Lectures notes On Production and Operation Management

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Lectures notes On Production and Operation Management Prepared by Dr. Sarojrani Pattnaik Dr. Swagatika Mishra Assistant Professor Department of Mechanical Engineering VSSUT Burla . PRODUCTION AND OPERATION MANAGEMENT(3-0-0) 1. Productivity : Importance, productivity ratio, productivity measurement, productivity index, awareness — improvement — maintenance (A.I.M) proceSs. 2. Production System Models of production system, Product Vs. Services, Process-focused & product focused systems, product strategies, product life cycle, production function. 3. Forecasting : Methods — moving average, exponential smoothing, Regression analysis, coefficient of co-relation, Delphi, Market survey. 4. Facilities Planning : Site location, facilities layout and various types, planning using CRAFT work place design, working conditions — noise illumination etc. 5. Motion study — principles of motion — economy, Time study-standard time. 6. Production Planning & Control : Aggregate planning. Sequencing, Line balancing, Flow control, Dispatching, expediting, Gantt chart, line of balance, learing curve. 7. Project Management — Network scheduling, PERT. Critical path, Most likely time estimate , Resource leveling. 8. 3 8 . Modern Trends in Manufacturing :Basic concepts of CAD,CAM,FMS, CIM, ISO 9000, Quality circle, Kaizen, Kanbans, Poke Yoke' supply chain management. Text Books th 1. Production Systems : Planning, Analysis & Control : By — Riggs, J.L.(4 Edn.) John Wiley & Sons 2. Modern Production/Operation management : By — Buffa, E.S. & Sarin, =,.K.(8`" Edn.) John Wiley & Sons. 1 3. Production & Operations Management : By Panneer saivem, R.(2' Edn.) PHI 4. Production & Operations Management : By Chary, S.N.(TMH) VEER SURENDRA SAI UNIVERSITY OF TECHNOLOGY BURLAHA DEPARTMENT OF MECHANICAL LESSON PLAN FOR Production and Operation Management th SUBJECT CODE: 8 Semester Lecture Topics to be covered Remark Productivity: Importance, productivity ratio, productivity Lecture 1 measurement, productivity index Awareness – improvement – maintenance (A.I.M) process, Lecture 2 Production System, Models of production system Product Vs. Services, Process-focused & product- focused systems Lecture 3 Product strategies, product life cycle, production function Lecture 4 Forecasting: Methods Lecture 5 Moving average, Exponential smoothing Lecture 6 Regression analysis, coefficient of co-relation Lecture 7 Delphi, Market survey Lecture 8 Facilities planning: Site location, facilities layout Lecture 9 Types of facility layout, Planning using CRAFT work place design Lecture 10 Working conditions – noise illumination etc. Lecture 11 Problems on single facility location using median method Lecture 12 Problems on single facility location using minimax method and Lecture 13 gravity method Problems on single facility location using Euclidean-distance Lecture 14 location Motion study, Principles of motion- economy, method study Lecture 15 Rules concerning human body, workplace layout and materials Lecture 16 handling, Rules concerning tools and equipments design, time conservation Lecture 17 Time study and work measurement techniques Lecture 18 Performance rating and different types of allowances Lecture 19 Production planning and control- Aggregate planning Lecture 20 Sequencing and line balancing Lecture 21 Flow control Lecture 22 Dispatching, centralized and decentralized dispatching Lecture 23 Expediting and Gantt chart Lecture 24 Line of balance and learning curve Lecture 25 Project management, network scheduling Lecture 26 PERT with problems Lecture 27 Problems Lecture 28 Critical path method with problems Lecture 29 Problems Lecture 30 Resource levelling Lecture 31 Basic concepts of CAD, CAM, FMS Lecture 32 CIM, JIT, ISO 9000 Lecture 33 Quality circle, Kaizen, Kanbans Lecture 34 Poke Yoke, Supply chain management Lecture 35 Revision of problems Lecture 36 Lecture 37 Revision of problems Lecture 38 Revision of problems Lecture 39 Revision of problems Lecture 40 Revision of problems CHAPTER-I PRODUCTIVITY 1.1 Introduction Production/Operation management is the process which combines and transforms various resources used in the production/operation subsystem of the organization into value added products/services in a controlled manner as per the policies of the organization. Value added products/services Resources used in Transform production/ operation (In controlled manner as subsystem per the policies of the organization) Production/Operation function: Range of inputs Required output (product/service) (Having the requisite quality level) The set of interrelated management activities which are involved in manufacturing certain products is called production management and for service management, then corresponding set of management activities is called as operation management. Examples: (Products/goods) Boiler with a specific capacity, Constructing flats, Car, bus, radio, television. Examples: (Services) Medical facilities, Travel booking services. In the process of managing various subsystems of the organization executives at different levels of the organization need to track several management decisions. The management decisions are Strategic, tactical and operational. Strategic (Top level) Tactical (Middle level) Operational (Bottom level) Defining goals Plant location effective and Making policies new product establishment efficient utilization Monitoring of budgets of resources Corrections from feedback information:  Tight quality check on the incoming raw-material.  Adjustment of machine settings.  Change of tools.  Proper allocation of operations to machines with matching skills.  Change in the production plans. 1.2 Productivity: Productivity is a relationship between the output (product/service) and input (resources consumed in providing them) of a business system. The ratio of aggregate output to the aggregate input is called productivity. Productivity = output/Input  For survival of any organization, this productivity ratio must be at least 1.If it is more than 1, the organization is in a comfortable position. The ratio of output produced to the input resources utilized in the production. 1.3 Importance: Benefits derived from higher productivity are as follows:  It helps to cut down cost per unit and thereby improve the profits.  Gains from productivity can be transferred to the consumers in form of lower priced Products or better quality products.  These gains can also be shared with workers or employees by paying them at higher rate.  A more productive entrepreneur can have better chances to exploit expert opportunities.  It would generate more employment opportunity.  Overall productivity reflects the efficiency of production system.  More output is produced with same or less input.  The same output is produced with lesser input.  More output is produced with more input.  The proportional increase in output being more than the proportional increase in input. 1.4 Productivity Measurement: Productivity may be measured either on aggregate basis or on individual basis, which are called total and partial measure. Total productivity Index/measure = Total output/ Total input = Total production of goods and services Labour+material+capital+Energy+management Partial productivity indices, depending upon factors used, it measures the efficiency of individual factor of production. 2 Labour productivity Index/Measure = Output in unit Man hours worked Management productivity Index/Measure = Output Total cost of management Machine productivity Index/Measure = Total output Machine hours worked Land productivity Index/Measure = Total output Area of Land used Partial Measure = Output or Output or Output or Output Labour Capital Materials Energy PROBLEMS: Example-1 The input and output data for an industry given in the table. Find out various productivity measures like total, multifactor and partial measure. Output and Input production data in dollar () Output 1. Finished units 10,000 2. Work in progress 2,500 3. Dividends 1,000 4. Bonds - 5. Other income Input 1. Human 3,000 2. Material 153 3. Capital 10,000 4. Energy 540 5. Other Expenses 1,500 Solution: Total measure = Total Output = 13,500 = 0.89 Total Input 15,193 Multi factor measure = Total Output = 13,500 = 4.28 Human+Material 3,153 Multi factor measure = Finished units = 10,000 = 3.17 Human+Material 3,153 Partial Measure = Total Output = 13,500 = 25 1 Energy 540 Partial Measure = Finished units = 10,000 = 18.52 2 Energy 540 3 Note: For multifactor and partial measures it is not necessary to use total output as numerator. Often, it is describe to create measures that represent productivity as it relates to some particular output of interest. Other fields for the measurement of partial measures of productivity are: Business Productivity Measure Restaurant Customers (Meals) per labour hour Retail Store Sales per square foot Utility plant Kilowatts per ton of coal Paper mill Tons of paper per cord of wood Example-2 A furniture manufacturing company has provided the following data. Compare the labour, raw materials and supplies and total productivity of 1996 and 1997. Output: Sales value of production in dollar () 22,000 (in 1996) and 35,000 (in 1997) 1996 1997 Inputs: Labour 10,000 15,000 Raw materials and Supplies 8,000 12,500 Capital equipment depreciation 700 1,200 Other 2,200 4,800 Solution: 1996 1997 a. Partial productivities Labour 2.20 2.33 Raw materials and Supplies 2.75 2.80 b. Total Productivity 1.05 1.04 1.5 Productivity measurement approaches at the enterprises level: As stated above total productivity is expressed as the ratio of aggregate output to the aggregate input. That the total overall performance is captured in this ratio, becomes apparent, if we examine the relationship between this ratio and the age-old performance measure of profit. If the outputs and input for the period for which productivity is measured, are expressed in rupees, then under such restrictive assumptions one can write: Aggregate output =Gross Sales=G (Say) Aggregate input=Cost =C (Say) 4 G Total Productivity=P(Say)= ………………..(1) C From the definition of profit, we have; Profit= π = G-C ………………….(2)  G n By dividing eq (2) by C, 1 C C  So from (1),  =P-1 C For Zero profit ( =0), P 1 For a Loss, ( 0),  P1 For a profit, 0, P1 Zero profit will give a productivity value of 1, while a loss will give productivity value less than 1.The profit to cost ratio will determine the increase in productivity. The above relationship that demonstrates that increased profit to cost ratio will lead to increased overall productivity, is constituent with our expectation on how an overall performance measure should behave. However it suffers from a number of drawbacks. Some of which are listed here, a) Given that our objective in productivity measurement is to capture the efficiency of utilization of resources, the effect of price variations over time need to be corrected. Thus aggregate output should be equal to gross sales suitably inflated or deflated with respect to a base year. b) Equating output to sales implies, whatever is produced in the particular period is sold. Possibility of inventory, material manufactured for own use, etc. are n’t taken in to consideration. c) Equating aggregate input to cost raises a host of problems and involves several restrictive assumptions. How to account for the fixed investment and working capital, whether to take the fringe benefits in to account etc. are some of the problems. The different approaches to measurement have arisen mainly in the context of correcting the above drawbacks. 1.6 Techniques for Productivity Improvement: Higher productivity in organization leads to national prosperity and better standard of living for the whole community. The methods contribute to the improvement of productivity are method study and work measurement by reducing work content and Ineffective time. 5 Work content means the amount of work “contained in” a given product or process measured in man-hour or machine-hour. Except in some cases like in processing industries, actual operation times are far in excess of the theoretical minimum. Ineffective time is the time for which the worker or machine or both are idle due to the shortcomings of the management or the worker. 6 CHAPTER-II PRODUCTION SYSTEM 2.1 Introduction A “Production System” is a system whose function is to transform an input into a desired output by means of a process (the production process) and of resources. The definition of a production system is thus based on four main elements: the input, the resources, the production process and the output. Resources Input-Production Process-Output Most of the organizations (including non-profit organization) can be described as production systems.These organizations transform (or convert) a set of inputs (such as materials, labour, equipment, energy etc.) in to one or useful outputs. The outputs of a production system are normally called products. These products may be: (a)Tangible goods (b)Intangible services (c)combination of (a) and (b) (Steels,chemicals etc.) (Teaching,health care etc.) (fast food,tailoring etc.) INPUT • Material OUTPUT • Machines • Goods TRANSFORMATION • Labor • Services PROCESS • Management • Capital Feedback & Requirements Fig 2.1 A simple block diagram of a production system Production system refers to manufacturing subsystem that includes all functions required to design, produce, distribute and service a manufactured product. So this system produces goods and/or services on a continuous and/or batch basis with or without profit as a primary objective. 7 Production is the basic activity of all organizations and all other activities revolve around production activity. The output of production is the creation of goods and services which satisfy the needs of the customers. In some organization the product is physical (tangible) good. For example, refrigerators, motor cars, television, toothpaste etc., while in others it is a service (insurance, healthcare etc.).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 (men, material, machines,information,energy) to useful outputs (goods and/or services).  Production system doesn’t oppose in isolation from the other organization system such as marketing, finance etc.  There exists a feedback about the activities which is essential to control and improve system performance. The transformation process involves many activities and operation necessary to change inputs to output. These operations and activities can be mechanical, chemical, inspection and control, material handling operation etc. 2.2 Models of Production system: A model is a representation of reality that captures the essential features of an object/system/process. Three types of models are there such as physical, schematic and mathematical. I. Physical model: Replica of a physical object with a change of scale. a. For big/huge structure of physical object: small scale (Ex. solar system) b. For microscopic objects: magnified scale(Ex. Atomic model) II. Schematic model: These are 2-D models which represents • Price fluctuations with year. • Symbolic chart of activities in sequence for a job. • Maps of routings • Networks of timed events. The pictorial aspects are useful for good demonstration purposes. III. Mathematical model: Formulas and equations have long being the servants of physical sciences. One can represent the important aspect of a system/problem in mathematical form using variables, parameters and functions. This is called mathematical model .by analyzing and manipulating the mathematical model, we can learn how the real system will behave under various conditions. 8 2.3 Product vs. services Product Services 1-tangible, durable products. 1- Intangible, perishable products. 2- Output can be inventoried. 2- Output can’t be inventoried. 3-consumption/use takes more time. 3-Immidiate consumption. 4-low costumer’s involvement. 4- High costumer’s involvement. 5-long response time. 5- Short response time. 6-available at regional, national and 6-local market. international market. 7-Reqire large facilities. 7- Require small facilities. 8-Capital intensive. 8-Labour intensive. 9-Quality easily measured. 9- Quality not easily measured. 10-Demand variable on weekly, monthly, 10- Demand variable on hourly, daily, weekly seasonally. basis. Explanations Manufacturing organization generally transfer tangible inputs or raw materials into some tangible output (ex: steel, refrigerator, toothpaste, soap etc.) Other inputs such as labour skills, management skills, capitals are used as well. Manufacturing organizations perform some chemical /physical processes (such as blending refining, welding, grinding.etc) to transfer their raw material into tangible products. Service providing organization though transform a set of input into set of output, they don’t produce a tangible output.(ex: mail service, library service, restaurant etc.).or provide service(ex: health care, hair care, watch and automobile repair etc.). The service of service providing organization is intangible. nd A 2 distinction is based on inventories .durable goods can be kept for longer time these goods can be stored for longer time and can be transported in anticipation in future demand .Thus with durable goods ,operation manager can co up with the peaks and valleys in demand by creating inventories and smoothing out output levels. Whereas service can’t be pre produced. For example: getting fast food from a fast food center, getting treatment from hospital etc. rd A 3 distinction is based on consumption/use of output. The products (goods) generally take longer period for its use, for ex refrigerator, T.V. automobile etc. can be used at least for 10 years. On the other hand, the output produced from a service operation (i.e. service) is consumed within a small time. Ex. consumption of fastfood,taking hair care, enjoying journey by a bus/train/aero plane enjoying entertainment program. th A 4 distinction is based on customer contact. Most of the consumers/customers have little or no contact with production system/organization. Whereas, in many service providing organization 9 consumers/customers are directly involved. For example: students in an educational institution, patients in hospital. th The 5 distinction is based on lead time/response time to customers demand. Manufacturers take generally some lead time (i.e. time period from placing the order to get the product) in terms of days/week. Whereas the services are offered within few minutes of customers arrival. For ex: ATM Service, getting postal stamps, getting grocery from a retail shop and getting examined by a doctor etc. th The 6 distinction is on availability. Products can be available from regional, national or international markets due to availability of transportations and distribution facilities whereas, service can’t shipped to distant locations. Thus service organization requiring direct customer contact must locate very near to the customers. th The 7 distinction is based on liabilities/facilities. Manufacturing unit/organization producing products generally require larger facilities, more automation and greater capital investment than service providing organization. th The 8 distinction is based on capital/labour priority. Generally manufacturing firm producing goods/products require more capital than a service provider. Ex. An automobile firm requires th th more capital than a post office/Nursing home. The 9 and 10 distinction is based on quality and demand variation. 2.4 Various types of Layout: Plant layout means the disposition of the various facilities (equipment, material, manpower etc.) and services of the plant within the area of site located. Objectives  Material handling and transportation is minimized and effectively controlled.  Bottlenecks and points of congestions are eliminated (by line balancing) so that the raw- material and semi-finished goods move fast from one workstation to other.  Workstations are designed suitable and properly.  Suitable spaces are allocated to production centers and service centers.  The movements made by the workers minimized. Layout can be classified into the following four categories: a. process layout b. product layout c. Group layout(combination layout) d. Fixed position layout 10 a. process layout: • It is also known as functional layout. • Here similar machines and services located together Ex. All the lathe machines will be at one place and all milling machines at another place and so on. • This type of layout generally employed for industries engaged in job-shop production and non-repetitive kind of production. • When there variety of products manufactured at low volume we prefer this type of layout. • Ex. furniture manufacturer company, restaurant etc. Fig 2.2 process layout b. Product layout • It is also known as line (type) layout. • The flow of product will smooth and logical. • When the machines and auxiliary services are located according to the processing sequence we prefer this layout. • It implies that various operations raw material are performed in a sequence and the machines are placed along the product flow line. • The product layout is selected when the volume of production of a product is high such that separate production line to manufacture it can be justified. • Assembly line production or mass production prefer this type layout. Ex. Assembly of television sets assembly of computer key-board etc. Fig 2.3 product layout 11 c. Group layout: • It is the combination of both process and product layout. • In this type of layout a set of machinery or equipment is grouped together in a section so that each group of machines or equipment is used to perform similar operations to produce a family of components. These machines grouped in to cells. • It minimizes the sum of cost of transport and the cost of equipment. Milling shaping Boring Fitting Drilling Welding Turning Welding Grinding Slotting Fig 2.4 Group layout d. Fixed position layout  It is also called static product layoutin which the physical characterstics of the product dictate as to which type of machine and men are brought to the product.  This type layout is inherent in ship building,aircraft manufacture and big pressure vessels fabrication.  In other type layout the product moves past stationary production equipment where as in this case men and equipment are moved to the material at one place and the product is completed at the place where the material lies. Fig 2.5 Fixed position layout 12 2.5 Process-focused and product-focused system: In process-focused system the arrangement of facilities is made according to the process layout and in product-focused system the arrangement of facilities is made according to the product layout. Comparison of process oriented layout and product oriented layout Sl No. Different Process oriented Product oriented Aspects 1 Product Diversified products using Standardized product, operations, varying rate of large volume,stable rate output or small batches of many of output different products 2 Workflow Variable flow depending on Identical flow and same nature of job sequence of operations for each unit. 3 Human skills Semiskilled craftsman and able Highly specialized and to do various/different able to perform repetitive categories of work tasks at fixed place 4 Supporting Less;scheduling,material Large; schedule materials staffs handeling,production and and people, monitor and inventory control maintain works Material Material handling cost Less dectble , flow 5 handling high,handeling sometimes systematized and often duplicated automated. Inventory In process inventory less In process inventory high 6 7 Space Space and capital are tied up by Less space is occupied by utilization work in process work in transit and for temporary storage. 8 Capital Comparatively low investment Large investment in requirement in machines required specialized equipment and processes Production cost Relatively low fixed cost, high Relatively high fixed 9 variable cost(for direct cost, low variable cost labour,material and material (for labour and materials) handling) 10 Production time Through time is larger. Throughput time is lesser. 11 Flexibility of high low design change Effect of Break down of any machine Seriously affected; as all 12 breakdown doesn’t effect much on the final are interrelated system. output 13 2.6 Product life cycle A product life cycle consist of 5 stages through which a product passes that is introduction growthmaturitydecline. the figure shown previously represent sales and profit associated with each stage and some practical example of products are also shown on it. 1. Introduction At this stage, sales begin and profit goes from –ve to +ve. In this stage ,the demand is low .because the costumer don’t know much about the product. The organization has to invest heavily in advertisement to make the product familiar to the costumers. the volume sales are low,and if proper care is not taken, there is chances to product failure. 2.Growth The product next enters a stage at rapid growth. Early in this stage (due to acceptability of the product by the costumer) there is drastic jump in sales and profit rise. It is because of limited or no competition. During this stage the mandate for operation is somehow to keep up with demand; efficiency is less of concern. 3.Maturity During this stage, sales level off and profit begins to decline. New competition create to cut costs and ultimately on unit profit margin. Now operation must stress on efficiency, although marketing can ease the pressure by intensifying to differentiate the product. 4.Decline At last the existing product enters to a declining stage and becomes obsolete. Either demand despisers or a better less expensive product. Life cycle suggest when to eliminate the existing product and introduce a new one. This life cycle varies greatly from product to product. For example it took 15 years for “Xerox” to introduce electrostatic copy m/c .in contrast and computer and microchip industry, products become obsolete in months. 14 Fig 2.6. product life cycle 2.7 Production function (a) Functions of industrial enterprise (b) Functions of process (a)Functions of industrial enterprise The major functions of a relatively large industrial firm is represented by the following figure MANUFACTURING PURCHASING PERSONNEL POLICY FINANCE PRODUCT DEVELOPMENT AND ACCOUNTING MATERIALS Fig 2.6 of production function a enterprise 15 The core area of the diagram represents the organization’s policy making group. In a hierarchic triangle, this group would occupy the apex. The overlapping portions of the circle denote the co- operation needed from the two groups in order to establish overall policy. The slope of each function and its relationship to the production process are briefly discussed in the following. (i)Manufacturing A fundamental function of much production system is to produce a physical output. Manufacturing includes the operations and direct support services for making the product operation management is concerned with production scheduling, performance standards, method improvement, quality control, plant layout and material handling. A plant service section handles shipping receiving, storing and transporting raw material parts and tools. The plant engineering group is usually responsible for in-plant construction, maintenance, design of tools and equipment and other problems of mechanical, hydraulic or electrical nature. (ii) personnel The recruitment and training of the personnel needed to operate the production system are the traditional responsibilities of the personnel function. Along with it, this department takes care health, safety, wage administration of the employees. Labour relation and employee services and benefits are increasingly important. (iii) Product development Many organizations give major emphasis on product development because the ultimate profit of any organization depends primarily on the nature/quality of product. The product must be customized. A separate section is responsible for this task. (iv)Marketing Many ideas of product development comes through the marketing function. Selling is the primary interest of marketing. Sales forecasts and estimate of the nature of future demands is also performed by this department. Contact with customers provide feedback about the quality expected from the firm and opinion on how well the products meet quality standard. (v) Finance and accounting Internal financing includes reviewing the budgets for operating sections, evaluating of proposed investments for production facilities and preparing balance sheet. Besides these the other responsibilities is to see how well the firm is scoring in the business competition game. In this business game analogy the accounting functions are collection of cost data for materials direct labour and overhead. Special reports are prepared regarding scarp, parts and finished goods inventories, pattern of labour hours and similar data applicable to production activities. 16

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