UNIT - 1

Nature And Scope of Production And Operation Management

 
E.S.Buffa defines production management as follows: ‘Production management deals with
decision-making related to production processes so that the resulting goods or services are
produced according to specifications, in the amount and by the schedule demanded and out of
minimum cost’.

Joseph G .Monks defines Operations Management as the process whereby resources, flowing

with in a defined system, are combined and transformed by a controlled manner to add value in
accordance with policies communicated by management.
Objectives of Production/Operations Management:

Some of the important objectives of production/operations management are:

(i) Maximum customer satisfaction through quality, reliability, cost and delivery time.

(ii) Minimum scrap/rework resulting in better product quality.

(iii) Minimum possible inventory levels (i.e.,optimum inventory levels).

(iv) Maximum utilisation of all kinds of resources needed.

 (v) Minimum cash outflow.

(vi) Maximum employee satisfaction.

(vii) Maximum possible production (i.e., outputs).

(viii) Higher operating efficiency.

(ix) Minimum production cycle time.

(x) Maximum possible profit or return on investment.

(xi) Concern for protection of environment.

(xii) Maximum possible productivity.

NATURE OF PRODUCTION/OPERATIONS:

The nature of production or operations can be better understood by viewing the manufacturing
function as :

(i) Production/operations as a system,

(ii) Production/operations as an organisational function,

(iii) Production/operations as a conversion or transformation process and

(iv) Production/operations as a means of creating utility.

These four distinct views are discussed in the following section.

 Production/Operations as a System

This view is also known as “systems concept of production”. A system is defined as the
collection of interrelated entities. The systems approach views any organisation or entity as an
arrangement of interrelated parts that interact in ways that can be specified and to some extent
 predicted. Production is viewed as a system which converts a set of inputs into a set of desired
outputs. A production system has the following elements or parts : (i) Inputs,

(ii) Conversion process or transformation process,

(iii) Outputs

(iv) Transportation subsystem,

(v) Communication subsystem and

(vi) Control or decision making subsystem.

 Production/Operations as a Conversion/Transformation Process

The conversion or transformation sub-system is the core of a production system because it

consists of processes or activities wherein workers, materials, machines and equipment are used
to convert inputs into outputs. The conversion process may include manufacturing processes
such as cutting, drilling, machining, welding, painting, etc., and other processes such as packing,
selling, etc. Any conversion process consists of several small activities referred to as
“operations” which are some steps in the overall process of producing a product or service that
leads to the final output.

 Production/Operations as a Means of Creating Utility:

Production is defined as the process of adding to the value of outputs or the process of creating
utility in outputs. “Utility” is the power of satisfying human needs. During the process of
converting the raw materials into finished goods, various types of utilities are created while
adding value to the outputs. These

Types of utilities are:

 Form utility:
 This is created by changing the size, shape, form, weight, colour, smell of inputs in order to
make the outputs more useful to the customers. For example, iron ore is changed to steel, wood
is changed to furniture, etc.

 Place utility:

This is created by changing the places of inputs or transporting the inputs from the source of
their availability to the place of their use to be converted into outputs. For example the iron ore
and coal are transported from the mines to the steel plant to be used in the conversion process.

 Time utility:

This is created by storage or preservation of raw materials or finished goods which are in
abundance sometime, so that the same can be used at a later time when they become scarce due
to higher demand exceeding the quantity available.

 Possession utility:

This is created by transferring the possession or ownership of an item from one person to another
person. For example, when a firm purchases materials from a supplier, the possession utility of
the materials will increase when they are delivered to the buying firm.

 Service utility:

Which is the utility created by rendering some service to the customer. For example, a doctor or
a lawyer or an engineer creates service utility to a client/customer by rendering service directly
to the client/customer.

 Knowledge utility:

This is created by imparting knowledge to a person. For example, a sales presentation or an

advertisement about some product communicates some information about the product to the
customer, thereby imparting knowledge.
 SCOPE OF PRODUCTION AND OPERATION MANAGEMENT

Production and operations management concern with the conversion of inputs into outputs, using
physical resources, so as to provide the desired utilities to the customer while meeting the other
organizational objectives of effectiveness, efficiency and adaptability. It distinguishes itself from
other functions such as personnel, marketing, finance, etc., by its primary concern for
‘conversion by using physical resources.’ Following are the activities which are listed under
production and operations management functions:

1. Location of facilities
2. Plant layouts and material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management.

Location of facilities for operations is a long-term capacity decision which involves a long term
commitment about the geographically static factors that affect a business organization. It is an
important strategic level decision-making for an organization. It deals with the questions such as
‘where our main operations should be based?’

Plant layout refers to the physical arrangement of facilities. It is the configuration of

departments, work centers and equipment in the conversion process. The overall objective of the
plant layout is to design a physical arrangement that meets the required output quality and
quantity most economically.

According to James Moore, “Plant layout is a plan of an optimum arrangement of facilities

including personnel, operating equipment, storage space, material handling equipment’s and all
other supporting services along with the design of best structure to contain all these facilities”.
‘Material Handling’ refers to the ‘moving of materials from the store room to the machine and
from one machine to the next during the process of manufacture’. It is also defined as the ‘art
and science of moving, packing and storing of products in any form’. It is a specialized activity
for a modern manufacturing concern, with 50 to 75% of the cost of production.

Product design deals with conversion of ideas into reality. Every business organization have to
design, develop and introduce new products as a survival and growth strategy. Developing the
new products and launching them in the market is the biggest challenge faced by the
organizations.

Process design is a macroscopic decision-making of an overall process route for converting the
raw material into finished goods. These decisions encompass the selection of a process, choice of
technology, process flow analysis and layout of the facilities.

Production planning and control can be defined as the process of planning the production in
advance, setting the exact route of each item, fixing the starting and finishing dates for each item,
to give production orders to shops and to follow up the progress of products according to orders.
Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.
Planning bridges the gap from where we are, to where we want to go. Routing may be defined as
the selection of path which each part of the product will follow, which being transformed from
raw material to finished products. Scheduling determines the programmer for the operations.
Scheduling may be defined as ‘the fixation of time and date for each operation’ as well as it
determines the sequence of operations to be followed.

Dispatching is concerned with the starting the processes. It gives necessary authority so as to
start a particular work, which has already been planned under ‘Routing’ and ‘Scheduling’.

Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of
quality in a product or service’. It is a systematic control of various factors that affect the quality
of the product. Quality control aims at prevention of defects at the source, relies on effective feed
back system and corrective action procedure. Quality control can also be defined as ‘that
industrial management technique by means of which product of uniform acceptable quality is
 manufactured’. It is the entire collection of activities which ensures that the operation will
produce the optimum quality products at minimum cost.

The main objectives of quality control are: To improve the companies income by making the
production more acceptable to the customers i.e., by providing long life, greater usefulness,
maintainability, etc. To reduce companies cost through reduction of losses due to defects. To
achieve interchange ability of manufacture in large scale production. To produce optimal quality
at reduced price. To ensure satisfaction of customers with productions or services or high quality
level, to build customer goodwill, confidence and reputation of manufacturer. To make
inspection prompt to ensure quality control. To check the variation during manufacturing.

Materials management is that aspect of management function which is primarily concerned with
the acquisition, control and use of materials needed and flow of goods and services connected
with the production process having some predetermined objectives in view.

The main objectives of materials management are:

 To minimize material cost.

 To purchase, receive, transport and store materials efficiently and to reduce the related
cost.
 To cut down costs through simplification, standardization, value analysis, import
substitution, etc.
 To trace new sources of supply and to develop cordial relations with them in order to
ensure continuous supply at reasonable rates.
 To reduce investment tied in the inventories for use in other productive purposes and to
develop high inventory turnover ratios.

THE SCOPE OF OPERATIONS MANAGEMENT

Operations management has been gaining increased recognition in recent years because of the
following reasons:

(i) The application of operations management concepts in service operations.

(ii) The growing importance of quality.

(iii) The introduction of operation management concepts to other areas such as marketing and
human resources and

(iv) The realization that the operations management function can add value to the end product.

OM AND ITS RELATION WITH OTHER FUNCTIONAL AREAS

Definition of Operations Management

What is the operations management (OM)? Operations management is the activity of managing
the resources which produce and deliver the goods and services (Slack etal. , 2010) Operations
management is the business function that responsible to planning, organizing, coordinating and
controlling the resources needed to produce a company’s products and services. The operations
function can be connected to other functional operations within organization such as marketing,
finance, human resource and etc. so it can be described that all functional areas undertake
operations activities because they all produce the services and goods. The operations manager is
the person who supervised the production, make decision on operations processes and regarding
to connecting into other functional areas. Thus, today every company realized that operations
management is important and also agreed that is the main core function to organize their
organization.

The Role of operations Management

The role of operations management is to create some kind of value-added in form of goods and
services by transforming a company’s inputs into output as finished goods and services. The
activities in operations can be divided as input, transformation process and output. The
company’s inputs include human resources such as workers and managers, information,
technology IT and facilities and processes such as equipments, buildings or lands and materials.
Then the operations system will convert the transformed resources from inputs into outputs that
are goods and services which produced by company and after that will get feedback information
about the activities in the operation system.
The relationship between Operations and Other Functions
The roles of operations management function and the decision was made by operations managers
interact with other functional areas in business. This will explain the relationship between
operations and other function clearly. As most businesses known, there are three main functional
areas in organization: finance, marketing and operations as the main supporter in their business,
yet other functions also supporting an organization as well. Although these functions scope in
different activities, they must interact achieve the goal of the organization and drive the business
moving forward too.

Finance function will responsible to controlling of the funds and judging the need for capital
investment such as equipments or relocations, collecting money and covering make decisions on
make-or-buy in organization and also plant expansions. Finance function cannot work without
understanding operations concepts and needed. On the other hand, operations managers cannot
make the financial plans without understanding the key and method of evaluating of financial
investment as well. It is essential that both functions must understand each other and work
together.

Marketing function will generates the demand for the company’s goods and services by
understanding customers needed and find out the way to build and develop the new markets. Sale
will not be happened if they do not understand what operations can produce or what due date can
meet or cannot and what type of customization operations to deliver. Thus, the main needed of
marketing and operations work closely together and both of them are important as marketing
providing the forecast of demand which operations will produce the goods and services and
sending to customers.

Production and operations, the main responsible on operations function is to produce goods
and services and deliver to customers on time. As mentioned previously, operations function will
connect with any functional areas by the operations roles.

Human resources will responsible on recruitment and labor relation and they must understand
job requirement and worker skills when they hire people in any positions. The operations
managers need to understand job market trends, labor cost when hiring or lay-off and the cost for
training lead to efficiency on employees’ management.

Information technology which co-ordinates with the computer-based information needed and
enables information flow through the organization and allow operations management to operate
effectively. Generally, operations management is heavily dependent on information technology
such as the forecast of demands, schedule of worker, level of quality to achieved and supplier
deliveries. Usually, this close relationship between operations management and information
technology will work together for design information network.

Accounting will consider the current performance measures, inventory management and labor
standard in order to develop the cost data for organization. In turn, operations managers should
communicate to accounting about billing information and the process improvement. To make
decisions about the cost management is highly depend on accounting data that shown the
relationship between two of them.

The New Trends in Operations Management

As mentioned previously, most businesses concern that operations management is the main core
function in organization and it continuously changing the business environment to meet the new
and exciting challenges in new business world today. As increasing the global competition,
developing technology into advanced level, improving job opportunities in operations
management, to concerning on environment and emphases to link the operations function more
closely with customers and suppliers.

Increased Global Competition

Today the business world changing itself is rapidly into new single global economy which
increasing competition on business around the world. Cause of more reliable on worldwide
communication and transportation networks than several years ago that market was dominated
by local or national companies. Now, many companies expand their business to foreign markets
which is the opportunities on operations function to take a broader, show how they are develop
operation’s strategy and more global perspective for companies to remain the competitive. Also
operations function must responsible managing an organization to remain and survive on globe’s
market place and competition.

Technologies changes and Job Opportunities

The advances in technology in this recent year are impact on operation management function.
The increased use of information technology, automations and robotics are permitted to improve
the quality of goods and services. The advances technology also addressed new requirement on
workforce and even on customer, especially on service operation (McGraw H, 2004). The
organization should be considered skilled worker, empowered employees replacing unskilled
worker in all areas of operations. Thus, this is become a new challenge on operations
management to changing job specialization, social-culture and increasing a knowledge and
information society to organization.

Better Quality Goods and Services

In the business environment today the higher-quality products are show up on increased global
competition and the standard high-quality continuous increasing. This is the new trend on
operations management to produce high-quality products but end up with the lower cost.

Environment issues
Many companies today are taking up the challenge to produce the environmentally friendly
products with environmentally friendly processes which undertake of operations management.
They were concerned about environment issues and the increased of disposal costs that happened
much more than before. This is an opportunity on operations function to create an
environmentally sensitive production, green manufacturing and recycle materials throughout the
new business world.

RECENT TRENDS

From Division of Labour to Scientific Management and Mass Production, Operations has always tried to adjust to
the need of the businesses by improvising and innovating with several trends.

Similarly, the following discussion illustrates how Operations are strategized these days and what are the recent
trends, which are affecting Operations Management.
COMPUTER AIDED DESIGN AND MANUFACTURING

After the trend of Scientific Management and automation, the next big step was CAD/CAM. These computer-aided
operations meant that all the designing and manufacturing of the product would be done with the help of computers
making the operations way more efficient.These systems immensely helped in new product development and
redesigning the processes.

General Motors had its first brush with computer-aided systems in 1996 and ended up saving time and money by
using these systems. It helped the company launch new vehicles faster and more efficiently by making the process
much smoother.

SHRINKING PRODUCT LIFE CYCLE

In the past, product life cycle used to be comparatively longer and when a product was introduced, it generally
stayed in the market for a longer period of time. Now with the fast expansion of technology, product life cycles have
become short and almost every product gets replaced by a new product in shorter time spans (Stevenson, 2005). Due
to this reason, companies are forced to introduce rapid development of new products with encouraging innovation.
This has provided a new challenge and requires redesigning of operations making the process faster.

SUPPLY CHAIN MANAGEMENT

Supply Chain partners are required to be more in tune with the needs of the end users as a result of shorter product
life cycles, demanding customers, fast changes in technology, material and processes. And because suppliers can
contribute unique expertise, operations managers are outsourcing and building long-term partnerships with critical
players in the supply chain.

MASS CUSTOMIZATION

In the past, there used to be large-scale standardized mass production to gain economies of scale. Now with
increased flexibility and competition, companies are forced to respond with creative product designs and flexible
production processes that cater to the individual whims of consumers (Stevenson, 2005). The trend has now been
changing towards customized production of goods, whenever and wherever needed. This has led to change in the
way operations were designed earlier leading to better and more efficient processes.

EMPLOYEE ENVOLVEMENT

In the past, employees were treated as just another input to the production process where they were treated more or
less like machines and worker concerns were generally ignored. The knowledge explosion and more technical
workplace have combined to require more competence in the workplace.
Operations managers now respond by moving more decision making to individual workers. With the development
of HRM alongside, firms tend to focus more on employee empowerment, treating employees as resources that bring
competitive edge to the firm. Quality management training based on lean philosophy has been very popular recently,
making employee involvement an essential part of the improvement process.

GREEN MANUFACTURING

In the past, the focus of the production was aimed on obtaining resources at lowest possible cost ignoring the
damage made to the environment. Operations’ managers now are increasingly getting concerned with design of
products and processes that are ecologically sustainable. That means designing and packaging products that
minimize resource use, are biodegradable, can be recycled and generally environment friendly.

In other words, Green production has been seen as a recent trend in operations management concerning ecological
sustainability.

OPERATIONS TURNING LEAN

Interestingly, all the trends discussed above can boil down to the “Lean” philosophy. Be it Sustainability or Mass
Customization, both the trends are two different aspects of lean operations. Businesses can lead to successful
Sustainable Management, only by following a part\ of lean philosophy: continuous improvement. In fact, Mass
Customization has been possible just because JIT, since it helps customise the products according to the customers’
needs or preferences without increasing costs or manufacturing time.

LEAN OPERATIONS – JUST IN TIME

JIT is a method of planning and control and an operations philosophy that aims to meet demand instantaneously
with perfect quality and no waste (Slack et al, 2007). Lean Operations philosophy replaces the past methods of mass
production where there were batches of produced goods sold at mass, generating economies of scale. The recent
trend in operations management era has shifted this to Just in Time production where goods and services are
produced upon the receipt of order with customizations, resultant being a drastic reduction of inventory cost.

Lean philosophy is based on the principle of moving towards the elimination of all the waste in order to develop an
operation that is faster, more dependable, produces higher-quality products and services and above all, operates at
low cost. An understanding of lean operations can be

developed through the phrase that is often used interchangeably with ‘lean’ – just in time or sometimes lean
synchronization. This is because apparently the means to achieve the lean state are less easily explained and
sometimes counterintuitive 
T HE OR Y OF C ONS TR AI N TS ?

The Theory of Constraints is a methodology for identifying the most important limiting factor
(i.e. constraint) that stands in the way of achieving a goal and then systematically improving that
constraint until it is no longer the limiting factor. In manufacturing, the constraint is often
referred to as a bottleneck.

The Theory of Constraints takes a scientific approach to improvement. It hypothesizes that every
complex system, including manufacturing processes, consists of multiple linked activities, one of
which acts as a constraint upon the entire system (i.e. the constraint activity is the “weakest link
in the chain”).

So what is the ultimate goal of most manufacturing companies? To make a profit – both in the
short term and in the long term. The Theory of Constraints provides a powerful set of tools for
helping to achieve that goal, including:

 The Five Focusing Steps (a methodology for identifying and eliminating constraints)
 The Thinking Processes (tools for analyzing and resolving problems)
 Throughput Accounting (a method for measuring performance and guiding management
decisions)

Dr. Eliyahu Goldratt conceived the Theory of Constraints (TOC), and introduced it to a wide
audience through his bestselling 1984 novel, “The Goal”. Since then, TOC has continued to
evolve and develop, and today it is a significant factor within the world of management best
practices.

One of the appealing characteristics of the Theory of Constraints is that it inherently prioritizes
improvement activities. The top priority is always the current constraint. In environments where
there is an urgent need to improve, TOC offers a highly focused methodology for creating rapid
improvement.

A successful Theory of Constraints implementation will have the following benefits:

 Increased profit (the primary goal of TOC for most companies)

  Fast improvement (a result of focusing all attention on one critical area – the system
constraint)
 Improved capacity (optimizing the constraint enables more product to be manufactured)
 Reduced lead times (optimizing the constraint results in smoother and faster product
flow)
 Reduced inventory (eliminating bottlenecks means there will be less work-in-process)

B A SI C S OF TOC

Core Concept

The core concept of the Theory of Constraints is that every process has a single constraint and
that total process throughput can only be improved when the constraint is improved. A very
important corollary to this is that spending time optimizing non-constraints will not provide
significant benefits; only improvements to the constraint will further the goal (achieving more
profit).

Thus, TOC seeks to provide precise and sustained focus on improving the current constraint until
it no longer limits throughput, at which point the focus moves to the next constraint. The
underlying power of TOC flows from its ability to generate a tremendously strong focus towards
a single goal (profit) and to removing the principal impediment (the constraint) to achieving
more of that goal. In fact, Goldratt considers focus to be the essence of TOC.

The Five Focusing Steps

The Theory of Constraints provides a specific methodology for identifying and eliminating
constraints, referred to as the Five Focusing Steps. As shown in the following diagram, it is a
cyclical process.
 The Theory of Constraints uses a process known as the Five Focusing Steps to identify and eliminate
constraints (i.e. bottlenecks).

The Five Focusing Steps are further described in the following table.

Step Objective

Identify Identify the current constraint (the single part of the process that limits the rate
at which the goal is achieved).

Exploit Make quick improvements to the throughput of the constraint using existing
resources (i.e. make the most of what you have).

Subordinat Review all other activities in the process to ensure that they are aligned with and
e truly support the needs of the constraint.

Elevate If the constraint still exists (i.e. it has not moved), consider what further actions
can be taken to eliminate it from being the constraint. Normally, actions are
continued at this step until the constraint has been “broken” (until it has moved
somewhere else). In some cases, capital investment may be required.

Repeat The Five Focusing Steps are a continuous improvement cycle. Therefore, once a
Step Objective

constraint is resolved the next constraint should immediately be addressed. This

step is a reminder to never become complacent – aggressively improve the
current constraint…and then immediately move on to the next constraint.

The Thinking Processes

The Theory of Constraints includes a sophisticated problem solving methodology called the
Thinking Processes. The Thinking Processes are optimized for complex systems with many
interdependencies (e.g. manufacturing lines). They are designed as scientific “cause and effect”
tools, which strive to first identify the root causes of undesirable effects (referred to as UDEs),
and then remove the UDEs without creating new ones.

The Thinking Processes are used to answer the following three questions, which are essential to
TOC:

 What needs to be changed?

 What should it be changed to?
 What actions will cause the change?

Examples of tools that have been formalized as part of the Thinking Processes include:

Tool Role Description

Current Documents the Diagram that shows the current state, which is
Reality Tree current state. unsatisfactory and needs improvement. When creating
the diagram, UDEs (symptoms of the problem) are
identified and traced back to their root cause (the
underlying problem).

Evaporating Evaluates Diagram that helps to identify specific changes (called

Cloud Tree potential injections) that eliminate UDEs. It is particularly useful
Tool Role Description

improvements. for resolving conflicts between different approaches to

solving a problem. It is used as part of the process for
progressing from the Current Reality Tree to the Future
Reality Tree.

Future Reality Documents the Diagram that shows the future state, which reflects the
Tree future state. results of injecting changes into the system that are
designed to eliminate UDEs.

Strategy and Provides an action Diagram that shows an implementation plan for
Tactics Tree plan for achieving the future state. Creates a logical structure that
improvement. organizes knowledge and derives tactics from strategy.
Note: this tool is intended to replace the formerly used
Prerequisite Tree in the Thinking Processes.

Throughput Accounting

Throughput Accounting is an alternative accounting methodology that attempts to eliminate

harmful distortions introduced from traditional accounting practices – distortions that promote
behaviors contrary to the goal of increasing profit in the long term.

In traditional accounting, inventory is an asset (in theory, it can be converted to cash by selling
it). This often drives undesirable behavior at companies – manufacturing items that are not truly
needed. Accumulating inventory inflates assets and generates a “paper profit” based on inventory
that may or may not ever be sold (e.g. due to obsolescence) and that incurs cost as it sits in
storage. The Theory of Constraints, on the other hand, considers inventory to be a liability –
inventory ties up cash that could be used more productively elsewhere.

In traditional accounting, there is also a very strong emphasis on cutting expenses. The Theory of
Constraints, on the other hand, considers cutting expenses to be of much less importance than
increasing throughput. Cutting expenses is limited by reaching zero expenses, whereas
increasing throughput has no such limitations.

These and other conflicts result in the Theory of Constraints emphasizing Throughput
Accounting, which uses as its core measures: Throughput, Investment, and Operating Expense.

Core
Measures Definition

Throughput The rate at which customer sales are generated less truly variable costs
(typically raw materials, sales commissions, and freight). Labor is not
considered a truly variable cost unless pay is 100% tied to pieces produced.

Investment Money that is tied up in physical things: product inventory, machinery and
equipment, real estate, etc. Formerly referred to in TOC as Inventory.

Operating Money spent to create throughput, other than truly variable costs (e.g. payroll,
Expense utilities, taxes, etc.). The cost of maintaining a given level of capacity.

In addition, Throughput Accounting has four key derived measures: Net Profit, Return on
Investment, Productivity, and Investment Turns.

Net Profit = Throughput − Operating Expenses

Return on Investment = Net Profit / Investment

Productivity = Throughput / Operating Expenses

Investment Turns = Throughput / Investment

In general, management decisions are guided by their effect on achieving the following
improvements (in order of priority):

 Will Throughput be increased?

  Will Investment be reduced?
 Will Operating Expenses be reduced?

The strongest emphasis (by far) is on increasing Throughput. In essence, TOC is saying to focus
less on cutting expenses (Investment and Operating Expenses) and focus more on building sales
(Throughput).

Drum-Buffer-Rope

Drum-Buffer-Rope (DBR) is a method of synchronizing production to the constraint while

minimizing inventory and work-in-process.

The “Drum” is the constraint. The speed at which the constraint runs sets the “beat” for the
process and determines total throughput.

The “Buffer” is the level of inventory needed to maintain consistent production. It ensures that
brief interruptions and fluctuations in non-constraints do not affect the constraint. Buffers
represent time; the amount of time (usually measured in hours) that work-in-process should
arrive in advance of being used to ensure steady operation of the protected resource. The more
variation there is in the process the larger the buffers need to be. An alternative to large buffer
inventories is sprint capacity (intentional overcapacity) at non-constraints. Typically, there are
two buffers:

 Constraint Buffer (immediately before the constraint; protects the constraint)

 Customer Buffer (at the very end of the process; protects the shipping schedule)

The “Rope” is a signal generated by the constraint indicating that some amount of inventory has
been consumed. This in turn triggers an identically sized release of inventory into the process.
The role of the rope is to maintain throughput without creating an accumulation of excess
inventory.
T HE NA TUR E OF C ONS TR AI N TS

What are Constraints?

Constraints are anything that prevents the organization from making progress towards its goal. In
manufacturing processes, constraints are often referred to as bottlenecks. Interestingly,
constraints can take many forms other than equipment. There are differing opinions on how to
best categorize constraints; a common approach is shown in the following table.

Constraint Description

Physical Typically equipment, but can also be other tangible items, such as material
shortages, lack of people, or lack of space.

Policy Required or recommended ways of working. May be informal (e.g. described to

new employees as “how things are done here”). Examples include company
procedures (e.g. how lot sizes are calculated, bonus plans, overtime policy),
union contracts (e.g. a contract that prohibits cross-training), or government
regulations (e.g. mandated breaks).

Paradigm Deeply engrained beliefs or habits. For example, the belief that “we must always
keep our equipment running to lower the manufacturing cost per piece”. A close
relative of the policy constraint.

Market Occurs when production capacity exceeds sales (the external marketplace is
constraining throughput). If there is an effective ongoing application of the
Theory of Constraints, eventually the constraint is likely to move to the
marketplace.

There are also differing opinions on whether a system can have more than one constraint. The
conventional wisdom is that most systems have one constraint, and occasionally a system may
have two or three constraints.
In manufacturing plants where a mix of products is produced, it is possible for each product to
take a unique manufacturing path and the constraint may “move” depending on the path taken.
This environment can be modeled as multiple systems – one for each unique manufacturing path.

Policy Constraints

Policy constraints deserve special mention. It may come as a surprise that the most common
form of constraint (by far) is the policy constraint.

Since policy constraints often stem from long-established and widely accepted policies, they can
be particularly difficult to identify and even harder to overcome. It is typically much easier for an
external party to identify policy constraints, since an external party is less likely to take existing
policies for granted.

When a policy constraint is associated with a firmly entrenched paradigm (e.g. “we must always
keep our equipment running to lower the manufacturing cost per piece”), a significant investment
in training and coaching is likely to be required to change the paradigm and eliminate the
constraint.

Policy constraints are not addressed through application of the Five Focusing Steps. Instead, the
three questions discussed earlier in the Thinking Processes section are applied:

 What needs to be changed?

 What should it be changed to?
 What actions will cause the change?

The Thinking Processes are designed to effectively work through these questions and resolve
conflicts that may arise from changing existing policies.

S I MPL I FI ED R OA D MA P

An excellent way to deepen your understanding of the Theory of Constraints is to walk through a
simple implementation example. In this example, the Five Focusing Steps are used to identify
and eliminate an equipment constraint (i.e. bottleneck) in the manufacturing process.
Step One – Identify the Constraint

In this step, the manufacturing process is reviewed to identify the constraint. A simple but often
effective technique is to literally walk through the manufacturing process looking for indications
of the constraint.

Item Description

WIP Look for large accumulations of work-in-process on the plant floor. Inventory often
accumulates immediately before the constraint.

Expedite Look for areas where process expeditors are frequently involved. Special attention
and handholding are often needed at the constraint to ensure that critical orders
are completed on time.

Cycle Review equipment performance data to determine which equipment has the
Time longest average cycle time. Adjust out time where the equipment is not operating
due to external factors, such as being starved by an upstream process or blocked by
a downstream process. Although such time affects throughput, the time loss is
usually not caused or controlled by the starved/blocked equipment.

Demand Ask operators where they think equipment is not keeping up with demand. Pay
close attention to these areas, but also look for other supporting indicators.

The deliverable for this step is the identification of the single piece of equipment that is
constraining process throughput.

Step Two – Exploit the Constraint

In this step, the objective is to make the most of what you have – maximize throughput of the
constraint using currently available resources. The line between exploiting the constraint (this
step) and elevating the constraint (the fourth step) is not always clear. This step focuses on quick
wins and rapid relief; leaving more complex and substantive changes for later.
Item Description

Buffer Create a suitably sized inventory buffer immediately in front of the constraint
to ensure that it can keep operating even if an upstream process stops.

Quality Check quality immediately before the constraint so only known good parts
are processed by the constraint.

Continuous Ensure that the constraint is continuously scheduled for operation (e.g.
Operation operate the constraint during breaks, approve overtime, schedule fewer
changeovers, cross-train employees to ensure there are always skilled
employees available for operating the constraint).

Maintenance Move routine maintenance activities outside of constraint production time

(e.g. during changeovers).

Offload Offload some constraint work to other machines. Even if they are less
(Internal) efficient, the improved system throughput is likely to improve overall
profitability.

Offload Offload some work to other companies. This should be a last resort if other
(External) techniques are not sufficient to relieve the constraint.

The deliverable for this step is improved utilization of the constraint, which in turn will result in
improved throughput for the process. If the actions taken in this step “break” the constraint (i.e.
the constraint moves) jump ahead to Step Five. Otherwise, continue to Step Three.

Step Three – Subordinate and Synchronize to the Constraint

In this step, the focus is on non-constraint equipment. The primary objective is to support the
needs of the constraint (i.e. subordinate to the constraint). Efficiency of non-constraint
equipment is a secondary concern as long as constraint operation is not adversely impacted.
By definition, all non-constraint equipment has some degree of excess capacity. This excess
capacity is a virtue, as it enables smoother operation of the constraint. The manufacturing
process is purposely unbalanced:

Item Description

Upstream Upstream equipment has excess capacity that ensures that the constraint buffer
is continuously filled (but not overfilled) so that the constraint is never
“starved” by the upstream process.

Downstrea Downstream equipment has excess capacity that ensures that material from the
m constraint is continually processed so the constraint is never “blocked” by the
downstream process.

Some useful techniques for this step include:

Item Description

DBR Implement DBR (Drum-Buffer-Rope) on the constraint as a way of

synchronizing the manufacturing process to the needs of the constraint.

Priority Subordinate maintenance to the constraint by ensuring that the constraint is

always the highest priority for maintenance calls.

Sprint Add sprint capacity to non-constraint equipment to ensure that interruptions to

their operation (e.g. breakdowns or material changes) can quickly be offset by
faster operation and additional output.

Steady Operate non-constraint equipment at a steady pace to minimize stops. Frequent

Operation inertial changes (i.e. stops and speed changes) can increase wear and result in
Item Description

breakdowns.

The deliverable for this step is fewer instances of constraint operation being stopped by upstream
or downstream equipment, which in turn results in improved throughput for the process. If the
actions taken in this step “break” the constraint (i.e. the constraint moves) jump ahead to Step
Five. Otherwise, continue to Step Four.

Step Four – Elevate Performance of the Constraint

In this step, more substantive changes are implemented to “break” the constraint. These changes
may necessitate a significant investment of time and/or money (e.g. adding equipment or hiring
more staff). The key is to ensure that all such investments are evaluated for effectiveness
(preferably using Throughput Accounting metrics).

Item Description

Performance Data Use performance data (e.g. Overall Equipment Effectiveness metrics plus

downtime analytics) to identify the largest sources of lost productive time
at the constraint.

Top Losses Target the largest sources of lost productive time, one-by-one, with cross-
functional teams.

Reviews Implement ongoing plant floor reviews within shifts (a technique

called Short Interval Control) to identify tactical actions that will improve
constraint performance.

Setup Reduction Implement a setup reduction program to reduce the amount of

Item Description

productive time lost to changeovers.

Updates/Upgrade Evaluate the constraint for potential design updates and/or component
s upgrades.

Equipment Purchase additional equipment to supplement the constraint (a last

resort).

The deliverable for this step is a significant enough performance improvement to break the
constraint (i.e. move the constraint elsewhere).

Step Five – Repeat the Process

In this step, the objective is to ensure that the Five Focusing Steps are not implemented as a
one-off improvement project. Instead, they should be implemented as a continuous
improvement process.

Item Description

Constraint If the constraint has been broken (the normal case), recognize that there is a
Broken new constraint. Finding and eliminating the new constraint is the new
priority (restart at Step One).

Constraint Not If the constraint has not been broken, recognize that more work is required,
Broken and a fresh look needs to be taken, including verifying that the constraint has
been correctly identified (restart at Step One).

This step also includes a caution…beware of inertia. Remain vigilant and ensure that
improvement is ongoing and continuous. The Five Focusing Steps are kind of like “Whac-A-
Mole”…pound one constraint down and then move right on to the next!
TYPES OF PRODUCTION SYSTEMS

Production systems can be classified as Project Production,Job-shop, Batch, Mass and

Continuous production systems.
Fig. 1.2 Classifications of production systems

Project Production

Intermittent Production

– Production system is flexible

– Design of the product can be change time to time
– We can adjust production system according to the order

Characteristics of Intermittent Production

 General purpose machines and equipment are used

 Variety of the product can be produced
 Production is not continuous
 Process layout is adopted
  Volume of production is small
 Production is as per the customer order

Project Production

 Single assignment job is there

 Complex in nature
 This system is for specific time period
 Specific expenditure is there
 All the operations are carried out in a fixed position layout
 Examples are: - ships, locomotives air crafts, roads, building, spacecrafts.

Characteristics of Project Production

 Short life cycle

 Low Volume end of the continuum
 High customization
 The sequence of operations is unique to each project
 Products cannot be produced to stock because needs of next customer unknown
 Fixed position layout
 Involvement of different agencies
 Examples are: - ships, locomotives ,aircrafts, roads, building, spacecrafts.

JOB-SHOP PRODUCTION

 Job-shop production are characterised by manufacturing one or few quantity of

products designedand produced as per the specification of customers within
prefixed time and cost. The distinguishing feature of this is low volume and high
variety of products.
  A job-shop comprises of general-purpose machines arranged into different
departments. Eachjob demands unique technological requirements, demands
processing on machines in a certainsequence.
 Job-shop Production is characterized by
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of
uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product,
capacities foreach work centre and order priorities.

Advantages

Following are the advantages of Job-shop Production:

1. Because of general purpose machines and facilities variety of products can be
produced.
2. Operators will become more skilled and competent, as each job gives them
learning opportunities.
3. Full potential of operators can be utilised.
4. Opportunity exists for Creative methods and innovative ideas.

Limitations

Following are the limitations of Job-shop Production:

1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.

Batch Production
American Production and Inventory Control Society (APICS) defines Batch Production as a
formof manufacturing in which the job pass through the functional departments in lots or batches
andeach lot may have a different routing. It is characterised by the manufacture of limited
number ofproducts produced at regular intervals and stocked awaiting sales.

Characteristics of Batch Production

1. Shorter production runs.
2. Plant and machinery are flexible.
3. Plant and machinery set up is used for the production of item in a batch and change of set up
is required for processing the next batch.
4. Manufacturing lead-time and cost are lower as compared to job order production.

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

Continuous Production
Production facilities are arranged as per the sequence of production operations from the first
operations
to the finished product. The items are made to flow through the sequence of operations through
material handling devices such as conveyors, transfer devices, etc.

Continuous Production is characterised by

1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.

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

Mass Production and Flow Production

Manufacture of discrete parts or assemblies using a continuous process are called Mass
Production.
This production system is justified by very large volume of production. The machines are
arranged
in a line or product layout. Product and process standardisation exists and all outputs follow the
same path.
6

Mass Production is characterised by

1. Standardisation of product and process sequence.

2. Dedicated special purpose machines having higher production capacities and output rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.

Advantages
Following are the advantages of Mass Production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilisation due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.

Limitations
Following are the limitations of Mass Production:
1. Breakdown of one machine will stop an entire production line.
2. Line layout needs major change with the changes in the product design.
3. High investment in production facilities.
4. The cycle time is determined by the slowest operation.

Process Production

 Process production is characterized by the manufacture of a single product produced

 The flexibility of such plants is almost zero as only one type of product can be produced
in the plant
 Examples are refineries, petrol, kerosene, and diesel oil.

Characteristics of Process Production

 Special purpose machines and equipments are used

 Material handling is highly mechanized

 In this manufacturing cycle time is almost zero. The whole plant is like one large
machine where materials are entered at the one end.
 Labor required is having semi skilled workmen and skilled technicians are required
 Supervision in this type of production is high.

Types of Process Production

There are two types of Processs Production

1. Analytical Process: Here raw material is broken down into its component parts. Ex: Crude oil
in refinery is broken down into individual fractions like Kerosene. Petrol, Naptha etc.

2. Synthetic Process: Mixing of two or more parts of materials to form a finishesd product like
soap.

JUST-IN-TIME (JIT)
 Introduction
Just-In-Time (JIT) Manufacturing is a philosophy rather than a technique. By eliminating all
waste and seeking continuous improvement, it aims at creating manufacturing system that is
response to the market needs.
The phase just in time is used to because this system operates with low WIP (Work-In-Process)
inventory and often with very low finished goods inventory. Products are assembled just before
they are sold, subassemblies are made just before they are assembled and components are made
and fabricated just before subassemblies are made. This leads to lower WIP and reduced lead
times. To achieve this organizations have to be excellent in other areas e.g. quality.
According to Voss, JIT is viewed as a “Production methodology which aims to improve overall
productivity through elimination of waste and which leads to improved quality”.

Jit in Production and Operation Management

JIT provides an efficient production in an organization and delivery of only the necessary parts
in the right quantity, at the right time and place while using the minimum facilities”.

SevenWastes
Shiego Shingo, a Japanese JIT authority and engineer at the Toyota Motor Company identifies
seven wastes as being the targets of continuous improvement in production process. By attending
to these wastes, the improvement is achieved.
1. Waste of over production eliminate by reducing set-up times, synchronizing quantities
and timing between processes, layout problems. Make only what is needed now.
2. Waste of waiting eliminate bottlenecks and balance uneven loads by flexible work force
and equipment.
3. Waste of transportation establishes layouts and locations to make handling and transport
unnecessary if possible. Minimize transportation and handling if not possible to eliminate.
4. Waste of processing itself question regarding the reasons for existence of the product
and then why each process is necessary.
5. Waste of stocks reducing all other wastes reduces stocks.
6. Waste of motion study for economy and consistency. Economy improves productivity
and consistency improves quality. First improve the motions, then mechanize or automate
otherwise. There is danger of automating the waste.
7. Waste of making defective products develop the production process to prevent defects
from being produced, so as to eliminate inspection. At each process, do not accept defects and
makes no defects. Make the process fail-safe. A quantify process always yield quality product.

Benefits of JIT
The most significant benefit is to improve the responsiveness of the firm to the changes in the
market place thus providing an advantage in competition. Following are the benefits of JIT:

1. Product cost—is greatly reduced due to reduction of manufacturing cycle time,

reduction of waste and inventories and elimination of non-value added operation.
2. Quality  —is improved because of continuous quality improvement programs.
3. Design—Due to fast response to engineering change, alternative designs can be quickly
brought on the shop floor.
4. Productivity improvement.
5. Higher production system flexibility.
6. Administrative and ease and simplicity.
1. Reduction in the order to payment timeline; cash, as they say is king in business.
Many businesses will suffer with cash flow problems as they will often have to purchase
large amounts of raw materials prior to manufacturing and subsequent payment by the
customer. Often this gap is many months. Through implementing JIT you are able to
considerably reduce that time period.
2. Reduction in Inventory costs; one of the main aims with any JIT implementation is to
improve stock turns and the amount of stock being held. Personal experience has seen
reductions of more than 90% stock in some industries. Along with the reduction in the
stock come many other associated benefits.
3. Reduction in space required; by removing large amounts of stock from the system and
moving processes closer together we will often see a significant reduction in the amount
of floor space being used. Results from 100’s of projects run within companies in the UK
through the Manufacturing Advisory Service saw average reductions of 33% for simple 5
day implementation projects.
4. Reduction in handling equipment and other costs; if you don’t have to move large
batches there is less need for complex machinery to move them and all of the associated
labor and training.
5. Lead time reductions; one of the most significantly impacted areas is that of the time it
takes for products to flow through the process. Instead of weeks or months most JIT
implementations result in lead times of hours or a few days.
6. Reduced planning complexity; the use of simple pull systems such as Kanban, even
with your suppliers, can significantly reduce the need for any form of complex planning.
With many implementations the only planning is the final shipping process.
7. Improved Quality; the removal of large batch manufacturing and reduction in handling
often results in significant quality improvements; often in the region of 25% or more.
8. Productivity increases; to achieve JIT there are many hurdles that must be overcome
with regards to how the process will flow. These will often result in productivity
improvements of 25% upwards.
 9. Problems are highlighted quicker; often this is cited as being a negative aspect of JIT
in that any problems will often have an immediate impact on your whole production
process. However this is the perfect way to ensure that problems are highlighted and
solved immediately when they occur.
10. Employee empowerment; one requirement of JIT as with most other aspects of Lean
manufacturing is that employees are heavily involved in the design and application of
your system.

Requirements for implementing Just in Time

 Reliable Equipment and Machines; if your machinery is always breaking down or

giving you quality problems then it will frequently manifest in big issues with any JIT
flow. The implementation of Total Productive Maintenance is required to ensure that you
can rely on your equipment and to minimize the impact that any failures have on your
processes.
 Well designed work cells; poor layout, unclear flow, and a host of other issues can all be
cleared up by the implementation of 5S within your production. This simple and very
easy to implement lean tool will make a significant improvement in your efficiencies all
by itself.
 Quality Improvements; an empowered workforce that is tasked with tackling their own
quality problems with all of the support that they need is another vital part of any lean
and JIT implementation. Setting up kaizen or quality improvement teams and using
quality tools to identify and solve problems is vital.
 Standardized Operations; only if you know how each operation is going to be
performed can you be sure what the reliable outcome will be. Defining standard ways of
working for all operations will help to ensure that your processes are reliable and
predictable.
 Pull Production; Just in time does not push raw materials in at the front end to create
inventory (push production), it seeks to pull production through the process according to
customer demand. It achieves this by setting up “supermarkets” between different
processes from which products are taken or by the use of Kanbans which are signals
(flags) to tell the previous process what needs to be made.
  Single piece Flow; the ideal situation is one in which you will produce a single product
as ordered by the customer. This for some industries is not immediately possible but
should always be your end goal. To achieve this you will need to work on reducing batch
sizes significantly through the use of Single Minute Exchange of Die (SMED) which
seeks to significantly reduce the time taken for any setup. It will also often require the use
of smaller dedicated machines and processes rather than all singing all dancing mega
machines.
 Flow at the beat of the customer; the demand of your customer is often referred to as
your Takt time. You need to ensure that your cells and processes are organized, balanced
and planned to achieve the pull of the customer.

LEAN SYSTEM

Lean System: Definition

A Lean system describes a business or business unit that holistically applies Lean principles to
the way it plans, prioritizes, manages, and measures work. The goal for any Lean system is to
maximize customer value. While Lean thinking can greatly improve the productivity and
function of a team or department, Lean implementations that spread across the entire
organization have the greatest impact on the customer.

Lean systems use a Lean approach to identify and eliminate waste. They systematically discover
and act upon opportunities to improve. These are two of the fundamental concepts of Lean:
Eliminate anything that does not add value to the customer, and work systematically and
continuously to create more value for the customer.

What is Lean Thinking?

The new Lean is differentiated from other business methodologies in that it doesn’t prescribe a
strict, rigid set of rules, tools, processes, or practices. Although transforming into a Lean system
involves a great deal of effort, its lightweight, flexible nature makes it easy to scale than more
structured, regimented methodologies.

Practicing Lean simply involves relying upon the principles of Lean thinking to make smarter,
more informed decisions. We define Lean thinking as the application of the 7 principles below,
each of which work to create a healthier, more sustainable, more productive organizational
system.

Guiding Principles of a Lean System

Although transforming into a Lean system involves a great deal of effort, Lean’s lightweight,
flexible nature makes it easy to scale than more structured, regimented methodologies. Practicing
Lean thinking begins with a thorough understanding of these 7 Lean principles.

Optimize the whole

Visualize, optimize, and manage the entire organizational value stream as one value-generating
system. Make decisions that optimize the entire organization’s ability to deliver value to the
customer, not just one team or department.

Create knowledge

A Lean system is a learning system; it grows and develops through analyzing the results of
small, incremental experiments. In order to retain the insight and knowledge gained from
constant experimentation, Lean systems must provide the infrastructure necessary to properly
document and retain value learnings.

Eliminate waste

Lean systems use this definition of waste: If your customer wouldn’t pay for it, it’s waste. Waste
can be anything from context switching, to too much work in process, to time spent manually
completing a task that could be automated. Lean thinkers are relentless about eliminating any
process, activity, or practice that does not result in more value for the customer.

Build quality in

Lean organizations set themselves up for sustainable growth by building quality into processes
and documentation. They automate and standardize any tedious, repeatable process or any
process prone to human error, which allows them to error-proof significant portions of their
value streams.

Deliver fast

In Lean, flow refers to the manner by which work moves through your organizational system.
Good flow describes a Lean system with a steady, consistent flow of value delivery, while bad
flow describes a system with unpredictable delivery and unsustainable habits.

Defer commitment

This Lean principle says that Lean systems should function as just-in-time systems, waiting until
the last responsible moment to make decisions and deliver work. This is based on the idea that
the longer we wait, the greater the chance that our decisions will be well-informed, based on data
that reflects the reality of the market.

Respect people

At its core, all successful Lean systems are rooted in one thing: Respect for people. Lean systems
are designed to maximize customer value while minimizing waste, out of respect for the
customer.
 Out of respect for employees, Lean systems encourage environments that allow everyone to do
their best work. In Lean systems, team members continuously strive to optimize processes to
allow everyone to deliver the most value they can provide.

Benefits of a Lean System

When an organization holistically applies these Lean principles, it is able to function in a

healthier, smarter, more sustainable way. This directly results in business value.

When the organization wins, the people within it win too. Members of Lean systems are not only
more productive, but often more fulfilled and less stressed too. Here are the top ten benefits Lean
practitioners report:

1. Manage team / process complexity

2. More efficient business processes

3. Better management of changing priorities

4. Better project visibility at the team level

5. Increased team productivity

6. Reduced lead time

7. Increased team morale

8. Improved visibility to stakeholders

9. Reduced costs

10. Predictable delivery of customer value

 UNIT – 2

PRODUCT DESIGN & PROCESS SELECTION

Product Design

A good product design has following common features:

Utility: The product design should make product utility as per expectation of customers and
provide steady performance through the product life.

Aesthetics: Product aesthetics is important in success of the product. The product aesthetics is
dependent on market and end customer.

Producible: Product design should enable effective production of product through available
production methods.

Profitability: Product design should make economic sense as to deliver value to customer and
sustainability to the organization.

Differentiable: A good product design should enable product to be differentiate among its
competition. This can be achieved by attractive packaging and also by providing additional
service on the product.

Objectives of Product Design

The essence of product design is to satisfy customer and maximizes the value for the customer at
minimum cost. The product or service should also be able to meet primary needs and desire of
the customer. This may not require development of new product, but enhancement to existing
product or service.

Stages of Product Design

Product design is a creative process which looks at all the available options and beyond. The
process is can be divided into three stages:
First stage: His stage involves brainstorming, bringing ideas and analysis of customer and
market feedback.

Second Stage: Idea is converted into a feasible solution to satisfy the customer expectation,
using available resource and technology.

Third Stage: This is the last stage in which the product is introduced in the market.

Factors Affecting Product Design

A successful product design is combination factors as follows:

Correct Team Selection: This is very essential to get the correct team in place which has expert
designers who are not only aware and comfortable with technology but also understanding of
customer expectation.

Customer Involvement: Involvement of customer in product design and testing can provide
insight into the direction of the project

Prototyping and testing: Product design is high risk concept as it involves commitment of
capital and man-power; therefore, it is imperative that extensive prototyping and testing are done
with customer and market.

Raw Material: It is essential that raw material to be used in the production meets the quality
standards of the end product. Furthermore, procurement system needs to be in place to ensure
continuous, cost effective supply.

Production method and process layout: Feasibility of production method and process layout
determines future success of the product.

External Factors: Environmental and government regulations plays an important part in product
design. And these norms are updated from time to time, so product design should have the
flexibility to adapt.