MS 53[Production Operations Management]
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Transcript of MS 53[Production Operations Management]
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MS-53 SOLVED ASSIGNMENT 2015 PROVIDED BY WWW.MYIGNOU.IN
Course Code : MS-53
Course Title : Production/Operations Management
Assignment Code : MS-53/TMA/SEM-I/2015
Coverage : All Blocks
Note: Attempt all the questions and submit this assignment on or before 30th April, 2015 to the
coordinator of your study center.
Q1. What is the system view of operations Management? Identify
the input, process and output for the following production systems.
a) Automobile manufacturing
b) A restaurant
Ans:
System view of operations 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 subsystems, and any system is a 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 behaviour of the system.A system’s inputs are the physical objects of
information that enter it from the environment and its outputs are the same which
leave it for the environment.
The activities in an operations system can be classified as inputs, transformation
process and output. Inputs are classified into three general categories-external,
market and primary resources. Transformation resources are the elements that act
on, or carry out, the transformation process on other elements. These include such
elements as labour, equipment/plant and energy. The nature and mix of these
resources will differ between operations. The transformed resources are the
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elements which give the operations system its purpose and goal. The operations
system is concerned with converting the transformed resources from inputs into
outputs in the form of goods and services. There are three main types of
transformed resource of materials which can be transformed either physically(e.g.
manufacturing),by location (e.g. transportation),by ownership(e.g.retail) or by
storage(e.g.Warehousing) or other private services, Government services.
The sub-systems of a firm related to specific business disciplines are termed the
functional areas of a business.The three main functional areas in a business are the
operations, marketing and Finance functions.The marketing function works to find
and create demand for the company’s goods and services by understanding
customer needs and developing new markets.
a) Input process and output for automobile manufacturing
Inputs to the automobile manufacturing industry sector include the outputs from
the industry sectors that produce sheet metal, plate glass windshields, tires,
carpeting, as well as computers (for designing the cars), electricity (to operate the
facilities), etc. In turn, the sheet metal, plate glass windshield tire, etc. industry
sectors require inputs for their operations that are outputs of other sectors, and so
on. Each of these requirements for goods or services between industry sectors is
identified in an Input-output model.
b) Input process and output for a restaurant
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Q3. When to use product and process layouts? Give example of
organizations that have predominantly product, process and fixed
position layout.
Ans:
Manufacturing companies put a lot of thought into the way their facilities are
laid out. Strategic process selection and design are crucial to maximizing
productivity and reducing costs in manufacturing operations. Managers put
different facilities design philosophies into practice to reduce waste, increase
output and decrease the time and manpower required for each work task.
Process layouts and product layouts are two popular facilities layout
philosophies best suited to different production situations. Understanding the
difference between process and product layout manufacturing can give you
insight for structuring your own manufacturing operation.
Product Layout
A product layout groups different workstations together according to the
products they work on. Workstations in a product layout can quickly transfer
small batches of semi-finished goods directly to the next station in a
production line. Product layouts can be ideal for smaller manufacturing
businesses with lower volume than their large corporate competitors. As a
business's manufacturing output grows, however, it is wise to at least
consider implementing a process layout.
Example
In a product layout for a garment manufacturer, for example, stations for
sewing cloth, sewing on buttons, inspecting seams, wrapping finished
garments and boxing them up would all be located within close proximity for
an individual clothing item, allowing individual garments to pass from one
station to another quickly.
Process Layout
A process layout groups workstations together according to the activities
being performed, regardless of which products each workstation is working
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on. Workstations produce higher volumes of output at a time before sending
semi-finished goods in bulk to the next area, which may be located as close as
the other end of a building or as far as another facility on the other side of the
globe.
Continuing the garment manufacturing example, a process layout would
group multiple sewing stations together for different clothing items in one
area, then locate inspection, wrapping and packaging stations for different
items together in different areas.
A manufacturing example would be a machine shop. A machine shop
generally has separate departments where general-purpose machines are
grouped together by function (e.g., milling, grinding, drilling, hydraulic
presses, and lathes). Therefore, facilities that are configured according to
individual functions or processes have a process layout. This type of layout
gives the firm the flexibility needed to handle a variety of routes and process
requirements. Services that utilize process layouts include hospitals, banks,
auto repair, libraries, and universities.
Q4. Review Shigeo’s seven wastes. Which of these wastes are
addressed by the following JIT techniques?
a) Pull production
b) Kanban
c) JIT purchasing
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1. Over Production
• To produce sooner, faster or in greater quantities than the absolute customer
demand
• Manufacturing too much, too early or “Just in Case”
• Overproduction discourages a smooth flow of goods or services
• Takes the focus away from what the customer really wants
• Leads to excessive inventory
Caused by:
• MRP push rather than kanban pull
• Large batch sizes
• Looks better to be busy!
• Poor people utilisation
• Lack of customer focus
Why one of the 7 wastes?
• Costs money
• Consumes resource ahead of plan
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• Creates inventory
• Hides inventory/defect problems
• Space utilisation
2. Inventory
Any raw material, work in progress (WIP) or finished goods which are not having
value added to them
Caused by:
• Production schedule not level
• Inaccurate forecasting
• Excessive downtime/set up
• Push instead of pull
• Large batching
• Unreliable suppliers
Why one of the 7 Wastes ?:
• Adds cost
• Extra storage space required
• Extra resource to manage
• Hides shortages & defects
• Can become damaged
• Shelf life expires
3. Motion
• Adds cost
• Motion is the movement of “man”
• Waste motion occurs when individuals move more than is necessary for the
process to be completed
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Caused by:
• No standard operating procedure
• Poor housekeeping
• Badly designed cell
• Inadequate training
Why one of the 7 Wastes ?:
• It interrupts production flow
• Increases production time
• Can cause injury
4.Waiting
People or parts that wait for a work cycle to be completed
• Where are the bottlenecks?
• What are the major causes of lost machine availability?
• What are we doing to improve machine availability?
• Do people wait on machinery?
Caused by:
• Shortages & unreliable supply chain
• Lack of multi-skilling/flexibility
• Downtime/Breakdown
• Ineffective production planning
• Quality,design,engineering Issues
• ‘Black art’ processes
Why one of the 7 Wastes ?:
• Stop/start production
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• Poor workflow continuity
• Causes bottlenecks
• Long lead times
• Failed delivery dates
5. Transportation
Unnecessary movement of parts between processes
• Complex material flow paths
• Poor close coupling
• Wasted floor space
• Unnecessary material handling
• Potential damage to products
Caused by:
• Badly designed process/cell
• Poor value stream flow
• Complex material flows
• Sharing of equipment
Why one of the Seven Wastes ?:
• Increases production time
• It consumes resource & floorspace
• Poor communication
• Increases work in progress
• Potential damage to products
6. Over-Processing
Processing beyond the standard required by the customer
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By improving processing efficiency we ultimately use less resource to achieve the
same customer satisfaction
Caused by:
• Out of date standards
• Attitude - ‘Always done it like this’
• Not understanding the process
• Lack of innovation & improvement
• Lack of standard operation procedures
Why one of the Seven Wastes ?:
• It consumes resource
• It increases production time
• It’s work above and beyond specification
• Can reduce life of component
7. Non-Right First Time (Scrap, Rework and Defects)
A defect is a component which the customer would deem unacceptable to pass the
quality standard
• Defects reduce or discourage customer satisfaction
• Defects have to be rectified
• Rectification costs money with regard to time effort and materials
• Defects in the field will lose customers
• Right first time is the key
Caused by:
• Out of control/Incapable processes
• Lack of skill,training & on the job support
• Inaccurate design & engineering
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• Machine inaccuracy
• Black art processes
Why one of the 7 Wastes ?:
• Adds costs
• It interrupts the scheduled
• It consumes resources
• It creates paper work
• Reduces customer confidence
a)Pull production :
The pull production of inventory control involves forecasting inventory needs to meet
customer demand. Companies must predict which products customers will purchase along
with determining what quantity of goods will be purchased. The company will in turn
produce enough product to meet the forecast demand and sell, or push, the goods to the
consumer. Disadvantages of the push inventory control system are that forecasts are often
inaccurate as sales can be unpredictable and vary from one year to the next. Another
problem with push inventory control systems is that if too much product is left in
inventory. This increases the company's costs for storing these goods. An advantage to the
push system is that the company is fairly assured it will have enough product on hand to
complete customer orders, preventing the inability to meet customer demand for the
product.
An example of a push system is Materials Requirements Planning, or MRP. MRP combines
the calculations for financial, operations and logistics planning. It is a computer-based
information system which controls scheduling and ordering. It's purpose is to make sure
raw goods and materials needed for production are available when they are needed.
The pull inventory control system begins with a customer's order. With this strategy,
companies only make enough product to fulfill customer's orders. One advantage to the
system is that there will be no excess of inventory that needs to be stored, thus reducing
inventory levels and the cost of carrying and storing goods. However, one major
disadvantage to the pull system is that it is highly possible to run into ordering dilemmas,
such as a supplier not being able to get a shipment out on time. This leaves the company
unable to fulfill the order and contributes to customer dissatisfaction.
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An example of a pull inventory control system is the just-in-time, or JIT system. The goal is
to keep inventory levels to a minimum by only having enough inventory, not more or less,
to meet customer demand. The JIT system eliminates waste by reducing the amount of
storage space needed for inventory and the costs of storing goods.
b) Kanban
Kanban is a method for managing knowledge work with an emphasis on just-
in-time delivery while not overloading the team members. In this approach,
the process, from definition of a task to its delivery to the customer, is
displayed for participants to see and team members pull work from a queue.
Kanban in the context of software development can mean a visual process
management system that tells what to produce, when to produce it, and how
much to produce inspired by the Toyota Production System and Lean
manufacturing.
c) JIT purchasing :
Just-in-time (JIT) purchasing as a management innovation can be adopted by
organizations as a strategy to gain advantage over their competitors. Seven
characteristics of JIT purchasing are identified based on a comprehensive
literature review. These elements are supplier cooperation, materials quality,
quantities purchased, transportation, top management support, training and
employee relations. A review of benefits of JIT purchasing implies that
implementation of JIT purchasing can increase firms' performance. The
benefits include higher inventory turnover, increased product quality and
productivity, which theoretically lead to a reduction in product costs. High
product quality and reduced costs will usually result in lower prices. Lower
prices will lead to increased market share and profit. Data have been collected
by a mail survey from both large and small manufacturing and service
organizations. The subjects of the survey are business unit chief officers or
high-ranking managers.
Dell provides an example of JIT inventory. As a computer manufacturing
company, Dell allows customers to purchase computers directly online.
Everything from the hard drive to features such as color and screen width is
custom ordered. As soon as the order is finalized, the raw materials and parts
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are ordered. The raw materials are then assembled and made ready for the
customer in a relatively short period of time.
Q5) Discuss various vendor-rating techniques? Why an organisation
should try to rate its vendors?
Ans:
Various Techniques of Vendor Rating:
The purchase organizations watch his enlisted suppliers continuously and
take requisite corrective action. Following rating plans are utilized for vendor
rating:
(a) Categorical plan: The categorical plan is a sample of all vendor rating schemes.
It relies heavily on the judgement and experience of the decision maker. The
purchaser maintains a list of his suppliers and their products. The vendor
performance is reviewed periodically by an evaluation committee comprising of all
representatives.
(b) Weighted point plan: Quality, delivery or service and price are the three most
important attributes of a good supplier. Depending upon the importance, a
purchaser attaches to a particular attribute he fixes a weightage for it.
(c) Cost ratio method : This method relates to identifiable purchasing and
receiving costs to the value of shipment received from respective suppliers. The
higher the ratio of costs to shipments, the lower the rating applied to the supplier:
Quality, delivery, service and price are the usual categories to which costs are
allocated, after subdividing each factor into various elements.
(d) Eavaston’s vendor selection : The suppliers’ past performance is utilized in the
choice of vendors and the basic steps in this method are as follows: (i) The vendors
on the approved list are ranked on the basis of the buyer’s subjective evaluation, (ii)
The first satisfactory vendor, meeting or exceeding all the standards, (iii) If the
applied vendors do not fulfill the minimum standards, then the minimum standard
may be relaxed till a vendor is chosen. It presupposes that standards of acceptability
for every criterion are formed to fit in order to take decisions.
(e) Forced decision matrix : The attributes of rating like price, quality, service,
reliability of the supplier, lead time of supply etc. — are identified first. Then these
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factors are compared between themselves, like quality and price. If price is
considered more important than quality by the evaluation committee, then a
weightage of one is given to price and zero to quality.
(f) Service cost ratio : There are other intangible aspects of a supplier’s services. They can only be measured subjectively. The procedure is as follows:
(i) Listing the service factors like R&D, Labour stability, financial stability, flexibility in production for rush orders, etc.
(ii) Assigning weights to each factor according to its importance to the purchaser.
(iii) Setting an acceptable norm e.g., out of a total of a 100 service points 70 may be an acceptable norm.
(iv) Rating suppliers for each service factor.
(v) Determining the percentage by which the supplier is over or under the acceptable norm.
(vi) Multiplying the percentage obtained in (v) by value of package percent. For sophisticated items the value of package percent may be 10% and for common Bazzar items it may be just 1%.
(vii) The percentage figure arrived at in (vi) is minus if the percentage in (v) is over the acceptable norm and is plus if it is below the acceptable norm.
(g) Bell quality rating system : The bell helicopter company developed a Lot
Quality Index (LQI), which give an assessment of all lots received against lots
rejected, by disposition and category, as the company attaches greater importance
to quality. The LQI is given by: LQ1 – X/L, where
L = total number of lots received during the period, x = (L1 x 1.00) + (L2 x 2.10) +
(L3 x 2.90) + (L4 x 3.10)+ (L5 x 3.90)
L1 = Number of lots acceptable as received
L2 = Number of lots rejected by sampling inspection but labelled.
L3 = Number of lots rejected and dispositioned, rework at supplier’s end.
L4 = Number of lots rejected and dispositioned, returned not usable and
L5 = Number of lots rejected and dispositioned rework at Bell helicopter company.
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The weights 1.00, 2.10 etc. were determined at the company after a careful study of
the complexity and number of operations required to have a usable lot from a
particular dispositioned lot. It is clear from the above equation, that the best lot
quality index figure rates is 1.0, the worst is 3.90. The formula can be modified
easily to suit the needs of a particular firm. The quality rating can be combined with
rating for other parameters, to develop suitable vendor rating schemes.
(h) IBM quality rating system.: The IBM rating system uses quality costs as the basis
for rating suppliers. The formula for the vendor quality rating is:
VGR = Desired cost of inspection / Actual cost of inspection x 100
The cost incurred in inspecting acceptable material is the desired cost, the cost of
inspecting rejected material being excluded from it. The actual cost of inspection
includes cost incurred in inspecting acceptable as well as rejected material plus cost
associated with extra handling of rejected material.
Inspection cost is obtained by multiplying the actual time spent on inspection by the
standard rate. The material handling cost is found by multiplying the number of
documents to process the rejected material by a standard cost.
Organization need to rate its vendors
Here are seven tips and tools you'll need to effectively rate your suppliers and vendors,
track their performance, and ultimately increase your company's overall productivity.
1. Establish Performance Indicators
At the onset of the vendor relationship you have to determine what characteristics a
vendor needs to have, demonstrate, or maintain to continue doing business with your
company. Create specific performance criteria for tracking and evaluating your suppliers
and vendors on a regular basis—monthly, quarterly, and/or annually. Considerations
include size of the company, number of certifications, quality management systems,
complaint history, and financial stability. For instance, you might consider if they have a
documented procedure for the product or service they provide? 'We look at a couple of
driving metrics to evaluate how good our vendors are,' says Greenblatt, 'including
percentages of on-time performance, number of times we received a quality part or
product, and how quickly the vendor responded to requests for quotes.'
Your own processes and needs will dictate what criteria you apply. For a business owner
who is looking for a shipping company, the biggest concerns might revolve around what is
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that supplier's on time delivery track record, how many trucks they own, how many
accidents have their drivers reported, and what certifications do they hold.
A basic consideration for every business owner should be whether the supplier has a
quality management system in place. 'This doesn't just apply to manufacturing but any
business including service providers,' explains Miriam Boudreaux, president of Mireaux
Management Solutions, a Houston-based consulting that specializes in the implementation
of quality management systems. 'It's really about if the supplier has a certain set of
procedures in place that its people are expected to follow. Is there a system for handling
complaints or problems? Are there corrective or preventive actions?' Such standards will
be addressed if the vendor is ISO certified.
2. Classify Multiple Suppliers and Vendors
If you have a huge number of suppliers and vendors and you intend to craft a survey to
evaluate them, it will be cumbersome to apply the same survey to each and every one, says
Boudreaux. It is better to separate suppliers into levels (1, 2, and 3) based on how critical
they are, she advises. Decide the classification that is best for you and evaluate suppliers
according to the effect they have on your product or service in order of importance,
Boudreaux adds.
Marlin Steel exports wire baskets and forms all around the world including Japan,
Columbia and China. Greenblatt points to the fact that 'about 80 percent of my vendors do
20 percent of my dollar amount of work and about 20 percent of my vendors do 80 percent
of my activity.'
By divvying up suppliers into two categories such as critical and non-critical or primary
and secondary, you can devote more time to measuring the performance of your critical
suppliers.
3. Devise an Evaluation Method
There are common techniques for rating a supplier's performance including evaluation
forms, surveys, system metrics, and software applications. Marlin Steel tracks vendor
performance using a customized program he created in QuickBooks Enterprise Solutions
accounting software, the Manufacturing & Wholesale edition.
You can craft a survey where you ask your own employees to answer questions and to rate
suppliers and vendors. You can review how many corrective actions you had to issue a
supplier or vendor, how many products you had to scrap or return because the supplier or
vendor failed to meet specifications, or how many customer complaints you received due to
a bad part or service from a vendor. You also can monitor suppliers and vendors by doing
an audit periodically. The bottom line is that you need to generate measurements or
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reports at the onset of the purchase and throughout the course of the supplier and vendor
relationship.
'We did vendor reviews where we would bring them together offsite at a hotel with our IT
and procurement people,' says Wright, who in his last business life for eight years was vice
president and director of procurement for a large global engineering company. At the point
he retired, the company had 100 plus suppliers and vendors ranging from Microsoft to
United Airlines to a small staffing agency. 'We would line them up. So, at 9 in the morning
AT&T would be making a presentation to our group. When AT&T finished and left the room
they would find the Verizon salespeople standing in the lobby waiting for their turn,'
Wright explains. 'We created a little competition amongst vendors.'
Wright says periodic vendor reviews would also entail a discussion about what the
company had been buying, how much it had been buying, what did that vendor have on the
shelf or working on for push out six months or a year down the road and did it represent a
significant improvement over what had been previously purchased, and what were
competitors buying from a particular vendor.
4. Determine Who's Calling the Shots
Once you establish the criteria for evaluating suppliers and vendors, who in your company
will be responsible for reviewing the data. It depends on how much resources you have to
dedicate to evaluating your suppliers, says Boudreaux. 'You may want to assign one person
or a team with this task.' For instance, selecting and evaluating level 1 suppliers and
vendors, might require the chief financial officer or someone from the finance department
along with the president and representatives from purchasing, operations, and engineering
or IT. With level 2 and 3 suppliers and vendors, it may be the purchasing or procurement
officer who approves the supplier or vendor list and monitors performance.
'I always made sure that the user group was involved in the process. The individuals who
were using the product or service were very active in the process from the very
beginning—at the point of selection,' Wright says.
5. Maintain Good Relationships
Consider your suppliers and vendors as part of the team and treat them as such.
Communicate often and openly. Technology is great but don't overlook the personal touch
of a phone conversation or face to face meetings,. Also, avoid supplier and vendor conflicts
by paying on time or at least honestly addressing late payment issues and talking with your
supplier or vendor about it. Be upfront and transparent with suppliers and vendors. Make
sure they understand your needs and expectations.
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'To improve our relationship and communication with our vendors, we added a page to all
of our print materials (drawings) calling out exactly how we are going to package things,'
adds Greenblatt. 'So, if it is going to be two layers of bubble wrap or an extra layer of
padding between each part so that there is no scratching. We go through that level of detail
so that we are not disappointed when parts come in.'
6. Decide When to Issue a Red Flag
As you monitor a supplier's performance, you have to decide when to praise them and
when to issue a read flag, says Boudreaux. Show appreciation for a job well done; give a
supplier additional business because of excellent performance. 'A bad supplier will provide
you with mediocre or poor products and services and cause a problem with your
customers,' adds Boudreaux.
You can drop a supplier for poor performance but strategically it is better to retain your
vendors and not to flip around all of the time to replace them. By giving a warning, you give
the supplier or vendor an opportunity to correct the problem. Use data that you have
collected like on-time delivery rate, return rate, and number of supplier corrective actions
to work with your suppliers, says Boudreaux. 'This process is not just about reviewing your
suppliers but helping them to improve their performance.'
7. Cut Loose Weak Links
No one of course should tolerate ongoing bad service. There may come a time when you
have to let go of an underperforming supplier or vendor. 'We fired a vendor that was really
cheap but was not meeting the ship dates. They were also non-responsive to complaints.
They cut corners and handed in shoddy paperwork,' Greenblatt cites an example.
'We give a warning and then put them on notice or a short leash before we cut ties
completely,' he explains. 'We will call the vendor and give them an opportunity to correct
the situation. We will send them digital pictures, e-mails, and quality reports. So, there is no
mystery when there is a challenge or an issue.'
The relationship with your supplier is a business partnership, says Wright, and if both
parties are working to make sure that the partnership is a success it will be a success. In the
long run, having a win-win supplier and vendor relationship will be a competitive
advantage.
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