CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT (POM)

CONCEPTS
Overview
 Introduction of Production/Operations (P/O) systems
 Some Historical Perspectives of P/O Management
 Basic components of P/O systems
 Manufacturing versus Service systems
 Major issues in P/O Management
 Current Trends

Learning Objectives
After completing this lesson you should be able to
 Explain the basic components of P/O systems
 Illustrate the distinctive characteristics of service operations
 Illustrate the differences between manufacturing and service operations
 Identify major issues in production/operations management
 Discuss some of the major factors affecting POM today
 Use the service package concept to analyze a typical purchase bundle

Introduction

This module is about production and operations management (POM), which involves the
planning, coordinating, and executing of all activities that create goods & provide services. The
subject matter is fascinating and timely: productivity, quality, foreign competition, and customer
service are very much in the news. All are part of production and operations management. This
first chapter presents an introduction and overview of operations management. Among the issues
it addresses are: What is operations management? Why is it important? What does an operations
manager do?

The chapter also provides a brief description of the historical evolution of operations
management, functions of operations management, operations decision-making, productivity
measurement, operations management & environmental impact, and a discussion of the current
trends that impact operation management.

To many people, the term production conjures up images of factories, machines, and assembly
lines. Interestingly enough, the field of production management in the past focused almost
exclusively on manufacturing management, with a heavy emphasis or the methods and techniques
used in operating a factory. In recent years, the scope of production management has broadened
considerably. Production concepts and techniques are applied to a wide range of activities and
situations outside manufacturing; that is, in services such as health care, food service, recreation,
banking, hotel management, retail sales, education, transportation, and government. This
broadened scope has given the field the name production/operations management, or more
simply, operations management, a term that more closely reflects the diverse nature of activities
to which the concepts and techniques are applied.We can use an airline company to illustrate a
production/operations system. The system consists of the airplanes, airport facilities, and
maintenance facilities, sometime spread out over a wide territory. Most of the activities
performed by management and employees fall into the realm of operations management:

1
Forecasting such things as weather and landing conditions, seat demand for flights, and the
growth in air travel.

Capacity planning, essential for the airline to maintain the cash flow and make a reason. able
profit. (Too few or too many planes, or even the right number of planes but in the wrong places,
will hurt profits.)

Scheduling of planes for flights and for routine maintenance; scheduling of pilots and flight
attendants; and scheduling of ground crews, counter staff, and baggage handlers.
Managing inventory of such items as foods and beverages, first-aid equipment, in-flight
magazines, pillows and blankets, life preservers.

Assuring quality, essential in flying and maintenance operations, where the emphasis is on safety.
Also important in dealing with customers at ticket counters, check-in, telephone reservations, and
curb service, where the emphasis is on efficiency and courtesy. Employee motivation and training
in all phases of operations.

Location of facilities according to managers ’ decisions on which cities to provide service for,
where to locate maintenance facilities, and where to locate major and minor hubs.
Now consider a bicycle factory. This might be primarily an assembly operation: buying
components such as frames, tires, wheels, gears, and other items from suppliers, and then
assembling bicycles. The factory might also do some of the fabrication work itself, forming
frames, making the gears and chains, and buy mainly raw materials and a few parts and materials
such as paint, nuts and bolts, and tires. Among the key management tasks in either case are
scheduling production, deciding which components to make and which to buy, ordering parts and
materials, deciding on the style of bicycle to produce and how many, purchasing new equipment
to replace old or worn out equipment, maintaining equipment, motivating workers, and ensuring
that quality standards are met.
Obviously, an airline company and a bicycle factory are completely different types of operations.
One is primarily a service operation, the other a producer of goods. Nonetheless, these two
operations have much in common. Both involve scheduling of activities, motivating employees,
ordering and managing supplies, selecting and maintaining equipment, satisfying quality
standards, and—above all—satisfying customers. In both systems, the success of the business
depends on short- and long-term planning.

1.1 Operations management general Concepts

1.1.1 Why Study Operations Management?

You may be wondering why you need to study operations management. Actually, there ’re a
number of very good reasons. One is that operations management activities are at the core of all
business organizations, regardless of what business they are in. Second, 35 percent or more of all
jobs are in operations management-related areas —such areas as

customer service, quality assurance, production planning and control, scheduling, job design,
inventory management, and many more. The following are entry-level jobs in POM: Purchasing
planner/buyer, Production (or operations) supervisor, Production (or operations)
scheduler/controller, Production (or operations) analyst, Inventory analyst, Quality specialist.
Third, activities in all of the other areas of business organizations, such as finance, accounting,
human resources, logistics, marketing, purchasing, as well as others are all interrelated with
operations management activities, so it is essential for these people to have a basic understanding

2
of operations management. But beyond all of this is the reality that production/operations
management is about management, and all managers need to possess the knowledge and skills in
the content areas you will learn in this module. Among them are productivity, strategy,
forecasting, quality, inventory control, and scheduling. Also, you will learn how to use a range of
quantitative tools that enhance managerial decision-making.

Definition
Operations management can be defined as the design, operation and improvement of the
production systems that create a firm ’s primary products or services. The primary concern of
operations-management is the conversion of inputs into outputs, using resources (human,
physical, financial, intangible, etc) so as to provide the desired utility to the customers. There are
three important concepts to understand any business: utility, value & price. Utility is the attribute
of an item that makes it capable of satisfying its user such as time saving, place convenience,
attractive form or design, and possession of knowledge or any other intangible product. In short
we can explain utility as the reason satisfaction. Value is the measure of performance or benefit
(such as speed, durability, maintainability, comfort, safety, cost, prestige, etc for a car) measured
against the investment made to secure this performance. Price is the standard measure of value in
monetary terms so as to facilitate comparison of the level of customer satisfactions on buying a
certain product (service or physical good). Hence utility creates value and value is measured as
price. Customer satisfaction is a function of benefit and cost. Customers will be satisfied if the
cost incurred to get the particular product is just equal to the benefit that they get from owning
and using it. Customers will be dissatisfied if the cost incurred is greater than the benefit that they
get from owning and using it. Finally Customers will be delighted if the cost incurred is less than
the benefit that they get from owning and using it.

Production as a System

An production/operations system is a combination of production process and management

process. A production process is the set of all activities that are required to transform a set of
inputs into more valuable outputs (products or services). A management process is the set of
activities undertaken in order to determine the value system and objectives; the organization
structure; the design; the planning and control operations.

Error: Reference source not found

Production System
Basic components of Production/ Operation Systems
Diverse organizations as manufacturing companies, financial institutions, health care facilities,
etc. all have in common the following basic elements within their operations system:
 Input
Conversion
 Transformation/ conversion subsystem,
Inputs
Inputs  Output, and
Subsystem Outputs
Outputs
 Control subsystem.
Inputs: All physical and nonphysical resources coming into the system
 External
 Legal, Economic, Social, Technological
 Market
 Competition, CustomerControl
Desires, Product Info.
 Primary Resources Subsystem
 Materials, Personnel, Capital, Utilities
Outputs:
 Direct

3
  Goods: A pure good is a tangible product that can be stored, transported, and
purchased for later use
 Services: A pure service is an intangible product which cannot be stored since it
is consumed as it is produced.
 Indirect
 Waste
 Pollution
 Technological Advances
Transformation/Conversion subsystem: which converts inputs into goods or services. It
consists of
 Concepts
 Procedures
 Non-equipment technologies
 Rules, Guideline, Steps, etc.
Examples of transformations
 Cutting, drilling
 Transporting
 Teaching
 Packing
 Mixing
 Consulting
 Copying, faxing
Control Subsystem:

To ensure that the desired outputs are obtained (e.g. it is acceptable in terms of quantity, cost and
quality), measurements are taken at various points in the transformation process (feedback) and
then compared to previously established standards to determine if corrective action is needed
(control)

Major Issues in P/O Management

 Design:
 Product and service design
 Process design
 Facility location and layout
 Planning/Scheduling
 Forecasting
 Planning
 Scheduling
 Materials management
o Inventory control and management
o Material requirement planning (MRP)
o Just-In-Time (JIT)
 Quality
o Quality assurance - Standards & Awards
o Statistical Quality Control
o Total Quality Management (TQM)
 Productivity
o Productivity Measurement
o Work Measurement and Analysis

4
1.2 Operations Functions and |Its Environment
Operations Management and Environmental impact

Environmental pollution of air, ground and water due to emissions, by products, waste, - package
material, etc and depletion of natural resources like forests, ores, minerals, fossil fuels, etc.) are
huge problems in both the industrialized as well as the developing countries. Because of the
magnitude of the problem operations management should also include ways and means to protect
the environment and minimize pollution and maximize utilization of scarce resources like fuels.
Environmental concerns should be right from the design phase of operations management to be
really effective The ways in which Operations Management can minimize pollution and depletion
are as follows:
Proper product design, process design and plant location; appropriate selection of raw materials,
efficient technology and usage of clean energy sources like hydro electric, solar, wind, etc; better
packaging which is bio degradable; quality control; effective treatment of waste products; proper
utilization of by products; recycling when ever possible.

Analysis of the impact of environmental conditions on Operations Management Control and

constant monitoring of the different types of environment are very essential for an organizations
survival. A clear environmental analysis is important because it helps to recognize the real
boundaries between the system and its environment more clearly; to identify the most significant
environmental factor which may influence the present and future system performance; and to
identify clearly, the relationship between each of the factors and the systems performance.

These environmental factors can be of internal or external (specific or general) origin. Factors
which fall beyond the control of a firm are considered as external. All aspects of operations
management right from the design of the system to actual operations require huge amounts of
information about both external as well as internal environmental factors.

External Environment

As it has been already said the external environment is generally out of the control a firm with in
which the organization has to adjust itself. External environmental analysis helps an organization
to be prepared to handle any future contingencies. It ’s usually carried out in three phases,
 Determination of the most important external factors which influence the organizations
performance but cannot be controlled. For example, GNP, disposable income,
competitors, demographic factors, international trade and developments, etc.
 Identify methods that can be used to forecast future environmental conditions, prevalent
trends and their combined affect on demand.
 Generation of alternative strategies for optimum expected performance under
anticipated conditions.

The external environment could be specific or general. Organizations could have a relatively
better influence on the specific external environment than the general environment. The specific
external environment according to Michael Porter deals with the impact of new entrants, the
number & closeness of substitute products, bargaining power of suppliers, the bargaining power
of customers and the rivalry among existing firms in the industry.

The general external environmental factors which have a profound influence on operations
management are, Economic Environment, Role of Government/Legal Establishment, Natural
Environment, Social & Cultural Environment and Technical Environment.

5
Economic Environment. The cost of production and distribution and sales of products
or services depend upon many economic factors like regional economic development of rural and
industrial areas; availability of natural resources (raw material & energy); unemployment level in
the labor market; efficiency of the economy’s infrastructure (transportation, communication,
banking, etc); governments economic policies (tariffs & exports); and competition from
multinational corporations, interest rates(borrowing & lending), inflation rate, etc.

Role of Government/Legal Establishment. Government plays a crucial role in the following

decisions-making areas of business which in turn have an important impact on operations
management;
 Starting a new business (policies regarding registration, permissions, etc)
 Developing a new product (policies regarding patent infringement, patent protection,
regulations regarding packaging, safety & pollution rules, etc)
 Introducing a new service (procedures for obtaining permissions from relevant agencies)
 Location of a new plant and building facilities (permission of regulatory agencies like
utilities, building code compliance, etc)
 Operating a production process (labor regulations, safety regulations & laws, custom
duties on imports and exports, taxes, pollution regulations, etc)
 Closing a business (creditors, outstanding settlements, etc)

Natural Environment. The natural environmental impact has already been discussed in detail
earlier under the topic operations management & environmental impact.

Social & Cultural Environment. Many social and cultural factors like the work culture,
honesty, hard. work, religion, language, aesthetic values, material values, attitudes( towards
business, foreigners, role of females ), norms, beliefs, concern for better quality of life(such as
commitment not to buy products that highly pollute the environment) etc, have an appreciable
impact on an organization’s work. Generally it is the socio-cultural environment that shapes the
economy, the politics and the technological environmental forces. The best example for this is
say if the society insists on the reduction of pollution, the government will be forced to enact laws
that ensure the reduction of pollution on the input-out put transformation as well as waste
disposition processes of business organizations (shows the impact of socio-cultural force on the
political/legal environment). This in turn will trigger scientists to create a new technology which
is more environmental friendly (shows the impact of socio-cultural force on technology). Usually
the new technology will have some impact on the cost structure, employment level, etc of
organizations (possible impact of socio-cultural force on the Economic Environment).

Technical Environment. The type of technological advancements which are being made in the
various production processes of industries and service providers influence the way an
organizations operations or production management is devised. Usually new technology has
mixed impact on organizations: some good and some bad. For example the coming in to
existence of the computer technology has crippled the typewriter business(recall the loss incurred
by Royal Typewriter Company) bus it has also improved a lot the communication among
organizations leading them to better profitability & achievement of organizational goals.

Generally external environmental factors are highly dynamic and hence the operations
management systems should be highly flexible and adaptable.

Internal Environment (Functions within Business Organizations)

6
Organizations are formed to pursue goals that are achieved more efficiently by the concerted
efforts of a group of people than by individuals working alone. Business organizations are
devoted to producing goods and/or providing services. They may be for-profit or nonprofit
organizations. Their goals, products, and services may be similar or quite different. Nonetheless,
their functions and the way they operate are similar.

A typical business organization has three basic functions: finance, marketing, and
production/operations (see Figure 1—1). These three functions, and other supporting functions,
perform different but related activities necessary for the operation of the organization. The
interdependency of the major functions is depicted by overlapping circles in Figure 1 —1. The
functions must interact to achieve the goals and objectives of the organization, and each makes an
important contribution. Often the success of an organization depends not only on how well each
area performs but also on how well the areas interface with each other. For instance, unless
production and marketing work together, marketing may promote goods or services that
production cannot profitably deliver, or production may turn out goods or services for which
there is no demand. Similarly, unless finance and production people work closely, funds for
expansion or new equipment may not be available when needed. However operations
management can be
considered as the most important of the primary activities because unless and until the goods or
services produced by an organization are of good utility to the customer, other activities cannot
be beneficial to the organization. Let’s take a closer look at these functions.

Operations
The operational function consists of all activities directly related to producing goods or providing
services. The production function exists not only in manufacturing and assembly operations,
which are goods-oriented, but also in areas such as health care, transportation, food handling, and
retailing, which are primarily service-oriented. The operations function is the core of most
business organizations; it is responsible for the creation of an organization ’s goods or services.
Inputs are used to obtain finished goods or services using one or more transformation processes
(e.g., storing, transporting, cutting). To ensure that the desired outputs are obtained,
measurements are taken at various points in the transformation process (feedback) and then
compared with previously established standards to determine whether corrective action is needed
(control). Figure 1.2 shows the conversion process.

Table 1—1 provides some examples of inputs, transformation processes, and outputs.
The essence of the operations function is to add value during the transformation process: Value-
added is the term used to describe the difference between the cost of inputs and the value or price
of outputs. In nonprofit organizations, the value of outputs (e.g., highway construction, police and
fire protection) is their value to society; the greater the value added, the greater the effectiveness
of these operations. In for-profit organizations, the value of outputs is measured by the prices that
customers are willing to pay for those goods or services. Firms use the money generated by
value-added for research and development, investment in new facilities and equipment, and
profits. Consequently, the greater the value-added, the greater the amount of funds available for
these purposes.
One way that businesses attempt to become more productive is to examine critically whether the
operations performed by their workers add value. Businesses consider those that do not add value
wasteful. Eliminating or improving such operations decreases the cost of inputs or processing,
thereby increasing the value-added. For instance, a firm may discover it is producing an item
much earlier than the scheduled delivery date to a customer, thus requiring the storage of the item
in a warehouse until delivery. In effect, additional costs are incurred by storing the item without

7
adding to the value of the item. Reducing storage time would reduce the transformation cost and,
hence, increase the value-added.

Finance

The finance function comprises activities related to securing resources at favorable prices and
allocating those resources throughout the organization. Finance and operations management
personnel cooperate by exchanging information and expertise in such activities as:
1. Budgeting. Budgets must be periodically prepared to plan financial requirements. Budgets
must sometimes be adjusted, and performance relative to a budget must be evaluated.
2. Economic analysis of investment proposals. Evaluation of alternative investments in plant
and equipment requires inputs from both operations and finance people.
3. Provision of funds. The necessary funding of operations and the amount and timing of
funding can be important and even critical when funds are tight. Careful planning can
help avoid cash-flow problems. Most for-profit firms obtain the majority of their funds
through the revenues generated by sales of goods and services.

Marketing

Marketing consists of selling and/or promoting the goods or services of an organization.

Advertising and pricing decisions are made by marketing people. Marketing is also responsible
for assessing customer wants and needs, and for communicating those to operations people (short
term) and to design people (long term). That is, operations needs information about demand over
the short-to-intermediate term so that it can plan accordingly (e.g., purchase materials or schedule
work), while design people need information that relates to improving current products and
services and designing new ones. Marketing, design, and production must work closely to
successfully implement design changes and to develop and produce new products. Marketing can
provide valuable insight on what competitors are doing. Marketing can also supply information
on consumer preferences so that design will know the kinds of products and features needed;
operations can supply information about capacities and judge the manufacturability of designs.
Operations will also have advance warning if new equipment or skills will be needed for new
products or services. Finance people should be included in these exchanges in order to provide
information on what funds might be available (short term) and to learn what funds might be
needed for new products or services (intermediate to long term). One important piece of
information marketing needs from operations is the manufacturing or service lead-time in order to
give customers realistic estimates of how long it will take to fill their orders.

Thus, marketing, operations, and finance must interface on product and process de-sign,
forecasting, setting realistic schedules, quality and quantity decisions, and keeping each other
informed on the other’s strengths and weaknesses.

Other Functions

There are a host of other supporting functions that interface with operations, finance, and
marketing. Among them are accounting and purchasing. Also, depending on the nature of the
organization, they may include personnel or human resources, product design and development,
industrial engineering, and maintenance.

Accounting has responsibility for preparing the financial statements, including the income
statement and balance sheet. It also supplies information to management on costs of labor,
materials, and overhead, and may provide reports on items such as scrap, downtime, and

8
inventories. It must keep track of receivables, payables, and insurance costs, and prepare tax
statements for the firm.
Purchasing has responsibility for procurement of materials, supplies, and equipment. Close
contact with operations is necessary to ensure correct quantities and timing of purchases. The
purchasing department is often called on to evaluate vendors for quality, reliability, service, price,
and ability to adjust to changing demand. Purchasing is also involved in receiving and inspecting
the purchased goods.

The personnel department is concerned with recruitment and training of personnel, labor
relations, contract negotiations, wage and salary administration, assisting in manpower
projections, and ensuring the health and safety of employees.

Public relations has responsibility for building and maintaining a positive public image of the
organization. This involves news releases announcing promotions, and new products or services.
It may also involve such things as sponsoring a Little League team, donating to cultural events,
giving public tours of facilities, and sponsoring community affairs (e.g., marathons, bike races).
Good public relations provide many potential benefits. An obvious one is in the marketplace.
Other potential benefits include public awareness of the organization as a good place to work
(labor supply), improved chances of approval of zoning change requests, community acceptance
of expansion plans, and instilling a positive attitude among employees.

Industrial engineering is often concerned with scheduling, performance standards, work methods,
quality control, and material handling. Manufacturing plants of medium and large firms typically
include this function.

Distribution involves the shipping of goods to warehouses, retail outlets, or final customers.

Maintenance is responsible for general upkeep and repair of equipment, buildings and grounds,
heating and air-conditioning; removing toxic wastes; parking; and perhaps security. Many of
these interfaces are elaborated on in later chapters.

The importance of production/operations management, both for organizations and society, should
be fairly obvious: The consumption of goods and services is an integral part of our society.
Production/operations management is responsible for creating those goods and services.
Organizations exist primarily to provide services or create goods. Hence, production is the core
function of an organization. Without this core, there would be no need for any of the other
functions—the organization would have no purpose. Given the central nature of its function, it is
not surprising that more than half of all employed people in this country have jobs in production
and operations. Furthermore, the operations function is responsible for a major portion of the
assets in most organizations.
Organization

Figure 1.1 The three basic functions of business organizations

Production/
Marketing Finance
operations

Production/
operations

Marketing Finance

Figure : The three basic functions of business organizations

Fig 1.2 The transformation process – from inputs to outputs

Value is added by the interaction

with markets where the product or
service is needed

OUTPUTS
INPUT TRANSFORMAT
Land, Capital,
Information, The conversion
Goods and/or
Machines, Labour process of all the
services
Raw materials inputs

Control and feedback from the

markets regarding outputs
produced
Table 1.1 examples of transformation processes.

TRANSFORMATION
OPE-RATION INPUTS PROCESS OUTPUTS
Doctors Beds Test results
Hospital Nurses Medicines Healthy patients
Patients Operations Research
Fresh foodstuff Prepare the food
Canned goods Machines Can and cook the food Canned goods
Other equipment

10
 Labour
Officers
Crime information Prevent crime Lawful society
Police Public Solve crime Public feel safe
Computers Arrest criminals
Foodstuffs for sale Display of goods The goods and
Food store Staff Advise given customers are
Cash registers Selling of goods brought together
Customers

Table 1.2 Differences between the manufacturing and service industries

MANUFACTURING SERVICE
A physical (tangible) product which An intangible product. This type of
is durable. The product may be used product is usually perishable. Can be
for many years. used once only.
Goods produced can be stored in a The final product cannot be stored.
warehouse or at home.
No direct contact between consumer and By the nature of the service industry there
producer. must be direct contact.
Output is usually produced in large plants Facilities for the service industry is
or factories. usually much smaller.
Large capital outlays are required. Very labour intensive operations.
Easy to determine and measure quality. Much harder to determine and measure
quality.
Not essential to be on the consumers Essential to be close to the consumer of
doorstep. Goods can be transported. the service rendered.
Output produced can be resold numerous Cannot be resold to a third party.
times.
Before consumption of the output can Provision and consumption take place
take place, it must be produced first. simultaneously.
The product produced can be patented. It is difficult to patent the output.
Due to the low variability, production The activities tend to be slow and
tends to be efficient and smooth. awkward. Output is variable.
Productivity measurements tend to be Productivity measurements tend to be
straightforward. much more difficult.

11
Examples of manufacturing and service industries:
Manufacturing: Motor vehicles, bottling of beverages, canning of foodstuffs, manufacturing of
household appliances and other electrical appliances.
Service: The following can be included: National, provincial and local government, financial
services, cellular telephones and the servicing of motor vehicles.

Distinctive Characteristics of Service Operations

 Customer as a participant in the service process
 Simultaneous production and consumption of services
 Intangibility
 Difficulty in measuring output
 Labor intensiveness
 Time-perishable capacity
 Site selection dictated by location of customers

Manufacturing versus Service System

 Differences
Services Goods
Output Intangible Tangible
Output Inventoried No Yes
Customer contact Extensive Little
Lead time Short Long
Intensity Labor Capital
Quality Subjective Objective
Manufacturing versus Service System
 Common issues
 Concerns for productivity and quality
 Similar basic components of managerial responsibility
 In the new world business, a factory is a service operation and service is a factory
operation. Intense competition is forcing firms to provide more and better “total product ”
(a mix of goods and services).
The service package
 The service package is defined as a bundle consisting of the following features:
o Supporting facility
o Facilitating goods
o Explicit services
o Implicit services
The service package
 Supporting facility:
o The physical resources that must be in place before a service can be offered
o Examples: an airplane, tennis course
 Facilitating goods:

12
 o The material purchased or consumed by the buyer, or the items provided by the
customer.
o Examples: food items, replacement motor parts
 Explicit services:
o Essential or intrinsic features of the service
o Examples: smooth-running of motorbike after a tune-up; response time of a fire
department
o Implicit services:
o Psychological benefits of the service
o Examples: certificate of a graduate degree from a well-known school, privacy of
a loan office

1.3 Evolution (Historical Perspectives) of POM

 The Industrial Revolution
 Scientific Management
 Human Relations and Behaviorism
 Operations Research
 Influence of Japanese Approach

The Industrial Revolution (18th century

 The industrial revolution developed in England in the 1700s.
 The steam engine, invented by James Watt in 1764, largely replaced human and water
power for factories.
 Adam Smith’s The Wealth of Nations in 1776 touted the economic benefits of the
specialization of labor.
 Thus the late-1700s factories had not only machine power but also ways of planning and
controlling the tasks of workers.

The Industrial Revolution (18th century)

 The industrial revolution spread from England to other European countries and to the
United Sates.
 In 1790 an American, Eli Whitney, developed the concept of interchangeable parts.
 In the 1800s the development of the gasoline engine and electricity further advanced the
revolution.
 By the mid-1800s, the old cottage system of production had been replaced by the factory
system.
Scientific Management (1900s)
 Frederick Taylor is known as the father of scientific management. His shop system
employed these steps:
 Each worker’s skill, strength, and learning ability were determined.
 Stopwatch studies were conducted to precisely set standard output per worker on
each task.
 Material specifications, work methods, and routing sequences were used to organize
the shop.
 Supervisors were carefully selected and trained.
 Incentive pay systems were initiated.
 In the 1920s, Ford Motor Company’s operation embodied the key elements of
scientific management:
o Standardized product designs

13
 o Mass production
o Low manufacturing costs
o Mechanized assembly lines
o Specialization of labor
o Interchangeable parts
Human Relations and Behavioralism
 In the 1927-1932 period, researchers in the Hawthorne Studies realized that human
factors were affecting production.
 Researchers and managers alike were recognizing that psychological and sociological
factors affected production.
 From the work of behavior lists came a gradual change in the way managers thought
about and treated workers.
Operations Research (Management Science)
 During World War II, enormous quantities of resources (personnel, supplies,
equipment, …) had to be deployed.
 Military operations research (OR) teams were formed to deal with the complexity
of the deployment.
 After the war, operations researchers found their way back to universities, industry,
government, and consulting firms.
 OR helps operations managers make decisions when problems are complex and
wrong decisions are costly.
Influence of Japanese Approach
 Total Quality Management
 Just In Time Management.
 Strong employees involvement
Today's Factors Affecting POM
 Global Competition
 Quality, Customer Service, and Cost Challenges
 Computers and Advanced Production Technology
 Growth of the Service Sector
 Scarcity of Production Resources
 Issues of Corporate Social Responsibility
Today's Factors Affecting POM: Growth of service sector
Economic Sector as Percentage of Gross Domestic Product in Asia

100 5000
90
4000
80
Agriculture
70
3000 Industry
60
GDP

Services
50 2000
%

GDP
40
1000
30
20
0
10
0 -1000

Economic Sector as Percentage of Working Population in Asia

90 700
80
E m p lo y m e n t

600

Today's
60
70
Factors Affecting POM: Growth of service sector 500

400 Agriculture
50 Industry
300
%

40 Services
200 Employment
30
20 100

10 0

0 -100
14
1.2 Decision Making in POM
Generally decision making in POM includes the following
 Strategic Decisions
 Operating Decisions
 Control Decisions
However in this module more emphasis will be given to operations decisions
Strategic Decisions
 These decisions are of strategic importance and have long-term significance for the
organization.
 Examples include deciding:
o The design for a new product’s production process
o Where to locate a new factory
o Whether to launch a new-product development plan
Operating Decisions
 These decisions are necessary if the ongoing production of goods and services is to
satisfy market demands and provide profits.
 Examples include deciding:
 How much finished-goods inventory to carry
 The amount of overtime to use next week
 The details for purchasing raw material next month
Control Decisions
 These decisions concern the day-to-day activities of workers, quality of products and
services, production and overhead costs, and machine maintenance.
 Examples include deciding:
o Labor cost standards for a new product
o Frequency of preventive maintenance
o New quality control acceptance criteria

Operations Decision Making (Detail Discussion)

Decision areas in operations management can be broadly divided into the following four
categories:
Technology Selection & Management. Decision making in this area will have a big impact on
manpower management, machine & materials capacity of the organization and the type of
disturbances within arid outside the system.

Capacity Management Decision making here revolves around matching of available capacity to
demand or making certain capacity available to meet demand variation, Capacity management is

15
essential for improving efficiency, increasing the effectiveness of the organization as well as in
increasing the customer satisfaction.
Both underutilization and over utilization of capacity has negative effects on the organization. To
ensure non-redundancy, flexibility in the operating systems is very essential. This degree of
flexibility depends upon the customers demand fluctuations.

Scheduling. This deals with timing of various activities to be performed in the production
process. The more product variety and more fluctuations in the demand volume, the more
complex is the scheduling. Scheduling determines to a large extent the efficiency of the
production system.

System Maintenance. Selection of good technology will make this easier. It ’s important to
maintain the systems of Operations so as to make capacity management and scheduling effective.

Factors which influence decision-making

Nature of the problem determines to a large extent the process of decision-making
 •The strength of the desire to provide a solution for the problem influences the process
of decision-making.
 •Number of decision makers.
 •The environment in which decisions are taken. The environmental influence can be
both because of eternal or internal factors.
 •Uncertainty/certainty of the information available for decision-making.

Decision-Making Approaches

There are three approaches to decision-making, the rational approach, the organizational
approach and the political approach.
The Rational Approach

Assumptions of this approach are there is one decision-maker or that all decision- makers act as
one; objective of the decision makers would be to maximize (maximize profits, production, etc);
and the decision-maker has complete information about the alternatives, their outcomes and their
values.

Phases of a rational approach

1. Problem Definition. k this phase all relevant data about the problem is collected through
various means and sources.
2. Problem Analysis. In this phase the relationship between the problem and its environment
or system is explored. Basic properties of the problem are found as well as its impact
External and internal constraints on the alternate solutions for solving the problems are also
analyzed in this phase.
3. Generation of Alternatives. In this phase courses of action, which may take us from current
state A to a desired state B, are identified. The more creative the decision-maker is, the
more finds in his possession and the more time he has on hand will lead to mote qualitative
alternatives.
4. Evaluation of Alternatives. These identified alternatives are filtered through perceived
restrictions and their feasibility is checked. Unfeasible alternatives are eliminated. Many

16
 criteria are used as perceived restrictions, the most important one is termed as the dominant
criteria and the remaining ones are called as constraints.
5. Implementation The best alternative is selected for implementation and is put into operation.
Constant support is provided for implementation and feedback is taken to see whether the
solution is achieving the desired results. Preparation for implementation should start from
the first phase itself Involving the people who would be affected by the decision in the
decision making process would make implementation easier.
.
Organizational Approach

This approach can be used in large organizations for complex decision-making. According to this
approach the response to a problem is a coordinated reaction of the subunits or people rather than
a choice of an alternative from many.
Features of the organizational approach to decision-making are,
> Large problems are split up and responsibility to solve the sub-problems is assigned to the
components or people in the organization. The solutions to the sub-problems are then
combined and an over-all solution is formed.
> Search for an alternate solution stops the moment a relatively good solution is discovered.
This approach is more satisfying than optimizing.
> Standard operating procedures are developed to achieve smooth coordination between the
various sub units of the organization for decision-making. This helps to avoid uncertainty.
> Action programs describe how the decision-makers should behave when routine problems
take place. These action programs are a part of the organizational approach.

17
Political Approach

In this approach decision-making could be the result of bargaining between the participants who
are involved. Power influences the outcome, i.e. the more powerful group or individual heavily
influences the decision. This approach can be useful in large organizations and for complex
decisions.

Features of political approach are,

 This approach is useful when there are many decision makers. Problems resulting from
many decision makers are a result of differences in views, opinions, values systems,
attitudes, etc; multiple responsibilities makes decision making more difficult; and when
power gets concentrated in certain decision makers decisions could be biased. Decision
makers obtain power due to the status they have, due to personal skills; due to control of
resources and the type of information that they possess about the problem.
 Engagement of decision makers in action channels. Action cannels are well-defined
procedures of taking action in response to specific issues. They indicate who the
participants in decision-making will be and how they will be brought into the picture and
at what time. A decision maker’s involvement in these action channels depends to a large
degree on his power and responsibility.
 Process of arriving at a response to a problem. Political bargaining is seen in this process.
Certain written and unwritten rules exist which make bargaining less controversial, these
are, a good structure or path of the appropriate action channel; the range of acceptable
decisions; and clear cut limitations to the various behaviors (like persuasion, threats,
coalitions, etc) witnessed while bargaining.
 Compromise generally leads to the final decision in this approach.
 This approach supports vested interests in an organization because of the use of power.
 The decisions taken under this approach cannot be optimum most of the time.

1.4 Productivity Measurement

Productivity is the measure of the quantity of output per unit of input. It ’s a ratio between the
outputs and the inputs. These inputs and outputs could be monetary value, units, time, number of
labor, etc. “Productivity means a balance between all factors of production that will give the
maximum output with the smallest effort.” Peter Drucker.

Productivity needs to be compared either with another organization in the same industry or over
time within the same organization.

Types of productivity
 Partial Measure. This productivity measures the output in comparison with a single
input. Example, output divided by number of labor or output divided by the amount of
energy used or turnover divided by amount of capital employed, etc.
 Multifactor measure. In this type of productivity measurement the output is measured
against a group (not all) of factors used as input. Example, output divided by labor ±
capital + energy.
 Total measure. Total of all goods and services produced divided by all resources used.
Illustration
Output
1. Finished units Bin 10000
2. Work in progress Dirt 2000

18
3. Income (Dividends, etc) Bin 1000
Total Bin 13000
Input
1. Labor Bin 4000
2. Material Bin 500
3. Capital Bin 10000
4. Energy Bin 400
5. Other expenses Bin 1000
Total Bin 15900
13000
Total Productivity = = .82
15900
Multifactor Productivity; = 2.89
Labor + Material 4500(or) 9

Finished units 10000

= 2.20
Labor ± Material 4500
Total output 13000
Partial Productivity: = 1.3
Capital 10000

In multifactor and partial measures it is not necessary to use only total output as the numerator.
Using finished units as numerator would make the ratio more useful. Productivity is relative and
takes many factors into consideration. An outwardly productive looking measurement may not be
really productive when other factors are taken into consideration.

Traditional Measures of Productivity

Economy describes the level of use of resources in creating and delivering products and services.
Performance is measured using the criteria like reducing the use of a particular input or resource
(example: energy, raw material, etc). Cost management in operations management is very
important because 70% of the production or service cost is due to the operations or the process of
production. Efficiency describes how well the operation does in transforming input into output. A
production process is found to be efficient or not by comparing the actual output with that of the
desired or standard output. Emphasis on efficiency only will lead to a lopsided approach to
increasing productivity. This emphasis on increasing efficiency only would result in more
activity, production of surplus quantity, longer production hours, increased paperwork, more sales
calls, etc. All these will be useless if the organization is not effective.

An effective organization can eliminate unnecessary activity and optimize them to be more
productive. Effectiveness concentrates on whether the right products or services are being
produced rather than on how efficiently they are being produced. Effectiveness includes measures
involving increased market share, increase in profits, enhancement of product quality, improving
the quality of raw materials, enhancing product features, improving brand image, etc. Efficiency
is a better measure of productivity than economy, effectiveness is a better measure of productivity
than efficiency and when all of these are used together then it is the best solution for ensuring that
an organization is productive.

19
Differences between efficiency and effectiveness
Objective of efficiency could be to produce goods of quality and in adequate quantity; where as,
objective of effectiveness could be to enhance the value to the customer and to the society. Goal
of efficiency could be to improve the product and the service; where as the goal of effectiveness
could be to determine the right direction for the organization and the value that needs to be
generated. Questions regarding efficiency could be “how to perform a task? ”; where as for
effectiveness it would be “why to perform?” and “what to perform? ” Measure for satisfaction for
efficiency could be smooth operations and for effectiveness it could be the direction in which the
organization is going.

Measures to increase productivity

Organizational measures: Clear mission, goals, & values; harmony between individual's goals and
the organization goals; customer orientation; planning; communication; & flexibility and
simplicity are certain organizational measures which could increase productivity. Human
resource measures: Training & development; employee empowerment; encourage creativity;
employee welfare; right man-right job; incentives & benefits; and team spirit are some human
resource measures. Operational measures: Effective management; time and motion studies;
research & development; updating technology; effective utilization of resources; and value
engineering to reduce material content by good design.

Questions for self-evaluation

1. Discuss the transformation process and give relevant examples.
2. Distinguish between the manufacturing and service industries. Use a table.
3. Discuss the guidelines for effective operations design
4. What is the difference b/n efficiency and effectiveness?
5. Explain the different types of political approachs.

20
 CHAPTER TWO
DESIGN OF THE OPERATIONS SYSTEM

Content Outline
 Need for product or service
 Factors to consider:
 Regulations published by the government
 New technologies
 Pressure from the competition
 What the customer requires
 Design guidelines:
 Target market – for whom?
 Costs associated with that design
 Keep the operations and parts necessary to manufacture the new product to a minimum.
 What do the customers require?
 Manufacturability
 Process capability - product to be delivered or manufactured by using existing processes,
machines, labour, materials and facilities; capabilities required
 Standard procedures, materials and processes must be put into place.
 Ease of use.
 The ease with which the new product can be assembled and disassembled.
 Straight-line assembly.
 Avoid special features
 Designs must be robust.

What is lean manufacturing?

2.1 Products and Services Design & Development
Content Outline
 Design process
 Reducing time-to-market
 Improving quality of design
 Special considerations in service design
2.1.1 Design Process
 Effective design can provide a competitive edge
 Matches product or service characteristics with customer requirements
 Ensures that customer requirements are met in the simplest and least costly
manner
 Reduces time required to design a new product or service
 Minimizes revisions necessary to make a design workable
2.1.2 Design Process (cont.)
 Product design
 Defines appearance of product
 Sets standards for performance

21
  Specifies which materials are to be used
 Determines dimensions and tolerances
 Service design
 Specifies what physical items, sensual benefits, and psychological benefits
customer is to receive from service
 Defines environment in which service will take place
Design Process (cont.)

Idea Feasibility
Generatio
Performance
Product or
specifications
service concept

Supplier Customer Form design

s R& s
D
Marketin Competitor
g s Revising and testing
prototypes

Functional Production
Design design

Design Manufacturing
New product or specifications or delivery
service launch Pilot run
specifications
Final design and final tests
& process plans

2.1.3 Idea Generation Sources

 Company’s own R&D department
 Customer complaints or suggestions
 Marketing research
 Suppliers
 Salespersons in the field
 Factory workers
 New technological developments
 Competitors

Idea Generation Sources (cont.)

 Perceptual Maps
 Visual comparison of customer perceptions
 Benchmarking
 Comparing product/service against best-in-class
 Reverse engineering
 Dismantling competitor’s product to improve your own product

22
Perceptual Map of Breakfast Cereals
Error: Reference source not found
Feasibility Study
 Market analysis
 Economic analysis
 Technical/strategic analysis
 Performance specifications
Rapid Prototyping
 Build a prototype HIGH
 LOW
Form design NUTRITION
 Functional design
NUTRITION
 Production design
 Test prototype
 Revise design
 Retest
BAD
TASTE

Form and Functional Design

Error: Reference source not found
 Form Design
 How product will look?
 Functional Design
 Reliability
 Maintainability
 Usability
Computing Reliability

0.90
R2

23
0.95
Components in 0.95 + 0.90(1-0.95) = 0.995
R parallel 1
 Components in series
Computing Reliability

0.90 0.90 0.90 x 0.90 = 0.81

System Reliability

0.90

0.98 0.92 0.98

0.90

0.98 0.92 0.98

System Availability (SA)

24
 MTBF
SA =
Error: Reference source not foundWhere:
MTBF = mean time between failures
MTTR = mean time to repair
System availability (cont.)MTBF + MTTR
Error: Reference source not foundError: Reference source not found
Usability
 Ease of use of a product or service
 Ease of learning
 Ease of use
 Ease of remembering how to use
 Frequency and severity of errors
 User satisfaction with experience
2.1.4 Production design
 Simplification
 Reducing number of parts, assemblies, or options in a product
 Standardization
 Using commonly available and interchangeable parts
 Modularity
 Combining standardized building blocks, or modules, to create unique finished
products

Design Simplification
Error: Reference source not found
Final Design and Process Plans
 Final design
 Detailed drawings and specifications for new product or service

 Process plans
 Workable instructions
 Necessary equipment and tooling
 Component sourcing recommendations
 Job descriptions and procedures

25
  Computer programs for automated machines
Reducing Time-to-Market
 Establish multifunctional design teams
 Make design decisions concurrently rather than sequentially
 Design for manufacture and assembly
 Use technology in the design process
 Engage in collaborative design

Design Team

Concurrent Design
 A new approach to design that involves simultaneous design of products and processes
by design teams

26
  Improves quality of early design decisions
 Involves suppliers
 Incorporates production process
 Uses a price-minus system
 Scheduling and management can be complex as tasks are done in parallel
Design for Manufacture and Assembly (DFMA)
 Design for manufacture
 Design a product for easy and economical production
 Design for assembly
 A set of procedures for:
 Reducing number of parts in an assembly
 Evaluating methods of assembly
 Determining an assembly sequence
DFM Guidelines
 Minimize number of parts and subassemblies
 Avoid tools, separate fasteners, and adjustments
 Use standard parts when possible and repeatable, well-understood processes
 Design parts for many uses, and modules that can be combined in different ways
 Design for ease of assembly, minimal handling, and proper presentation
 Allow for efficient and adequate testing and replacement of parts
Technology in the Design Process
 Computer Aided Design (CAD)
 Assists in creation, modification, and analysis of a design
 Includes
 Computer-aided engineering (CAE)
 Tests and analyzes designs on computer screen
 Computer-aided manufacturing (CAM)
 Ultimate design-to-manufacture connection
Collaborative Design
 Internet added to concurrent/CADD design software system for collaborative design and
development among trading partners
 Follows life cycle of the product
 Accelerates product development, helps to resolve product launch issues, and improves
quality of the design
 Designers can
 Conduct virtual review sessions
 Test “what if” scenarios
 Assign and track design issues
 Communicate with multiple tiers of suppliers
 Create, store, and manage project documents
Improving Quality of Design
 Review designs to prevent failures and ensure value
 Design for environment
 Measure design quality
 Use quality function deployment
 Design for robustness
Design Review

27
  Failure mode and effects analysis (FMEA)
 a systematic method of analyzing product failures
 Fault tree analysis (FTA)
 a visual method for analyzing interrelationships among failures
 Value analysis (VA)
 Helps eliminate unnecessary features and functions
FMEA for potato chips
Failure Mode Cause of Failure Effect of Failure Corrective Action
Stale  Low moisture content  Tastes bad  Add moisture
 Expired shelf life  Won’t crunch  Cure longer
 Poor packaging  Thrown out  Better package seal
 Lost sales  Shorter shelf life
Broken  Too thin  Can’t dip  Change recipe
 Too brittle  Poor display  Change process
 Rough handling  Injures mouth  Change packaging
 Rough use  Chocking
 Poor packaging  Perceived as old
 Lost sales
Too Salty  Outdated receipt  Eat less  Experiment with
 Process not in control  Drink more recipe
 Uneven distribution of  Health hazard  Experiment with
salt  Lost sales process
 Introduce low salt
version

Fault tree analysis (FTA)

Error: Reference source not found

Value analysis (VA)

 Can we do without it?
 Does it do more than is required?
 Does it cost more than it is worth?
 Can something else do a better job?
 Can it be made by
 A less costly method?
 With less costly tooling?
 With less costly material?
 Can it be made cheaper, better, or faster by someone else?

Design for Environment

 Design for environment
 Designing a product from material that can be recycled

28
  Design from recycled material
 Design for ease of repair
 Minimize packaging
 Minimize material and energy used during manufacture, consumption and
disposal
 Extended producer responsibility
 Holds companies responsible for their product even after its useful life
Design for Environment (cont.)

Measure Design Quality

 % of revenue from new products or services
 % of products capturing 50% or more of market
 % of process initiatives yielding a 50% or more improvement in effectiveness
 % of suppliers engaged in collaborative design
 % of parts that can be recycled
 % of parts used in multiple products
 % of parts with no engineering change orders
 Average number of components per product
 Things gone wrong (TGW)

Quality Function Deployment (QFD)

 Translates voice of customer into technical design requirements
 Displays requirements in matrix diagrams
 First matrix called “house of quality”
 Series of connected houses

House of Quality

29
Error: Reference source not found

30
 Competitive Assessment of Customer Requirements
Error: Reference source not foundFrom Customer Requirements

Protective cover for soleplate

to Design Characteristics

Material used in soleplate

Energy needed to press

Thickness of soleplate
Error: Reference
Customersource not found
Requirements 1 2
Competitive 3

Automatic shutoff
Number of holes
Size of soleplate
4 Customer
5 Requirements Assessment

Weight of iron

Size of holes
Presses Presses
quicklyquickly 9 - B- A+ + + X

450º to 100º
Removes wrinkles 8 AB
Iron

well

-
s

X Removes wrinkles + + +
+ +
Doesn’t stick to fabric 6 X
Iron

well
s

Doesn’t stick to fabric - +

BA
+ + +
ProvidesProvides
enoughenough
steamsteam 8 + AB
+ X+ +
and

Eas e to
Eas

y use
saf

Doesn’t spot fabric 6

Doesn’t spot fabric X AB+ -
y

Doesn’t scorch
- - fabric 9 A XB
safe
and

use
to

Heats quickly scorch

Doesn ’t 6 fabric X + B+
A + - +
Heats quickly - -
Automatic shut-off
+
3 -
ABX X
Automatic shut-off
Quick cool-down 3 + X A B
Doesn’t break when dropped
Quick cool-down 5 - - AB+
X +
Doesn ’t break
Doesn’t burn when touchedwhen dropped5 + +
AB X+
+
Not too heavy 8 X
Doesn’t burn when touched +
A B + + +
Tradeoff Matrix Not too heavy + - - - +
-
Error: Reference source not found

+
+
- -
+
to reach
Thickness of soleplate

Time to go from 450º

Protective cover for

Flow of water from

Automatic shutoff
Energy needed to

Number of holes
Size of soleplate

to pr used in
Weight of iron

from required

for
Time to go from 450º to 100º
Size of holes

to reach 450º

Units of measure ft-lb lb in. cm ty ea mm oz/s

Material used in soleplate

holes

sec sec Y/N Y/N

soleplate

soleplate

TargetedIron
Changes in Design
Thickness of soleplate

A3
Material

1.4 8x4 2 SS 27 15 0.5 45 500

cover
to 100º

N Y
press

Size of holesholes

Error: Reference source not found

Flow of waterTime

Automatic shutoff
450º

Iron B 4 1.2 8x4 1 MG 27 15 0.3 35 350

Number of holes
Size of soleplate
Energy needed

N Y
Weight of iron

Time required

Our Iron (X) 2 1.7 9x5 4 T 35 15 0.7 50

Protective

600 N Y
31
soleplate

Estimated impact 3 4 4 4 5 4 3 2 5
measur
Objecti

5 3 0
ve

es

Estimated cost 3 3 3 3 4 3 3 3 4
Completed
House of Quality
Error: Reference source not found

SS = Silverstone
MG = Mirorrglide
T = Titanium

A Series of Connected QFD Houses

Error: Reference source not found
Benefits of QFD
 Promotes better understanding of customer demands
 Promotes better understanding of design interactions
 Involves manufacturing in design process
 Breaks down barriers between functions and departments
 Provides documentation of design process
Design for Robustness
 Robust product
 Designed to withstand variations in environmental and operating conditions
 Robust design
 Yields a product or service designed to withstand variations
 Controllable factors
 Design parameters such as material used, dimensions, and form of processing
 Uncontrollable factors
 User’s control (length of use, maintenance, settings

Tolerance and Consistency

 Tolerance
 Allowable ranges of variation in the dimension of a part
 Consistency

32
  Consistent errors are easier to correct than random errors
 Parts within tolerances may yield assemblies that are not within limits
 Consumers prefer product characteristics near their ideal values
Taguchi’s Quality Loss Function
 Quantifies customer preferences toward quality
 Emphasizes that customer preferences are strongly oriented toward consistently
 Design for Six Sigma (DFSS)

Error: Reference source not found

Quali

Loss
ty

Special Considerations in Service Design

 Services are intangible
 Lower
Service output is variableTarget Upper
 tolerance
Service have higher customer contact tolerance
 Services arelimit
perishable limit
 Service inseparable from delivery
 Services tend to be decentralized and dispersed
 Services are consumed more often than products
 Services can be easily emulated

Error: Reference source not found

2.1.4 Service Design Process (cont.)

 Service concept
 Purpose of a service; it defines target market and customer experience
 Service package
 Mixture of physical items, sensual benefits, and psychological benefits
 Service specifications
 Performance specifications
 Design specifications
 Delivery specifications

High v. Low Contact Services

Error: Reference source not found

33
High v. Low Contact Services (cont.)
Error: Reference source not found
High v. Low Contact Services (cont.)
Error: Reference source not found

High v. Low Contact Services (cont.)

Error: Reference source not found2.2 Processes, Technology,
Design High-Contact Service Low-Contact
and Capacity
Decision Service
Content outlines

Service
 Process planning Mostly front-room Mostly back-room
 Process analysis activities; service activities;
 process
Process innovation
 Technology decisions may change during planned and
 Capacity decisions delivery in response executed with
to customer minimal
2.2.1 Process Planning interference
 Process
Servicepackage Varies
A group of related taskswith customer;
with specific Fixed, less
inputs and outputs
 Process design
 Defines what tasks includes need to be doneenvironment
and coordinated amongextensive
functions, people,
and organizations as well as actual
 Process planning service
 Determines how output will be produced and converts design into workable
instructions
Source: Adapted for N.
from R. Chase, manufacture
Aquilano, andorR.delivery
Jacobs, Operations Management for Competitive
 Process
Advantagestrategy
(New York:McGraw-Hill, 2001), p. 210
 Determines organization’s overall approach for physically producing goods and
services
2.2.2 Process Strategy
 Capital intensity
 Mix of capital (i.e., equipment, automation) and labor resources used in
production process
 Process flexibility

34
  Ease with which resources can be adjusted in response to changes in demand,
technology, products or services, and resource availability
 Vertical integration
 Extent to which firm will produce inputs and control outputs of each stage of
production process
 Customer involvement
 Role of customer in production process
Make or Buy Decisions
 Cost
 Capacity
 Quality
 Speed
 Reliability
 Expertise
Sourcing Continuum
Error: Reference source not found
2.2.3 Process Selection
 Projects
 One-of-a-kind production of a product to customer order
 Batch production
 Systems process many different jobs through the system in groups or batches
 Mass production
 Produces large volumes of a standard product for a mass market
 Continuous production
 Used for very-high volume commodity products

Types of Processes
Error: Reference source not found

Types of Processes (cont.)

Error: Reference source not found

Types of Processes (cont.)

Error: Reference source not found

Types of Processes (cont.)

35
 Error: Reference source not found

Process Selection with

Break-Even Analysis
Cost
 Fixed costs - constant regardless of the number of units produced
 Variable costs - vary with the volume of units produced
Revenue - price at which an item is sold
Total revenue - price times volume sold
Profit - difference between total revenue and total cost
Process selection with
break-even analysis (cont.)
Error:
TotalReference
cost =source
fixed not
costfound
+ total variable cost
Process SelectionTC = cf + vcv
with
Total revenue = volume x price
Break-Even TR
Analysis
= vp (cont.)Error: Reference source not found
Profit = total revenue - total cost
Z = TR – TC = vp - (cf
(cf + vcv)
vcv)

TR = TC Total cost of
vp =$20,000
cf +
Break-Even Analysis:
vc
Examplev
process A
—
vp - vc = c
Fixed cost = cf = $2,000
$15,000
Variable cost =vcv = $5 per f
raft
Total cost of
— process B
v(p - c ) = c
Price = $10,000
p = $10 per raft
Error: Reference source — found f
v not
$5,000 c f
$3,000 —
Break-Even — v= p - c
Analysis: GraphError: Reference source not foundProcess
Choose
Selection$2,000 Choose v
process
— process A
Error: Reference
$1,000 source Solving for Break-Even Volume B
not found
— source not found
Error: Reference | | | |
Process 1000 2000 3000 4000 Units
Selection: Total Total 36
revenue cost
Graph Point of 400
indifference
Break-even
line Units
=
point2,667
line
 Process Plans
 Set of documents that detail manufacturing and service delivery specifications
 Assembly charts
 Operations sheets
 Quality-control check-sheets
Error: Reference source not found

Process Analysis
 Process flowcharts
 Symbolic representation of processes
 Incorporate
 Nonproductive activities (inspection, transportation, delay, storage)
 Productive activities (operations)

Process Flowchart Symbols

Error: Reference source not found

Error: Reference source not found

Error: Reference source not found

Process Innovation
Error: Reference source not found
From Function to Process

Product Development
Process
flowchart Error: Reference source not found Order Fulfillment
of apple
processing
al
Purchasi

Manuf
Acco

S
untin

e
s
acturi

Error: Reference source not found Supply Chain Management

g

ng
ng

Principles for Redesigning Processes

Customer Service

37
Function
  Remove waste, simplify, and consolidate similar activities
 Link processes to create value
 Let the swiftest and most capable enterprise execute the process
 Flex process for any time, any place, any way
 Capture information digitally at the source and propagate it through process
Principles for Redesigning Processes (cont.)
 Provide visibility through fresher and richer information about process status
 Fit process with sensors and feedback loops that can prompt action
 Add analytic capabilities to process
 Connect, collect, and create knowledge around process through all who touch it
 Personalize process with preferences and habits of participants
Techniques for Generating Innovative Ideas
 Vary the entry point to a problem
 In trying to untangle fishing lines, it’s best to start from the fish, not the poles
 Draw analogies
 A previous solution to an old problem might work
 Change your perspective
 Think like a customer
 Bring in persons who have no knowledge of process

Techniques for Generating Innovative Ideas (cont.)

 Try inverse brainstorming
 What would increase cost
 What would displease the customer
 Chain forward as far as possible
 If I solve this problem, what is the next problem
 Use attribute brainstorming
 How would this process operate if. . .
 Our workers were mobile and flexible
 There were no monetary constraints
 We had perfect knowledge

Technology Decisions
 Financial justification of technology
 Purchase cost
 Operating Costs
 Annual Savings
 Revenue Enhancement
 Replacement Analysis
 Risk and Uncertainty
 Piecemeal Analysis
Error: Reference source not found

38
A Technology Primer
Error: Reference source not found
A Technology Primer (cont.)
Error: Reference source not found

A Technology Primer (cont.)

Error: Reference source not found

A Technology Primer (cont.)

Error: Reference source not found

A Technology Primer (cont.)

Error: Reference source not found
A Technology Primer (cont.)
Error: Reference source not found

A Technology Primer (cont.)

Error: Reference source not found

39
A Technology Primer (cont.)
Error: Reference source not found
2.2.4 Capacity Decisions
 Capacity
 Maximum capability to produce
 Rated capacity is theoretical
 Effective capacity includes efficiency and utilization
 Capacity utilization
 Percent of available time spent working
 Capacity efficiency
 How well a machine or worker performs compared to a standard output level
 Capacity load
 Standard hours of work assigned to a facility
 Capacity load percent
 Ratio of load to capacity

Capacity
Error: Reference source not found Expansion Strategies

Capacity Decisions (cont.)

 Capacity increase depends on
 Volume and certainty of anticipated demand
 Strategic objectives
 Costs of expansion and operation
 Best operating level
 % of capacity utilization that minimizes unit costs

40
  Capacity cushion
 % of capacity held in reserve for unexpected occurrences
Economies of Scale
 It costs less per unit to produce high levels of output
 Fixed costs can be spread over a larger number of units
 Production or operating costs do not increase linearly with output levels
 Quantity discounts are available for material purchases
 Operating efficiency increases as workers gain experience
Diseconomies of Scale
 Occur above a certain level of output
 Diseconomies of Distribution
 Diseconomies of Bureaucracy
 Diseconomies of Confusion
 Diseconomies of Vulnerability
Best Operating Level for a Hotel
Error: Reference source not found

Diseconomies of Confusion
Error: Reference source not found

2.3 Capacity planning

Capacity can be defined as the maximum use of all the limited resources available to produce a
set quantity of goods in a given time frame that is fixed if all the condition for production were
ideal. The capacity available can be seen as the upper limit of the amount of work that a
productive unit will be able to perform.

The objectives of capacity planning.

 The balance that is struck between capacity and demand will influence the cost structure.
 The balance struck between capacity and demand will influence revenues.

41
 If finished goods are manufactured for stock (inventory); working capital will be tied up.
 Large fluctuations in the demand may cause quality problems.
 Enhancement of the speed with which a customer’s order can be filled.
 The closer the demands are to the available capacity the more dependable the supply of
goods will be.

Effective capacity can be defined as the maximum rate at which a process can produce for
extended periods when the production conditions are normal, taking the maintenance
requirements, the rest periods, the production mix to be manufactured, how well employees are
trained in their jobs, their work schedules and the methods used to schedule that work into
account.

Factors that will influence the availability of capacity in a factory:

1. Design of the process.
2. Design of the product.
3. Variety of the product.
4. Quality of the product.
5. Scheduling of production.
6. Management of materials.
7. Maintenance of the equipment.
8. Management of people.

Capacity measurement.

Table 9.3 Examples of how capacity can be measured

BUSINESS INPUTS OUTPUTS
Filling Station Number of pumps Quantity fuel pumped
Airline Number of seats Number of passengers
University Number of students Students graduating
Hospital Beds available Patients treated
Movie Theatre Number of seats Number of patrons
Repair Facility Number of jobs received Number of jobs
completed

1.) Design capacity: If everything is ideal during the manufacturing process, it is the maximum
output that can possibly be attained by that manufacturing process.
2.) Effective capacity: If all the constraints such as the number of products to be manufactured,
breakdown of machines, scheduling and quality is taken into account, it will be the capacity
necessary to attain the maximum possible output from that process.
3.) Actual output: That is what was actually achieved by that process.

Efficiency = Actual Output

Effective capacity
Utilization = Actual Output
Design Capacity

Example

42
Use the following information for the repair workshop of a motor dealership and compute
workshop efficiency and utilization factors:

Designed capacity: 100 vehicles per day

Effective capacity: 80 vehicles per day

Actual output: 72 vehicles per day

Efficiency = Actual Output

Effective capacity

= 72 vehicles per day

80 vehicles per day

= 90%

Utilization = Actual Output

Design Capacity

= 72 vehicles per day

100 vehicles per day

= 72%

Flexible Manufacturing Systems (FMS)

 Self-contained machines, which is operated by a centralized computer e.g. Automated Guided
Vehicles
 A flexible manufacturing system can be described as an automated job shop that do
intermittent processing of jobs.
 Numerically Controlled (NC) machines - simplest form of a flexible manufacturing system
 Examples of more advanced flexible manufacturing systems are welding robots, spray
painting booths, cleaning equipment and monitoring equipment in complex plants.

The following features can characterize a flexible manufacturing system:

 An automated loading mechanism for the loading and unloading of materials and tools.
 The tool changes can take place at two machines simultaneously.
 A tool-storage and changing system will be found at each of these machines.
 An automated materials handling system that moves materials to and fro as and when
required.
 At each machine the materials will be automatically loaded and stacked when completed or
waiting to be loaded.
 A computer controls the complete flexible manufacturing system.

Certain advantages or benefits can be derived from a flexible manufacturing system. They are:
 Labour costs can be reduced significantly. Fewer people are required to operate more
machines. Where previously an operator operated each machine, with a flexible
manufacturing system one operator can operate two or more machines.
 Better quality products can be produced. This is made possible by the programmability of the

43
 machines. The exact measurements and requirements can be programmed into the machine.
Every job will be done to the exact standard.
 The flexibility and efficiency of automation is combined in a flexible manufacturing system.
 The flexibility of the system eliminates the need for jobs to be moved between machines or
work centers by hand. All this can be achieved by making use of automated guided vehicles.
 As a result of the repetitiveness of a flexible manufacturing system, improvements in the
flexibility of the system and the productivity of the process can be obtained.
 Lower capital investment is required.
 Savings in the set-up times of machines can be achieved. The reason being that the machine
is automatically set-up before the job reaches the machine. It can be done because the set-up
of the job is written into the programme that controls that machine.
 Almost no work-in-process is kept. Jobs and materials are delivered at the machine when
required. No half-finished jobs clutter up the workplace. Another advantage of delivering a
job or material at the machine only when it is needed is that hardly any queue form at the
machines of jobs or materials waiting to be loaded. Automated guided vehicles will deliver
materials only when instructed to do so by the computer.
 As a result of the computer programming of the machine, a one-off unique job can be done
without affecting the efficiency of that machine.
 The machines in that group can be reprogrammed at random without affecting capacity,
quality or efficiency.

Disadvantages associated with FMS:

 The flexible manufacturing system can handle only a narrow range of products.
 Due to the narrow range only products that use the same machines can be manufactured by
the flexible manufacturing system.
 Much longer planning and development times are needed. The reason being that the
complexity of the machines involved and the programmes that must be written for each of the
machines take a long time.

Just in Time (JIT)

A system that has the purpose to fulfill any demand placed on the system without delay. It will do
so with the minimum of waste and only with high quality products. In simpler language it means
to produce the product only when it is required. The required product will thus not be delivered
earlier or later than the date specified by the customer.

Scrap and rework. If a business wants to be successful in implementing Just-in-Time and lean
production this practice cannot exist. Therefore businesses that have implemented Just-in-Time
will have certain advantages over those that still use the older methods of production. The
following advantages can be derived from implementing a Just-in-Time system:
1. Costs will decrease.
2. Less defective products will be manufactured which will result in higher customer
satisfaction. This is one of the reasons that costs will decrease.
3. Flexibility of the production system will increase.
4. New and more improved products can be made available to the consumers much faster.

Once a Just-in-Time system has been installed it should not be seen as the begin all and end all of
the production system. The system must be managed properly and most importantly continuous
improvements must be made to the system. Fine-tune the system continuously. The main purpose
of a Just-in-Time system is to eliminate waste in the production process. Waste for this purpose

44
can be defined as anything that does not add value to a product or service. Examples of waste is
the following:
 An operator standing or sitting watching a machine while the manufacturing process is in
progress. Him being there does not add value to the product. The operator is there just in case
the machine breaks down.
 The rework of sub standard quality products. No value is added when products have to be
reworked because quality is low or non-existent.
 The moving around of completed or half-completed products over long distances. No value is
added as valuable time is wasted.
 Operators looking for lost or misplaced tools.
 Machines or work centers waiting for raw materials or parts to continue the manufacturing
process. No value is added as both the machine and the operator is idle.
 Holding of inventory. The space is required for the holding of inventory could be put to better
use.
 The breakdown of machinery. Better maintenance plans should be put into operation to
eliminate this kind of waste.
 Continuous counting and recounting of existing stock. This is one of the biggest sources of
waste in any business. Nothing constructive is produced. For this very reason no inventory
exist in the Just-in-Time system.
 The overproduction of products. Many companies do this to prevent the non-availability of
their products. This is one of the cases where “fat ” is built in just in case of stock-outs.

It is therefore the goal of the Just-in-Time system to eliminate this waste and ensure a smooth
production process. For a successful Just-in-Time system the following goals must be met:
 Waste must be eliminated. If waste is not eliminated resource that could have been used in
production is kept busy with unproductive work.
 The system must be flexible. The system must be developed in such a manner that any mix of
products can be handled without much of a problem. The balance and rate of throughput must
be maintained at a steady rate.
 Prevent disruptions. Disruptions have a negative influence on the production process. It will
interrupt the smooth flow of products through the production process. Once this happens one
of the cornerstones of the Just-in-Time system is absent. Factors such as poor quality,
continuous changes in the production schedule, the late receipt of materials and the
breakdown of machines will cause disruptions to the smooth flow of products through the
production process.
 Delivery times of raw materials and the set-up times of machines must be reduced. The
longer these times are, the less value is added to the final product. This will also impact
negatively on the flexibility of the production process.
 Keep the minimum inventory. Ideally, there should be no inventory in a Just-in-Time system.
The more inventory that is held, the more space is required. This will push up the cost of the
final product.
 Good supplier network. To eliminate the holding of stock a reliable supplier network must be
build up. The smaller the number of suppliers the more reliable the deliveries become. The
suppliers must constantly be kept informed of when and what quantities of goods are
required. It will be a great help if the suppliers are situated close to the factory.
 Source quality. Quality is a prerequisite for a successful Just-in-Time system. Ensure that
only high quality parts and raw materials are received from the suppliers. In this manner the
manufacturing of zero defect products become more viable.

45
Many benefits can be derived from a properly installed Just-in-Time system. The following is the
main benefits of Just-in-Time:
 All levels of inventory (work-in-process, bought in goods and finished goods) will be
reduced. If properly installed Just-in-Time will trim inventory down to only the materials
needed for that day’s production.
 Quality of the goods produced will improve. Rework and scrap will be reduced and
eventually eliminated.
 All the costs involved will be reduced. This includes the cost of rework, scrap, and inventory
holding costs as well as the cost of constantly setting up the machines.
 The time taken to manufacture a finished product will be reduced.
 The productivity of both the man and the machine will improve because of better utilization.
 There will be more flexibility in the production process.
 Better relationships with the suppliers will be the result of a successful implementation of a
Just-in-Time system.
 The scheduling and controlling of jobs will be simplified.
 Due to fewer interruptions in the manufacturing process capacity will be increased. This will
come to pass because of better quality, better training of employees and less machine
breakdowns.
 Use employees more productive. Employees can now become actively involved in the
solving of production problems. The people working in the process are usually more aware
where a problem is likely to occur and how to solve them. Listen to their input.
 Indirect labour (progress chasers, store men and planners) can be reduced.
 More types of products can be produced.

To become more competitive and stay competitive more and more companies will have to
seriously consider conversion to a Just-in-Time system. Those that choose not to convert, risk
becoming irrelevant in the manufacturing environment. Their cost will be high, capital will be
tied up in unproductive stock holing and their quality will be almost non-existent. It is for these
reasons that the Japanese and other Asian countries dominated the world markets in the late
1970’s through the 1980’s and early 1990’s. It is only lately that the Western countries can
compete on an equal footing with the Asian countries. These countries have learned their lessons
well. If South-African firms want to compete in the global market they to will have to learn these
lessons. If they do not, South Africa will always remain a manufacturing backwater.

2.4 Facility Locations and Layout

Content Outline
 Types of facilities
 Site selection: where to locate
 Location analysis techniques
 Basic layouts
 Designing process layouts
 Designing service layouts
 Designing product layouts
 Hybrid layouts

Types of Facilities
 Heavy-manufacturing facilities
 Large, require a lot of space, and are expensive

46
  Light-industry facilities
 Smaller, cleaner plants and usually less costly
 Retail and service facilities
 Smallest and least costly

2.4.1 Facility Location

Factors in Heavy Manufacturing Location
 Construction costs
 Land costs
 Raw material and finished goods shipment modes
 Proximity to raw materials
 Utilities
 Labor availability

Factors in Light Industry Location

 Transportation costs
 Proximity to markets
 Frequency of delivery required by customer
 Land costs
 Easily accessible geographic region
 Education and training capabilities
Factors in Retail Location
 Proximity to customers
 Location is everything

Global Location Factors

 Government stability
 Government regulations
 Political and economic systems
 Economic stability and growth
 Exchange rates
 Culture
 Climate
 Export import regulations, duties and tariffs
 Raw material availability
 Number and proximity of suppliers
 Transportation and distribution system
 Labor cost and education
 Available technology
 Commercial travel
 Technical expertise
 Cross-border trade regulations
 Group trade agreements

Regional Location Factors

 Labor (availability, education, cost, and unions)

47
  Proximity of customers
 Number of customers
 Construction/leasing costs
 Land cost
 Modes and quality of transportation
 Transportation costs
 Community government Local business regulations
 Government services (e.g., Chamber of Commerce)
Regional Location Factors (cont.)
 Business climate
 Community services
 Incentive packages
 Government regulations
 Environmental regulations
 Raw material availability
 Commercial travel
 Climate
 Infrastructure (e.g., roads, water, sewers)
 Quality of life
 Taxes
 Availability of sites
 Financial services
 Community inducements
 Proximity of suppliers
 Education system
Location Incentives
 Tax credits
 Relaxed government regulation
 Job training
 Infrastructure improvement
 Money

Location Analysis Techniques

 Location rating factor
 Center-of-gravity

 Load-distance
Location Rating Factor
 Identify important factors
 Weight factors (0.00 - 1.00)
 Subjectively score each factor (0 - 100)
 Sum weighted scores
Location Factor Rating: Example
Error: Reference source not found

48
 Location Factor Rating
Error: Reference source not found

Error: Reference source not found

Center-of-Gravity Technique
 Locate facility at center of geographic area
 Based on weight and distance traveled establish grid-map of area
 Identify coordinates and weights shipped for each location

Factor
Rating
with Excel

Grid-Map Coordinates
Error: Reference source not found
Center-of-Gravity Technique: Example
Error: Reference source not found

Center-of-Gravity Technique: Example (cont.)

Error: Reference source not found

Center-of-Gravity Technique: Example (cont.)

Error: Reference source not found

49
Error: Reference source not found

Load-Distance Technique
 Compute (Load x Distance) for each site
 Choose site with lowest (Load x Distance)
 Distance can be actual or straight-line
Load-Distance Calculations
Error: Reference source not found
n

LD li di
= i=
where 1
,LD = load-distance value

li = load expressed as a weight, number of trips or units

being shipped from proposed site and location i
di = distance between proposed site and
location i
di = (xi - x)2 + (yi
- y)2
where
,(x,y) = coordinates of proposed
Load-Distance:
site Example
(xi , yi) = coordinates of existing
Error:facility
Reference source not found

Load-Distance: Example (cont.)

Error: Reference source not found
Error: Reference source not found

2.4.2 Facility layout

Arrangement of areas within a facility to:
 Minimize material-handling costs
 Utilize space efficiently
 Utilize labor efficiently
 Eliminate bottlenecks
 Facilitate communication and interaction
 Reduce manufacturing cycle time
 Reduce customer service time
 Eliminate wasted or redundant movement

50
  Increase capacity
 Facilitate entry, exit, and placement of material, products, and people
 Incorporate safety and security measures
 Promote product and service quality
 Encourage proper maintenance activities
 Provide a visual control of activities
 Provide flexibility to adapt to changing conditions

Basic layouts
 Process layouts
 Group similar activities together according to process or function they perform
 Product layouts
 Arrange activities in line according to sequence of operations for a particular
product or service
 Fixed-position layouts
 Are used for projects in which product cannot be moved

Process layout in services

Error: Reference source not found
Manufacturing Process Layout
Error: Reference source not found

A Product Layout
Error: Reference source not found

Comparison of Product
and Process Layouts
Error: Reference source not found

Comparison of Product
and Process Layouts
Error: Reference source not found
Fixed-Position Layouts
 Typical of projects
 Equipment, workers, materials, other resources brought to the site
 Highly skilled labor
 Often low fixed
 Typically high variable costs

51
Designing Process Layouts
 Goal: minimize material handling costs
 Block Diagramming
 Minimize nonadjacent loads
 Use when quantitative data is available
 Relationship Diagramming
 Based on location preference between areas
 Use when quantitative data is not available
Block Diagramming
 Unit load
 Quantity in which material is normally moved
 Nonadjacent load
 Distance farther than the next block
 Steps
 Create load summary chart
 Calculate composite (two way) movements
 Develop trial layouts minimizing number of nonadjacent loads

Block Diagramming: Example

1 2 3

Error: Reference source not found

4 5

Error: Reference source not found

52
Block Diagramming:
Example (cont.)

2 3 200 loads
2 4 150 loads
1 3 110 loads
1 2 100 loads
4 5 60 loads
3 5 50 loads
2 5 50 loads
3 4 40 loads
1 4 0 loads
1 5 0 loads
Error: Reference source not foundError: Reference source not found

Block Diagramming:
Example (cont.)
Error: Reference source not found
Relationship Diagramming
 Production
Schematic diagram that uses weighted lines to denote location preference
 Muther’s grid
Offices
 Format for displaying manager preferences for department locations
Error: Reference source not found

Stockroom
Relationship Diagramming
Shipping and A Absolutely necessary
Error:receiving
Reference source not found E Especially important
I Important
Locker room O Okay 53
U Unimportant
Toolroom X Undesirable
Relationship Diagrams:
Example (cont.)
(a) Relationship diagram of original layout
Error: Reference source not found

54
Relationship Diagrams:
Example (cont.)
Error: Reference source not found

Computerized layout solutions

 CRAFT
 Computerized Relative Allocation of Facilities Technique
 CORELAP
 Computerized Relationship Layout Planning
 PROMODEL and EXTEND
 Visual feedback
 Allow user to quickly test a variety of scenarios
 Three-D modeling and CAD
 Integrated layout analysis
 Available in Vis Factory and similar software
Designing Service Layouts
 Must be both attractive and functional
 Types
 Free flow layouts
 Encourage browsing, increase impulse purchasing, are flexible and
visually appealing
 Grid layouts
 Encourage customer familiarity, are low cost, easy to clean and secure,
and good for repeat customers
 Loop and Spine layouts
 Both increase customer sightlines and exposure to products, while
encouraging customer to circulate through the entire store
Types of Store Layouts
Error: Reference source not found

Designing Product Layouts

 Objective
 Balance the assembly line
 Line balancing
 Tries to equalize the amount of work at each workstation
 Precedence requirements
 Physical restrictions on the order in which operations are performed
 Cycle time
 Maximum amount of time a product is allowed to spend at each workstation

55
Cycle Time Example
Error: Reference source not found

Flow Time vs Cycle Time

 Cycle time = max time spent at any station
 Flow time = time to complete all stations
Error: Reference source not found

Efficiency of Line
Error: Reference source not foundLine Balancing Procedure
1. Efficienc
Draw and label a precedence diagram Minimum number of
Calculate desired cycle time required for the line workstations
2.
3.
y
Calculate theoretical minimum number of workstations
4. Group elements into workstations, recognizing cycle time and precedence constraints
5. Calculate efficiencyi of the line i

t t
6. i=
Determine if the theoretical i =an acceptable efficiency
minimum number of workstations or
1 Ifinot, go back to step 4.
level has been reached. 1 i
E N
= nCa = Cd
ti = completion time for element i
Where j = number of work elements
n = actual number of workstations
Ca = actual cycle time
Cd = desired cycle time

56
Line Balancing: Example
Error: Reference
WORKsource not found
ELEMENT PRECEDENCE TIME (MIN)
Line Balancing: Example (cont.)
A Press out sheet of fruit — 0.1
Error:
B Reference
Cut into source
strips not
A found0.2
WORK ELEMENT PRECEDENCE TIME (MIN)
C Outline fun shapes A 0.4
DA Roll up out
Press and sheet
package B, C 0.3
of fruit — 0.1
B Cut into strips A 0.2
LineCBalancing: Example (cont.)
Outline fun shapes A 0. 0.4
D Reference
Error: Roll upsource
and package
not foundB, C2 0.3
B
0.
Line Balancing: Example (cont.) 0.
1
A D 3
Error: Reference source not found
Computerized Line Balancing C 0.
4
 Use heuristics to assign tasks to workstations 240
Cd  40 hours x
= Longest operation time60 minutes / =0 = 0.4
 Shortest operation hourtime
minute 600
 Most number 6,000 unitstasks
of following
 Least number of following tasks 0
 Ranked positional weight
Hybrids Layouts
1.
 Cellular 0.1 + 0.2 + 0.3 +
layouts
N= =0 = 2.5  3
0.4 machines into work centers (called cells) that process families
 Group dissimilar
workstations 0.
0.4similar shapes or processing requirements
of parts with
 Flexible manufacturing system 4
 Automated machining and material handling systems which can produce an
enormous variety of items
 Mixed-model assembly line
 Processes more than one product model in one line
Cellular Layouts
1. Identify families of parts with similar flow paths
2. Group machines into cells based on part families
3. Arrange cells so material movement is minimized
4. Locate large shared machines at point of use
Parts Families
Error: Reference source not found

57
Original Process Layout
Error: Reference source not found

Part Routing Matrix

Error: Reference source not found

Revised Cellular Layout

Error: Reference source not found
Assembl
y
1 1
8 9
0 2

11
4 6
7

2 1 3 5
A B
C
Raw
materials

58
Reordered Routing Matrix

Machines
Parts 1 2 4 8 10 3 6 9 5 7
11 12
A x x x x x
D x x x x x
F x x x
C x x x
G x x x
B xxxx
H x x x
E x xx

Error: Reference source not found

Automated Manufacturing Cell

Error: Reference source not found
Advantages and Disadvantages
of Cellular Layouts
 Advantages
 Reduced material handling and transit time
 Reduced setup time
 Reduced work-in- process inventory
 Better use of human resources
 Easier to control
 Easier to automate
 Disadvantages
 Inadequate part families
 Poorly balanced cells
 Expanded training and scheduling
of workers
 Increased capital investment
Flexible Manufacturing Systems (FMS)
 FMS consists of numerous programmable machine tools connected by an automated
material handling system and controlled by a common computer network

59
 FMS combines flexibility with efficiency
 FMS layouts differ based on
 Variety of parts that the system can process
 Size of parts processed
 Average processing time required for part completion

60
Full-Blown FMS
Error: Reference source not foundMixed Model Assembly Lines
 Produce multiple models in any order on one assembly line
 Issues in mixed model lines
 Line balancing
 U-shaped line
 Flexible workforce
 Model sequencing
Balancing U-Shaped Lines
Error: Reference source not found
Precedence diagram:

A B C

Cycle time = 12 min

D E
(b) Balanced for a U-shaped line
(a) Balanced for a straight line
A,B
A,B C,D E
9 min 12 min3
min3 min
2
24 C,D
4
Efficiency = 3(12 = = .6666 = 66.7 %
3
)
6
E
2
24
2.5 Job Design & Measurement (Productivity, Teamwork, and
4
Efficiency = 2(12 = = 100 % 12 min 12 min
Empowerment: Behavior, Work Methods 2 & Measurement)
)
4
Overview
 Productivity and Human Behavior
 Designing Workers’ Jobs
 Empowering Workers
 Work Measurement
 Learning Curves

Learning Objectives
After completing this lesson, you should be able to:
 Define the term productivity and explain why it is important to measure productivity
 Discuss major approaches to improve productivity
 Explain what is work methods analysis
 Perform stopwatch time study and work sampling calculations
 Discuss limitations of learning curves
Productivity

61
  Productivity is the amount of products or services produced with the resources used
 Productivity = Quantity of products or services produced
Amount of resources used
 Productivity varies with the amount of production relative to the amount of resources
used.
Why do We Care About Productivity?
 Without productivity improvement, businesses do not survive in a global economy.
Higher productivity means higher standard of living
Ways to Increase Productivity
 Increase output using the same or a lesser amount of resource.
 Reduce amount of resource used while keeping output constant or increasing it.
 Use more resource as long as output increases at a greater rate.
 Decrease output as long as resource use decreases at a greater rate.
Impact of Price/Cost Change on Productivity
 When the cost of a resource increases and profit is to remain the same, some combination
of the following must occur:
 Output is increased
 Resource usage is decreased
 Price of output is increased
Single Factor Approach to
Measuring Productivity
 Capital - Number of products produced
Divided by asset value
 Materials - Number of products produced
Divided by dollars spent on materials
 Direct Labor - Number of products produced divided by direct labor-hours
 Overhead - Number of products produced
Divided by dollars spent on overhead
 The productivity of a particular resource can be increased simply by replacing some of
this resource with a different type of resource.
 Example: If automation is substituted for direct labor and output volume is unaffected,
direct-labor productivity increases (and capital productivity decreases).
 Our view of productivity must be toward improving the productivity of all the factors of
production.
Labor Productivity
 Three major factors affect labor productivity:
 Employees’ job performance
 Technology, machines, tools, and work methods
 Product quality

Employee Job Performance

 Motivation may be the most complex variable in the productivity equation.
 Only unsatisfied needs are motivators.
 Maslow identified five basic needs: physiological, safety, social, esteem, and self-
fulfillment.
 The higher level needs -- social, esteem, and self-fulfillment -- may hold the most
promise for motivating.
 If productivity is seen as a way to fulfill these needs, higher productivity is likely to
result.
Specialization of Labor

62
  Advantages
 High production rates
 Low wage rates
 Low skill requirements
 Disadvantages
 High turnover, absenteeism, tardiness, grievances, sickness, and sabotage
 Low production quality
Modifying Jobs to Provide
Broader Range of Needs Satisfactions
 Cross-training -- workers perform multiple jobs
 Job enlargement -- adding similar tasks to worker’s job --> horizontal job expansion
 Job enrichment -- adding more management functions to job --> vertical job expansion
 Team production -- organizing workers into teams; assigning management
responsibility to teams
Empowering Workers
 Employees have control of and know the most about the details of production.
 To get employees to accept this responsibility, managers must first give employees the
authority to act.
 Conveying authority from managers to workers is called worker empowerment.
 Workers accepting responsibility for production can lead to internal ownership.
Work Methods Analysis
 Meticulously scrutinize every facet of the job being studied.
 Apply the principles of motion economy developed by Taylor and the Gilberts.
 Use graphical aids such as flow diagrams, process charts, and multi-activity charts.
 Ask for input from the workers doing the job.
Work Measurement
 Work measurement is the process of estimating the amount of worker time required to
produce one unit of output.
 Goal of work measurement is to develop labor standards that can be used for planning
and controlling operations.
Labor Standards
 A labor standard is the number of worker-minutes required to complete an element,
operation, or product under ordinary operating conditions.
 Ordinary operating conditions refers to a hypothetical average situation -- average or
typical worker, material, machinery, environment, etc.
Labor Standards
 Labor standards are used in:
 Cost estimation
 Pricing of products and services
 Incentive pay systems
 Capacity planning
 Production scheduling
 A labor standard can be determined using one or more of the following approaches:
 Time study
 Work sampling
 Predetermined time standards
 Historical standards
 Supervisor estimates

63
Determining Labor Standards
from Time Studies
Error: Reference source not found
Performance Allowance
Rating
Steps in Determining Labor Standard Fraction
1. Make sure correct methods are being used to perform the operation being studied.
2. Break the operation down into basic tasks (elements).
Observed Normal Standard
3. Determine how many cycles to time. A cycle is one complete set of the elemental tasks.
4. Observe and record the elapsed time for each element for the number of required cycles.
Time Time Time
5. For each element, estimate the observed worker ’s performance rating. A rating of 1.00
indicates the worker is working at normal speed.
6. Compute the allowance fraction for the operation. The allowance fraction is the fraction of
time that workers cannot work through no fault of their own.
7. Compute the mean observed time for each element:
(Sum of observed element times) (Number of cycles timed)
8. Compute the element normal time for each element:
= (Mean observed time) x (Performance rating)
9. Compute the total normal time for the entire operation:
= (Sum of element normal times for all elements)
10. Compute the labor standard for the operation:
= (Total normal time) / (1 -Allowance fraction)

Example: Labor Standard

In a time study of a manufacturing operation, the average time observed to complete a product
was 8.6 minutes. The performance rating applied to the observed worker was 0.95 and the
allowance during an 8-hour shift were 12.5% or 60 minutes.
Compute the labor standard.
 Observed time = 8.6 minutes
 Performance rating = 0.95
 Allowance fraction = 0.125
 Normal time = Observed time x Performance rating = 8.6 x 0.95
= 8.17 minutes
 Standard Time = Normal time / (1 - Allowance)
= 8.17 / (1 - .125)
= 8.17 / (0.875)
= 9.337 minutes
Number of observations (Sample size) in Time Studies
2
Z s
n= 
 a 

 Z: number of normal standard deviations

needed for desired confidence
 s: sample standard deviation

64
  a: Maximum acceptable error or allowable
accuracy (stated as amount, e.g. within
one minute of the true mean).
 If a is expressed as a percentage of the
mean of the observed times then:

: n =  Samp

Z s
x  le mean
 ax 

Work Sampling
 A technique for estimating the proportion of time that a worker or machine spends on
various activities.
 No timing an activity. Observe at random intervals over a period of time and note the
nature of the activity. The resulting data are counts of the number of times each category
of activity (or non- activity) was observed.
 Primary use are in:
 Ratio-delay studies: concern percentage of a worker ’s time that involves
unavoidable delays or percentage of time a machine is idle
 Analysis of non-repetitive jobs
 Identify the worker or machine to be studied
 Inform the worker and the supervision
 Determine sample size
 Develop a random observation schedule
 Take observations
 Determine the estimated proportion of time spent on the specified activity.
In most instance, manager will specify the desired confidence level and amount of allowable
error, and the analyst will determine a sample size sufficient to obtain these results.
Sample size in Work Sampling
2
 Z
n =   p
 (1 - p)

 a

 Z: Number of standard deviations needed to achieve desired confidence

 : Sample proportion (the number of occurrences divided by sample size)
 n: Sample size
 If no sample estimate of p is available, use = 0.50 After a number of observations,
counts the number of occurrences of certain activity then compute and revise n.
Repeat until the computed value of n is less than the number of observations already
taken.

Learning Curves
 Workers exhibit pattern of learning in manufacturing operations through experience. The
time to manufacture a product drops as more units are produced to a point then the curve
levels off.
 Arithmetic analysis
 Logarithmic analysis
 Learning curve tables
Learning Curves (continued)
 Selecting a learning rate

65
  Industry journals
 Historical experience
 Uses and limitations
 Products and services tend to be custom designed
 Batches tend to be small
 Product/services tend to be complex.... learning occurs quickly
Example: Learning Curve
C.W. Crow has just received an order for 200 special customized tote bags for a professional
football team. It has been established that the first tote will take 20 minutes to produce and a
90% learning curve is expected.
a. How many labor minutes should the 200th unit require?
b. How many labor hours should the whole order of 200 tote bags take?
 Learning Curve Table Approach
Using the Learning-Curve Coefficients table on page 610 of the textbook:
a. 20 minutes x .447 = 8.94 minutes
b. 20 minutes x 105.0 = 2,100 minutes = 35 hours
Wrap-Up
 Recognize strategic and tactical importance of employees
 Workers must gain problem-solving abilities and be trained, cross-trained, educated and
empowered so they can work in teams and respond to customer needs
 Organizational structure must be developed to encourage full use of employees
 Information is the main media of management

Questions for Self-evaluation.

1. Discuss the guidelines for effective operations design.
2. Define capacity.
3. List and discuss the objectives of capacity planning.
4. Discuss the different types of capacity measurements available with examples.
5. Discuss the characteristics of a flexible manufacturing system.
6. List the advantages of a flexible manufacturing system.
7. Discuss the term Just-in-Time
8. Discuss the advantages of lean production as part of a Just-in-Time system.

66
 CHAPTER THREE
OPERATIONS PLANNING AND CONTROL
3.2 Aggregate Production Planning
Content Outline
 Aggregate planning process
 Strategies for adjusting capacity
 Strategies for managing demand
 Quantitative techniques for aggregate production planning
 Hierarchical nature of planning
 Aggregate planning for services
Aggregate Planning
 Determine the resource capacity needed to meet demand over an intermediate time
horizon
 Aggregate refers to product lines or families
 Aggregate planning matches supply and demand
 Objectives
 Establish a company wide game plan for allocating resources
 Develop an economic strategy for meeting demand

 Aggregate Planning Process

Error: Reference source not foundMeeting Demand Strategies
 Adjusting capacity

67
  Resources necessary to meet demand are acquired and maintained over the time
horizon of the plan
 Minor variations in demand are handled with overtime or under-time
 Managing demand
 Proactive demand management
Strategies for Adjusting Capacity
 Level production
 Producing at a constant rate and using inventory to absorb fluctuations in demand
 Chase demand
 Hiring and firing workers to match demand
 Peak demand
 Maintaining resources for high-demand levels
 Overtime and under-time
 Increasing or decreasing working hours
 Subcontracting
 Let outside companies complete the work
 Part-time workers
 Hiring part time workers to complete the work
 Backordering
 Providing the service or product at a later time period
Level Production
Error: Reference source not found
Chase Demand
Demand
Units

Error: Reference source not foundStrategies for Managing Demand

Time
 Shifting demand into other time periods
 Incentives
 Sales promotions
 Advertising campaigns
 Offering products or services with counter-cyclical demand patterns
 Partnering with suppliers to reduce information distortion along the supply chain
Error: Reference source not foundQuantitative Techniques For APP
 Pure Strategies
 Mixed Strategies

68
  Linear Programming
 Transportation Method
 Other Quantitative Techniques
Error: Reference source not found

Pure Strategies
Error: Reference source not found
QUARTER SALES FORECAST (LB)
Hiring cost = $100 per worker
Spring 80,000
Firing cost = $500 per worker
Regular production
Summer cost per pound = $2.00
50,000
Inventory carrying cost = $0.50 pound per quarter
Fall per employee
Production 120,000
= 1,000 pounds per quarter
Winterwork force =150,000
Beginning 100 workers

Level Production Strategy

Error: Reference source not found
Level production
(50,000 + 120,000 + 150,000 +
80,000) = 100,000
SALES PRODUCTION 4 pounds
QUARTER FORECAST PLAN INVENTORY
Spring 80,000 100,000 20,000
Summer 50,000 100,000 70,000
Fall 120,000 100,000 50,000
Winter 150,000 100,000 0
400,000 400,000 140,000
Cost of Level Production Strategy
(400,000 X $2.00) + (140,00 X $.50) = $870,000
Chase Demand Strategy
Error: Reference source not found
Mixed Strategy
 Combination of Level Production and Chase Demand strategies
 Examples of management policies
 No more than x% of the workforce can be laid off in one quarter
 Inventory levels cannot exceed x dollars
 Many industries may simply shut down manufacturing during the low demand season
and schedule employee vacations during that time
General Linear Programming (LP) Model
 LP gives an optimal solution, but demand and costs must be linear
 Let
 Wt = workforce size for period t

69
  Pt =units produced in period t
 It =units in inventory at the end of period t
 Ft =number of workers fired for period t
 Ht = number of workers hired for period t
Error: Reference source not found
Transportation Method
Error: Reference source not found

Transportation Tableau

Error: Reference source not found

Burruss’ Production Plan

Error: Reference source not found
Other Quantitative Techniques
 Linear decision rule (LDR)
 Search decision rule (SDR)
 Management coefficients model
Hierarchical Nature of Planning
Error: Reference source not found
Available-to-Promise (ATP)
 Quantity of items that can be promised to the customer
 Difference between planned production and customer orders already received
AT in period 1 = (On-hand quantity + MPS in period 1) –
- (CO until the next period of planned production)
ATP in period n = (MPS in period n) –
- (CO until the next period of planned production)
ATP: Example
Error: Reference source not found
ATP: Example (cont.)
Error: Reference source not found

70
ATP: Example (cont.)
Error: Reference source not foundTake excess units from April
Error: Reference source not found

Rule Based ATP

Error: Reference source not found
Aggregate Planning for Services
 Most services can’t be inventoried
 Demand for services is difficult to predict
 Capacity is also difficult to predict
 Service capacity must be provided at the appropriate place and time
 Labor is usually the most constraining resource for services

Yield Management
Error: Reference source not found

Yield Management (cont.)

Error: Reference source not found

Yield Management: Example

Error: Reference source not found

Copyright 2006 John Wiley & Sons, Inc.

All rights reserved. Reproduction or translation of this work beyond that permitted in section 117
of the 1976 United States Copyright Act without express permission of the copyright owner is
unlawful. Request for further information should be addressed to the Permission Department,
John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and
not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or
damages caused by the use of these programs or from the use of the information herein.

3.3 Resource Requirements Planning Systems: Material Requirements

Planning (MRP) and Capacity Requirements Planning (CRP)

71
Overview
 Resource Requirements Planning
 Material Requirements Planning (MRP)
 Capacity Requirements Planning (CRP)

Learning Objectives
 After completing this lesson you should be able to:
 Describe the conditions under which MRP is most appropriate
 Describe the major inputs, outputs and nature of MRP processing
 Translate requirements in an MPS into production schedules for lower-level
items
 Compute lot-sizes for MRP
 Describe the process of CRP
Resource Requirements Planning
Error: Reference source not found
Aggregate
Planning
Lesson 4
Master Production
Scheduling (MPS)

Resource Material Requirements

Requirements Planning (MRP)
Planning
Material Requirements Planning (MRP) Lesson 7
Error: Reference source not found
Capacity Requirements
Materials Requirements Planning (MRP)
Planning (CRP)
 Computer based system
 Explodes Master Schedule (MPS) into required amounts of raw materials and
subassemblies

72
 Nets against current orders and inventories to develop production and purchased
material ordering schedules
 MRP determines how much of each material, components should be purchased or
produced in each future time period (usually each week) to support MPS.

73
 Elements of MRP
Error: Reference source not found
Service-Parts Inventory
Orders and Transaction Data
Inputs of MRP
Forecasts
 MPS
 Bill of Materials (BOM) Order Changes
 Inventory status file Order
Inventory
Bill of Materials (BOM) File
Status File Planned
BOM file or product structure file identifies all components required Order
to make one of any
end-item. It must be structured to reflect the sequence of steps necessary to produce the
product.
Schedule
 Determining all the lower-level components needed to make a parent- item is called
Master exploding the requirements by the bill of the materials.
BOM Planning
Production
Report
Schedule
Error: Reference source not found
Performance
Bill of Exception
Materials File (BOM) File
Bill of Materials Reports
 Low level coding of an item in a BOM is necessary when identical items exist at various
levels in the BOM. Low-level coding means the item is coded at the lowest level at which
it occurs.
 Modified BOM: When the bill of material is turned on its side and lead times for each
component are added, we have a modified BOM or time-phased product structure.

BOM: Low-level Coding

Error: Reference source not found
Modified BOM
Error: Reference source not found
Inventory status file
 Contains two major types of data
 Inventory on hand, projected receipts of each item, and customer orders for the
item which determine end-of-period inventory balances for each period in the
planning horizon
 Production (or purchasing) lead time, lot sizes, safety stock level for each item
MRP Processing
 Begins with number of end items needed
 Add service parts not included in MPS
 Explode MPS into gross requirements by consulting bill of materials file
 Modify gross requirements to get net requirements:
 Net Requirements = Gross Requirements
+ Allocated Inventory + Safety Stock
- Scheduled Receipts - Inventory On Hand
 Offset orders to allow for lead time

74
Outputs of MRP
 Planned order schedule - quantity of material to be ordered in each time period
 Changes to planned orders - modifications to previous planned orders
 Secondary outputs:
 Exception reports
 Performance reports
 Planning reports
Example
 50 items of A are required in week 8. Given the following on-hand inventory and lead
times, construct a net material requirement plan for product A

Example
Error: Reference source not found

Example

Week
1 2 3 4 5 6 7 8
A Gross Requirement 50
Scheduled Receipts
Projected on Hand 10 10 10 10 10 10 10 10 10
Net Requirements 40
Planned Order Receipts 40
Planned Order Releases B 40 C
D Gross Requirement 130 200
Scheduled Receipts A
B Gross Requirement
Projected on Hand 10 10 10 10 10 10 80
Scheduled Receipts
Net Requirements 120 200
Planned Order
Projected onReceipts
Hand 15 15 15 15 15 15 120
15 200
15
Planned
Net Order Releases
Requirements 120 200 65
Planned Order Receipts 65 C
E Gross Requirement
Planned Order Releases 65 200
Scheduled Receipts
Projected on Hand 5 5 5 5 5 5 5A
C Gross Requirement
Net Requirements 120
195
Scheduled
Planned OrderReceipts
Receipts 195
Projected onReleases
Planned Order Hand 20 20 20 20 195
20 20 20 20
Net Requirements 100
F B
F Gross Requirement
Planned Order Receipts 390 130 100
Scheduled Receipts
Planned Order Releases 100
Projected on Hand 10 10 10 10
Net Requirements 380 130
Planned Order Receipts 380 130
Planned Order Releases 380 130

F
G Gross Requirement 195
Scheduled Receipts
Projected on Hand 0
Net Requirements 195 75
Planned Order Receipts 195
Planned Order Releases 195
Lot-Sizing in MRP
 Lot-size is the quantity ordered/produced at one time
 Large lots are preferred because:
 Changeovers cost less and capacity greater
 Annual cost of purchase orders less
 Price breaks (discounts) and transportation breaks can be utilized
 Small lots are preferred because:
 Lower inventory carrying cost
 Reduced risk of obsolescence
 Shorter cycle time to produce customer order
Lot-Sizing Methods
 Economic Order Quantity (EOQ)
 Does not consider quantity discounts
 Does not always provide the most economical approach with lumpy demands
 Lot-for-Lot (LFL)
 Accommodates lumpy demand
 Period Order Quantity (POQ)

The best method, resulting in least cost,

Depends on cost and demand patterns.
 Lumpy demand is demand that varies significantly from one period to the next
 If the end products are produced periodically in batches, the demand for their component
parts is lumpy.
 Because of this tendency, dependent demand items need only be stocked just prior to the
time they will be needed in the production process.

Issues in MRP
 Lot-Sizing
 Useful at lower levels but may drive excess inventory when applied at higher
levels
 Net Change versus Regenerative MRP

76
  Net change may generate too many action notices
 Regenerative more costly to run but appears to be easier to manage
 Safety Stock
 Use depends on uncertainty of demand..... more uncertain the greater the need for
safety stock
 Assemble-to-Order Firms
 MPS and MRP treated separately from Final Assembly Schedule (FAS)
 Use Modular Bill of Material
Objectives of MRP
 Improve customer service: meeting delivery promises and shortening delivery times
 Reduce inventory investment:
 Raw materials are timed to arrive at the right time
 Production operations work on parts that are really needed on their due date
 Improve plant operating efficiency: more production without increases in the number of
employees and machines
MRP I to MRP II
 MRP I simply exploded demand (MPS) into required materials
 MRP II became Manufacturing Resource Planning which provides a closed-loop
business management system
 Financial management
 Shop floor control
 Operations management
 Simulation capability
Evaluation of MRP
 Most beneficial to process-focused systems that have long processing times and complex
multistage production steps
 Lead times must be reliable
 Must freeze MPS for some time before actual production... certain demand
 Difficult to implement
Capacity Requirements Planning (CRP)
MRP enables managers to evaluate capacity requirements generated by a given MPS

77
Capacity Requirements Planning (CRP)
 Tests MPS for feasibility
 Takes the planned order releases off the MRP
 Utilizes routings to determine labor/machine loads
 If schedule feasible, recommends freezing
 If schedule overloads resources, points out processes that are overscheduled
 Managers may increase capacity (by overtime, subcontracting, etc. ) if this is
possible and economical, change the routing or assignment of orders to work
centers or else revise the MPS and repeat the process
Load Schedules
 Compares actual labor and machine hours against available hours
 Offsets schedules between successive stages of production by lead times
 Provides feasible MPS and economically loaded work centers
 Promotes system-operating efficiency ... lowers costs!
Wrap-Up
 Lead times respond to conditions
 Lead times that adjust to load
 MRP reports shared with customers and suppliers
 All of the above results in bias towards smaller batches and shorter lead times

Questions for Self-evaluation

1. What is materials requirement planning? show with example.
2. Write the different strategies for adjusting capacity.

78
 CHAPTER FOUR
PRODUCTION ACTIVITY CONTROL: SHOP-FLOOR PLANNING AND
CONTROL IN MANUFACTURING
Overview
 Scheduling Process-Focused Manufacturing (job-shop scheduling)
 Scheduling Product-Focused Manufacturing
Learning Objectives
 After completing this lesson, you should be able to
 Explain what scheduling involves
 Discuss scheduling needs in job-shops
 Use and interpret Gantt charts
 Discuss and give examples of commonly used priority rules
3.1 Scheduling
 Establishing the timing of the use of specific resources
 Scheduling decisions are the final step in the production planning hierarchy before actual
output occurs
 Generally, the objectives of scheduling are to achieve trade-offs among conflicting goals
which include efficient utilization of staff, equipment, and facilities and minimization of
customer waiting time, inventories and process time
Process-Focused Manufacturing
 Process-focused factories are often called job shops.
 A job shop’s work centers are organized around similar types of equipment or operations.
 Workers and machines are flexible and can be assigned to and reassigned to many
different orders.
 Job shops are complex to schedule.
 Two basic issues for job-shop schedulers: how to distribute the workload among work
centers (loading or assignment problem) and what job processing sequence to use (order-
sequencing problem)

Pre-production Planning
 Design the product in customer order,
 Plan the operations the product must pass through... This is the routing plan,
 Work moves between operations on a move ticket
Common Shop Floor Control Activities
 The production control department controls and monitors order progress through the
shop.
 Assigns priority to order
 Issues dispatch list
 Tracks WIP and keeps systems updated
 Controls input-output between work centers
 Measures efficiency, utilization, and productivity of shop
Input-Output Control
 Input-output control identifies problems such as insufficient or excessive capacity or
any issues that prevents the order from being completed on time.
 Gantt charts are useful tools to coordinate jobs through shop; graphical summary of job
status and loading of operations
Assigning (Loading) Jobs to Work Centers:
How Many Jobs/Day/Work Center
 Infinite loading - assigns jobs to work centers without regard to capacity.. large queues

79
  Finite loading - uses work center capacity to schedule orders. …the popular scheduling
approach and is integral to CRP
Assigning Jobs to Work Centers:
Which Job Gets Built First?
 Forward scheduling - jobs are given earliest available time slot in operation... excessive
WIP
 Backward scheduling - start with promise date and work backward through operations
reviewing lead times to determine when a job has to pass through each operation .. less
WIP but must have accurate lead times

Order Sequencing Problems

 We want to determine the sequence in which we will process a group of waiting orders at
a work center.
 Many different sequencing rules can be followed in setting the priorities among orders.
 There are numerous criteria for evaluating the effectiveness of the sequencing rules.

Order Sequencing Terminology

 Given n jobs to be processed by a single machine (or work station): Job i ( i = 1,...,n) has
processing time ti and due date Di
 Flow-time of job i: time elapsed between the initiation of the first job until the
completion of job i (time job i spends in the system)
 Lateness: positive difference between the completion time of a job and its due date
 Waiting time of job i: time until job i starts to be processed
 Critical Ratio of job i = ratio of the remaining time until its due date and its processing
time {(due date - current date)/processing time}

Order Sequencing Rules

 Sequencing rules include:
 First-Come First-Served (FCFS)
 Shortest Processing Time
 Earliest Due Date
 Least Critical Ratio
 Least Changeover Cost

Evaluating the Effectiveness

of Sequencing Rules
 Average flow time - average amount of time jobs spend in shop
 Average number of jobs in system (work-in-process inventory)- total flow time / total
processing time
 Average job lateness - average amount of time job’s completion date exceeds its
promised delivery date
 Changeover cost - total cost of making machine changeovers for group of jobs
Experience Says:
 First-come-first-served does not perform particularly well on most commonly used
evaluation criteria. However it gives customers a sense of fair play.
 Shortest processing time does perform well; supervisors like it but have to watch out for
long processing time orders
 Critical ratio works well on average job lateness criterion.. may focus too much on jobs
that cannot be completed on time forcing more jobs to miss promise dates
Example: Sequencing Rules

80
Use the FCFS, SPT, and Critical Ratio rules to sequence the five jobs below. Evaluate the
rules on the bases of average flow time, average number of jobs in the system, and average
job lateness.
Job Processing Time Time to Promised Completion
A 6 hours 10 hours
B 12 16
C 9 8
D 14 14
E 8 7
Example: Sequencing Rules
 FCFS Rule A>B>C>D>E
Processing Promised Flow
Job Time Completion Time Lateness
A 6 10 6 0
B 12 16 18 2
C 9 8 27 19
D 14 14 41 27
E 8 7 49 42
49 141 90
 FCFS Rule Performance
 Average flow time:
141/5 = 28.2 hours
 Average number of jobs in the system:
141/49 = 2.88 jobs
 Average job lateness:
90/5 = 18.0 hours
 SPT Rule A>E>C>B>D
Processing Promised Flow
Job Time Completion Time Lateness
A 6 10 6 0
E 8 7 14 7
C 9 8 23 15
B 12 16 35 19
D 14 14 49 35
49 127 76

81
  SPT Rule Performance
 Average flow time:
127/5 = 25.4 hours
 Average number of jobs in the system:
127/49 = 2.59 jobs
 Average job lateness:
76/5 = 15.2 hours
 Least Critical Ratio Rule E>C>D>B>A
Processing Promised Flow
Job Time Completion Time Lateness
E (.875) 8 7 8 1
C (.889) 9 8 17 9
D (1.00) 14 14 31 17
B (1.33) 12 16 43 27
A (1.67) 6 10 49 39
49 148 93

 Least Critical Ratio Rule Performance

 Average flow time:
148/5 = 29.6 hours
 Average number of jobs in the system:
148/49 = 3.02 jobs
 Average job lateness:
93/5 = 18.6 hours
 Comparison of Rule Performance
Average Average Average
Flow Number of Jobs Job
Rule Time in System Lateness
FCFS 28.2 2.88 18.0
SPT 25.4 2.59 15.2
CR 29.6 3.02 18.6

SPT rule was superior for all 3 performance criteria.

Product-Focused Scheduling
 Two general types of product-focused production:

82
  Batch - large batches of several standardized products produced
 Continuous - few products produced continuously.... minimal changeovers
Scheduling Decisions
 How large should production lot size be for each product?
 How many products should have passed each operation if time deliveries are to be on
schedule?
Batch Scheduling
 EOQ for production lots:
 Does not consider production capacity
 Run-Out Method
 Only so much capacity available each week so determine size of lots for all
orders at the same time
 Based on most current demand and production rates... not annual estimates
Delivery Schedules: Line-of-Balance Method
Error: Reference source not found
Wrap-Up
 In process-focused factories:
 MRP II refined.... promises are met, shop loading is near optimal, costs are low,
quality is high
 In product-focused factories:
 EOQ for standard parts containers, this sets S, lot sizes are lower, inventories
slashed, customer service improved

3.2 Production Activity Control (Scheduling)

Content Outline
 Objectives in scheduling
 Loading
 Sequencing
 Monitoring
 Advanced planning and scheduling systems
 Theory of constraints
 Employee scheduling
What is scheduling?
 Last stage of planning before production occurs
 Specifies when labor, equipment, facilities are needed to produce a product or provide a
service
Scheduled operations
 Process Industry
 Linear programming
 EOQ with non-instantaneous replenishment
 Mass Production
 Assembly line balancing
 Project
 Project -scheduling techniques (PERT, CPM)
 Batch Production
 Aggregate planning
 Master scheduling
 Material requirements planning (MRP)
 Capacity requirements planning (CRP)

83
Objectives in Scheduling
 Meet customer due dates
 Minimize job lateness
 Minimize response time
 Minimize completion time
 Minimize time in the system
 Minimize overtime
 Maximize machine or labor utilization
 Minimize idle time
 Minimize work-in-process inventory
Shop Floor Control
 Loading
 Check availability of material, machines and labor
 Sequencing
 Release work orders to shop and issue dispatch lists for individual machines
 Monitoring
 Maintain progress reports on each job until it is complete
Loading
 Process of assigning work to limited resources
 Perform work on most efficient resources
 Use assignment method of linear programming to determine allocation
Assignment Method
1. Perform row reductions
1. Subtract minimum value in each row from all other row values
2. Perform column reductions
1. Subtract minimum value in each column from all other column values
3. Cross out all zeros in matrix
1. Use minimum number of horizontal and vertical lines
4. If number of lines equals number of rows in matrix then optimum solution has been
found. Make assignments where zeros appear
5. Else modify matrix
1. Subtract minimum uncrossed value from all uncrossed values
2. Add it to all cells where two lines intersect
3. Other values in matrix remain unchanged
6. Repeat steps 3 through 5 until optimum solution is reached

Assignment Method: Example

Error: Reference source not found
Assignment Method: Example (cont.)
Error: Reference source not found
Sequencing
 Prioritize jobs assigned to a resource
 If no order specified use first-come first-served (FCFS)
 Many other sequencing rules exist
 Each attempts to achieve to an objective
Sequencing Rules

84
  FCFS - first-come, first-served
 LCFS - last come, first served
 DDATE - earliest due date
 CUSTPR - highest customer priority
 SETUP - similar required setups
 SLACK - smallest slack
 CR - critical ratio
 SPT - shortest processing time
 LPT - longest processing time

Critical Ratio Rule

Error: Reference source not found

Sequencing Jobs Through One Process

 Flow time (completion time)
 Time for a job to flow through the system
 Make span
 Time for a group of jobs to be completed
 Tardiness
 Difference between a late job’s due date
and its completion time
Simple Sequencing Rules
Error: Reference source not found
PROCESSING DUE
JOB TIME DATE
A 5 10
B 10 15
C Rules:
Simple Sequencing 2 FCFS 5
D source
Error: Reference 8 not found 12
E Rules:
Simple Sequencing 6 DDATE 8
Error: Reference source not found

Simple Sequencing Rules: SLACK

85
Error: Reference source not found

Error: Reference source not found

Simple Sequencing Rules: CR

Error: Reference source not found

Error: Reference source not found

Simple Sequencing Rules: SPT

Error: Reference source not found
Simple Sequencing Rules: Summary
Error: Reference source not found

Sequencing Jobs Through Two Serial Process

 Johnson’s Rule
 List time required to process each job at each machine. Set up a one-dimensional
matrix to represent desired sequence with # of slots equal to # of jobs.
 Select smallest processing time at either machine. If that time is on machine 1,
put the job as near to beginning of sequence as possible.
 If smallest time occurs on machine 2, put the job as near to the end of the
sequence as possible.
 Remove job from list.
 Repeat steps 2-4 until all slots in matrix are filled and all jobs are sequenced.

Johnson’s Rule
Error: Reference source not found

Johnson’s Rule (cont.)

Error: Reference source not found

Guidelines for Selecting a Sequencing Rule

1. SPT most useful when shop is highly congested
2. Use SLACK for periods of normal activity
3. Use DDATE when only small tardiness values can be tolerated
4. Use LPT if subcontracting is anticipated
5. Use FCFS when operating at low-capacity levels
6. Do not use SPT to sequence jobs that have to be assembled with other jobs at a later date
Monitoring
 Work package
 Shop paperwork that travels with a job
 Gantt Chart
 Shows both planned and completed activities against a time scale
 Input/Output Control
 Monitors the input and output from each work center

86
3.2 Project Management
Content outline
• Projects versus Operations
• Project planning
• Project scheduling
• Project control
• CPM/PERT
• Project crashing and time-cost trade-off
3.2.1 Projects versus Operations
Organizations perform work - either
Operations, or
Projects
Shared characteristics of projects and operations
Performed by people
Constrained by limited resources
Planned, executed and controlled

Operations and projects differ:

 Operations are ongoing and repetitive
 Projects are temporary and unique
“A project is a temporary endeavor undertaken to create a unique product or service. ”
 Temporary - definite beginning and end
 Unique - different in some distinguishing characteristic
Operations and projects differ:
Operations are ongoing and repetitive
Projects are temporary and unique
“A project is a temporary endeavor undertaken to create a unique product or service. ” temporary
- definite beginning and end unique - different in some distinguishing characteristic
Examples of projects
 Developing a new product or service
 Effecting a change in structure, staffing, or style of an organization
 Designing a new transportation vehicle
 Constructing a building or facility
 Running a campaign for political office
 Implementing a new business procedure or process

The project management challenge

Meeting or exceeding stakeholder needs and expectations invariably involves balancing
competing demands among:
 Scope, time, cost, and quality
 Stakeholders with differing needs and expectations
 Identified needs and unidentified expectations - “client relations challenge ”
The core of project management

87
 published by PMI in 1987
Where most projects fail

Project Management Knowledge Areas (PMBOK)

 Scope Management
 Cost Management
 Communications Management
 Human Resources Management
 Time Management
 Quality Management
 Risk Management
 Procurement Management

Relationship to other disciplines - similarities

88
  General management encompasses
 Planning
 Organizing
 Staffing
 Directing
 Controlling
 PM management functions overlap
Function overlap
 Planning the work, schedule and budget
 Organizing and staffing a team to implement the work
 Controlling the project through tracking and monitoring progress against the plan
 Directing people and resources so the plan is adjusted and implemented as smoothly as
possible

Relationship to other disciplines - differences

 Much of the knowledge needed to manage projects is unique or nearly unique to project
management, e.g.
 Critical path analysis, and
 Work breakdown structures
 Primary differences between general management and PM found in the use of specialized
tools and techniques.

Relationship to other disciplines

Why do you need project management techniques?

89
  “The reason for organizing an assignment as a project is to FOCUS the responsibility,
authority, and scheduling of the project in order to meet defined goals.”
 Schedule
 Cost
 Performance (quality)

Other major reasons to use PM techniques

 Clear work descriptions minimize surprises and conflicts
 Responsibilities and assignments for specific tasks are easily identified
 Reduces need for continuous reporting
 Progress can be measured against a plan
 Time limits for task completion are more easily specified

The two types of project management activities

 Project planning and definition activities
 Project implementation and control activities
 More simply
 Deciding, and
 Doing
Planning and definition activities
 Definition of project goals and objectives
 Definition of work requirements
 Definition of quantity of work
 Definition of quality of work
 Definition of required resources
 Definition of organization structure
 Planning of task sequencing and schedule
 Planning of the budget
Implementation and control activities
 Initiating work
 Monitoring and tracking progress
 Comparing schedules and budgets to plans
 Analyzing impact of changes and progress
 Coordinating activities and people
 Making adjustments to the plan as required
 Completing the project
 Assessing project results
Success factors in project management
 Appropriately skilled project manager
 Clear authority for the PM to act
 Commitment to the PM methodology
 A skilled PM team agreed to the project goals
 A complete project plan that is understood by all participants
 Objectives that contribute to the larger goals of the organization
 Workable tracking and monitoring methods

90
Bottom line
 What project management will do is provide a system for planning, documenting,
organizing, and communicating.
 It provides a basis for better decisions
 Ultimately, it is the people who will make things happen and make things work, not the
methodology

What is a project?
• Project
– Unique, one-time operational activity or effort
• Examples
– Constructing houses, factories, shopping malls, athletic stadiums or arenas
– Developing military weapons systems, aircrafts, new ships
– Launching satellite systems
– Constructing oil pipelines
– Developing and implementing new computer systems
– Planning concert, football games, or basketball tournaments
– Introducing new products into market
Project elements
• Objective
• Scope
• Contract requirements
• Schedules
• Resources
• Personnel
• Control
• Risk and problem analysis

What is Project Management?

• Project management is the application of knowledge, skills, tools, and techniques to
project activities in order to meet or exceed stakeholder needs and expectations from a
project.
Project management process
• Project planning
• Project scheduling
• Project control
• Project team
– Made up of individuals from various areas and departments within a company
• Matrix organization
– A team structure with members from functional areas, depending on skills
required
• Project Manager
– Most important member of project team

Project scope

91
 • Scope statement
– A document that provides an understanding, justification, and expected result of
a project
• Statement of work
– Written description of objectives of a project
• Work breakdown structure
– Breaks down a project into components, subcomponents, activities, and tasks
Error: Reference source not found

• Organizational Breakdown Structure

– A chart that shows which organizational units are responsible for work items
• Responsibility Assignment Matrix
– Shows who is responsible for work in a project

Error: Reference source not found

Project scheduling
• Steps
– Define activities
– Sequence activities
– Estimate time
– Develop schedule
• Techniques
– Gantt chart
– CPM
– PERT
– Microsoft Project
Gantt chart
• Graph or bar chart with a bar for each project activity that shows passage of time
• Provides visual display of project schedule
• Slack
– Amount of time an activity can be delayed without delaying the project

Example of Gantt chart

Error: Reference source not found
Project control
• Time management
• Cost management
• Quality management
• Performance management

92
 – Earned Value Analysis
• a standard procedure for numerically measuring a project ’s progress,
forecasting its completion date and cost and measuring schedule and
budget variation
• Communication
• Enterprise project management

CPM/PERT
• Critical Path Method (CPM)
– DuPont & Remington-Rand (1956)
– Deterministic task times
– Activity-on-node network construction
• Project Evaluation and Review Technique (PERT)
– US Navy, Booz, Allen & Hamilton
– Multiple task time estimates
– Activity-on-arrow network construction
Project network
• Activity-on-node (AON)
– Nodes represent activities, and arrows show precedence relationships
• Activity-on-arrow (AOA)
– Arrows represent activities and nodes are events for points in time
• Event
– Completion or beginning of an activity in a project
Error: Reference source not found
AOA Project Network for a House
Nod
Error: Reference source not found

1 2 3

Branc
Concurrent activities
Error: Reference source not found
AON Network for House Building Project
Error: Reference source not found

Critical Path

93
Error: Reference source not found

Activity Start Times

Error: Reference source not found
Mode Configuration
Forward Pass
• Start at the beginning of CPM/PERT network to determine the earliest activity times
• Earliest Start Time (ES)
– Earliest time an activity can start
– ES = maximum EF of immediate predecessors
• Earliest finish time (EF)
– Earliest time an activity can finish
– Earliest start time plus activity time
• EF= ES + t

Earliest Activity Start and Finish Times

Error: Reference source not found Backward Pass
• Determines latest activity times by starting at the end of CPM/PERT network and
working forward
• Latest Start Time (LS)
– Latest time an activity can start without delaying critical path time
LS= LF - t
• Latest finish time (LF)
– latest time an activity can be completed without delaying critical path time
– LS = minimum LS of immediate predecessors

94
Latest Activity Start and Finish Times
Error: Reference source not found

Activity Slack
Error: Reference source not found

Probabilistic Time Estimates

• Beta distribution
– a probability distribution traditionally used in CPM/PERT

Mean (expected) time (teј) = (a+4m+b) ⁄ 6

Standard deviation (δ) = b-a ⁄ 6

Examples of Beta Distributions

Error: Reference source not found
Project Network with Probabilistic Time Estimates: Example
Error: Reference source not found
Equipment
installation Equipment testing
and modification
1 4
6,8,10 2,4,12 System Final
training debugging
System 1
development 8 0
Manual 3,7,11 1,4,7
Start 2 testing Finish
3,6,9
5 11
Position 2,3,4 9 1,10,13
recruiting 2,4,6
Job Training System
3 6 System changeover
1,3,5 3,4,5 testing
Activity Time Estimates
Orientation
Error: Reference source not found
7
2,2,2

Activity Early, Late Times, and Slack

95
Error: Reference source not found

Earliest, Latest, and Slack

Error: Reference source not found

Error: Reference source not found

96
Probabilistic Network Analysis
Error: Reference source not found

Normal Distribution Of Project Time

Error: Reference source not found

Southern Textile Example

Error: Reference source not found

Southern Textile Example

Error: Reference source not found

Project “crashing”
• Crashing
– Reducing project time by expending additional resources
• Crash time
– An amount of time an activity is reduced
• Crash cost
– Cost of reducing activity time
• Goal
– Reduce
$7,000 – project duration at minimum cost
Project Crashing: Example
$6,000 –
Error: Reference source not foundProject Crashing: Example (cont.)
Crash cost
$5,000 – Crashed activity

$4,000 – 2 41
8 2 Normal activity
$3,000 – source not found
Error: Reference
Normal cost 7
11 –
$2,000 4
2 Normal
97
time cost per week
$1,000 – Slope = crash
– |
0
3|2 Crash|4time |
6
5 |
8
|
10
6|12 14 Weeks
Normal Activity and Crash Data
Error: Reference source not found

Error: Reference source not found

98
Time-Cost Relationship
• Crashing costs increase as project duration decreases
• Indirect costs increase as project duration increases
• Reduce project length as long as crashing costs are less than indirect costs
Time-Cost Tradeoff Error: Reference source not found

Questions for self evaluation

1. Explain project network.

2. Write the steps and techniques of project scheduling.
3. What is Project Management?

CHAPTER FIVE
QUALITY MANAGEMENT

CONTENT OUTLINE
 Meaning of Quality
 Total Quality Management
 Quality Improvement and Role of Employees
 Strategic Implications of TQM
 Six Sigma
 TQM in Service Companies
 Cost of Quality
 Quality Management and Productivity
 Identifying Quality Problems and Causes
 Quality Awards and Setting Quality Standards
 ISO 9000
Meaning of Quality
 Webster’s Dictionary
 Degree of excellence of a thing
 American Society for Quality

99
  Totality of features and characteristics that satisfy needs
 Consumer’s and Producer’s Perspective
Meaning of Quality:
Consumer’s Perspective
 Fitness for use
 How well product or service does what it is supposed to
 Quality of design
 Designing quality characteristics into a product or service
 A Mercedes and a Ford are equally “fit for use,” but with different design
dimensions

Dimensions of Quality:
Manufactured Products
 Performance
 Basic operating characteristics of a product; how well a car is handled or
its gas mileage
 Features
 “Extra” items added to basic features, such as a stereo CD or a leather
interior in a car
 Reliability
 Probability that a product will operate properly within an expected time
frame; that is, a TV will work without repair for about seven years
Dimensions of Quality:
Manufactured Products (cont.)
 Conformance
 Degree to which a product meets pre–established standards
 Durability
 How long product lasts before replacement
 Serviceability
 Ease of getting repairs, speed of repairs, courtesy and competence of
repair person

Dimensions of Quality:
Manufactured Products (cont.)
 Aesthetics
 How a product looks, feels, sounds, smells, or tastes
 Safety
 Assurance that customer will not suffer injury or harm from a product; an
especially important consideration for automobiles
 Perceptions
 Subjective perceptions based on brand name, advertising, and the like
Dimensions of Quality:
Service
 Time and Timeliness
 How long must a customer wait for service, and is it completed on time?

100
  Is an overnight package delivered overnight?
 Completeness:
 Is everything customer asked for provided?
 Is a mail order from a catalogue company complete when delivered?
Dimensions of Quality:
Service (cont.)
 Courtesy:
 How do employees treat customers?
 Are catalogue phone operators nice and are their voices pleasant?
 Consistency
 Is the same level of service provided to each customer each time?
 Is your newspaper delivered on time every morning?
Dimensions of Quality:
Service (cont.)
 Accessibility and convenience
 How easy is it to obtain service?
 Does a service representative answer you calls quickly?
 Accuracy
 Is the service performed right every time?
 Is your bank or credit card statement correct every month?
 Responsiveness
 How well does the company react to unusual situations?
 How well is a telephone operator able to respond to a customer’s
questions?

Meaning of Quality:
Producer’s Perspective
 Quality of Conformance
 Making sure a product or service is produced according to design
 If new tires do not conform to specifications, they wobble
 If a hotel room is not clean when a guest checks in, the hotel is not
functioning according to specifications of its design
Meaning of Quality:
A Final Perspective
 Consumer’s and producer’s perspectives depend on each other
 Consumer’s perspective: PRICE
 Producer’s perspective: COST
 Consumer’s view must dominate

Meaning of Quality
Error: Reference source not found

Total Quality Management

101
  Commitment to quality throughout organization
 Principles of TQM
 Customer-oriented
 Leadership
 Strategic planning
 Employee responsibility
 Continuous improvement
 Cooperation
 Statistical methods
 Training and education
Quality Gurus
 Walter Shewart
 In 1920s, developed control charts
 Introduced the term “quality assurance”
 W. Edwards Deming
 Developed courses during World War II to teach statistical quality-control
techniques to engineers and executives of companies that were military
suppliers
 After the war, began teaching statistical quality control to Japanese
companies
 Joseph M. Juan
 Followed Deming to Japan in 1954
 Focused on strategic quality planning
Quality Gurus (cont.)
 Armand V. Feigenbaum
 In 1951, introduced concepts of total quality control and continuous
quality improvement
 Philip Crosby
 In 1979, emphasized that costs of poor quality far outweigh the cost of
preventing poor quality
 In 1984, defined absolutes of quality management—conformance to
requirements, prevention, and “zero defects”

 Kaoru Ishikawa
 Promoted use of quality circles
 Developed “fishbone” diagram
 Emphasized importance of internal customer
Deming’s 14 Points
1. Create constancy of purpose
2. Adopt philosophy of prevention
3. Cease mass inspection
4. Select a few suppliers based on quality
5. Constantly improve system and workers
Deming’s 14 Points (cont.)
6. Institute worker training
7. Instill leadership among supervisors

102
 8. Eliminate fear among employees
9. Eliminate barriers between departments
10. Eliminate slogans
Deming’s 14 Points (cont.)
11. Remove numerical quotas
12. Enhance worker pride
13. Institute vigorous training and education programs
14. Develop a commitment from top management to implement above 13 points
Deming Wheel: PDCA Cycle
Error: Reference source not found
TQM and…
 Partnering
 A relationship between a company and its supplier based on mutual
quality standards
 … Customers
 System must measure customer satisfaction
 … Information Technology
 Infrastructure of hardware, networks, and software necessary to support a
quality program
Quality Improvement and Role of Employees
 Participative problem solving
 Employees involved in quality management
 Every employee has undergone extensive training to provide quality
service to Disney’s guests
Quality Circle
Error: Reference source not found

Strategic Implications of TQM

 Strong leadership
 Goals, vision, or mission
 Operational plans and policies
 Mechanism for feedback
Six Sigma
 A process for developing and delivering near perfect products and services
 Measure of how much a process deviates from perfection
 3.4 defects per million opportunities
 Champion
 An executive responsible for project success

Black Belts and Green Belts

 Black Belt
 Project leader
 Master Black Belt

103
  A teacher and mentor for Black Belts
 Green Belts
 Project team members
Six Sigma: DMAIC
Error: Reference source not found

TQM in Service Companies

 Principles of TQM apply equally well to services and manufacturing
 Services and manufacturing companies have similar inputs but different processes
and outputs
 Services tend to be labor intensive
 Service defects are not always easy to measure because service output is not
usually a tangible item
Quality Attributes in Service
 Benchmark
 “Best” level of quality achievement one company or companies seek to
achieve
 Timeliness
 How quickly a service is provided
Cost of Quality
 Cost of Achieving Good Quality
 Prevention costs
 Costs incurred during product design
 Appraisal costs
 Costs of measuring, testing, and analyzing
 Cost of Poor Quality
 Internal failure costs
 Include scrap, rework, process failure, downtime, and price
reductions
 External failure costs
 Include complaints, returns, warranty claims, liability, and lost
sales
Prevention Costs
 Quality planning costs
 Costs of developing and implementing quality management program
 Product-design costs
 Costs of designing products with quality characteristics
 Process costs

104
  Costs expended to make sure productive process conforms to quality
specifications
 Training costs
 Costs of developing and putting on quality training programs for
employees and management
 Information costs
 Costs of acquiring and maintaining data related to quality, and
development of reports on quality performance
Appraisal Costs
 Inspection and testing
 Costs of testing and inspecting materials, parts, and product at various
stages and at the end of a process
 Test equipment costs
 Costs of maintaining equipment used in testing quality characteristics of
products
 Operator costs
 Costs of time spent by operators to gar data for testing product quality, to
make equipment adjustments to maintain quality, and to stop work to
assess quality
Internal Failure Costs
 Scrap costs
 Costs of poor-quality products that must be discarded, including labor,
material, and indirect costs
 Rework costs
 Costs of fixing defective products to conform to quality specifications
 Process failure costs
 Costs of determining why production process is producing poor-quality
products
 Process downtime costs
 Costs of shutting down productive process to fix problem
 Price-downgrading costs
 Costs of discounting poor-quality products—that is, selling products as
“seconds”
External Failure Costs
 Customer complaint costs
 Costs of investigating and satisfactorily responding to a customer
complaint resulting from a poor-quality product
 Product return costs
 Costs of handling and replacing poor-quality products returned by
customer
 Warranty claims costs
 Costs of complying with product warranties
 Product liability costs
 Litigation costs resulting from product liability and customer injury
 Lost sales costs

105
  Costs incurred because customers are dissatisfied with poor quality
products and do not make additional purchases
Measuring and Reporting Quality Costs
 Index numbers
 Ratios that measure quality costs against a base value
 Labor index
 Ratio of quality cost to labor hours
 Cost index
 Ratio of quality cost to manufacturing cost
 Sales index
 Ratio of quality cost to sales
 Production index
 Ratio of quality cost to units of final product
Quality–Cost Relationship
 Cost of quality
 Difference between price of nonconformance and conformance
 Cost of doing things wrong
 20 to 35% of revenues
 Cost of doing things right
 3 to 4% of revenues
 Profitability
 In the long run, quality is free
Quality Management and Productivity
 Productivity
 Ratio of output to input
 Yield: a measure of productivity

Yield=(total input)(% good units) + (total input)(1-%good units)(% reworked)

Or
Y=(I)(%G)+(I)(1-%G)(%R)
Product Cost
Product Cost ( K d )( I )  ( K r )( R )

Y
Where:
Kd = direct manufacturing cost per unit
I = input
Kr = rework cost per unit
R = reworked units
Y = yield
Computing Product
Yield for Multistage Processes
Y = (I)(%g1)(%g2) … (%gn)
Where:
I = input of items to the production process that will result in finished products
gi = good-quality, work-in-process products at stage i

106
Quality–Productivity Ratio
Error: Reference source not found

Seven Quality Control Tools

 Pareto Analysis
 Flow Chart
 Check Sheet
 Histogram
 Scatter Diagram
 SPC Chart
 Cause-and-Effect Diagram

Pareto Analysis
Error: Reference source not found

Error: Reference source not found

Flow Chart
Error: Reference source not found

Check Sheet
Error: Reference source not found

Histogram
Error: Reference source not found

Scatter Diagram
Error: Reference source not found
Control Chart
Error: Reference source not found
Cause-and-Effect Diagram
Error: Reference source not found

Baldrige Award
 Created in 1987 to stimulate growth of quality management in the United States
 Categories
 Leadership

107
  Information and analysis
 Strategic planning
 Human resource
 Focus
 Process management
 Business results
 Customer and market focus
Other Awards for Quality
 National individual awards
 Armand V. Feigenbaum Medal
 Deming Medal
 E. Jack Lancaster Medal
 Edwards Medal
 Shewart Medal
 Ishikawa Medal
 International awards
 European Quality Award
 Canadian Quality Award
 Australian Business Excellence Award
 Deming Prize from Japan
American Customer Satisfaction Index (ACSI)
 Measures customer satisfaction
 Established in 1994
 Web site: www.acsi.org
 Examples (in 2003)
 Amazon.com scored 88 (highest in service)
 Dell scored of 78 (highest in computer industry)
 Cadillac scored 87 (highest in car industry)
ISO 9000
 A set of procedures and policies for international quality certification of suppliers
 Standards
 ISO 9000:2000
 Quality Management Systems—Fundamentals and Vocabulary
 Defines fundamental terms and definitions used in ISO 9000
family
 ISO 9001:2000
 Quality Management Systems—Requirements
 Standard to assess ability to achieve customer satisfaction
 ISO 9004:2000
 Quality Management Systems—Guidelines for Performance
Improvements
 Guidance to a company for continual improvement of its quality-
management system
Implications of ISO 9000 for U.S. Companies

108
Copyright 2006 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright
Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the
Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs
or from the use of the information herein.

4.1Total Quality Management (TQM)

“TQM” is an interlocking arrangement of procedures and practices that ensures that all
employees in every department are adequately trained and directed to continuously
implement aligned improvements in Quality, service and total costs, such that customer
expectations are met or exceeded (IEEE, 1993)
TQM- Fundamental principles
• Understand and answer the voice of the customer
• All people must be involved in Quality improvement
• Continuously strive for zero defect
• Design and build quality into the product
• Focus on the process

109
TQM- Fundamental principles (Cont)
• Suppliers are partners in quality
• Quality is free
TQM
The Granite Rock Company – Experience
• Bottom line:
– What does customer want?
– What does the customer like about company?
– What needs improving
– Customer service
TQM-The voice of the customer
• Informal customer research
• Formal customer research
• Qualitative customer research
• In depth interviews
• Focus groups
• Quantitative research

TQM – Employees involvement in Quality improvement

• TQM is a company thing
• Top management must lead TQM initiative
• Focus on preventing, not fixing problems
• Every one must be totally committed
TQM – Employee involvement
TQM implementation steps
• Set up quality council, all role players
• Develop formal documented quality policy
• All people must be involved
• Train every one in TQM principles
• Set up small Process Improvement Teams (PIT's) & Quality in own area
• Allocate sufficient time for quality training
• Monitor Quality improvements and reward.
• Quality specialist should facilitate initiatives

TQM – Strive for zero defects – Rules

1) Focus on the process
2) Make quality visible
3) Insist on compliance-Quality first
4) Stop the line
5) Correct your own errors
6) Do a 100% check till process is capable
7) Improve on a project-by- project basis

TQM – Design and build quality into the product

• Design a quality product in the beginning

110
 • Design to prevent quality problems
• Design for reliability and serviceability
• Specify methods of measurement
• Designs must satisfy customers
TQM – Quality function Deployment (QFD)
• QFD helps to determine:
– Customer requirements
– Customer highest priorities
– Characteristics that will satisfy customer requirements
– Which characteristics will have greatest impact on customer requirements
TQM – QFD
• Steam iron-Fig10.1
• Voice of the customer (VOC)
• Identify the customer’s needs
• Rate the importance of the VOC
• Identify characteristic that will meet need
• Develop VOC matrix
• Prioritize product characteristics
TQM – Focus on the process
• What is a Process
– Repetitive set of interacting activities
– Uses resources
– Transform inputs to outputs
– Value to customer
TQM – Focus on the process
• Variation – special and common causes
• If quality varies, process variation
• Variation due to chance (common cause)
– Inherent variation
– Nothing can be 100%
• Variation due to special causes
– Warn parts
– Incorrect setting

TQM – Quality Improvement tools

1) Process chart
2) Pareto analysis
3) The Ishikawa diagram (Fish bone diagram)
4) Histograms
5) Run diagrams and correlation diagrams
6) Control charts
7) Average and range charts
8) P and C charts
TQM – Suppliers are partners in quality
• Suppliers are also partners in TQM

111
 • Lowest prices must not be the aim
• Transfer TQM knowledge to supplier
• Advantages
– Better service
– Reduced monitoring of products
– Better relationship with supplier
– Better price
TQM – Quality is free
1) Prevention costs
2) Appraisal costs
3) Failure costs
TQM – ISO standards
• ISO 9000 – Quality management and Quality assurance standards
• ISO 9001 – Quality systems: Quality in design
• ISO 9002 – Quality systems: Production and Installation
• ISO 9003 – Quality systems: Final Inspection and test
• ISO 9004 – Quality management and systems

4.2 STATISTICAL PROCESS CONTROL

Lesson Coverage:
• Introduction to statistical process control (SPC)
• Control charts for attributes
• Control charts for variables
• Acceptance sampling
• Capability improvement study
Suggested readings:
- Textbook Gaither-Frazier, chapter 17, 18
Reading option:
- Competing on the eight dimensions of quality. David A. Garvin, HBR November -
December 1987- Statistical Quality Control for Process Development by Roger Bohn -
HBR 9-684-068
Homework:
Textbook, chapter 18: No. 3, 5, 6, 10, 11
Learning Objectives
After completing this section you should be able to:
• Define the term ‘quality’
• Understand and use different types of
Control charts for monitoring processes
• Decide quality sampling policy successfully
• Discuss the concept underlying process
Capability improvement study
Quality Concept

Quality refers to the ability of a product or service to consistently meet or exceed

customer’s expectation.

112
Total quality management: A business strategy that provide goods and services that
completely satisfy both internal and external customers by meeting their explicit and
implicit expectations.

Quality Management Mechanism

 Quality control: Mechanism to determine if the product or service is as planned or
meet the specifications and expectation. It is product oriented and includes
measures to:
 Detect and correct deviation from planned specifications
 Improve the product/service quality
Quality Management Mechanism (con’t)
 Quality Assurance: System to measure the effectiveness of the quality control
mechanism and to ensure the customers about the quality of the product or
services. It is rather process oriented.
 Quality Audit: Systematic and independent examination to determine whether the
quality activities and related results comply with the planned arrangement,
whether these arrangements are implemented effectively, and whether they are
suitable to achieve the set objectives. Audit can be internal or external.
- Internal Audit: by top management, unit heads, QC staff or mutual audit
- External Audit of suppliers by customers or by outside consultants or Quality
Board for quality prizes, certificates

Quality vs. Productivity

 The traditional view: quality and productivity move in opposite directions
 The modern view: When quality increases so will productivity
 Most techniques of quality management can be used for the combined
improvement of both quality and productivity
Quality Management Techniques/Tools
 Quantitative/Graphical Tools includes:
 Cause - Effect Diagram
 Pareto Analysis
 Quality Error Mapping
 Force Field Analysis
 Statistical Process Control

 HRD/Behavioral Techniques
 Employees Involvement and Training
 Teamwork (QC)
 Problem Solving Techniques

1. INTRODUCTION TO SPC
Causes of Variation
All processes that provide a good or service exhibit a certain amount of variation in
their output
a. Common (or Unassignable) Variation

113
  Produce natural or random pattern of variation
 Difficult to identify, but do not cause instability
 Examples: old machines, poor lighting or layout, poor procedures, etc.
b. Special (or Assignable) Variation
 Occur intermittently and create unusual patterns of variation
 Should be identified and rectified
 Examples: changes in raw material or machine setting, broken tools,
failure to clean equipment, incorrect data entry, etc.
Attributes and variables
 Variables: are quality characteristics such as weight, length, time,
temperature, voltage, tensile strength, shrinkage, or any other characteristics
that you measure.
 Attributes: are quality characteristics, when you observe them, you
concentrate on defect/defective. These characteristics either do or do not
exist, and they can be counted.
Defective items & Defects
 Defective item: nonconforming unit which must be discarded, reworked,
scrapped or down-graded
 Defect: imperfection that does not necessary render the entire product or
service unusable

Control chart
 W.A. Shewhart (1896 - 1967)
 W.E. Deming (1900 - )
 A control chart is a chart used to monitor outputs or input processes.
 The use of control charts in monitoring processes is called Statistical Process
Control (SPC).
Purpose of control chart
 Goal 1: To achieve stability of the system
(A system is stable if it exhibits only common variations resulting from inherent system
limitation)
 Goal 2: To improve the process capability through
 Change of process average
 Reduce the level of common variations
by procedures & input (training, supervision, tools, materials, composition of
workforces, etc.)
Applying statistics into process control
 Sampling
 Representative
 Sample size
 Central limit theorem
 Sampling distributions can be assumed to be normally distributed even
though the population distributions are not normal

114
Central limit theorem illustration

Error: Reference source not found

Building control charts

 Specifying control standards and limits
 Taking periodic sample data
 Compare sample data to standards
 Identifying faulty trends to take corrective actions by investigating causes or
 Maintaining favorable conditions for high quality
Benefit of control charts:
quick conformance identification
Control chart - methodology
Error: Reference source not found
Figure 1: control charts in practice
Error: Reference source not found

UCL

LCL
In statistical control
(Stable)

UCL

LCL
Out of statistical control
(Unstable)

115
 2. CONTROL CHART FOR ATTRIBUTES: p-chart
 Application: Control the fraction of defective items
total number of defective items
 Center line: p
total number of items inspected

p(1 - p)
 Standard deviation:  
n
 Upper/Lower Control Limits:
UCL(p), LCL(p) = p  3 
Example: Attribute Control Chart for defect prevention for data entry
operation

Table 2.1 Formulation of control chart for data entry operation

Raw Data for Construction of Control Chart

Number of Entries Number of Fraction of
Day
Inspected Defective entries Defectiev Entries
1 200 6 0.030
2 200 6 0.030
3 200 6 0.030
4 200 5 0.025
5 200 0 0.000
6 200 0 0.000
7 200 6 0.030
8 200 14 0.070
9 200 4 0.020
10 200 0 0.000
11 200 1 0.005
12 200 8 0.040
13 200 2 0.010
14 200 4 0.020
15 200 7 0.035
16 200 1 0.005
17 200 3 0.015
18 200 1 0.005
19 200 4 0.020
20 200 0 0.000
21 200 4 0.020
22 200 15 0.075
F r a c t io n o f D e f e c t iv e E n t r ie s

23 200 4 0.020
24 200 1 0.005
Total 4800 102
0.08

Figure 2.1 0.07

0.06

0.05

0.04

0.03

0.02

0.01

0.00
0 5 10 15 20 25 30
116
Day
 p-chart (con’t)
Error: Reference source not found
p-chart (con’t)
 Upper/Lower Control Limits
p(1 - p)
UCL(p) = p + 3 = 0.05184
n
p(1 - p)
LCL(p) = p - 3 =0 (= -.00934)
n

Interpretation: Under “normal” conditions, the probability that the process “shoots
out” of the control limits is 0.28%
Error: Reference source not found
p-chart (con’t)
Observations: Days 8 and 22: Lack of control
Investigation for circumstances / possible causes
Corrective actions to eliminate problem roots
Remove data of these 2 days & revise the chart
Error: Reference source not found
Zones in control chart
Error: Reference source not found
“Out-of-Control” Rules
(1) Any single value falls outside of the CL
(2) Any 2 out of 3 consecutive points fall in one of zones A or beyond on the same side of the
center line
(3) Any 4 out of 5 consecutive points fall in one of zones B or beyond on the same side of the
center line
(4) Eight (8) or more consecutive points line on the same side of the center line
Center
(5) Eight (8) or more consecutive points move upward (or move downward) Line
in value

Figure 2.5: Lack of control by virtue of rule 2

Error: Reference source not found

Figure 2.6: Lack of control by virtue of rule 3

Error: Reference source not found

Figure 2.3:

Figure 2.7: Lack of control by virtue of rule 4

Error: Reference source not found

117
Figure 2.8: Lack of control by virtue of rule 5

Error: Reference source not found

3. CONTROL CHART FOR VARIABLES

 Variables: data resulted from measuring some product characteristics (e.g.
length, diameter, weight, arrival time, etc.) or process parameters (e.g.
temperature, speed, pressure, etc.)
 Measurements: X1, X2, .., Xn (n = sample size)
Error:
 Reference
Basic source: not found
Statistics:
Statistics
3.1 R chart
1 n
x
n

= Centerx i line N
(mean)
 Control limits
1

R = X max - X min
 Ri
i1 (range)
UCL(R) R =D  2R
(x i -LCL(R)
x) 2 N
= D1R
S= (s.d.)
n -1
3.2 X-bar chart
Process
Center line mean x = mean of all sample means
x
Average xrange R = mean of all sample ranges
=
Control limits NUCL(x) = x + AR
LCL(x) = x - AR

= 12.018
LCL (x) = 11.989 - .577.05 = 11.960

UCL (R) = 2.116*.05 = .1058

LCL (R) = 0

X-bar chart
12.04
12.02
12
11.98
11.96
11.94
11.92
11.9
0.09
R chart
11.88
0.08
0.07 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

0.06
0.05
0.04
0.03
0.02
0.01
118
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
4. Acceptance Sampling
 Sampling for quality control
 Quality control trade-off
 Quality test too much
 Quality test too little
 Acceptance plan = policy to accept and reject lots base on sampling information
 Risks:
 Reject good lots: who bear this risk?
 Accept bad lots: who bear that risk?

Acceptance Sampling (con’t)

 Acceptance sampling scheme design: decide
 Sample size (n)
 Maximum number of defectives in a sample to accept the lot (c)
 Using precalculated Tables:
 Military standard
 Industry standard
 Using statistical method: hypothesis test

Statistical Acceptance Plan

 For attributes
 Percent defectives<
 For variables
 x-Zx<sample mean< x+Zx
Statistical Acceptance Plan Example
 “Defective rate” in serving of Pete Sampras is estimated at 24% based on
historical data in the last 2 years. Take a random sample of 200 serves he
did at Wimbledon last July, there were 59 faults. Did his “serving process”
has any problem at that time? What is the maximum faults allowed to
considered his serving skill still OK???
 Flying Vietnam Airlines to Hanoi takes 1 hour 40 minutes  13 minutes
on average. In week 18-Oct to 24-Oct, mean of 60 flights SGN-HAN was
1 hour 46 minutes. Should the airline operation at that time be considered
normal? (significant level of .005)
 Sampras
P=24
Acceptance =
= 24 + 2.58(24(100-24)/200)½ = 31.79
Wimbledon record = 59/200 = 29% < 31.8%
His serving performance was normal (but…)
 Vietnam Airlines

119
 x = x/n½ = 13/(60)½ = 1.68 minutes
acceptance = x+Zx = 1h40 + 2.58*1.68 = 1h44’
The flight operation at that time is not acceptable

5. CAPABILITY IMPROVEMENT STUDY

5.1 Process capability
Problem: stable, in-control process may still not meet customers’ requirement
 need to improve the process’ capability

Process capability refers to the inherent variability of process output relative to the
variation allowed by the design specifications.

5.2 Types of Specification

Performance Spec.: Needs of the customer

 Technical Spec.: Performance at delivery

- Individual unit spec.: Boundaries that apply to individual units of a product or

service.
USL = Nominal level + Tolerance
LSL = Nominal level - Tolerance
- Acceptable quality level (AQL) spec.: Requirements that must be met by most of
the individual units of a P/S but allow a certain proportion of the units to exceed the
requirement

- Distribution spec.: Acceptable statistical distribution of P/S quality characteristics

(in terms of means, s.d., shape, etc.)

120
Example: Determine which machines are capable if the specification is to be within
0.50 cm of the mean

Machine Standard deviation (cm)

A 0.10
B 0.15
C
5.3 Process capability indices 0.30
a. Cp
Assumptions:
Stable process
Normal distribution
Variable data
Center line nominal value of spec.

Purpose: To measure the process’ capability to meet 2-sided spec. limits

Calculation: USL - LSL
Cp =
6
Interpretation:
Cp = 1 : 0.3% out - of - spec.
Cp = 2 : 0.0003% out - of - spec.
Cp = 0.5 : 13.4% out - of - spec.
Example:
Machine Standard Machine Cp
deviation (cm) capability
A 0.10 0.30 0.05/0.03 = 1.67
B 0.15 0.45 0.05/0.45 = 1.11
C 0.30 0.90 0.05/0.90 = 0.56

The Motorola Corporation is well known for its use of the term six-sigma, which refers to
its goal of achieving process variability so small that the design specifications represent
six standard deviations of the process
b. Cpk
Assumptions: Similar, except for the last one
|m- x|  USL  x x - LSL 
Cpk = Cp  Or Cpk  min , 
3σ  3 3 
 

where m = nominal value of spec.

Remarks:
- There are many other indices
- Continuous improvement: Push Cp, Cpk
toward 

121
Questions for self-evaluation
1. Write the different types of specification.
2. Write the different purposes of control chart.

122
 CHAPTER SIX
MAINTENANCE MANAGEMENT (MM)

• Very important
• No maintenance = No Breakdowns = No / Low Profit
• SA Maintenance in 1995 were R6800m
• Previously equipment were stand alone, not integrated
• Today machines are integrated
• In 1950’s preventative maintenance introduced
• In 1970’s computerized maintenance information systems

Maintenance Management – World-class maintenance

• Leadership – control – continuous improvement – process redesign
• Leadership – Strategy, where are we going?
• Control – quantitative objectives, planning, scheduling tasks
• Continuous improvement – Establish strategy
• Process redesign – If performance is insufficient

Maintenance Management – Framework for maintenance management

Maintenance Management – Models in maintenance
• Why use models?
– To understand, predict , control, improve system
– To determine frequency of preventive maintenance
– To decide spares needed in store
– To decide when to discard asset
Maintenance Management – Models in Maintenance
• Total value of a system
Maintenance Management – Models in Maintenance (Cont)
• Reliability – Determine the failure rate
• System reliability
• Maintainability
“ Probability that an item can be returned to a specified functional level within a specified
time period!!
– Total maintenance down time (MDT)
– Logistics delay time (LDT)
– Administrative delay time (ADT)
• Availability
“Probability that the item will, when used under specified conditions operate
satisfactorily and effectively”

Maintenance Management – Maintenance planning

• Needed to bridge gap between vision of business and current situation
• Establish feasible maintenance objectives
• Be in harmony with rest
• Long (2-5y) and short term planning

123
 • Must be within budget constraints
• Strategic planning must support maintenance
Maintenance Management – Tactical Maintenance planning
(Short term, Medium term maintenance planning)
• Define objectives
• Formulate maintenance strategy
• Detailed maintenance plan, tasks, schedules
Maintenance Management – The System Breakdown structure
• Breakdown to lowest level
• Fig 12.8
Maintenance Management – The maintenance life plan
• Define maintenance action for each item
• E.g. Repair, replace, adjust, calibrate etc.
• See Fig 12.9
Maintenance Management – Organization
• Formalize positions
• Workers, tool, facilities must be organized
• Changing demands will effect maintenance

Maintenance Management – Elements of organizing in maintenance

• Division of the work
• Division of labour and specialization
• Authority and responsibility
• Unity of direction
• Span of control (15 – 20 workers / Manager)

Maintenance Management – The Maintenance Resources

• People
• Spare parts
• Tools
• Information
• Facilities
• Technology
• Cleaning materials
Maintenance Management – Maintenance Resources – Staffing
Methods
• Totally – in – house
• Combined – In – house / contract
• Contract maintenance
• Complete outsourcing
Maintenance Management – Geographical division
• Centralized maintenance
• Area maintenance
• Combination

124
Maintenance Management – Maintenance Resource structure
• Human Resources
– Salaries could be large component of costs
• Spare parts
– Must reduce unavailability of the system
– Cost of keeping parts is important
• Maintenance tools
– Special tools must be available
– Tools must be adequate
• Information
– User manuals
– Specifications etc.

Maintenance Management – Maintenance workload

• Corrective maintenance
– Emergency work
– Deferred work (Not immediately)
• Preventative maintenance
– Inspections (online)
– Minor preventive maintenance (off line)
– Shutdown work (off line)
• Modification
– Maintenance department could assist
Maintenance Management – Control
Maintenance Management – Maintenance cost control
• Part of company budget
• Record of costs is basis for budget
• If no record, collect information in first months
Maintenance Management – Reliability and availability control
• Must be monitored to determine maintenance effectively
• Adequate records must be kept

Maintenance Management – Maintenance strategies

Business – centered maintenance (BCM)
Maintenance Management – Reliability-centered maintenance (RCM)
• Asset centered –Large system (eg.Air planes)
• Objective is to realize reliability of system
Maintenance Management – Total Productive Maintenance (TPM)
Big assembly line industries)
• Philosophy for all workers of enterprise
• Involve all departments
• Involve everyone
• Prevent all types of losses
• Maximize effectiveness of production systems

125
Questions for self-evaluation

1. Define maintenance management.

2. Write the different types of maintenance management.

126