Producation and operation Mgt............

Production and Operations Management

Module 1: Introduction to Production and Operations Management

Products – Television, Soap, Car , Garments

Services– Medical treatment, consultancy, Education, Transport

• Products are manufactured• Services are provided

Some of the characteristic differences between product and Service (there are exceptions!)

Product Service

1. Customer is not associated during production

2. Is tangible3. Can be made in anticipation and

stocked4. Requirements can be stated in clear

terms5. Meeting requirements can be easily

checked6. Input material content is relatively high 7. Transformation process normally done

by machines or low cost human resource

8. Products have life cycle till discarded ( use, Maintenance, servicing, obsolescence)

9. Products may have residual value10. Products are pushed to market and

selected by customer based on requirements / life style

1. Customer associated during service

2. Is intangible3. Cannot be stocked: can be provided on

demand. 4. Requirements cannot be stated in clear

terms5. Satisfaction can be felt after service is

delivered6. Input material content is relatively low7. Transformation process is normally

done by skilled human resource

8. Life cycle concept do not exist

9. Services do not have any10. Services are normally need driven and

pulled by customer

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• Organizations can be manufacturing or Service organizations• No organisation is pure product oriented or pure service oriented

(Car manufacturers have components like servicing, handling warranty complaints. Hospitals have components like drugs, diagnosis reports etc)

• Classification is based on whether product orientation is dominant or service

Transformation process

Transformation process

Inputs Outputs Customer

Defects/ deficiencies /poor performance

Improvements

Feedbacks /

ComplaintsImprovements

Discuss above for a Scooter manufacturer and Hospital

Typical Transformation activities for products

Purchasing of Raw materials and Storage Production ( conversion )- Cutting, Machining, Fabrication, painting, packing Inspection and testing Ware housing and delivery

Transformation activities for Services vary greatly depending on type of service.For Hospital, these activities are

Out patient services In-patient services (eg. ward, ICU, OT) Diagnostic service ( eg. X-ray, laboratory, scans) Purchase of medicines and Dispensing Blood bank activities

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Definition of Production and Operations Management

Production and operation management is defined as the design, operation and improvement of the transformation process which converts the various inputs into the desired outputs of products and services

The term “operations management” is widely used now which includes manufacturing and service organizations.

Critical system elements of production Management• Product , process and service design• Facility, capacity, location and layout• Capacity management• Materials management• Production scheduling• Quality management• Technology management

Responsibilities of Production manager1. Planning of geographical location of factory2. Purchasing production equipment3. Layout of equipment 4. Process Design5. Establishment of work standards6. Capacity planning7. Production planning and scheduling8. Production control9. Inventory management10. Supply chain management11. Quality control12. Industrial relations13. Equipment Maintenance14. Health and safety15. Staff selection and training16. Budgeting and capital planning

Some factors affecting Production management

1. High Quality level demands by customer ( PPM, 6 sigma)2. Low lead time for manufacture3. Large verities4. Low Batch Quantities5. Global Competition6. Pressure on operating cost reduction ( raising input costs with product prices declining)

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Good production management can offer competitive advantage to a firm by:

1. Sorter new-product lead time2. More inventory terns3. Sorter manufacturing lead time4. Higher quality5. Greater flexibility6. Better customer service7. Reduced wastage

Types of production• Continuous production

– very few verities– very long production runs– Eg. Cement , Steel, Plastic

• Semi-continuous production– Few varieties– Long production runs– High volume of output– Repetitive in nature– Eg. Automobiles, electronic items, Soaps, White goods

• Intermittent production– Batch production

• Many verities• Short production runs• low volume of output• Repetitive in nature• Eg. Standard tools, products to customer specifications, earth moving

machinery– Job shop

• Few numbers• Specials• Not repetitive• Eg. Specials Tools, custom built cars,

Competitiveness means :1. Existing demand for products2. Value for money3. No threat from competitors4. No threat of obsolescence5. Continuous additions to product features insuring future acceptance and demand6. Quality, pricing meets customer expectations and competitors at a distance7. High customer satisfaction

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ProductivityProductivity ensures competitive edge

1. Labour productivity2. Inventory Turn over3. Return on Investment (ROI)4. Quick product Design & development5. Less time to Market6. Marketing efficiency7. Supplier rationalization8. Total Productive Maintenance (TPM)

Strategic management means formulations of long term goals and actions plans to accomplish those goals. It consists of the following broad steps:

1. Analysis of opportunities and constraints in the market place2. Formulation of strategies3. Implementation of the strategies4. Evaluate and control till objectives are reached

Typical; corporate strategies Horizontal integration Vertical integration Mergers Alliances Disinvestment

Typical unit level strategies: Increase market share by 4% Launch 10 new products in next 3 years Increase exports by 100% Reduce cost by 15%

Some strategy factors:• Make –buy decisions• Automation• Computerization • Supplier development• Waste elimination• Value addition• Cost reduction• New product introduction and timing• Value engineering• Business process re-engineering

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Module 2: Product, Process and Service design

Product Design• Products are designed to

meet customer requirements , needs and expectations

• Examples: Car, TV, Soap, Garments, perfumes, Apartments

• Examples: Bank loans, course curriculum, postal services,

Product design and Development stages

1. Design and development Inputs( eg.

Features, safety, customer needs and expectations, Regulations)2. Design and Development Outputs ( eg Specifications, Drawings )3. Design and development review ( with production, maintenance, QA for

manufacturability and serviceability)4. Design Verification ( eg. calculations, prototype and testing)5. Design and development validation ( eg. Performance testing , field trials)

Product design concepts 1. Research and development

• Using state of knowledge on the subject for commercial applications ( Applied research)

2. Reverse Engineering• Dismantling and studying competitors products. Reduces development time.

Provides opportunity to improve on the competitor’s product3. Manufacturability

• To ensure ease of manufacture and assembly. Using existing manufacturing capabilities such as machines, equipment, Skills of workers .

4. Standardization• Refers to use of less variety of parts to build a products. • Modular design refers to standardization of modules or sub-assembly of parts.• Reduced cost. Faster time to market, Ease of maintenance and servicing.• Example: use of indicator lamps, meters for various models of Motorcycles

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Marketing

Production and Operations

Product Design and Development

Customer

5. Robust design• Designing a product that is operational in varying environmental and other

conditions of usage (eg. dust, vibration, temperature , humidity, over load )6. Concurrent Engineering

• Involvement of other functional areas during early stages of design• Functions like Marketing, production, purchase, Tool design, servicing are

involved for review and incorporation of any changes required.• Faster time to market. No holdups during production.

7. Computer-aided design• Use of computer soft ware for design• Three dimensional visualizations possible.• Faster, accurate, cost effective, easy to change, easy to transmit, easy to

collaborate,• Links to computer aided manufacturing possible

Product design concepts• Life Cycle of product

growth

Decline

Maturity

Time

Demand

Incubation

Manufacturing processes ( Production processes)

Broad classification:1. Forming processes

• Change shape of work piece without adding or removing material2. Machining processes

• Change shape of work piece by removal of material in the form of chips or particles

3. Assembly processes• Joining or fastening of parts/ components

4. Heat treatment

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• Heating , soaking and cooling of parts in furnace at determined levels to obtain desired mechanical properties

5. Finishing processes• Change the surface properties of parts. For protective and decorative purposes. Eg

corrosion resistance, coloring, aesthetics

Forming processes

Casting- pouring or forcing molten material into moulds of desired cavity. Eg. Gravity casting, injection moulding, pressure die- casting

Forging-Formed during plastic state by impact or force. Eg. Die forging, upset forging, roll forging

Extrusion- forcing the metal through to obtain desired cross section Drawing -Pulling material through dies of desired cross section. Eg. Wire drawing Stamping- normally for thin sheets. Impacting in a press to obtain desired size and

shape. Embossing or coining- Stretching of metal in a closed die. Eg. Making of currency

coins. MedalsMachining processes

Turning- material is removed by a cutting tool in contact with rotating work piece. Drilling and boring- making of holes using drill bit. Making of large circular cavities

using boring tools Milling- making of flat surfaces on work piece using a milling cutter Grinding- Finishing of circular parts or flat parts using a rotating grinding wheel.

Normally for hardened parts. Shaping and planning- material is removed by linear motion of a cutting tool on work

piece. Electro –discharge machining( EDM)- Erosion of material by sparking between

electrode and work piece. For very hard materials , intricately shaped parts, toolingAssembly processes

Welding-joining of work pieces by fusion due to heat. eg. Gas welding, arc welding, spot welding, seam welding, laser welding

Brazing- joining of metals using brazing alloys. Strength of joint less than welding Soldering- joining of metals using soldering alloys. Eg. Making of PCBs. Soldering

of wires. Normally for electrical connections Riveting- joining of overlapped plates by upsetting rivets in holes . Eg. Boiler Fastening-joining using screws, nut and bolts Assembly using adhesives- used for metals, wood, plastics, rubber. Eg furniture,

shoes, toysHeat treatment processes

Annealing- softening to improve machinablity Normalizing-to improve grain structure and relive internal stresses Hardening- to increase hardness which improves wear properties. Tempering- normally follows hardening. To decrease brittleness Case hardening- to increase hardness in surface only leaving the core tough.

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Cyaniding-immersion of steel in molten bath of carburizing salt followed by quenching. Distortion is less.

Finishing processescleaning is done to remove dirt, oil, scale, rust before and after finishing operations Metallic coatings- Electroplating, Hot dipping, Galvanizing ( zinc coating), Tin

coating, Phosphating, anodizing ( for aluminum) Plastic coating- PVC, Nylon, Polythene etc to prevent rusting for tanks, pipelines etc Organic finishes- Paints, varnishes, enamels Inorganic finishes- ceramic coatings, porcelain enamels. Highly wear resistant

Process planning • Process planning deals with methods of converting Input materials into finished

products. A Production process is a series of manufacturing operations performed at work stations to achieve the design specifications at planned output.

• Types of processes– Continuous process– Semi-continuous– Batch process– Job shop– Project

Starting point for process design is the outputs from product design. These may be product specification, Drawing, Technical specifications , Product standards etc.

Output Quantity requirements greatly influences the process planning and design

Process planning consists of two areas: Process design Operations design

Process design covers the overall conversion/ transformation process

1. Input materials required 2. Sequence of operations 3. Existing Infrastructure

1. Machine and equipments2. Facilities ( handling, storage)3. Layout of plant

4. Tooling ( devices required to produce a particular product- commercial tools, special tools)

6. Inspection and testing stages and methods7. Quantities to be produced

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Operation design:Covers how individual operation are to be.

1. Design of individual operations in a process2. Man-machine relation ship3. Economics4. Work standards

The Basic objective of Process planning and design is to:• Produce products that consistently meet design specifications• Produce products at the lowest cost • Produce products with proven production technology

System approach to process planning and design

Inputs Product information Resources ( machines, equipment, facilities) Output requirements Manpower availability

Process Selection of type of processes ( forming, machining etc) Make or buy decisions Equipment studies Production sequence Tooling studies Inspection and testing studies

Out puts Production sequence and equipments Raw material specifications Layout of machines Tooling requirements Inspection stages and equipments

Process planning aids:Assembly charts- gives pictorially step by step assembly sequence and what items to be assembled till finished product is producedProcess charts:

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Input Process Output

Operation process chart- gives the sequence of operations, machine to be used, tooling needed, inspection stages. These are also called “ROUTING SHEETS”Flow process charts-gives graphically, with symbols, manufacturing operations, inspection stages, Transport operations, Delays, storage requirements.Man-machine chart- gives a graphical representation of what worker will be doing and machine will be doing over time. This is to effectively use workers time when machine is operating unattended. This is to increase productivity.

Types of process designs Product focused production system

o All production processes or organized an a continuous flow. Required machines are lined up to make the product

Process focused production systemo Machines/ equipments are grouped according to process ( machining,

forming etc). products flow from one location to another depending on the process. Travel distances are more. Products are stored without processing for want of machine.

Group Technology ( Cellular manufacturing)o Products are grouped into families based on processing requirements .o Machines re lined up to process each family . this gives the advantage

of product focused system to batch production.

Economic analysis Process which gives lowest cost per unit is the best Processes to have the same capability. Otherwise we may have to take cost of rejections

into calculations. Increase production by rejection percentage and add raw material cost to your calculation

Take into consideration the total number of products to be made , if there are any limitations

Manufacturing cost per unit may include• Setup cost• Tooling cost• Fixture cost• Operating cost ( labour, power etc)

Production costs Fixed costs (Depreciation, Insurance, administration etc) Variable costs ( material, consumables, power , Direct labour costs etc)

Break even analysis is done to determine quantity to be produced to cover the production cost. Producing less than break even quantity results in loss to the company.

Example Fixed cost is Rs 50 000 per year, Material cost is Rs. 50/ pc, other variable cost is Rs 30/ pc . the selling price is Rs 100 / pc . What is the break even point?

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Let X be the break even Quantity. Then 50, 000 + 50 X + 30 X = 100 XX = 50000 / 20 =2500.

Comparing processes to determine which is the best.

Production TechnologyMechanisation- deals with replacement of hard manual muscle power by using devices like power lifts, conveyors , hydraulic and pneumatic devices etc.

Automation- deals with all activities in production operations and service operations to make them faster, accurate, with minimum human intervention and cheaper at high production volumes

Production technology deals with automation all aspects of manufacturing, which includes:o Production activitieso Planning and procurement activitieso Inspection activitieso Integration of design with production ( CAD/CAM)o handling, storage , transport

Automation levels/`areas• Automated machines

– Machines with pallet changers, Tool magazine , Automatic tool changers, strip feeders, tool wear detection and correction, in- built inspection system

• Machine attachments

Process A Process B

Components / setup 4000 3000

Setup cost Rs 300 Rs 1500

Production rate / hr 10 15

Operating cost /`hr 20 20

Operating hrs /setup 4000/10=400 3000/15=200

Operating cost 400 X 20=8000 200 X 20=4000

Total mfg. cost 300+8000=8300 1500+4000=5500

Cost/piece 8300/4000=2.057 5500/3000=1.833

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– Attachments to make the machine more versatile. Grinding attachments on lathe, power operated holding devices, Quick change tooling, copying attachments , digital readouts, strip feeders

• Numerically controlled machines– Machine movements controlled by servo motors , stepper motors (closed loop or

open loop), multi-axis controls, eg. Lathes, milling machines• Robots

– Programmable devices . Can pick and place, weld, paint . Load and unload components with in its reach. Can work in hazardous areas. Can tend many machines.

• Automated inspection devices– Vision systems, on –line inspection devices, Computerized measuring machines

• Automated Identification systems– Automatic acquisition of information, eg bar code systems, smart cards, RFID,

biometrics• Automated process controls

– Continuous checking of performance and automatic correction/ adjustment of process parameters. Eg. Power stations, oil refineries, chemical plants

• Automated storage and retrieval systems (ASRS)– Taking orders , collecting materials from locations in ware house and delivery to

dispatch section or to production areas. Eg. Garments, tools, hardware• Automated lines

– Machines linked together by automatic raw material feeders, transport equipments. Hard automation. Good for single part produced in very large quantities

• Flexible manufacturing systems– CNC Machines linked together by AGVs( automatic guided vehicles). Highly

programmable and hence flexible. Normally used for a family of similar components. Set up times are less and hence can handle very small batch quantities economically.

Advantages of automation1. Enhanced productivity2. Improved and uniform Quality3. Reduced total cost per unit4. Better production control5. Dangerous and unpleasant tasks can be easily handled6. Fewer accidents

Disadvantages of automation ( constraints)1. Heavy capital investment2. Displacement of Labour

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3. Tighter input material specification may be needed.4. Cost of material shortages/ breakdowns are high5. Reduced demand is disastrous.

Problem An automotive component manufacturer wants to improve competitiveness. Cost of 3 manufacturing methods are as below:

1. On the basis of economic analysis , rate the three alternatives.2. If 1,50,00 units are to be produced in a year, what would be the most desirable and least

desirable alternative?

CM CNC FMS

Annual production( units) 1,00,000 1,00,000 1,00,000

Annual fixed costs Rs 90,000 1, 90.000 3, 20, 000

Variable cost per unit Rs 29.40 Rs 28.50 Rs 27.30

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Production and Operations ManagementModule 3: Facility, capacity, location and layout

Forecasting• Estimating future demand for products and service

Need for forecasting– New facility planning– Production planning– Work force scheduling– Material planning– Financial planning

Types of Forecasts• Long range ( years)

– Factory capacity, new product development,• Intermediate range ( months)

– Purchasing, inventory management• Short range( weeks)

– Cash out flow, production planning, labour planning

Forecasting methods• Quantities methods

– Based on previous data– Appropriate for shot period

• Qualitative methods– Based on judgment of experts– Long periods in future

• Demand patterns– Constant– Linear– Seasonal

Models for forecasting:• Simple moving average ( SMS)• Weighted moving average( WMA)• Exponential smoothening model ( ESM)• Regression analysis (identifying the variables and developing a model for forecasting)• Delphi Method ( taking views of experts from inside and outside the organisation)• Field expectation method• Customer expectation method

SMS example : If the demand for a product was 100, 120, 120 for the months of Jan, Feb. and March, fore cast for April would be ( 100+120+120)/ 3 = 113.33 rounded off to 114.

WMA example : demand forecast for above example with weightage of 4, 2, 1 for previous months would be ( 100 x 1 + 120 x 2 + 120 X 4 ) / 7 = 117.44 rounded off to 118

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ESM exampleFormula: smoothened forecast = forecast + smoothening factor ( Actual demand last period-forecasted demand for last period)

Example : a company fore casts a demand of 400 units every month but would like to smoothen forecast based on previous month actual demand by factor 0.25. if the demand for April was 375 what is the forecast for May?

Forecasted demand = 400 + 0.25 X ( 375-400) = 400- 6.25 =393.75 rounded off to 394

Plant Location ( Facility Location)Consists of identifying location:

1. Within the country or outsidea. Political stabilityb. Exchange ratesc. Closeness to consumptiond. Human resources and skills

2. Selection of the regiona. Availability of Raw materialsb. Nearness to marketc. Availability of powerd. Transport facilitiese. Climatef. Governmental policyg. Competition between regions

3. Selection of localitya. Availability of labourb. Amenities for workersc. Existence of competitorsd. Finance facilitiese. Local taxes

4. Selection of the exact site.a. Topography, sizeb. Disposal of wastesc. Land cost

Location Models1. Factor Rating method2. Point rating method3. Break even analysis4. Quantitative factor analysis

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Factor rating method

Point rating method

Factor Max. points Location A Location BAvailability of Fuel 300 200 150Water supply 200 200 200Topography 200 150 175Other factors

Total X Y

Break even analysis1. Determine all relevant costs2. Categorize as fixed cost and variable cost3. Total cost=fixed cost + variable cost X quantity produced4. Compare total cost for all locations and determine the most suitable location

A graph can also be drawn which helps analysis over different production outputs

Factor Factor rating

Location rating Location rating X Factor rating

Location A

Location B

Location A Location B

Tax advantage 4 8 6 32 24Closeness to Customer 3 2 3 6 9Closeness to suppliers 5 8 10 40 50Factor 4Factor n

Total X Y

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Problem :A firm is considering 4 alternate locations for a new plant annual interest on capital is 10%. Determine the best location for an output of 1, 20, 000 unitsData Rs A B C DLabour cost/unit 0.75 1.10 0.80 0.90Plant construction cost 46 lakhs 39 lakhs 40 lakhs 48 lakhsMaterial and equipment cost per unit

0.43 0.60 0.40 0.55

Electricity charges per year

30, 000 26, 000 30,000 28,000

Water charges per year 7,000 6,000 7,000 7,000Transportation cost per unit

0.02 0.10 0.10 0.05

Taxes per year 33,000 28,000 63,000 35,000

A

CB

Quantity

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Total cost

Qualitative Factor analysis method

Factors Assigned Weight

Score for locations Weighted scoresA B C A B C

Production cost

0.35 50 40 60 17.5 14.0 21.0

Raw material supply

0.25 70 80 80 17.5 20.0 20.0

Labour Availability

0.20 60 70 60 12.0 14.0 12.0

Cost of living

0.05 80 70 40 4.0 3.5 2.0

Environment 0.05 50 60 70 2.5 3.0 3.5

Markets 0.10 70 90 80 7.0 9.0 8.0

Total 1.00 60.5 63.5 66.5

Manufacturing Facility planning

Basic input for manufacturing capacity planning is the long range forecast for demand for products and services

Deals with:1. Identification of production and operating equipments2. Space and building requirements3. Raw material requirements and Sources4. Storage quantities and facilities5. Inspection facilities6. Maintenance facilities7. Material handling equipments ( eg. conveyors, cranes)8. Administrative areas ( eg. purchase, personnel) 9. Canteen, conveniences10. Other requirements of the plant based on product produced, environmental requirements,

power requirements, storage of hazardous materials

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Manufacturing planning may be :

Long range planning is normally for 3 to 10 years Medium range planning normally for 1 to 3 years Short range planning is normally for 3 months to 1 year

Plant Layout (Facility Layout)

Plant layout deals with locations for:1. Production machinery2. Location of stores ( Raw materials, WIP, Finished goods)3. Inspection facilities ( Receiving, In- process and Final inspection)4. Tool rooms5. Maintenance requirements6. Material handling equipments ( eg. conveyors, cranes)7. Administrative areas ( eg. purchase, personnel) 8. Canteen, conveniences9. Other requirements of the plant based on product produced, environmental requirements,

power requirements, storage of hazardous materials.

Since the plant layout is not frequently changed because of economic reasons and long production stoppages, utmost attention has to be paid for layout design. However layout may be changed based on changes in product design; change in production methods or towards expansion.

Some of the objectives of a good layout:1. Provide required production capacity2. Reduce material handling costs3. Provides for free movement of materials and people4. Reduce hazards and hence safety and health of personnel5. Utilization of available space efficiently and effectively6. Enhancement of employee morale7. Flexible to handle variations in volume and product variations8. Supervision to be easy9. Easy maintenance on equipments10. High utilization of equipment11. Enhanced productivity

Major factors influencing the layout are:1. Materials- solid or liquid, light or heavy2. Product- normally product moves from work station to work station. When product is

very large, machinery and men are moved to product3. Worker-whether stationery or moving. On conveyor belt operations worker is stationery

and belt stops for prearranged time at every work station4. Machinery- depends on the type of manufacturing operations, size of product, volume of

product. Manual, semi automatic, automatic

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Principles of layout (Importance of Layout)

1. Minimum travel-Materials and men should travel the shortest distance. Heavier materials are to travel the least. Typically 30% of the production cost is because of material handling

2. Minimum production delays: materials should spend minimum time as possible in the facility. Operations to flow in a sequential order. Back tracking for operations on the same machine to be eliminated. bottle necks to be avoided

3. Usage of space- every meter of space to be effectively utilized. Land costs are high. Maintenance costs are also high.

4. Early detection of Quality problems: Continuous flow, Inspection points5. Better production control. Less chasing work. Visual control. Few control points.6. Improved utilization of labour: workers time to be used effectively.7. Compactness- all functional areas are fully integrated and act as a well knit facility8. Safety- hazards to be as less as possible. Work place to be economic for productivity9. Flexibility- slight variations in volume or change in product features should not affect the

productivity of the layout 10. Maximum return Investment- fixed capital cost to be as low as possible and

Investments to be fully utilized Some types of Layout

1. Process layout ( job shop layout, functional layout)2. Product layout ( flow line layout, line processing layout)3. Cellular manufacturing ( CM) or Group Technology layout4. Combined layout

1.Process layout

Features

1. Different sizes of machines are grouped2. Distance between grouped machines are made as short as possible3. Groups are arranged such that there is no back tracking4. Convenient Inspection

Turning machines

Milling machines

Drilling machines

Grinders

Assembly

Packing

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5. Convenience of supervision6. Many types of products can be manufactured7. Low volume of production8. Many inspection points are required

Advantages1. Machines are general purpose and hence reduced investment2. Flexibility in production3. Better supervision4. Capacity expansion is easy5. Better utilization of men and machines6. Break downs can be easily handled

Disadvantages1. Movement of material is difficult. Mechanization not easily possible.2. Requires more floor space3. Production control is difficult4. Distance traveled is more5. Accumulation of WIP ( work- in -progress)

2. Product Layout

Features1. Individual machines are arranged as per sequence of operations2. No back track at all. Flow is continuous.3. All operations eg production, inspection, assembly is include in a line4. One or two standard products can be produced5. Large volume of production6. Minimum inspection required

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Advantages1. Mechanization is possible thus reducing martial handling costs2. Production bottle necks are avoided3. Better production control4. Less floor space required for production5. WIP is very minimum6. Early detection of mistakes7. Very high Through put time

Disadvantages1. Inflexible2. Layout is expensive3. Expansion is difficult4. Breakdown or rejections in a line or machine stops the entire production

Comparison of product and process layout

# Characteristics Product layout

Process layout

1 Mechanization of material handling 2 Reduced bottle necks 3 Minimum Manufacturing time ( trough put time) 4 Minimum work in progress 5 Better production control 6 Early detection of bad workmanship 7 Better performance measurement of workers 8 Reduced investment in machines

Assembly lineTesting Packing

Individual machines

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9 Flexibility in production 10 Scope for expansion 11 Easier handling of breakdowns 12 Better utilization of workers and equipment 13 Specialisation in supervision

3. Cellular manufacturing

FeaturesThis brings the advantages of product layout to identified products in a process layout facility.Some Machines are grouped into cells to manufacture a group of products with similar characteristics and process flow (family of products). Cells could exist in a manufacturing facility along with process layout for other productsMachines can be laid out in ‘U’,’L’ and Straight line to suit the material flow and overall layout of the facility

Advantages1. Lower WIP2. Reduced material handling3. Shorter throughput times4. Simplified production planning5. Improved visual control6. Less time for setup because of few tool changes7. Lower cost of production8. Sorter delivery9. Improved Quality due to early detection of problems

Disadvantages

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A

B

C

Reduced flexibilityLess machine utilizationAdditional machines may be required to create cells

In a cellular manufacturing setup advantages heavily overweigh the disadvantages

4. Combined layout

G

Featureso Machines are grouped as process layout.o Products are processed on identified machines to maintain flow.o Used when batch processing like heat treatment is necessary.o Used when costly machines are involved and duplication for pure product layout

is not economical.

Apart from location of production machines, a layout has to integrate the following facilities:

Receiving and dispatch areas- space, material handling equipments, Storage areas- space , Safety, Material handling equipments Maintenance areas- storage of spares, area for repairs Inspection areas- inspection equipments, Space

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Forging presses

Gear cutting mcs

Heat treatment Furnaces

Gear Grinding mcs

Employee facilities- Quarters, , rest rooms, change rooms Others – diesel generating sets, treatment plants, Laboratories, tool rooms

Design and Selection of layout depends on:Material handling cost- using material handling equipments, keeping the distances shorter, keeping sequential processing activities in adjacent areasWorker effectiveness- good communication, well placed supporting areas, ergonomics

Methods for Selection of layout

Travel Chart methodThe solution may be trial and error. Principle is most active departments should be close together or adjacent.

ProblemA manufacturing concern has 4 departments and number of moves between departments is as follows. From To

A B C DA - 2 - 2B 2 - 4 -C - 3 - 1D 2 - 1 -

Step1 ; locate most active departments ( compute no. of links)Department A B C DNo. of links 4 4 4 4

Step2: try to locate the most active departments at the centreAll are important here.

Step3 : ensure there are no non adjacent movements. Enter no. of moves in the chart

A

D C

B

3422

1

1

2

2

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Load –Distance analysisProblem : A company wants to add a new wing to its manufacturing shop which layout is better.

Lay out A

Layout B

Distances are as below;Between Departments Distances between departments

Layout A Layout B1-2 24 501-3 24 301-4 38 482-3 44 202-4 30 723-4 44 524-5 50 405-6 50 445-7 50 606-7 40 40

Products produced , Batches produced per year and sequence of processing;

Products Processing sequence Batches of products produced per year

P1 1-2-3-4-5-6-7 1400P2 1-2-4-5-6-7 200P3 1-3-4-5-6-7 1200P4 1-3-4-5-7 300P5 1-4-5-6-7 200

Solution;

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1 52 4 6

3 7

2

3

5

1

6

4 7

Step 1: calculate distance traveled for each batch of products for each layout

Product Sequence Distance movedLayout A Layout B

P1 1-2-3-4-5-6-7 24 + 44 + 44 + 50 + 50 + 40=252

50 + 20+ 52+ 40+ 44+ 40=246

P2 1-2-4-5-6-7 24 + 30 + 50 + 50 + 40=194

50 + 72+ 40 + 44 + 40=246

P3 1-3-4-5-6-7 24 + 44 + 50 + 50 + 40=208

30+52 +40 + 44 + 40=206

P4 1-3-4-5-7 24 + 44 + 50 + 50=168

30 + 52 + 40 + 60=182

P5 1-4-5-6-7 38+ 50 + 50 + 40=178

48 + 40+ 44+ 40=172

Step 2 : compute total distance moved per year

Product Batches per year

Distance per batch

Product Total distance =Batches per year x Distance per batch

Layout A Layout B Layout A Layout BP1 1400 252 246 3, 52, 500 3, 44, 400P2 200 194 246 38, 800 49, 200P3 1200 208 206 2, 49, 600 2, 47, 200P4 300 168 182 50, 400 54, 600P5 200 178 172 35, 600 34, 400

Total 7, 26, 900 7, 29, 800

Layout A is better. The material movement is lower.


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Module 4: Capacity Management

Work Design is the over all term used for Job design and Work measurement.

Job design aims to organize tasks, duties and responsibilities into a unit of work . The objective may be: to increase Productivity To reduce costs. job satisfaction motivation

Poor job design may lead to Lower productivity High attrition rate Absenteeism Complaints Sabotage

Objectives of Job design

Principles of motion economy

Stop watch Time study

Work Sampling

Work measurement

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Job design

Method study

Job enlargementJob rotationJob enrichment

Work design

Technical feasibility – Jobs ( set of tasks) should be able to be performed by the person (s) with y the equipments and systems available.

Economic feasibility – cost of performing the job should \be as low as possibleBehavioral feasibility- motivation and mental simulation are considered.

Techniques of Job designWork simplification- Big job is broken down into small parts and assigned to one employee.

Less trained or less skilled persons can do the job. This may also result in highly repetitive jobs and less job satisfaction.

Job rotation - Persons are assigned different jobs at different times . reduces boredom , monotony and exposes employees to different aspects of the process.

Job enlargement - Adding similar tasks to a job. to add variety and autonomy . to make work more meaningful.

Job enrichment - tasks of planning, organizing and controlling are assigned along with routine tasks. Objective is more involvement, motivation and satisfaction.

ErgonomicsErgonomics is concerned with designing of work situations with human characteristics in mind.

1. Human and machine interfaces- some considerations are : location on tools , switches, parts for assembly , controls, levers, push buttons, Working height, sitting height, left hand and right hand operations, heights at which readings are taken, weights lifted, forces applied , direction of force .

2. Environmental factors – which affect morale, productivity, quality and long term heath problems. Ambient temperature ( 26-38 C) , Noise ( < 90 dB), Lighting( 100 ft-candles Machines), vibrations, air circulation, comfortable furniture.

Work Study

Work study is concerned with the analysis of work methods and the equipment used in performing the job, the design of optimum work method and the standardization of proposed work methods.Work study covers: Method study Work Measurement

Objective of work study:

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Analysis of present method and to develop a new and better method To measure work content by measuring time and to establish standard time. To increase the productivity by ensuring best possible man- machine interface To reduce cost of production / increase efficiency

Benefits of work study1. Increased productivity2. Reduced production costs3. Better layout4. Better manpower planning5. Reduced handling costs6. Better Morale and satisfaction of employees7. Standard performance measurement and basis for incentive schemes

Methods studyMethod is a technique of observing, recording and examining the present method of performing the work with a view to develop a cheaper and productive method. It covers work processes, working conditions, equipments and tools used to carry out the job.

When method study is conducted:1. High operating cost2. Heavy rejections 3. Excessive movement of materials and men4. Production bottle necks5. Quality problems6. Poor working conditions7. Excessive overtime8. Poor delivery performance

Objectives of Method study:1. To study present method and propose new and improved method2. Improvement in productivity and cost 3. Reduce material handling and operator fatigue4. Elimination of wasteful motions5. To standardize work methods

Advantages of Method study:1. Work simplification2. Improved method( cheaper and productive03. Better quality product4. Improved layout5. Better material handling6. Better work flow

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7. Less fatigue to operator8. Shorter production time9. Job satisfaction

Method study procedure

1. Selection of work based on present problems and scope for improvement2. Record relevant facts and information on existing method , use appropriate charts and

diagrams3. Examining recorded facts ( use what, when , how, who, where, why type of

questioning on collected facts)4. Developing improved method by

a. Eliminating wasteful tasksb. Simplifying tasksc. Combining tasksd. Evaluating alternatives with respect to cost, savings, feasibility , reaction of

employees, short term and long term implications etc.

5. Installing improved method ( plan, schedule, coordinate, involve all concerned)6. Maintaining the new method ( feed back on performance towards objectives)

Symbols used in process charts:

Operation ( conversion)

Movement /‘ Transportation

Inspection Delay / waiting

Storage Combined activity

Recording Charts and diagrams used in method study:

# Chart type Usage1 Outline process chart Covers only main operations and Inspections2 Operations process chart Includes operations, inspections and material

inputs3 Flow process charts Includes sequence of operations, transportation,

inspections, delays and storages. For Material or product For Man For Machine

4 Two handed process charts Depicts the activities of both hands or limbs

5 Multiple activity chart For more than one worker/ machine or equipment

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6 Man- machine chart Worker and machine on common time scale Worker and two machines on common time

scale

7 Flow diagram Actual paths followed by materials. Diagram drawn to scale

8 String diagram Sting used to trace the path of materials or workmen in a scale plan or a Model. To measure distances traveled.

9 SIMO chart Simultaneous motion cycle chart . used for cery small cycle time operations .

Micro motion study is useful for analysis of very small cycle operations, rapid movements and high production rates. E.g. Sewing, assembly of small parts.Video pictures are taking and analyzed to understand the minute tasks and to eliminate unnecessary movements. Therbligs which indicate basic body motions of worker is used to analyse the activities.

Some therbligs are:Search , Select, Grasp ,Transport empty, Transport loaded, Hold, Release load, Position, Inspect, Assemble, Disassemble

Principle of motion economyAims at minimizing the fatigue of workers due to repetitive motions of various parts of body such as hands, feet, eyes etc.Some principles: Two hands should begin and complete their motions at the same time Two hands should not be idle at the same time except during rest Curved motions are preferred to straight line motions Fixed place for tools and materials Materials to be fed to point of use by feeders Materials and tools to be located for best sequence of motions Height to be such that alternate suiting and standing is easily possible Materials to be prepositions Operations to be combined Levers, clamps to have greatest mechanical advantage

Work Measurement

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Work measurement is concerned with techniques to establish work content of specified task by measuring the time required to carry out the job at defined standard of performance by a qualified worker.

Qualified worker ( ILO Definition):A qualified worker is one who has the necessary physical attributes, intelligence, education and skills and knowledge to carry out the work to satisfactory standards of safety, quality and quantity

Objectives of Work Measurement Improved planning and control Basis for sound incentive schemes Better utilization of manpower Better labour productivity Better labour cost control

Work measurement procedure: ( arriving at standard time for the job)1. Divide the job into elements 2. Record observed time for each element by

Time study Synthesis Analytical estimation Predetermined motion time system ( PMTS) ( for basic body movements)

3. Establish elemental value by normalizing observed values4. Add relaxation allowances ( personal, fatigue)5. Add contingency allowances ( for non-repetitive elements)6. Process allowance ( for forced idleness , wating for operation to complete)

Time studyDetermination of the amount of time required to perform a unit of work at defined level of performance.Objective of Time study

1. To set standards of performance2. To determine labour costs3. To balance the work of operators4. To establish a incentive scheme

Conducting time study1. Select job 2. Select worker to be studied3. Plan and stopwatch study

a. divide into elements. Elements may be repetitive, occasional, manual , machine foreign etc

b. Measure time with stop watchc. Note rating factor ( normal pace of work is equivalent of walking 4 kmph )

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4. Determine normal time for each element by: Normal time = observed time x rating factor

Synthesis method

Synthesis method takes values of normal time for reach element from the data base developed and available . data base has elemental times for all similar job elements eg.` loading, unloading, clamping, checking etc.Advantages: less time to establish, reliable , good for estimation for new jobs

Analytical estimationTakes data from elemental time data base as far as possible. Estimation of time is made for remaining elements based on experienceAdvantages : good for non-repetitive jobs and for estimation for new jobs

Predetermined motion time systemsTimes for basic motions ( Therbligs ) are established in TMUs ( time measurement units) . 1 TMU =0.036 sec. Times for reach, move , grasp etc are available in TMUs.

Problem1:Calculate standard production per shift of 8 hours with following data.Observed time per unit= 5 minsRating factor =120%Total allowance =33 1/3 % of Normal time

Ans: observed time X observed rating = Normal time x normal rating 5 x 120 =Normal time X 100 : normal tine = 5 x 120 / 100 = 6 min.allowance = 33 1/3 percent = 1/3 of normal time = 6/3 =2 min.Standard time =normal time + allowance = 6 +2 =8 minStandard production / shift = time available / standard time per piece = (8 x 60)/ 8 =60 pcs.

Problem 2;Time for making 4 pieces of an item with elements a, b, c, d is as follows .. Fatigue allowance is 25% of normal time. find the standard time per piece

Element Cycle 1 ( min)

Cycle 2 ( min)

Cycle 3 ( min)

Cycle 4 ( min)

Rating

a 1.2 1.3 1.3 1.4 85b 0.7 0.6 0.65 0.75 120c 1.4 1.3 1.3 1.2 90d 0.5 0.5 0.6 0.4 70

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Ans# average observed time Normal timea 1.3 1.105b 0.675 0.81c 1.3 1.17d 0.5 0.35

Total Normal time = 3.435

Allowance = 25/100X 3.435 = 0.858 : Standard time = 3.435 + 0.858 =4.29 min. Standard time per pc = 4.29 / 4 =1.073 min per pc

Work sampling

Work sampling is based statistical theory of random sampling and probability of Normal distribution.Normally used for determining fraction of time the machines are idle or the operators are idle. More the number of samples taken, less is the error.

No. of observations n= pqz2 / a2

p= percentage of observations where machine was idleq= 100-p( percentage machine not idle)z= desired confidence level ( z=1 for 68.3%, 2 for 95.4%, 3 for 99%)a= desired accuracy or error ( in percentage)

Advantages Economical Not necessary to use trained work study experts No stop watch measurements

Limitations Little value to improve the operations If random sampling is not done results will be erroneous

ProblemNine observations were made for machine busy or idle. If an accuracy of +- 15% is required at a confidence level of 95.4%, determine the sample size necessary.

No. Working

1 yes2 yes3 yes4 no5 yes

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6 no7 no8 yes9 yes

Ans p= 3/9 X 100 = 33.33% ; q =66.67% ; z=2 ; a= 15%:

n= pqz2 / a2 : n= 33.33 x 66.67 x (2 x 2) / 15 x 15 = 39.50 = 40 observations

Productivity

Production – refers to total out put : 1000 pcs per month ; 100 tons of castings per monthProductivity = Out put / input = Quantity of goods and services / Amount of resources used

Productivity can be improved by: Increase production with same amount of resources Decrease resources while keeping the production same Add few resources and get higher production Allow slight production decrease while utilizing significantly less resources

Productivity can be applied to labour, space, money, materials energy used .

Ways of measuring labour productivity; Output per man –hour = Output / man hours used ( 50 pcs per man-hr) Labour hour per unit of out put = man-hours/ output ( 100man-hrs per part) Added value per unit of labour cost = added value for the product/ total wages ( eg. 8, 10 )

Some ways to increase productivity:1. Reducing rejections and rework2. Reducing cycle time3. Reducing setup time4. Reducing wasted time by method study5. Good training6. Automation

Learning curveWorkers take more time in the beginning when the task or product is new. As they gain experience the performance improves. The reduction in time taken is drastic in the beginning , tapers off and finally the time taken is constant .

There are mathematical models to estimate the time taken such as : Arithmetic analysis

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Logarithmic analysis

Typical learning curve is as below

Aggregate planning

Aggregate planning involves best quantities to be produced during the time period ( normally 6months to 18 months) at the lowest cost. It involves:

Planning work force size Production rate Inventory levels

Aggregate production planning involves determining the output levels of product groups for the planning period.Aggregate planning or aggregate capacity planning consists of devising a plan to support the production required.

Why aggregate planning is required?1. It facilitates loading of facilities fully. Minimizes over loading and under loading2. Provision of production capacity to meet aggregate demand3. Helps in Systematic production in spite of peaks and valleys in customer demand.4. Utilization of resources is enhanced

Steps in Aggregate capacity planning1. Prepare sales forecast for each product over the planning period (normally 6-18 months)2. Indicating quantities for weeks/ months .

No. of components

Time taken

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3. Sum up individual product requirements into one arrogate demand for the factory.4. Convert aggregate demand into labour, materials, machines and other elements of

production capacity5. Identify alternate resources for supplying necessary production capacity , if required.6. Develop alternatives and select one which meets the objectives of the organization.

Production capacity may have to be computed with respect to:1. Size of work force2. Use of over time or idle time3. Inventories or back orders4. Use of subcontractors

Costs associated with aggregate planning are:Pay roll costsCost of overtimeSecond shift/ third shift operationCost of hiring or laying off workersCost of inventories Cost of backlogs ( liquidity damages – reduced price in case of delays as a part of contract)

Approaches to Aggregate planningTopdown approach – consideration is given to product families , products and quantities. Does not consider small capacity differences that may exist among specific products

Bottomup approach- each product with details at lower level ( say parts) are taken into consideration while developing the plan. This the most popular method of arriving at aggregate plan.

Capacity planning

Capacity indicates the ability of the firm to meet the market demandTypes of capacity planning Long range capacity planning Medium range capacity planning Short range capacity planning Long range capacity planning

Meets corporate / business objectives Normally for 3 or more years ahead Planning of land Planning of facilities Planning of technology and equipments Planning of human resources

Medium range capacity planning Making of aggregate plans

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Normally for 6 to 18 months or more years ahead Work force reallocation Inventory management Work force recruitment Second shift and third shift operation Subcontracting ( development and permanent loading) Make –buy decisions

Short tem capacity planning Normally for 3-6months Overtime management Control of inventories ( raw material, WIP and finished goods) Work force reallocation Subcontracting Alternate tooling

Capacity requirement planning (CRP)

Capacity requirement planning is concerned with determining the following requirement for a Master production schedule.( MPS)

What and when materials are required ( MRP – Material requirement planning) Machine hours required Labour hours and categories required

Major CRP inputs are: Planned orders and released orders Loading information from work centre file ( standard hours for jobs and hours available) Routing information and alternate routing , if any

Major CRP outputs are Load reports Revisions to MPS for rescheduling if any Verfication of materials planned as per MRP system

If the load reports indicate inadequacy of capacity, overtime or subcontracting to be resorted to or changes to be made to MPS.

Strategies to meet non –uniform demandStrategy 1: Absorbing demand fluctuations by varying inventory levels or allowing backlogs

Method1- Produce in earlier period and hold in inventory until the product is demandedCost- Inventory carrying cost

Method 2- deliver product when capacity is availableResult- lost revenue, lost customers, unhappy customers

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Stategy2 : Change production according to demand

Method 1- Work additional hours with out changing work force sizeCost- overtime pay ( normally double)

Method 2- Add work force for higher productionCost- excessive labour charges during period of slack demand

Method 3- Sub -contractCost- company overhead and sub-contact costQuality and production schedules may be affected

Strategy 3 : vary work force according to demand

Method1- Hire additional personnel when demand increasesCost- cost of advertisement, interview, trainingSkilled labour may not be available when needed

Method 2- lay-off when demand reducesCost- cost of lay off ( half pay during lay off)Capital investments are idle

Problems;Order position for a certain product is as belowMonth Units Month Units1 13, 000 7 11,0002 12, 000 8 7, 0003 10, 000 9 15, 0004 9, 000 10 13, 0005 11, 000 11 12,0006 13, 000 12 10,000Given: Capacity of shop is10,000 per month on regular basisOvertime capacity is 3000 per monthSub-contract capacity is3000 per month with 3 months lead timeInitial inventory is 1000 units

Production cost is Rs 5 / unit on regular basisProduction cost is Rs 9 / unit on Overtime basisSubcontract cost is Rs 7 / unit Cost of carrying inventory is 1.00 per month per unit

No back log of orders is allowed. Work out the total production cost on: leveled production basis No inventory basis

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and suggest which to be adopted

Ans :Plan A : Level production basis

Month Units Regular production

Overtime production

Subcontract production

From Inventory ( stock)

Inventory carried ( stock)

1 13, 000 10,000 2000 nil 10002 12, 000 10, 000 2000 nil3 10, 000 10, 0004 9, 000 10, 000 10005 11, 000 10, 000 10006 13, 000 10, 000 30007 11,000 10, 000 10008 7, 000 10, 000 30009 15, 000 10, 000 2000 300010 13, 000 10, 000 300011 12,000 10, 000 200012 10,000 10, 000Total 1, 36, 000 1, 20, 000 4000 11,000 1000** from initial inventory

Cost of production;1. Regular basis :1,20, 000 X Rs .5 = Rs. 6, 00, 0002. Overtime basis: 4000 x Rs 9 = Rs 36, 0003. Subcontract basis 11, 000 X Rs 7 = Rs 77, 0004. Inventory carrying cost : 1000 X 1 (month) X Rs 1 + 3000 x 1 x Rs 1 = Rs 40005. Total cost = Rs 7, 17, 000

Plan B : No Inventory basisMonth Units Regular

productionOvertime production

Subcontract production

From Inventory ( stock)

1 13, 000 10,000 2000 nil 10002 12, 000 10, 000 2000 nil3 10, 000 10, 0004 9, 000 9, 0005 11, 000 10, 000 10006 13, 000 10, 000 30007 11,000 10, 000 10008 7, 000 7, 0009 15, 000 10, 000 2000 3000

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10 13, 000 10, 000 300011 12,000 10, 000 200012 10,000 10, 000Total 1, 36, 000 1, 16, 000 6000 13000 1000

Cost of production;1. Regular basis :1,16, 000 X Rs .5 = Rs. 5, 80, 0002. Overtime basis: 6000 x Rs 9 = Rs 54, 0003. Subcontract basis 13, 000 X Rs 7 = Rs 91, 0004. Inventory carrying cost : nil5. Total cost = Rs 7, 25, 000

Plan A is to be adopted because of lower total production cost.


Module 5: Materials management

Scope of materials management:

1. Amount of materials is high compared to other inputs , and it is increasing year to year. Proper materials management is key to the survival and growth of the company.

2. Cost of materials could be as high as 70-75% of the cost of the product in engineering industries. In other industries it could be between 40- 60 % . Hence reduction in the cost of materials plays an important role in the profitability of a company

3. Materials form a important part of current assets of the organization. Its proper utilization is vital for ROI ( return on Investment)

4. Added value of a product = Value of produced goods- value of materials purchased. It is imperative that not only that purchase cost of materials are to be low but also expenses incurred in purchasing, storing, handling should be as low as possible.

5. Quality of end product depends on quality of input materials. Hence it is important that right quality of products are to be procured at right time. Giving detailed description of requirements to supplier in the Purchase order ensures the same.

6. Materials management is one of the Key centers of accountability for performance. It includes purchasing, handling of materials, maintaining appropriate inventory levels and ensuring storage conditions.

7. Minimizing the use of scarce resources and finding alternatives8. Ensuring safety during handling and storage of hazardous materials and compiling with

regulatory requirements9. Efficiency of business depends on ensuring right quality of materials in right quantity ant

the right time. Otherwise it hampers the production to a great extent. Cost of production shoots up.

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Primary Objective of materials management

1. Low prices- to be lowest - includes transportation: enhances profit 2. High inventory Turnover- value of inventories to be low in relation to sales. Reduces

storage costs3. Low cost acquisition and possession- reduced handling and storage costs. 4. Continuity of supply- alternative sources, , captive suppliers, flexible suppliers5. Low payroll costs- Low operating costs of material management personnel6. Favorable supplier relations- supplier development

Secondary objectives of Materials management1. New materials and products- working closely with Design and research departments for

development of new materials and products2. Economic make-buy- Coordinating and assisting other departments in Make-Buy

decisions3. Standardization- coordinating with Design departments in reducing no. of items. 4. Product improvement- Contribution towards product improvement by giving

appropriate inputs and assisting Design department.5. Interdepartmental Harmony- Success of materials management department depends on

the success of other departments . hence relations are to be harmonious6. Forecasts- Forecasts in terms of prices, availability and general market conditions are to

be regularly monitored towards taking important business decisions.

Functions of Materials Management1. Purchasing2. Vendor selection and rating3. Material storage and handling4. Inventory management

Purchasing:Objectives of Purchasing;

1. To pay reasonably low prices for best value of products2. To keep inventories low3. To develop satisfactory sources of supply4. To secure good vendor performance 5. To locate new materials or products as required6. To develop good purchasing policies and procedures7. To implement programs like value analysis , cost analysis and make-or-buy decisions8. To keep overheads of the department Low.9. To have a high degree of coordination with other departments

Low price, inventory low, supply, vendor performance, new materials reqd., good purchasing policies, value analysis, cost & make- buy, low overheads, coordination.

Main Functions of Purchasing department1. Selection of vendors

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2. Obtaining quotations/prices3. Awarding purchase orders4. Follow-up for delivery5. Handling complaints , if any6. Supplier development/ vendor relations7. Payment of invoices

Other functions of purchase department ( in coordination with other departments)1. Establishing specifications2. Scheduling orders3. Inspection 4. Accounting5. Market research6. Inventory policy7. Sale of scrap 8. Customs clearances ( during import of materials)9. Transportation10. Make-or-buy decisions

Steps in Purchasing 1. Receipt of Purchase requests ( qty, delivery, item description)2. Development Purchase specifications 3. Obtaining quotations from sources4. Selection of source 5. Release of purchase order and acceptance by supplier ( technical and commercial terms)6. Follow up for receipt7. Checking invoice and approval for payment

Vendor / supplier selection is based on the following considerations

1. Availability of Infrastructure ( equipment, building, inspection facilities etc)2. Availability of human resources ( managerial, workers, Inspectors)3. Technical capability4. Meeting delivery requirements5. Reasonable prices6. Flexibility to take up variations in demand7. Willing to work and grow with the company

Normally suppliers are selected on the basis of few trail orders . if the performance is satisfactory , they are included in approved supplier list and future purchase orders are placed on them.

Single source or Multiple sourcesSingle source:

1. Quantities may be very small for multiple sources2. Supplier may be exclusive ( eg patent) 3. Supplier is outstanding in quality and delivery and no need to consider others

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4. Ordering and scheduling is very easy and less costly

Multiple sources:1. Suppliers will be competitive2. Delivery disruptions cannot be sustained (because of Breakdowns , strike, floods etc)3. Quantities too huge for one supplier4. Scheduling flexibility

Vendor ratingVendor rating is carried out periodically (once in 6 months / 12 months ) to gauge the performance of the approved supplier and to intimate him regarding improvement if needed. Suppliers may be classified as( example)A-good > 80% B-satisfactory > 60 and < 80%C-unsatisfactory < 60%If the performance is not satisfactory , supplier may be given a chance to improve. If the supplier still falls under not satisfactory category, the supplier may be considered for removal from approved suppliers list

Some of the criteria for Vendor rating ( weightages may be given for the criteria )1. Quality of products received2. Delivery performance3. Price of product4. Flexibility in meeting demand fluctuations5. Assistance in Product development6. Cost reduction suggestions7. Implementation of Inventory plans / JIT system8. Credit terms9. Management competence10. Financial position

ProblemsCalculate vendor rating with the data below and indicate which supplier is betterWeightages for Quality=50; delivery=25; price =15 : response to suggestions = 10

Supplier data Supplier A Supplier BQuantity supplied 108 90Quantity accepted 102 90Price Rs 1 Rs 1.2Delivery promised 3 weeks 4 weeksActual delivery 2.7 weeks 5 weeksResponse to suggestions 90% 85%Solution:

# Description Supplier A Supplier B1 Percentage accepted ( quality

ratio)102/108 x 100 =94.4% 90/90 x 100 = 100%

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2 Quality rating 94.4 x 50 /100 =47.2% 100 x 50/100 = 50 %3 Delivery against promise 3/2.7 x 100=111.11% 4/5 x 100=80%4 Delivery rating 111.11 x

25/100=27.77%80 x 25/100 =20%

5 Price ratio ( in percentage )= lowest price/supplier price X 100

1/1 x 100 =100% 1/1.2 x 100=83.33%

6 Price rating 100 x 15/100= 15% 83.33 x 15/100 =12.50%

7 Response to suggestions rating 90 x 10/100= 9% 85 x 10/100= 8.5%8 Total 98.97% 91%

Supplier A is better.

Stores management

Functions of stores management1. To receive materials and account for them2. To provide adequate and proper storage various materials3. To ensure proper identification4. To preserve product from deterioration 5. To receive indents from consuming departments , issue and maintain accounts6. To minimize obsolescence by stock rotation ( FIFO method) especially shelf life items7. To highlight stock accumulation, discrepancies and abnormal consumption8. Ensure good house keeping9. To ensure efficient material handling10. To verify stock periodically

Stores layout is critical to good stores management. It should have:1. Adequate storage areas2. Good lighting3. Good material handling equipments4. Safety provisions 5. Areas marked for receipt of material, inspection areas and area for rejected goods6. Easy access to all storage areas7. Storage areas are clearly identified for quick location and fast service8. Good usage of floor space and heights9. Secure areas for costly items to prevent theft, pilferage.

Stock verification is conducted to verify the physical stock against book stock. If the discrepancies are less , it indicates good stores management.Types of stock verification: Periodic verification- stock is verified once in 6 months or 12 months. Receipts and issues

are closed and all materials are checked physically. Continuous verification- materials are divided into 52 groups and physical stock is checked

weekly. This will distribute the stock verification burden over the complete year.

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Proper classification and codification of various items helps in management of stores in an efficient way. It reduces duplication and enables reduction in sizes and varieties.

Some broad classifications are – raw materials, parts, spares, tools, packing materials, hardwareInventory ManagementInventory is the materials stocked in order to meet an unexpected demand or distribution in the future. The materials may include Raw materials, Materials in –process, Finished goods, spares, Tools and others.

Level of inventories depend on :

1. Nature of product 2. Nature of customer demand3. Lead times for manufacturing4. Lead times for procurement5. Consumption pattern6. Shelf life of product

Purpose of holding Inventories:

1. Meeting delivery requirements2. Better utilization of manpower and equipment3. flexibility in scheduling

Carrying Inventories costs money. It increases production cost.

Inventory costs are: Ordering costs - preparation of purchase order, processing payments, Receiving and

inspection Carrying costs- deterioration, pilferage, taxes, insurance, storage, Interest Capital costs- space, buildings, equipments Storage space costs- rent, power, maintenance Service costs- salaries of employees, bonus, security, Record keeping, Overtime Looses- pilferage, damages, expired products

Inventory carrying costs per year may be 20-30% of the value of Inventory.

Because of high costs involved in inventories proper management and control assumes importance .Inventory management involves; Development of policies, systems and procedures Administration of policies, systems and procedures Close interaction with other functions like customer service, production scheduling,

purchasing and transport Inventory control pertains only to administration of policies, systems and procedures

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Factors influencing Inventory management and control:

1. Type of product – if the unit cost is high, closer control is needed. Short supply may have to be stocked more. custom built products may have to be stocked more. Standard products may be stocked less.

2. Type of Manufacture - stock out situation should not be allowed to occur. Batch production and intermittent manufacture allows greater flexibility in inventory control.

3. Volume of production – inventory may not increase with volume of production. If products have many components then inventory required may be high.

4. Others- objective of the company, supplier capabilities, information systems, capabilities of personnel

Benefits of Inventory management and control:1. Ensures adequate supply of materials and minimizes stock out situations2. Reduces costly interruptions in production3. Keeps down investment in inventories and inventory costs4. Bring in purchasing economies by monitoring consumption5. Better utilization of stocks of common materials for various departments6. Better accountability7. enables identification of obsolete items and their disposition8. enables reliable and consistent financial statements

Steps in inventory management and control:

1. Determination of optimum inventory levels- too much inventory blocks capital. Less inventory may result in production interruptions. Consumption trends and sales trends offer inputs for fixing the inventory levels. Inventory levels have to be reviewed periodically and adjusted as necessary.

2. Determine degree of control – normally based on value of item. ABC analysis is made and a class items are controlled closely for variations in consumption , stock, record keeping and review. ( A- high value, low , C- low value, high quantities)

3. Plan and design inventory system-

a. Fixed Quantity system

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Maximum level

b Fixed period system

4. Organise structure to manage inventory- responsibility for inventory control, monitoring, keeping records, handling exceptions, raising requests etc ( normally production planning and control)

Inventory control techniques ABC classification- based on identification of “vital few” from ”trivial many”. And

controlling the vital few whose rupee value is high. Steps in classification is as follows;o List each item carried in inventoryo Determine annual volume and Rupee value of each itemo Calculate product of annual volume and rupee valueo Compute percentage of each item in terms of total inventory in rupeeso Select top 10% of all items which has the highest rupee percentages and

catagorise as ‘A ‘ itemso Select next 20% of all items which has the highest rupee percentages and

catagorise as ‘B‘ items

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Time

Inventory

EO Q Re order

level

Safety stock

Lead time

Replenishment level

Fixed periods

Inventory

o Select next 70% of all items which has the highest rupee percentages and catagorise as ‘C ‘ items

VED analysis ( effect on production)– V-vital, E- essential, D- desirable SDE analysis ( based on availability)- S=scarce, D-Difficult, E-easy FSN analysis ( based on consumption)- F-fast moving, S-slow moving, N- non moving Economic order quantity- EOQ is based on

TC=DC +D/Q x S + Q/ 2 x HTC = Total costD=Annual demandC= purchase cost per unitQ =quantity to be ordered ( EOQ)S= cost of placing orderH= holding cost per unit

D/Q x S = Q/ 2 x H : Q= Sq Rt ( 2DS/H )

When wide variations are there in demand or usage EOQ method does not work satisfactorily. Also inaccurate cost estimates lead to poor calculation of EOQ. EOQ must be modified with judgment.

Minimum –maximum techniqueUsed with manual inventory control systems. Min quantity is and maximum quantity are established. When withdrawal reduces the qty below min . qty. order is placed to bring to maximum level.

Two – Bin Technique-Normally done for C class items. One bin contains enough to meet the demand between orders. Other contains enough material to take care of consumption between placement of order and receipt. When first bin is an empty order is placed and materials are used from other bin.

Material requirement Planning ( MRP)For large firms with many different products and products with many components it is accurate and fast to use software for material planning purposes. MRP is such a software . Inputs to MRP are : Production plan with products, Quantities and delivery requirements Existing stock levels of various components Bill of materials ( BOM) – a list of components that make up the product. They may be

brought out, made in house or subcontracted. Purchasing information – products , suppliers and agreed prices Processing information – Production sequence, equipments, production rates

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Outputs from MRP are : Purchase orders on suppliers with Quantities and delivery dates Production schedule

Just in time ( JIT)The concept originated in japan and adopted by many companies in India.As a

concept , JIT means materials arrive on time and no inventories are held at any time. Either in raw materials, WIP or finished goods. Materials are pulled in to the system. JIT system ensures great efficiency in production To ensure a good JIT system the following are essential:

Reliable suppliers Good processes with least rejections Break downs of equipment to be very less Continuous flow of materials with no bottle necks Low setup times

Benefits of JIT are: Faster through put time Less or no storage place Visual control and enhanced quality Greatly reduced production cost Constant flow of Finished goods to customers

MRP

Purchase orders

Customer orders / production Plan

Bill of MaterialsInventory

Production Schedules

Purchase information Processing

information

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Enterprise Resource Planning ( ERP)Enterprise Resource planning is similar to MRP . It can do what MRP can do and much more. ERP is very useful for planning and controlling activities in a very large firm with very many products and operations are carried out in many locations including many countries.ERP system can handle many functions and comes in modules, each of these can be individually used or together . normally the modules are:

1. Sales and marketing2. Materials 3. Production 4. Financial5. Human resources

Inputs to ERP are : Production plan with products, Quantities and delivery requirements Existing stock levels of various components Bill of materials ( BOM) – a list of components that make up the product. They may be

brought out, made in house or subcontracted. Purchasing information – products , suppliers and agreed prices Processing information – Production sequence, equipments, production rates Sales information Human resource information Accounting information

Main vendors of ERP are SAP, Oracle, Microsoft. It may take 1-2 years to put all the inputs and get the ERP online. Once the ERP is on line., all transactions are input into ERP system on a daily basis and decisions are taken as per recommendations of the system . With ERP system, the speed of transactions , accuracy and availability of information to various persons for taking decisions are greatly improved. Productivity of personnel is greatly improved.

Benefits of ERP are:Tangible benefits:

Reduction of lead time for manufacture Improvement in delivery performance Increased Inventory turn over

Intangible benefits: Better customer satisfaction Improved supplier performance Reduced Quality costs Improved resource utilization Speed and accuracy of information Better decision making capability

Information systems for Material management:

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Effectiveness of Materials management function is greatly enhanced if supported by good information system. Some of the information computer system can provide are : Purchasing

o Automatic release of orders on approved partieso Status of receipt ( dates, Quantities, acceptance details)o Vendor ratingo Payments to vendorso Handling of complaints and corrective actionso Vendor Audit and action taken

Inventory controlo Number and value of items in inventoryo Trends of consumptiono Fast moving, slow moving, and non-moving itemso FIFO control ( First- in –first-out)o ABC analysiso Inventory trends ( weekly, monthly etc)

Measurementso Inventory carrying costso Inventory turnso Stock out or incidences of going below safety levelso Over stock situations

Value Analysis / Value EngineeringValue analysis refers to the managerial activity which deals with study of existing products and its components with the objective of reducing the cost and retaining its value or function. This is done by a team of people comprising of , normally, Design, purchase, Methods engineering.Value analysis is done on products which in market but loosing to competitors on price.The following are the steps followed;

Analysis of function of each component to check its contribution using less expensive material for same function Combining components to reduce cost Use of standard parts Taking ideas from suppliers

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Problem1 : ABC analysis:# Unit price( Rs) Consumption Annual value %1 1.5 2000 3000 0.3352 7.5 400 3000 0.3353 20 3500 70, 000 7.826 A4 80 800 64,000 7.155 A5 4 2000 8000 0.8946 65 500 32, 500 3.6337 15 750 11, 250 1.2578 22 800 17, 600 1.9679 0.5 2000 1000 0.11110 3 600 1800 0.20111 2.5 2000 5000 0.55912 17.5 1500 26250 2.93413 22 1000 22, 000 2.45914 45 2500 1, 12, 500 12.578 A15 350 600 2, 10, 000 23.479 A16 30 3500 1, 05, 000 11.739 A17 45 700 31, 500 3.52118 115 200 23, 000 2.57119 260 450 1, 17, 000 13.081 A20 15 2000 30, 000 3.354

8, 94, 400

Problem 2 : computation of EOQ No. of tires sold= 9600 Annual carrying cost is Rs 16 Ordering cost is Rs 75Compute EOQ, total cost

EOQ = SQRT (( 2 x D x S )/ H )= SQRT (( 2 x 9600 x 75 ) /16 )= 300 tires

Problem 3 ; inventory carrying cost Average inventory = 60 lakhs Salaries o stores personnel=Rs 2, 75, 000 Cost of security =Rs 80, 000 Taxes and insurance = 1% of inventory Interest rate =20% p.a. Handling of inventory= Rs 1, 50, 000 Lost / damage= Rs 20, 000Compute inventory carrying cost as a percentage of value of inventory

Total cost = 2, 75, 000 + 80, 000 + 60, 000 (1/ 100 x 60,00, 000) + 12, 00, 000 ( 20/100 X 60,00,000) + 1, 50, 000 + 20, 000 = 17, 85, 000.

Inventory carrying cost as a % of Inventory = 17, 85, 000 / 60,00,000 X 100 = 29.75%

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Module 6: Production Scheduling

Production scheduling on the shop floor aims to:

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Meet customer demands of Quantity Meet customer requirements of delivery Achieve maximum utilization resources ( human and infrastructure) Achieve lowest production cost

Production scheduling methods vary depending on type of product, continuous production or batch production, made to order or made to stock etc.

Broadly the sequence of realizing the business plan is as follows;

1. Aggregate planningDetermines the production requirements over a period of 6 months to 18 months

2. Master production schedulingConverts production plan into specific material and capacity require nets. This is the beginning of all short range planning

3. Material requirement planningConverts MPS into what materials are required , how much and when.

4. LoadingAssignment of jobs to various work centers based on future processing, resource utilization and sequence of operations

5. SequencingDetermines what jobs are to be processed when on each work centre. This depends on priorities of jobs and best utilization

6. Detailed schedulingDetermines start and finish dates and times for jobs on each machine.

7. ExpeditingActions to ensure scheduling is met by coordination for materials, tools, availability of machines and manpower.

8. Production control Information on status of plan and accruals. Information on problems that may be faced in future period. This helps in taking decisions to meet the aim of production planning and scheduling.

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Master Production Scheduling (MPS)MPS is a plan for future production . The plan unit may be weeks, months or QuarterInputs for MPS Customer orders Market forecasts Inventory levels Facility loading and capacity information

Objectives of MPS To schedule products to meet Delivery requirements To fully utilize capacity at lowest production cost

Procedure for preparation of MPS1. Estimate product quantities and due dates ( based on customer orders and Stocking

requirements)2. Decide time period For MPS ( week, month, Quarter)3. check existing Inventory4. Calculate load ( no.. of hours ) at each work centers for the time period5. Check for over loading or under loading work centers

Updating of MPS1. MPS is made as frozen, firm and open ( frozen –no change, firm –change in

exceptional cases, open- major changes may be effected02. Firm MPS is released for production planning and control3. Based on actual production and inventories MPS is updated

Poorly Designed MPS results in: Over loaded facilities Under loaded facilities Excessive inventories or frequent shortages Excessive expediting Unreliable deliveries

Detailed scheduling:

Detailed scheduling is concerned with identifying and determining Product and operations to be carried out on specific work centre Period ( day, week, month) Scheduling depends on volume of orders, nature of operations and job complexity.

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Two types of scheduling techniques are used: Forward scheduling: loading starts as soon as materials are available and work centers

are free. No control over when the product may be available. Results in excess inventories. Used where supplier is unable to meet delivery dates.

Backward scheduling: Here the delivery dates is the starting point and the loading date is determined by the lead time taken in each work center working back wards

Facility loadingFacility loading is the process of determining which work centre receives which jobLoading depends on capacity determined by load schedules, priority sequencing and work centre utilisation.Finite loading – jobs are assigned to work centers based on required hours and hours available. Infinite loading- Jobs are assigned to work centers without regard to available capacity. This requires decisions regarding overtime, subcontracting or delaying selected orders.

Load charts helps in visualizing loading and progress;

Priority sequencingQuestion of sequencing arises when several jobs require same work centre for processing. Priority indicates which is to be loaded first.

Some single-criterion priority sequencing rules1. First in first served-Normally applied at service operations like banks, super bazaars 2. Shortest processing time- Job requiring least processing time is taken first. This may

ultimately increase throughput time.3. Longest processing time-Job with longest processing time is taken first. 4. Least slack job first- slack= available time-processing time5. Earliest due date job first

Dept Machine shop Week no 3 Month January 2004

Work centre

Mon Tue Wed Thu Fri Sat

Turning

Milling

Grinding

Drilling

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6. Truncated shortest processing time- Jobs waiting for more than specified time is given priority

7. Preferred customer order- important customers are given priority8. Random selection9. Cost over time- based on ration of delay cost and processing cost10. Least change over cost- change over is based on overall cost of all change over between

jobs

Example: Single machine, 6 waiting jobsJobs Processing time

( mins)A 7B 6C 4D 3E 2F 1

Rule: longest processing time firstJobs Processing time

( mins)Total flow time

A 7 7B 6 7+6=13C 4 13+4=17D 3 17+3=20E 2 20+2=22F 1 22+1=23

Average flow time = (7+13+17+20+22+23 )/6 = 102/6= 17 mins

Rule 2; Shortest processing time first

Jobs Processing time ( mins)

Total flow time

F 1 1E 2 1+2 =3D 3 3+3=6C 4 6+4=10B 6 10+6=16A 7 16+7=23

Average flow time = (1+3+6+10+16+23 )/6 = 59/6= 9.83 mins

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Sequencing of ‘n’ jobs on 2 machines. ( Johnson’s rule )

Minimum total flow time Minimum idle time

Step 1- List all processing times on two work centersStep2-Scan the processing timesStep 3-Select the job with the shortest time. If the shortest time is at first work center , select the job first. If it is at second work center , select the job last.Step 4- remove the job from the list.Step5- continue step 2 to 4 till all jobs are assigned..

If the processing time is same on work centre 1 and 2 , arbitrarily assign either in the beginning or last.

Processing time in hoursJob Work center 1 Work center 2A 2 1B 4 2.25C 0.75 2.5D 1.5 3.0E 2.0 4.0F 2.0 3.5

Sequence : C, D, E ,F , B , A

Calculation of cumulative flow time:

Total flow time = 17 hourIdle time Work center 1= 4.75 hrsIdle time Work center 2= 075 hrsTotal idle time =5..5 hrs.Total operation time 12.25 + 16.25 = 28.5 hrs.

0.75 1.5 2.0 2.0 4.0 2.0

2.5 3.0 2.254.0 3.5 1.0

17 hours

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Check Total operation time + total idle time = twice cycle time 28.5 + 5.5 = 2 x 17= 34 hrs.

Line BalancingLine balancing deals with apportionment of sequential work activities to work stations in order to gain high utilization of labour and equipment and therefore minimize idle time.

Steps in line balancing

Step 1- determine tasks to be performed to complete one unit of finished product, determine the sequence . Draw a precedence diagram.Step2- estimate task timeStep3- determine cycle time to meet desired production ( hourly/ daily etc)Step4 – assign tasks each task to worker and balance the assembly line

Analysis of line balancing ;1. Determination of number of work stations and time available at each work station2. Group the individual tasks into approximately equal amounts of work at each work

station3. Evaluate the efficiency

Grouping of tasks should be at or slightly less than the cycle time or multiples of cycle times. If multiples are present more than one worker will be doing the same job.

Cycle time = Available time / out put required

Theoretical number of workers required: =( total operation time X out puts per period )/ available time per period per worker.

Balance efficiency = Out put of task time / cycle time x no. of work stations( workers) Balance efficiency = Theoretical no. of workers/ Actual no. of workers

Problem:Precedence diagram . operation time in minutes.

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Operation time = 7 hours per dayOutput desired is 550 units per day

Cycle time = Available time / output = 7 x 60 / 550 = 0.76 mins

Theoretical minimum no. of workers= (0.65 + 0.40 + 0.3 + 0.2 0 + 0.45 0.4 + 0.3 )/0.76= 2.7 / 0.76= 3.552

Workstation 1 : idle time = 0.11Workstation 2 : idle time = 0.06Workstation 3 : idle time = 0..11Workstation 4 : idle time = 0..06

Total idle time = 0.34 mins

Balance efficiency = (2.7 x100)/ 4 x 0.76 = 88.81%

Also = 3.552/ 4 X 100 = 88.81

Line of Balance ( LOB)

LOB is a technique used for production scheduling and control to ensure committed delivery requirements.

There are 5 stages followed on LOB technique.

Stage 1 – Preparation of operation program chart. This is based on lead times for each activity. Delivery date is taken as 0 and worked back wards

Stage 2- Preparation of completion scheduleStage 3 – Construction of line of balance chartStage 4 – Construction of program progress chart

A 0.65

F0.400

E0.45

D0.20

C0.30

B0.40

G0.30

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Stage 5 – Analysis of progress and corrective action.

Left part of chart indicates the week numbers and cumulative number of products to be completedRight side chart indicates the operations required At any period line can be drawn from left hand chart and the quantity of products that should have been completed at various operations can be easily read from the Right hand chart

Benefits of LOB Technique: LOB is a planning and controlling technique which enables controlling at each stage of

production line Production problems may be spotted early and necessary actions may be taken When products are to be delivered as per schedule and there are many processing steps and

production lead times, LOB has the greatest advantage.

Week no.

Operation stages

Cumulative completion Quantity

QTY

1 2 3 4

LOB

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Production and Operations ManagementModule 7: Quality Management

Definitions

Quality

Degree to which a set of characteristics of a product or service meet requirementsCharacteristics may be subjective or objectiveSubjective characteristics may be poor, good, excellent etc.Objective characteristics may be defective parts per million (PPM), complaints, Cost of poor Quality)

Characteristics may be:– Physical ( e.g.. Mechanical, electrical, chemical)– Sensory ( e.g.. Smell, touch, taste, sight, hearing)– Behavioral (e.g.. courtesy, honesty)– Temporal (e.g.. Punctuality, availability, reliability)– Ergonomic ( related to human safety)– Functional ( performance oriented)– Others (e.g.. maintainability, reliability, spares support)

Inspection:Inspection deals with verification of products to ensure that product produced meet specified requirements. Main purpose of Inspection is to segregate good products from bad.Inspection may at receiving stage, in process stages and final stageInspection may be inspection with instruments , testing , visual Inspection may be 100 %, sampling or Audit . extent of inspection depends on cost and risk of bad products being accepted.

Quality ControlQuality control covers activities that are performed to ensure that product meet requirements. These include right selection of materials, Statistical process control, calibration of instruments, verification of tooling, setup inspections. Quality control activities cover inspection also.

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Statistical Quality ControlStatistical Quality control deals with the application of statistical techniques for control of processes to produce quality products and also for inspection

Variability of a process (Process variation)Each work station in a manufacturing cycle converts inputs to outputs. These processes convert material inputs to value added outputs. The characteristics of Products produced may be:

Dimensional characteristics (eg Length, thickness, diameter) Form characteristics ( eg. parallelism, ovality) Physical and chemical properties ( eg. Hardness, chemical composition)

If a batch of products is produced, none individual items are not identical. There will always be very small differences. Some times, these differences are apparent only when measurements are taken with high accuracy instruments.

Variation in the batch= maximum dimension – minimum dimension

These variations are due to two broad causes Chance causes or Common causes Special causes or Assignable causes

Examples of chance causes are: slight variation in materials equipment variations (eg. Run out, play, backlash ,geometric inaccuracies positional

accuracy, repeatability) clearances in fixtures minute tool wear variations in environment (temperature, humidity) slight variation in measurements

Characteristics of chance causes are: many individual causes are present at the same time any one cause results in only a very a small amount of variation cannot be economically eliminated Output of process follows predictable pattern ( bell curve/ Normal curve)

Examples of Special causes are: Tool not sharpened when worn out batch of defective material component not located properly power failure excessive variation in measurements machine malfunction setting disturbed

Characteristics of Special causes are:

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Consists of one or few individual causes any cause can result in large variation easy to detect and generally economical to eliminate no specific pattern n the Output

Variation in the process is minimum when only chance causes are present. Also the distribution ( frequency diagram)out put exhibits normal curve.

Distribution pattern (only common causes are present)

variation in a process is the total variation that can be expected from the process when very large quantities are produced.

Variation in the process is be computed based on the output values of a batch. Normally the batch should be more 100 components .i.e. there should be at least 100 readings to calculate the process variation.

Histogram or frequency diagram is drawn to make sure that only chance causes are present. In other wards the process is under control (statistical control)Suppose N readins are taken, then Standard deviation ( sigma) ( σ ) is calculated from the formula

Process Variation

Average

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σ = root of ( (( M-X1)2 + ( M-X2)2 + ( M-X3)2 …….( M-XN)2 )/ N-1))

Where M= average of N readings X1, X2 ,X3 ……. XN are individual readings

Process variation = 6 times σ or 6 σ

Property of Normal curve

In manufacturing operations less variation means better quality.If special causes are present , the variation will be more than 6 σ. Or the pattern would change. This property is used in construction and use of control chats for statistical process control.

The out put of a process has two properties. Process average and process variation (6 sigma)Out put of a process should meet process requirements. Requirements are given in specifications or Drawings. A typical specification has a mean and Tolerance.Example: Length to be 100.0 +0.6mm means product is acceptable if the length is 100.0 or 100.6mm. Alternatively specification can be given as 100.0/100.6. This gives the lower and upper specification limits.

Difference between upper specification and lower specification is the tolerance.

Average

Process variation (6 σ)

68.3% of readings would lie in this range



3 out of 1000 reading may fall outside +/- 3 σ limits

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Two process measurements are normally made to indicate the capability of the process to meet requirements. Namely:

Process capability Cp Process capability index Cpk

Example:

Process capability = Tolerance/ process variation For the above example, the process variation is 0.3:Process capability = 0.6/0.3 = 2.0

Process capability IndexThis takes into account both tolerance and specification mean.Cpk is calculated for both upper and lower specification limits and lower of the two, is the Cpk

Cpk ( Upper)= (upper specification- process average)/ 3 sigma = (100.6-100.4)/.15 = 1.33 Cpk ( lower)= (process average –lower specification)/ 3 sigma = (100.4-100.0)/.15 = 2.66

Cpk of the process is 1.33.

If the process capability index is equal to 1.33 , the process is considered acceptable. More than 1.33 is desirable. This can take up variations in process average without producing rejects on the long run.

100.0LSL 100.6

USL

100.3Specn. mean

100.4Process average

Process variation(6 σ)=0.3

Tolerance =0.6

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Control chartsControl charts were developed by Walter Shewhart in 1920. The chart is based on the principle that the variability of a process is minimum when the process is running under chance causes (common causes) only. Trial batches are produced and process variation ( 6 sigma)is established . Control charts are prepared with control limits calculated on sample sizes . Sample sizes could be 2 to up to 9 . At fixed intervals ( eg, 30 min, one hr, 4 hrs based on production quantity) samples are taken and sample averages are plotted on the chart.

When the process is under control, all the points will be with in the limits No unnatural patterns will be present Distribution of points will be denser in the centre and very infrequent at the limits.

Any change in the above indicates presence assignable/ special causes (out of statistical control). The process is stopped and actions are taken to eliminate the causes of variation.

Construction of X bar –R chart

Step 1 - Choose quality characteristic to be controlled. Step2 - determine sample size ( 3 to 5 is ideal) and no. of samples.Step 3 - Collect samples at fixed intervals and note readings ; no. of samples depends on production rate and total duration of manufacture.Step4 -select No. of subgroups ( K ) Normally total no. of readings required is 75 to125Step 5 – Calculate mean and range for each sample

Example : sample size =3 : No. of subgroups=26

Mean

Time

LCL

UCL

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parameter for charting -bond strength in grams

Step 5 – Calculate mean of subgroups ( X-double bar)= (6.0 + 6.5 + ………..+ 3.8 + 3.5 ) / 26 = 4.72

Step 6- Calculate mean of ranges ( R-bar)=( 1.5 + 1.0 + ………… + 2.0 + 2,5) / 26 = 1.75

Step 7 - Calculate control limits for X-bar chart and R –chart Use statistical tables below:

Sample A2 D3 D4

Sub group no.

Sample 1 Sample 2 Sample 3 Sub group Mean(X-bar)

Range ( R )

1 6.5 6.5 5.0 6.0 1.52 6.5 6.0 7.0 6.5 1.03 7.0 5.5 5.5 6.0 1.54 4.0 3.0 3.5 3.5 1.05 2.0 0.0 1.0 1.0 2.06 6.0 6.0 6.0 6.0 07 6.0 4.0 4.0 4.6 2.08 6.0 4.0 6.0 5.3 2.09 5.5 5.0 4.5 5.0 1.010 7.0 6.0 6.0 6.3 1.011 4.0 3.0 3.5 3.5 1.012 4.0 3.5 3.0 3.5 1.013 5.0 3.5 5.0 4.5 1.514 6.0 4.5 4.5 5.0 1.515 4.0 6.5 5.5 5.3 2.516 4.0 7.0 7.0 6.0 3.017 5.0 6.0 4.0 5.0 2.018 3.0 6.0 6.0 5.0 3.019 5.5 5.0 7.5 6.0 2,520 7.0 6.0 5.0 6.0 2.021 5.0 5.0 5.0 5.0 022 5.0 2.5 3.5 3.6 2.523 4.0 5.5 5.0 4.8 1.524 4.0 0 2.0 2.0 4.025 5.0 3.0 3.5 3.8 2.026 2.5 5.0 3.0 3.5 2.5

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size2 1.88 0 3.273 1.02 0 2.574 0.73 0 2.285 0.58 0 2.11

For X-bar chart: ULC = X-double bar + A2 x R-bar = 4.72 + 1.02 x 1.75 = 6.50LCL = X-double bar - A2 x R-bar = 4.72 - 1.02 x 1.75 = 2.94

For R chart: ULC = D4 x R-bar = 2.57 x 1.75 = 4.50LCL = D3 x R-bar = 0 x 1.75 = 0

Step 8 – test for HomogeneityCheck sample averages or Ranges fall outside the control limits for any subgroups. sub group averages for no. 5 and 24 fall below lower control limit all values in Range are within control limits

Step 9 – remove subgroups which are outside control limits .

Step 10- Recalculate control limits

Modified X- double bar = 4.99 For X chart : Modified UCL = 6.67 : modified LCL= 4.21For range chart ; Modified ULC = 3.31 : modified LCL=0

Step 11- check for Homogeneity. Repeat the process till all reading are homogeneous.In the example , All 24 subgroups are with in control limits.

Step 12- construct control chart for X-bar and R chart

X-bar chart

UCL = 6.67

Mean =4.99

LCL = 3.31

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Types of control charts are: 1. For variable measurements (Quantitative) ( eg. Weight, dimensions):

X-R chart ( mean -Range chart) - constant sample size – most popular X-MR chart ( mean – moving range chart)- for single value per batch Median- range ( middle value –range chart) – for easy calculations X-S chart ( mean –standard deviation chart – for large sample sizes

2 For Attribute measurements (Qualitative) (OK/not OK, Good/bad): np chart, - no of defectives – for constant sample size p chart, - percentage defectives – for varying sample sizes c chart – no of defects - for constant sample size u chart – no. of defects per part - for varying sample sizes

Control chart for attributes

Sample size = n : No. pf subgroups = K : Number of defectives in sub group = cp= fraction defective = c/n ; p is calculated for each sub group ( p1=c1/n , p2=c2/n ……)p-bar ( average/ mean ) = (c1 + c2 + …….) nK

UCL = n x p-bar + 3 Sqrt ( n x p-bar ( 1 - p-bar))LCL = n x p-bar - 3 Sqrt ( n x p-bar ( 1 - p-bar))

R chart

UCL = 4.21

Mean =1.64

LCL = 0

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Acceptance sampling

100 % Inspection is costly and time consuming when quantity to be inspected is large. Sampling inspection is the best way of estimating the quality of incoming or outgoing lots.

Acceptance sampling involves taking a random sample from the lot and by inspection of the sample and after inspection to determine whether to accept the lot or not.

Sampling may be: Single sampling Double sampling Sequential sampling

The sampling plans are based on average outgoing quality levels required on the long run. Based on the these quality levels sample sizes are determined and given in statistical tables. IS 2500 is a standard which gives such a table.Depending on the average outgoing quality levels the tables gives values for lot size, sample size, quantity of defectives that is acceptable.

There is always a risk of rejecting good lots and risk of accepting bad lots in any sampling plan.

The probability o accepting bad lots is called consumer’s risk . bad lot are defined by LTPD value ( lot tolerance percent defective) and The probability o rejecting good lots is called producer’s risk. Good lots are defined by Acceptable quality levels ( AQL)

The graph which gives the characteristics of the sampling plan indicating producers risk and consumers risk is known as OC curve

np chart

UCL

Mean = p-bar

LCL

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Average Outgoing Quality level (AOQL) is the percent defectives after lots are accepted and replacement of all defective items on rejected lots.

Single samplingSample is taken only once. If the no. of defects are more than acceptable then the lot is rejected and 100 % inspection is carried out.Double samplingDepending on the number of defectives in the first sample , second sample is drawn and decision is taken. Therte will be an acceptance number c1 and a rejection number c2 fixed during the first sampling. If the value is between this , second sample is taken Sequential sampling Allows more samples to be drawn based on number of defectives in the previous sample .until the lot is accepted or rejected

Quality Circles

Quality circle (QC) is a small group of people who carry out quality improvement activities within their work area. The group may consist of 3 to 5 person normally. Features of Quality circles are:

1. QC activities performed by operating level employees.2. Voluntary participation

OC curve

Actual percentage defective

Probabality of acceptance

AQL=0.1 LTPD=0.5

0.10

0.95

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3. Small group of persons in the same work area or doing similar type of work4. Identify, define and solve problems related to work area5. QC members meet regularly( every week for an hour in normal)6. Leads to improved performance I the work area7. motivates and enriches work life8. Nature of the problems are of such that they can be solved by themselves with little help

form management9. Good work is recognized by management

Quality circles originated in Japan and has spread to other countries. Some of the organisations in India which have very active QC circles are BHEL, BEL, Canara Bank, Indian airlines, Apollo Hospital. Quality Circle Forum of India ( QCFI), a Non-profit national body , Promotes Quality circle movement in India. It has more than 2500 members and more than 25 chapters in various locations in India. QCFI organises Quality circle conventions. QC presentations by circle members and awards are a part of the convention.

Some of the don’ts in QC circles: QC members should not be chosen by management Problems should not be given by management Management persons should not be members.

Problems taken up by QC s are not restricted to Quality. Productivity improvements, cost reduction, safety, Housekeeping etc. could also be taken up. QCs are not forum for airing grievance or demands. Quality circles are not replacement for task forces, suggestion schemes,

Key benefits of Quality circles are:1. Improved quality, productivity, cost reduction, House keeping, safety etc. which are the

objectives for improvement2. Improvement of Human relations in work area3. Effective team work4. Improved communication between employees and management5. Problem solving capabilities of members6. Leadership development among members

Implementation of QCsTop management must inform their decision to all employees about the implementation of QC programSteering committee to be formed with members from various departments Steering committee should define:

Goals of QC program Long rage plan for programs Select facilitator and commit resources

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Encourage and provide resources for QC meetings Participate in QC presentations

Facilitator: Facilitator forms the link between top management and QCs. Some of the duties of facilitator are:

Co-ordination of training activities for members. To get support from top management and steering committee To provide resources.

Circle leader: Circle leader is the leader of the circle and must: Inform status of activities to management conduct meetings regularly Monitor circle activities with regard to plan Maintain enthusiasm and motivate members

Circle members: Circle members must participate actively in meetings and discussions. They should develop a good attitude towards Quality, productivity and improvements.

Five major steps in implementation of QC program are Top management orientation Training for middle management Training for facilitator, leaders and members Pilot testing in selected areas Company –wide implementation

Subjects for training for Quality circle include: Back ground and concept of Quality circles Structure of QC Problem solving methodology 7 QC tools Mock circle meetings Presentation skills

Total Quality management

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TQM is a Management philosophy and company practices that aim to harness the human and material resources in most effective way to achieve objectives of the organization

Total in “Total Quality management” means All Interested parties are considered All requirements are addressed All activities of the organization are covered All employees are involved

TQM-Fundamental concepts

CommitmentCommitment to TQM by top management is essential. Promotion of this concept at all levels and all activities of the organization is fundamental for success. Every one should be aware of his/her customers (internal and external)

Customer satisfactionUnderstanding customer needs and expectations and striving to meet them should be the key objective

Quality lossesQuality looses are losses caused by the failure to utilize most effectively the potential of human, financial and material resources in a process.

loss of customer satisfaction Loss of opportunity to add more value to customers, organization and

society Loss due to waste or misuse of resources

Participation by allAbilities of all members in the organization should be fully and effectively utilized.

Process measurementsProcess measurements to be applied to all organization activities

Continuous improvementsThe means of improvement to people and processes performance need to be Continually sought and monitored.

Problem identificationProvision for identification and resolution of potential and existing problem son a continuing basis is essentialAlignment of corporate objectives and individual attitudeRemoval of prejudices and restrictive approvals that inhibit effectiveness of the organization needs continuous attention

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Personal accountabilityRecognition of individual responsibility and authority should be accepted by all

Personal developmentThere should be continuous appraisal, training and development of individuals at all levels

TQM- implementation 1. Policy and strategy of the organization

MissionEstablish mission statement, corporate objectives, strategy for achieving these objectives and a business plan.Leadership and commitmentHave visible and sustained commitment starting from chief executive and extending to every member.Divisional objectivesEstablish objectives for each level of organization with roles and responsibilities

2 Management of the organization

Organization structureEstablish effective organization structureManagement systemEstablish, audit and keep under review an effective management systemInformation systemEstablish a planned information system through out the organization

3 Improvement of the organizationWorking environmentStructure Physical environment and relationships between individuals and the organization1Measurement of performanceEstablish measures of performance of individuals or teams involved in each processImprovement objectivesImprovement goals to be closely integrated with corporate objectivesImprovement plansEstablish plans for improvement of products, service or process quality, safety, environment impact, dependability and customer satisfaction at all levelsMonitor and reviewEnsure that all plans, targets, and measure compliment each other.Review results of improvement plans to measure effectiveness

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Some recent trends in TQM

Improve customer satisfactionImplement auditable Quality management system

Implement ISO9001, QS9000, TS16949, AS9000 as applicable

Improve environmental performance Implement ISO 14001

Improve safety and Hygiene Implement OSHAS 18001/ ISO 15001

Enhance social responsibility Implement SA 8000

Identify Improvement opportunities Conduct value stream mapping

Extensive use of tools and techniques in problem solving

7 QC tools7 Management tools

Improve supplier performance Supplier QMS development

Reduce lead time Flexible Manufacturing systemsComputerizationUse of information technology

Reduce inventory, reduce lead times JIT systemIntegration of suppliers

Effect Quantum leap/ break through improvements

Bench marking, Six sigma initiativesBusiness process re-engineeringTotal productive maintenance(TPM)Lean manufacturing

Participation by all employees Suggestion schemes5S House keepingQuality circlesQuality teams

Improve product quality Quality function deploymentDesign of Experiments

Improve planning process Policy deployment ( Goals, objective, Tasks)

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Barriers in implementation of TQMBarriers to implementation of TQM may be divided into two groups. Both of them can be tackled by systematic education, training and participation.

Organizational barriersThese consist of lack of senior management commitment, unwilling ness and non-involvement of middle level management. Staff treating themselves as experts and not amenable to suggestions from line people..

Behavioral barriersThese may be also called as attitudinal barriers. Artificial organizational structures, negative attitude to changes and improvements, dislike because of previous experiences arte some of the factors.

Effects of TQM implementation in a company

# Aspect Before After1 Top management

commitmentNot visible Highly visible

2 Policy clarity No policy Transparent , detailed3 Participation in

improvementsVery few persons All levels

4 Involvement of people < 10% >80%5 Communication No or poor

communicationEffective communication at all levels

6 Recognition Seldom Always7 Customer satisfaction low high8 Cost of poor quality high Very low9 Training activities Almost nil Continuous, every one10 Performance

measurementsNot focused Focused and targeted

11 Business results Stagnant or declining Steady improvement12 Suppliers Outsiders keep them in

dark, squeeze them.Willing to work as extension of the company

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Producation and operation Mgt............

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