledge of Industrial Management will help anybody managing business activities, tackle the problems encountered.

5.

For example: The Industrial Management consists of Planning in various segments of industry in all the departments,

e.g. Production, Inspection & quality, Procurement, Store management, management of activities in assembly line etc. In production department the management includes selection of materials, planning of processes, Routing, Scheduling and controlling the activities etc., Scope of Industrial Management encompasses all industrial and human activities.

What TCS Provides 1. Geospatial Technologies (GST): These reduce maintenance costs, optimize assets, monitor environmental impacts, automate processes, streamline work procedures, integrate business systems and enable regulatory reporting through dashboards. 2. Control System Integration (CSI): This involves upgrading water, waste-water treatment and power plants in terms of hardware, software and process areas. It covers the design, development and implementation of control systems to cater to the redefined process requirements as mandated by environmental regulations. 3. Advanced Process Control (APC): It optimizes water and waste water/sludge treatment process by reducing the total cost of operation while improving operational efficiency and meeting quality norms. 4. Real-Time Systems (RTS): These are used for developing data acquisition, real-time control and monitoring products and solutions for automating plant operations. 5. Enterprise Asset Management (EAM): This improves the operational and IT asset management. We provide services like business process analysis, solution mapping, product configuration, product customization, system integration with legacy systems, data conversion, testing, go-live and post implementation support in the EAM space. 6. Life-Cycle Investment Planning (L-CIP): TCS innovative solution L-CIP includes Universal Prioritization System (UPS) to allow all kinds of projects to compete for capital on a level-playing field and eventually pick the optimal combination that delivers the maximum benefits to the business, customers and the environment.

Productivity Definitions and Measurements

Productivity is one measure of the effective use of resources within an organization, industry, or nation. Productivity, based on the relationship between inputs and outputs, is a measure of performance toward an established goal. The classical productivity definition measures outputs relative to the inputs needed to produce them. That is, productivity is defined as the number of output Output Productivity units per unit of input.
Input

Slide 11

Productivity = Labour utilisation X labour Efficiency Standard hours X Available shift hours Available shift hours Actual hours worked Standards hours Actual hours worked

 Productivity vs. efficiency.

Efficiency is generally seen as the ratio of the time needed to perform a task to some predetermined standard time.

However, doing unnecessary work efficiently is not exactly being productive.

It would be more correct to interpret productivity as a measure of effectiveness (doing the right thing efficiently), which is outcomeoriented rather than output-oriented.

Productivity Definitions and Measurements

For example, traditionally productivity in hospital nursing units has been measured by hours per patient day (HPPD). That requires an inversion of the typical calculations: meaning total hours are divided by total patient days.

Total Hours HPPD Patient Days

Slide 14

Example
Nurses in Unit A worked collectively a total of 25 hours to treat a patient who stayed 5 days, and nurses in Unit B worked a total of 16 hours to treat a patient who stayed 4 days. Calculate which of the two similar hospital nursing units is more productive.

HPPD A

Total Hours 25 5 Patient Days 5

HPPD B

Total Hours 16 4 Patient Days 4

Since the HPPD productivity ratio is expressed as input over output, lower is better. Unit B productivity is better than Unit A.

15

Productivity can be measured in several ways: e.g. Output per worker or hour of labour Output per hour / day / week Output per machine Unit costs (total costs divided by total output)

The unit cost measure is particularly important. A falling ratio would indicate that efficiency was improving.

Productivity measurement:
Global Methods: = comparison of the total volume of outp and total employment in a given industry in different countries. Sample Methods: = based on the comparison of performance of few selected industries producing identical products under identical conditions. Net output value method= based on the comparison of value of net output per head in the two countries converted in to the same monetary unit. productivity = output man-hour

Measuring Productivity
Productivity is a measure of how efficiently inputs are converted to outputs
Productivity = output/input

Total Productivity Measure:

Total Productivity = (total output)/(total of all inputs)

Partial Productivity Measure:

Partial Productivity = (total output)/(single input)

19

Total Productivity: example

Bluegill Furniture makes kitchen chairs. The weekly dollar value of its output, including finished goods and work-in-progress, is $14,280. The value of inputs (labor, materials, capital) is approximately $16,528. What is the total productivity measure for Bluegill? Total productivity = output/input = $14,280/$16,528 = .864 or 86.4%

20

Partial Productivity: example

Bluegill Furniture has hired 2 new workers to paint chairs. Together they have painted 10 chairs in 4 hours. What is labor productivity for the pair? Labor productivity = output/labor = (10 chairs)/(2 x 4 hr) = (10 chairs)/(8 hr) or 1.25 chairs/hr

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TYPES OF PRODUCTION SYSTEM

Broadly one can think of three types of production systems which are mentioned here under: -

(a) Continuous production (b) Job or unit production (c) Intermittent production (a) Continuous production: It refers to the production of standardized products with a standard set of process and operation sequence in anticipation of demand. It is also known as mass flow production or assembly line production.
This system ensures less work in process inventory and high product quality but involves large investment in machinery and equipment. The system is suitable in pants involving large volume and small variety of output e.g. oil refineries reform cement manufacturing etc.

(b) Job or Unit production: It involves production as per customer's specification each batch or order consists of a small lot of identical products and is different from other batches. The system requires comparatively smaller investment in machines and equipment. It is flexible and can be adapted to changes in product design and order size without much inconvenience. This system is most suitable where heterogeneous products are produced against specific orders.

(c) Intermittent Production:

Under this system the goods are produced partly for inventory and partly for customer's orders. E.g. components are made for inventory but they are combined differently for different customers. . Automobile plants, printing presses, electrical goods plant are examples of this type of manufacturing.

1
2 3 4

Business Activities

Kendriya Bhandar is into the following business activities: a) Sales of Grocery and Consumer products b) Sales of Stationery and office equipment c) Sales of Medicines

Unit-II Management Function :

1. Principles of Management2. Management Tools time and motion study, 3. work simplification- process charts and diagrams, 4. Production Planning, 5. Specification of Production requirements.
flow

Management Function:

Unity Of Command-

Time and Motion Study

Frederick Winslow Taylor (March 20, 1856 March 21, 1915) was an American mechanical engineer who sought to improve industrial efficiency.

He is regarded as the father of scientific management and was one of the first management consultants
Taylor thought that by analyzing work, the "One Best Way" to do it would be found.
He is most remembered for developing the stopwatch time study, which combined with Frank Gilbreth's motion study methods later becomes the field of time and motion study.
Gilbreth with a wire representation of the path of motion for a unit of work

1. F.W. Taylor initiated a series of experiments to study the ways men handle materials, machines and tools to develop a coordinated system of work management . 2. He advocated one best method of doing a job which must result from the scientific method of the work. 3. For this purpose he proposed work study (which means organised, objective , systematic , analytical and critical assessment of the methods of doing various operations by the workers. 1. The byproducts of work study included method study, time study and motion study. 2. These concepts are the basis of scientific management developed by Taylor.
3. The purpose of these techniques as advocated by Taylor was improvement of work and increase in the efficiency of the workers.

Techniques of scientific management

For improvement of work and increase in the efficiency of the workers.

Means organised, objective , systematic , analytical and critical assessment of the methods of doing various operations by the workers
Different aspects of work study -

Work study

1. Methods study
2. Motion study

Conducted to know best method of doing a job

3. Time Study
4. Fatigue Study

To see that efficiency without injury to health and happiness

Motion Study: 1. It is the study of the movement of a machine operator and his machine on the job. 2. The purpose is to eliminate useless motions thereby establish standards of performance, for developing a more efficient and less time consuming system of operation.

Time Study: 1. It is done to find out by observation and study the minimum time required to perform an operation . 2. Through time study the precise time required for such elements of a mans work is determined. 3. It will help in fixing the standard time required to do a particular job.

Basis of comparison
Meaning

Motion Study Time Study

It relates to watching and It involves careful recording the movements measurement of time of workers. required to do the different parts of a job. Motion study is concerned with minimisation of movement of operators. The purpose of motion study is to determine the best way of doing a job Time study is concerned with increasing the productivity to labour. The purpose of time study is to determine fair days work.

Nature

Purpose

Techniques

Motion is conducted with Time study is conducted a moving camera with a stop watch.

Time and Motion Study: Purposes

1. A method created to determine the correct time it takes to complete a certain task 2. A method to establish the one best way to perform a task 3. To end waste of time and to establish what constituted a fair days work 4. To make sure that the job being evaluated does not include any unnecessary motion by the worker 5. T&M Studies can be effective for performance evaluations 6. T&M Studies can be used for planning purposes in order to predict the level of output that may be achieved 7. T&M Studies can be used to uncover problems and create solutions 8. T&M Studies can be used for time cost analysis.
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How it Works Step-by-Step 1. 2. 3. 4. 5. 6. 7. Establish the standard job method. Break down the job into elements Study the job. Rate the workers performance Compute the average time Compute the normal time Compute the standard time
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work simplification- process charts and flow diagrams

Frank and Lillian Gilbreth

brought an engineers and psychologists skills to study the economy of movements-work simplification through elimination of useless motions and waste-

-use of flow diagrams, process charts

work simplification- process charts and flow diagrams

Work simplification describes the
required to complete an activity.

making of daily tasks

easier in order to reduce strain, or to decrease the amount energy

Work Simplification is a scientific approach to

study work processes with a view to simplifying the process such that the work process becomes more efficient and effective and
thereby raises productivity and reduces wastage of labor effort, materials, space, time and energy in the process of producing a good or delivering a service

Recording techniques:
The next step in the basic procedure , after selecting the work to be studied( work study= technique employed to improve the activities in the production(Time & Motion) is to record all the facts relating to existing methods.
According to nature of the job being studied and the purpose for which the record is required, the following are the most generally used techniques-

1- Charts: Indicating process sequence:

(A) Flow process charts:

1- Material type

2- Man type

3-Equipement type

(B) two handed process charts

2- Diagrams indicating movements and models:

(A)-Flow diagrams:

1- Charts: Indicating process sequence: (A) Flow process charts:

A flow process chart is a graphical representation of the sequences of all operations, transportation, inspection, delays and storages occurring during a process or procedure and includes information such as time required and distance moved for the purpose of analysis. Five standard symbols are used in the process charts are shows time required for each activity and does not indicate time of occurrence. To reduce distance travelled, to reduce time material spends in storage, to eliminate unnecessary operations and handling and as basis of plant layouts.

Flow Process Chart: This chart uses -

INDICATIONS
Circles for operations Arrows for transports, Squares for inspections, Triangles for storage,

SYMBOLS

The letter

D for delays.

1- MATERIAL FLOW PROCESS CHART

MPC records what happens to material ( in location or condition).

1- MATERIAL FLOW PROCESS CHART

2- MAN FLOW PROCESS CHART

Man PC records the movements ( activities) of a man.

2- MAN FLOW PROCESS CHART

3- Equipment process chart

Equipment process chart are used to record the way in which equipment is used.

Care must be taken in making flow process chart to decide whether materials or men are to be followed, because descriptions are likely to indicate first one and then the other being followed.

(B) Two -Handed Process Charts

This chart records the activities of both the hands of an operator moving or static in relation to one another. The activities of the two hands can be synchronized by providing a time scale on the chart.

One advantage of a time scale is that it brings the above discussed five standards symbols for what the two hands are doing at any given movements opposite to one another. For examples:

(B) Two -Handed Process Charts

OPERATION

It is used for the activities like , grasping position, releasing, etc. of tools , components or material.

It is used to represent the TRANSPORTATION movements of the hands to or from the work, tool or material. It is used to denote time duration for which workers hands remain idle. In two handed process chart the term hold is used in place of storage to represent the activity of holding work, tool or material, i.e. when worker's hand is holding something.

DELAY

HOLD

Such a chart is generally used for respective work of short duration. For example, it can be used in assembly work, machining and clerical jobs.
Working time Idle time

OPERATOR

TIME

MACHINE

Ready
Material
Insert
Occupied

Package finished product Extract Inspect finished product

Running
Occupied Occupied

Two handed process charts:

Left Hand description To bolt Pickup bolt To position Hold the belt

Right Hand description

Two handed process charts:

2- Diagrams indicating movements and models: (A) Flow Diagram:

It depicts the probable movement of materials in the floor plant. The movement is represented by a line in the plant drawing. 1 2 3 Draw to scale the plan of the work area Mark the relative positions of machines tools benches, store, racks, inspection boots etc. From the different observations, draw the actual movements( paths) of the material or the worker on the diagram and indicate the direction of movement.

4
5

Each movement is serially numbered and indicated by an arrow for its direction. Different colors are used to identify different types of movements e.g. worker with empty trolley or with loaded trolley etc.

Flow Diagram

Production Planning

Gorden and Carson observe production; planning and control involve generally the organization and planning of manufacturing process. Especially it consists of the planning of routing, scheduling, dispatching inspection, and coordination, control of materials, methods machines, tools and operating times. The ultimate objective is the organization of the supply and movement of materials and labour, machines utilization and related activities, in order to bring about the desired manufacturing results in terms of quality, quantity, time and place.
Production planning without production control is like a bank without a bank manager, planning initiates action while control is an adjusting process, providing corrective measures for planned development. Production control regulates and stimulates the orderly how of materials in the manufacturing process from the beginning to the end.

1-Production planning:
Production planning may be defined as the technique of foreseeing every step in a long series of separate operations, each step to be taken at the right time and in the right place and each operation to be performed in maximum efficiency.

work out the quantity of material manpower, machine and money requires for
It helps entrepreneur to producing predetermined level of output in given period of time.

2- Routing:
Under this, the operations, their path and sequence are established. To perform these operations the proper class of machines and personnel required are also worked out.

The main aim of routing is to determine the best and cheapest sequence of operations and to ensure that this sequence is strictly followed.
In small enterprises, this job is usually done by entrepreneur himself in a rather adhoc manner.

Routing procedure involves following different activities.

(1) An analysis of the article to determine what to make and what to buy. (2) To determine the quality and type of material (3) Determining the manufacturing operations and their sequence. (4) A determination of lot sizes (5) Determination of scrap factors (6) An analysis of cost of the article (7) Organization of production control forms

3- Scheduling:
It means working out of time that should be required to perform each operation and also the time necessary to perform the entire series as routed, making allowances for all factors concerned.

It mainly concerns with time element and priorities of a job. The pattern of scheduling differs from one job to another which is explained as below:
1. Production schedule: 2. Master Schedule: 3. Manufacturing schedule:

1-Production schedule:
The main aim is to schedule that amount of work

which can easily be handled by plant and equipment without interference.

Its not independent decision as it takes into account following factors. (1) Physical plant facilities of the type required to process the material being scheduled. (2) Personnel who possess the desired skills and experience to operate the equipment and perform the type of work involved. (3) Necessary materials and purchased parts.

2-Master Schedule:
Scheduling usually starts with preparation of master schedule which is weekly or monthly break-down of the production requirement for each product for a definite time period. This forms a base for all subsequent scheduling acclivities. A master schedule is followed by operator schedule which fixes total time required to do a piece of work with a given machine or which shows the time required to do each detailed operation of a given job with a given machine or process.

3-Manufacturing schedule:

1. It is prepared on the basis of type of manufacturing process involved. 2. It is very useful where single or few products are manufactured repeatedly at regular intervals. 3. Thus it would show the required quality of each product and sequence in which the same to be operated.

4- Loading:
The next step is the execution of the schedule plan as per the route chalked out it includes the assignment of the work to the operators at their machines or work places.
So loading determines who will do the work as routing determines where and scheduling determines when it shall be done. Gantt Charts are most commonly used in small industries in order to determine the existing load and also to foresee how fast a job can be done.

Enterprise can be successful if they have ability to meet delivery order in time which no doubt depends upon production of quality goods in right time.
It makes all the more important for entrepreneur to judge ahead of time what should be done, where and when thus to leave nothing to chance once the work has begun.

Specification of Production requirements Material resources planning (MRP) And Manufacturing Resources Planning (MRP-II)

Concept of material requirement planning

MRP stands for material requirement planning. It is a computer based technique: 1. It converts master production schedule (MPS) into detailed schedule for requirement of raw material, components parts, sub- assemblies and assemblies used in the end product. 2. It then breaks the material requirements in to two parts: 1. Material that are in stock ( inventory) and 2. The amount of material to be purchased. 3. Finally, it develops a schedule of order for purchased materials and produced parts over the planning period.

1- MRP constitutes a set of techniques that use bill of material , inventory data and the master production schedule to calculate requirements for materials. 2- The purpose of MRP is to ensure that materials and components are available in the right quantities and at the right time so that finished products can be completed according to the master production schedule. 3- MRP is often considered as a sub set of inventory control. 4- It is a effective tools for minimizing unnecessary inventory investment without affecting the production schedule. 5- The core of MRP is its relationship with bills of materials and use of MRP records to calculate the time phased release of orders for manufacturing , planning and control system.

Inputs of MRP:

1-Master Production Schedule

2-Bill of Material file defining the product structure

3-Inventory status file

1-Master Production Schedule

The MPS specifies a period by period list of final products required. The MPS is based on the accurate estimate of demand determined from the orders received and an estimate of the uncertain demand for the period obtained by statistical forecasting. It is a specific production plan which specifies what end times of all components that must be purchased or produced to satisfy the end requirements. MPS is a list of end products to be produced.

It contains items name ( and Code) , quantity to be purchased and time for completing the production.

Tentative master production schedule

Resources requirement planning

Resource available

Authorized master production schedule

Development of MPS

Month

August 98

August 98

August 98

August 98

Septem Septem Septem Septem ber 98 ber 98 ber 98 ber 98

Week 1 starti ng on Produ ct P4

60

100

200

40

Produ 40 ct P5
Produ ct P6 35

80

20

50

25

45

60

MPS for products P4, P5, P6 showing weekly delivery schedule in no. of items.

2- Bill of material File

1. Bill of material file shows all the materials, parts, and subassemblies and their quantities required to produce each end products. 2. It shows the how the various parts , components, sub assemblies are joined to form the end products. 3. It thus shows the product structure or the manufacturing sequence of the end product. 4. This enables the planners to readily identify the components which must be available to make subassemblies prior to assembly of the end product.

The structure shows of an assemble product P1 which is assigned level(zero) in the product structure hierarchy. .
It is made of two types of sub-assemblies S1 and S2 ( 2 nos. and 4 nos. each). Each sub assemblies S1 consists of components C1,C2 ,C3 ( in 1,3 and 2 nos. respectively ). Similarly , each sub assembly S2 consists of components C4 and C5 in two and three nos. respectively. Part C2 consist parts D1 and D2 in two and four nos. respectively (level 3).

PRODUCT STRUCTURE
P1
S1(2) S2(4) Level

0 1
C1 (1) C2(3) C3(2) C4(2) C5(3) 2 3

D1(2)

D2(4)

3- Inventory Status File

1. It is mandatory in MRP to have accurate current data on inventory status. 2. It provides a computerised list of records of each material , physically in stock in the system. 3. There will be only one inventory status for individual material, even if it used at different levels of production or in different end products. List of records contains: 1-Material code 2-Material name

3-Inventory on hand 4-Material on order ( yet to arrive) 5- Customer order for the product

>The inventory status file should be updated regularly . >The updating requires entering the following information (inventory transaction)
Receipt of material Disbursement of inventory Scrap reported

Wastage Pilferage and theft if any

Planned orders Order release etc.

It also contains information such as lot size, lead time, safety stock ands scrap rate. The ordering lead time can be determined from purchasing records and the manufacturing lead time can be determined from the route sheets or operation process charts.

Working Of MRPSteps involved in Material Resource Planning(MRP) programme:

Sales Order

Determine gross requirement of finished products

Sales Forecast Inventory on hand

Determine Net requirements of finished products

Develop master production schedule Explode bill of materials determine gross part requirement s Determine net part requirements Adjust requirements for scrap allowance

Components parts and Raw material inventory

Scrape allowances

Procurement schedule

Computerised system of MRP- I MRP computer software programme does the following: 1-Determines gross requirement of finished products.

2-Determines the net requirements of finished products.

3-Determines net component requirements. 4- Plans order size. 5- Offsets requirements considering lead time. 6- Maintains and Updates the requirements plan 7- provides a review of planned orders and adjustments to the planned orders.

Benefits of MRP are as follows: Reduction in work in process:

Keep needed materials priority up to date: materials are ordered at the

correct due date and that due date is kept valid.

Effective utilisation of capacity: by generating anticipated materials

requirements over a sufficiently long time horizon, facility and labor time can be effectively planned and used. Improved customer service Reduction in lead time Reduction in past due orders Reduction in finished goods inventory, raw materials , components and parts and safety stock. Increased productivity Increased inventory turnover. Quicker response in change in demand.

Materials requirement planning (MRP)

Materials requirement planning (MRP) is an inventory control system used to release production and purchase orders so that the correct item, in the quantity, at the correct time is produced or purchased.

The system has three inputs: the bill of materials (BOM), the master production schedule (MPS) and the inventory file; and one output: orders.
The BOM provides the structure of the product. The MPS indicates when and in what quantities the final products are required. The inventory file contains data on individual product numbers, such as the lead time and number of items in stock. With all this information, the system (usually a computer system) can determine when to start production so that all the components which make up the final product arrive at the right time in the right quantity, so that customer orders can be met.

Master production schedule (MPS)

The master production schedule (MPS) is the list of the finished products which will be produced during a specified time period.

A common time frame is a week, which is also known as a weekly time bucket.

MRP-II ( MANUFACTURING RESOURCE PLANNING) MRP do not provide a link with other areas of business, such as finance and marketing . For example collection of payments fro customers , billing of suppliers, pricing decision, change of new product design etc. are not directly included. Therefore there is a need to have an integrated system encompassing business functions other than manufacturing . MRP- II is an attempts in this direction. MRP II includes linking of financial and marketing functions to manufacturing function. MRP- II is a computer based system designed to synchronise all the aspects (not just manufacturing) of the business and therby overcoming the limitations of MRP-I.

Manufacturing resource planning (MRP II) is an extension of the MRP system. its act as a planning and scheduling system, linking manufacturing with sales , engineering, purchasing, and finance by adopting a central production plan and one unified data base to plan and update activities of all the functions. The basic elements of the MRP system remain in place, but a host of other modules can be added. These computerised modules can provide useful information to other areas of an organisation. The system can cover materials planning, personnel, purchasing, accounting, marketing and management reporting.

Market Demand Production Plan

Rough cut capacity planning
Problem ? NO MPS MRP Adjust CRP

Finance Marketing Manufacturing

Business Planning

Adjust Production Plan

YES Adjust MPS

Capacity requirement planning ( CRP)

NO Realistic YES

Execute capacity plans

Requirement schedules

Execute material plans

Advantages of MRP- II: Improved customer services Improved productivity Reduction in purchase cost

Limitations of MRP- II:

Non availability of basic accurate data Complexity in manufacturing planning and control High initial cost of software. Lack of top management support

Higher inventory turnover

Better financial planning Improved cash flow Better utilization of machines

Unit-III Inventory control :

Inventory, cost, Deterministic models, Introduction to supply chain management.

Inventory:
There are four common classifications of inventory: Raw materials. Raw materials are components, objects, materials, elements and items which are received by the company, usually from a supplier, which are used in the final product. Work in progress (WIP). Work in progress consists of all the items which are currently being worked on, but are not in a state to be sold or dispatched to a customer. Once an item of raw materials has some action performed on it, it becomes WIP.

Finished goods. Finished goods inventory is the stock of products which are in a position to be sold or dispatched to a customer, and require no further action performed on them.
Consumables. Consumable items are items which are not directly used in the finished product, but are necessary for production. Examples of consumables are spares and supplies. Spares are usually machine parts which are vital to production. Supplies include items such as packaging materials, documentation, and paper.

Inventory:
list of movable good which helps directly or indirectly in the production of goods for sale and to maintain the plant facilities in working conditions. Ex: Raw materials tools, supplies , gauges etc. Classification of inventories:
Direct inventories: Raw materials, In process inventories ( work in progress), purchased part, finished goods. Indirect inventories: 1- Tools: - Drill, hobs, broaches, chasers, lathe tools, milling cutters. 2- Supplies:- Materials used in running the plant- welding, soldering, brushes, maps, oils and greases such as kerosene, files, pins, clips, carbon paper, envelops, letterheads.

MILLING CUTTERS

Lathe Tools
CHASERS & CUTTERS

Inventory Cost:
The costs that are affected ( i.e. , increase or decrease) by the firms decision to maintain a particular level of inventory are called cost associated with inventories or relevant inventory costs. These costs may be classified as: Total Inventory Cost:

1)- Purchase cost 2)- Ordering cost 3)- Inventory carrying cost 4)- Shortage cost
Total Inventory Cost = Purchase cost + Total variable cost of managing the inventory (TIC)

TIC = Purchase cost + Inventory carrying cost + Ordering cost + shortage cost.

1- Purchase cost: The cost purchasing a unit of an item is called as purchase cost . It is the actual price paid for the procurement of items. Its unit of measurement is in Rs. Per unit. The unit price of the item depends on the size of the quantity ordered of purchased ( or manufactured) . Purchase cost = Price per unit X Demand per unit time 2- Ordering Cost: ( inventory procurement cost) . It is the cost of placing an order from a vendor. This includes all costs incurred from calling for quotations to the point at which the item is taken into stock. It consists of the expenditure connected with: Receiving quotations. Processing purchase requisition.

Receiving materials and then inspecting it.

Following up and expediting purchase order. Processing sellers invoice.

3- carrying cost:
Carrying costs which are also known as holding costs are the costs incurred in maintaining the stores in the firm.

Rent of storage facilities Salaries of personal and related storage expenses Cost of obsolescence Cost of capital Sometimes special tax is to be paid for storing certain items. Cost of pilferage and employing a person for safety.

Shortage cost:Shortage cost = (cost of being short one unit in the inventory) X ( average number of units short in the inventory ) The average number of units short in a planning period is determined by using the following relationship: Average number of units short =
Minimum shortage in the inventory + max. shortage 2

Time for which shortage exists

Deterministic models

Inventory Models Economic lot size of an item depends on the

following:
1- Possibility of placing repeat orders 2- Nature of demand 3- Availability of discount.
4- Single or multiple product manufacture

Inventory models considering the above aspects can be classified as under: A- Static Inventory models:
It is applicable in case where only order can be placed to meet the demand Repeat orders are either impossible or too expensive . Examples perishables goods like breads, vegetables etc, seasonable products like coolers, umbrellas, crackers, sweaters, rain coats etc.

B- Dynamic Inventory Models It is applicable for items where repeat orders can be placed to replenish stock.

Dynamic inventory models can be classified as:

(a)- Deterministic models: These are based on the assumption that the demand as well as lead time of an item are deterministic (i.e. known with certainty). (b)- Probabilistic models: These models take into account the variations in demand and lead time of an item.

(a)- Deterministic modelsFurther these models may be classified as:

i)- Single products ( item) inventory models.

ii)- Multi Products inventory models.

The single product deterministic inventory models may be classified as:

(a)- Deterministic inventory models with no shortages:

i=> Inventory models with uniform demand. ii=> Inventory models with several production runs of length unequal

iii=> Inventory models with finite replenishment (production)

(b)- Inventory models with shortages:

i=> Inventory models with instantaneous production and variable order cycle. ii=> Inventory models with instantaneous production and fixed order cycle. iii=> Inventory models with finite replenishment ( production)

(C)Inventory models when quantity discount is allowed:

(i)- With one price break. (ii)- More than one price break.

Assumptions in deterministic models: The demand of the item is known exactly for a given period. The demand of the item occurs uniformly over a period of time. The cost of placing an order is fixed and does not vary with the lot size. Similarly , set up costs are also constant. The inventory carrying charges are directly proportional to the order quantity.

The price per unit is fixed and is independent of the order size ( in case of fixed price inventory models). Orders are received instantaneously (replenishment is instantaneous) The item can be purchased free from restrictions of any kind.
The item has fairly long life, there being no fear of deterioration or spoilage.

Supply Chain Management

What Is Supply Chain Management (SCM)?

A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers So that the product is produced and distributed
In the right quantities To the right locations And at the right time

System-wide costs are minimized and Service level requirements are satisfied

Goal of Supply Chain Management

Goal is to deliver right product to right place at right time in order to maximize profit.

The Supply Chain Another View

Plan

Source

Make

Deliver

Buy

Suppliers

Manufacturers

Warehouses & Distribution Centers

Customers

Material Costs

Transportation Transportation Costs Costs Manufacturing Costs Inventory Costs

Transportation Costs

Dell Computer => Direct Model => Use of Information Technology >provides suppliers with access to Dells inventories

=> Minimum Inventory Levels

Classic case in supply chain management. Dell Computer

Established in 1984, Dell experienced supply problems in 1993 and there upon completely redesigned its supply chain process along the lines of what its founder, Michael Dell, called the direct model.
Between 1993 and 1998, Dell's earnings subsequently grew at 65 percent per year.
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Dell's supply chain redesign was based on the following elements.

Dell Computer continued

First, Dell sells directly to customers, eliminating the wholesaler and retailer. Second, Dell also takes advantage of new information technologies in their communications with suppliers who can access Dell's component inventories, production plans, and forecasts in real time and thus keep their production precisely matched to Dell's needs.

Third, Dell deliberately maintains absolute minimum inventory levels at every stage of production, averaging 4 days overall
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History of Supply Chain Management 1960s - Inventory Management Focus, Cost Control

1970s - MRP & BOM - Operations Planning

1980s - MRPII, JIT - Materials Management, Logistics 1990s - SCM - ERP - Integrated Purchasing, Financials, Manufacturing, Order Entry 2000s - Optimized Value Network with Real-Time Decision Support; Synchronized & Collaborative Extended Network
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Major Features of SCM:

Supply chain management is identified by the following features:

1. Material flow. 2. Financial flow. 3. Information flow.

Major Features of SCM: 1. Material flow. It is in the direction from supplier to customer through the chain. It involves procurement of the materials, transformation of these materials into finished products and distribution of these finished products to the customers. 2. Financial flow. It involves payment options, credit card information, credit terms, payment schedule etc. It is in the direction from customer to supplier as payment for products or services originates from customer and end at supplier. 3. Information flow. It involves product information, demand forecasts, order status report, delivery report, customers communication, etc. Information is always two-way, particularly in ebusiness.

Supply Chain Management Key Issues

ISSUE CONSIDERATIONS
Warehouse locations and capacities Plant locations and production levels Transportation flows between facilities to minimize cost and time How should inventory be managed? Why does inventory fluctuate and what strategies minimize this? Impact of volume discount and revenue sharing Pricing strategies to reduce ordershipment variability Selection of distribution strategies (e.g., direct ship vs. cross-docking) How many cross-dock points are needed? Cost/Benefits of different strategies

Network Planning

Inventory Control Supply Contracts

Distribution Strategies

Supply Chain Management

Key Issues
How can integration with partners be achieved? What level of integration is best? What information and processes can be shared? What partnerships should be implemented and in which situations? What are our core supply chain capabilities and which are not? Does our product design mandate different outsourcing approaches? Risk management How are inventory holding and transportation costs affected by product design? How does product design enable

Integration and Strategic Partnering

Outsourcing & Procurement Strategies Product Design

Unit-IV: standard
Quality control :
Meaning, Process control, Statistical Quality Control (SQC) control charts, Single, double and sequential sampling, Introduction to TQM.

Quality control :- Meaning:The word quality refers to the degree of excellence of a product. The quality of a product means the degree of excellence of the characteristics it possesses. It is a relative term, like high, low or inferior grade or in terms of conformity with certain specifications.

The word quality has following meanings:

1- Fitness for purpose: the components is said to possess good quality, if it works well in the equipment for which it is meant. Quality is thus defined as fitness for purpose. 2- Grade: Quality is a distinguishing feature or grade of the product in appearance, performance , life, reliability, taste, maintainability, etc. this is generally called as quality characteristics.
3- Degree of performance: Quality is the degree to which a specified product is preferred over competing products of equivalent grade, based on comparative test by customers, normally called as customers preference.

Degree of excellence:
Quality is measure of degree of general excellence of the product.

The quality of a product is a measure of fulfillment of the promises made to the customers.

The word control, is used to denote the process of setting standards, measuring the performance and taking corrective action. Control of quality deals with the determination of quality standards and measurement and control necessary to see that the established standards are maintained and practised.

According to J.A. Shubin quality control means the recognition and removal of Identifiable causes or defects and variations from the set standards.

Objectives of Quality Control: To decide about the standard of quality of a product that is easily acceptable to the customer and at the same time this standard should be economical to maintain. To take different measures to improve the standard of quality of product. To take various steps to solve any kind of deviations in the quality of the product during manufacturing.

Functions of Quality Control Department:

Only the products of uniform and standard quality are allowed to be sold. To suggest method and ways to prevent the manufacturing difficulties. To reject the defective goods so that the products of poor quality may not reach to the customers. To find out the points where the control is breaking down and investigate the causes of it. To correct the rejected goods, if it is possible. This procedure is known as rehabilitation of defective goods.

Advantages of Quality Control: Quality of product is improved which in turn increases sales. Scrap rejection and rework are minimized thus reducing wastage. So the cost of manufacturing reduces. Good quality product improves reputation.

Inspection cost reduces to a great extent.

Uniformity in quality can be achieved. Improvement in manufacturer and consumer relations.

Factors influencing quality

Technological advancement Quality of human resources Availability of funds Management commitment (Managers)

Steps to improve quality

Improved raw materials Better technology quality Factors influencing Scientific selection of workers- right type of Technological advancement employee selection resources Quality of human and providing training to them. Good working conditions- lighting, ventilation, Availability of funds cleanliness, cooling and heating of workplace. Management commitment (Managers) Harmonious relation Natural factorsQuality and cost consciousness- be conscious abut cost and quality. Industrial Research- to explore new methods and techniques of production will increase the quality.

Statistical Quality Control (S.Q.C): Statistics: Statistics means data, a good amount of data to obtain reliable results. The science of statistics handles this data in order to draw certain conclusions.

S.Q.C: This is a quality control system employing the statistical techniques to control quality by performing inspection, testing and analysis to conclude whether the quality of the product is as per the laid quality standards.

Using statistical techniques, S.Q.C. collects and analyses data in assessing and controlling product quality. The technique of S.Q.C. was though developed in 1924 by Dr. Walter A. Shewartan American scientist, it got recognition in industry only second world war. The technique permits a more fundamental control.

Process Control:
From a batch of products manufactured by a certain production process, some of the products are selected at random. Their quality characteristics say (length, diameter, thickness etc.) are measured and classified according to actual dimensions.

If we tabulate these dimensions in order of size (in ascending or descending order) and give the frequencies with which each size occurs, we have a frequency distribution.

If the distribution of observation follows a normal curve, then it is assumed that the variations are due to chance causes and no assignable causes of error are present. The conditions which produced these variations are said to be under control and it is concluded that the process is under statistical control.

On the other hand if the distribution does not follow a normal curve then it is concluded that one or more assignable causes if error are present and the process is not in statistical control.

Statistical quality control can be simply defined as an economic & effective system of maintaining & improving the quality of outputs throughout the whole operating process of specification, production & inspection based on continuous testing with random samples.

Statistical quality control should be viewed as a kit of tools which may influence decisions to the functions of specification, production or inspection.

Control Charts

Walter A. Shewhart
Born March 18, 1891 New Canton, Illinois March 11, 1967 (aged 75) physics, engineering, statistics

Died Fields

Institutio Western Electric ns University of Alma Illinois, University of mater California, Berkeley

History The control chart was invented by Walter A. Shewhart while working for Bell Labs in the 1920s. The company's engineers had been seeking to improve the reliability of their telephony transmission systems. Because amplifiers and other equipment had to be buried underground, there was a business need to reduce the frequency of failures and repairs.

Bell Laboratories (also known as Bell Labs and formerly known as AT&T Bell Laboratories and Bell Telephone Laboratories) is the research and development subsidiary of the French-owned Alcatel-Lucent and previously of the American Telephone & Telegraph Company (AT&T), half-owned through its Western Electric manufacturing subsidiary.

 Chart details
A control chart consists of: Points representing a statistic of measurements of a quality characteristic in samples taken from the process at different times. The mean of this statistic using all the samples is calculated. A center line is drawn at the value of the mean of the statistic. The standard error for the mean of the statistic is also calculated using all the samples.

 Upper and lower control limits (sometimes called "natural process limits") that indicate the threshold at which the process output is considered statistically 'unlikely' are drawn typically at 3 standard errors from the center line. The chart may have other optional features, including: 1. Upper and lower warning limits, drawn as separate lines, typically two standard errors above and below the center line. 2. Division into zones, with the addition of rules governing frequencies of observations in each zone. 3. Annotation with events of interest, as determined by the Quality Engineer in charge of the process's quality.

Control Charts :
Control charts, in statistical process control are tools used to determine whether a manufacturing or business process is in a state of statistical control. A control chart is a graphical representation of the collected information.
=> The information may pertain to measured quality characteristics or judged quality characteristics of samples. => It detects the variation in processing and warns if there is any departure from the specified tolerance limits.

In other words , control charts is:

=> a device which specifies the state of statistical control. => a device for attaining statistical control , and

=> a device to judge whether statistical control has been attained or not.

Types of control charts: 1- Control charts for variables ( measurable quality characteristics) . charts This includes X bar charts, R chart and .
2- Control charts for attributes (judged quality characteristics). This includes : P charts , nP chart, C chart and U chart.
9

Objectives of X , R and

charts:

1- X (bar) and R or X (bar) sigma charts are used in combination for the control process. X ( bar) chart shows the centring of the process i.e. it shows the variation in the average of the samples. R chart shows the uniformity or consistency of the process i.e. it shows variations in the ranges of the samples. Sigma Chart shows the variation of the process.

2- The control charts are used to determine whether a given process can meet the existing specifications without a fundamental change in production process.

3- To secure information .to be used in establishing or changing production procedures. 4- To secure information when it is necessary to widen the tolerances.

5- To secure information to be used in establishing or changing inspection procedure or acceptance procedure or both.
6- to provide a basis for current decisions on acceptance or rejection of manufactured or purchased parts.

Plotting the control charts : Making and recording measurements.

The information given by control chart is influenced by variations in quality as well as variations in measurements .

Any measuring system will have its own inherent variability which should not be increased due to assignable causes such as errors in reading or recording.

Calculation Procedure :
1- Calculate the average X bar and Range R for each subgroup. A good number of samples of items manufactured are collected at random, at different intervals of time and their quality characteristics ( say diameter, thickness, weight, length etc.) are measured. For each sample mean value and the range is calculated .

For example, if a sample contains 5 items whose dimensions are X1, X2,X3,X4, and X5, the sample average.

X (bar) = X1+X2+X3+X4+X5
5
The range is computed by subtracting the lowest value from the highest value. ( Range, R = Highest value smallest value)

R = xmax - xmin

2- Calculate the grand average X double bar and average range R bar. After calculating the average and range of each sub- group the next step is to find X-double bar and R (bar) where X double bar is the average of the X bar values for each sub group. Thesis is the sum of X bar values divided by the number of sub- groups. i.e. X double bar = X N Where X = average of averages And N = number of sub- groups

Introduction to TQM

Total quality management or TQM is an integrative philosophy of management for continuously improving the quality of products and processes.

A comprehensive, organization-wide effort to improve the quality of products and services, applicable to all organizations.

TQM recognises that all businesses require "processes" that enable customer requirements to be met. TQM focuses on the ways in which these processes can be managed - with two key objectives:

1 2

100% customer satisfaction Zero defects

What does TQM mean?

Total Quality Management means that the organization's culture is defined by and supports the constant attainment of customer satisfaction through an integrated system of tools, techniques, and training. This involves the continuous improvement of organizational processes, resulting in high quality products and services.
Total Quality Management

Whats the goal of TQM?

Do the right things right the first time, every time.

Total Quality Management

Another way to put it

At its simplest, TQM is all managers leading and facilitating all contributors in everyones two main objectives:

(1) total client satisfaction through quality products and services; and (2) continuous improvements to processes, systems, people, suppliers, partners, products, and services.
Total Quality Management

Productivity and TQM

Traditional view:
Quality cannot be improved without significant losses in productivity.

TQM view:
Improved quality leads to improved productivity.

Total Quality Management

Basic Tenets of TQM

1. The customer makes the ultimate determination of quality. 2. Top management must provide leadership and support for all quality initiatives. 3. Preventing variability is the key to producing high quality. 4. Quality goals are a moving target, thereby requiring a commitment toward continuous improvement. 5. Improving quality requires the establishment of effective metrics. We must speak with data and facts not just opinions.
Total Quality Management

The three aspects of TQM

Counting Customers Culture
Tools, techniques, and training in their use for analyzing, understanding, and solving quality problems Quality for the customer as a driving force and central concern. Shared values and beliefs, expressed by leaders, that define and support quality.
Total Quality Management

The TQM System

Objective

Continuous Improvement

Principles

Customer Focus

Process Improvement

Total Involvement

Elements

Leadership Education and Training Supportive structure Communications Reward and recognition Measurement

Total Quality Management

Main Principles of TQM The main principles that underlie TQM are summarised below:
Prevention Prevention is better than cure. In the long run, it is cheaper to stop products defects than trying to find them The ultimate aim is no (zero) defects - or exceptionally low defect levels if a product or service is complicated Better not to produce at all than produce something defective Quality is not just the concern of the production or operations department - it involves everyone, including marketing, finance and human resources Businesses should always be looking for ways to improve processes to help quality Those involved in production and operations have a vital role to play in spotting improvement opportunities for quality and in identifying quality problems

Zero defects

Getting things right first time Quality involves everyone

Continuous improvement Employee involvement