Production and Operations Management – BBA V SEM NEP

Unit-I : Introduction to Production and Operations Management.

Meaning of Production and Operations,

Production and Operation Management deals with the creation of goods and services through the
application of the business concept. They are also vital in both service and manufacturing firms. It
has a primary objective, which is to employ the company’s resources to produce goods and services
fit for the market. The goal of the production function is to add value. Be it product or services; the
idea is to create something that will strengthen the relationship between the organization and
customers.

Production management is relevant to the firm’s success in many ways. Used efficiently, it can lead
to numerous accomplishments which will take the business to a great height.
Following are the importance of production management:

• Helps the Firm to Accomplish its objectives

• Boost Business Reputation and Goodwill
• Reduces the Cost of Production

Objectives of Production/Operations Management

Some of the important objectives of production management are :

(i) Maximum customer satisfaction through quality, reliability, cost and delivery time.
(ii) Minimum scrap/rework resulting in better product quality.
(iii) Minimum possible inventory levels (i.e., optimum inventory levels).
(iv) Maximum utilisation of all kinds of resources needed.
(v) Minimum cash outflow.
(vi) Maximum employee satisfaction.
(vii) Maximum possible production (i.e., outputs).
(viii) Higher operating efficiency.
(ix) Minimum production cycle time.
(x) Maximum possible profit or return on investment.
(xi) Concern for protection of environment.
(xii) Maximum possible productivity.

Meaning of "Production"
Production implies the creation of goods and services to satisfy human needs. It involves conversion
of inputs (resources) into outputs (products). It is a process by which, raw materials and other inputs
are converted into finished products. Earlier the word "manufacturing" was used synonymously with
the word "production", but nowadays, we use the term "manufacturing" to refer to the process of
producing only tangible goods whereas the word "production" (or operation) is used to refer to the
process of creating both goods (which are tangibles) as well as services (which are intangibles). Any
process which involves the conversion of raw materials and bought-out components into finished
products for sale is known as production. Such conversion of inputs adds to the value or utility of the
products produced by the conversion or transformation process. The utility or added value is the
difference between the value of outputs and the value of inputs. The value addition to inputs is brought
about by alteration, transportation, storage or preservation and quality assurance.

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Meaning of “Operations”
The term “operations” refers to a function or system that transforms inputs into outputs of greater
value. Operations are often defined as a transformation or conversion process wherein inputs such as
materials, machines, labour and capital are transformed into outputs (goods and services). In a
productive system, if the outputs are strictly tangible goods, such a system is referred to as a
“production system” and the transformation process is referred to as “production”. Nowadays, the
service system in which the output is predominantly a service or even a pure service, is also treated
as a productive system and often referred to as an “operating system” instead of a “production
system”.

Differences between Production and Operations Management

Basic for
Production Management Operations Management
Comparison
It revolves around the management of complete
It revolves around managing all production
Definition overall business operations, including production
activities.
and post-production stages.
Broader scope because operations management
Scope is limited because it focuses on the
Scope of revolves around routine business activities like
design, pricing, quality, and quantity of goods
Operation workforce management, inventory management,
production
and more
Focused on leveraging organizational resources in
Ensures that the right quality of products
Objective the most effective way to meet customer
are produced at the right time
requirements
Area of Relevant specifically for different aspectsRelevant for daily business operations in any
Decision-Makingof production organization
Capital Revolves around high capital
Less capital requirements.
Requirement requirement initially
Technical skills, IT skills, Leadership skills, data entry and processing skills,
Skills Required project management skills, decision-making skills, conflict management
communication skills, and confidence skills, and organizational skills
Meeting deadlines without compromising Development of technology and innovative business
Challenges quality is a major challenge for productionmodels pose new challenges to operations
managers managers
Delivering high quality products on time Utilization
at low of resources to improve regular business
Advantages
costs operations and improving business reputation
Applicable only in organizations where Applicable in all types of organizations like banks,
Prevalence
products are manufactured hospitals, and more

Scope of Production Management

Production management is mainly associated with the factory management crept with the
development of factory system. With the continuing development of factory system, the trend towards
mechanization and automation developed and it resulted in the increased costs of indirect labour
higher than the direct labour costs. So concerns found it difficult to run the business in these
circumstances and evolved many controlling devices to regulate the cost of production. They had
developed devices like designing and packing of products, indirect labour cost control, production &
inventory control and quality control.

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Since the level of production has increased tremendously, so many other production problems have
been added to its scope. In the present era of intense competition, the scope of production management
is very wide.

The various activities that form scope of production function can be studied in the following broad
areas –

1. Product Selection and Design : The product mix makes the production system either efficient or
inefficient. Choosing the right products, keeping the mission and overall objectives of the organization
in mind is the key to success. Design of the product, which gives it enough functional and aesthetic
value, is of paramount importance. It is the design of the product which makes the organization
competitive or noncompetitive. Value engineering does help to retain enough features, while
eliminating the unnecessary ones.

2. Activities Relating to Production System Designing : Decision related to the production system
design is one of the most important activity of the production management. This activity is related to
production engineering and includes problems regarding design of tools and jigs, the design,
development and installation of equipment and the selection of the optimum size of the firm. All these
areas require the technical expertise on the part of the production manager and his staff.

3. Facilities Location: The selection of an optimum plant location very much depends upon the
decision taken regarding production engineering. A wrong decision may prove disastrous. Location
should as far as possible cut down the production and distribution cost. There are diverse factors to
be considered for selecting the location of a plant.

4. Method Study : The next decision regarding production system design concerns the use of those
techniques which are concerned with work environment and work measurement. Standard methods
should be devised for performing the repetitive functions efficiently. Unnecessary movements should
be eliminated and suitable positioning of the workers for different processes should be developed.
Such methods should be devised with the help of time study and motion study. The workers should
be trained accordingly.

5. Facilities Layout and Materials Handling : Plant layout deals with the arrangements of machines
and plant facilities. The machines should be so arranged that the flow of production remains smooth.
There should not be overlapping, duplication or interruption in production flow. Product layout, where
machines are arranged in a sequence required for the processing of a particular product, and process
layout, where machines performing the similar processes are grouped together are two popular
methods of layout. The departments are laid out in such a way that the cost of material handling is
reduced. There should be proper choice of materials handling equipment. These days, computer
software is available for planning the process layout (e.g. CRAFT, CORELAP etc.). Group
Technology (G.T.), Cellular Manufacturing Systems (CMS) and Flexible Manufacturing Systems
(FMS) have made our concepts of layout planning undergo a tremendous change.

6. Capacity Planning : This deals with the procurement of productive resources. Capacity refers to a
level of output of the conversion process over a period of time. Full capacity indicates maximum level
of output. Capacity is planned for short-term as well as for long term. Process industries pose
challenging problems in capacity planning, requiring in the long run, expansion and contraction of
major facilities in the conversion process. Some tools that help us in capacity planning are marginal
costing (Break Even Analysis), learning curves, linear programming, and decision trees.

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7. Production Planning : The decisions in production planning include preparation of short-term

production schedules, plan for maintaining the records of raw materials, finished and semi-finished
stock, specifying how the production resources of the concern are to be employed over some future
time in response to the predicted demand for products and services. Production planning takes a given
product or line of products and organizes in advance the manpower, materials, machines and money
required for a predetermined output in a given period of time. Thus, production planning is a
management technique which attempts to gain the best utilization of a firm’s manufacturing facilities.
It is gained by the integration and coordination of the manpower, machines, materials and plant
services employed in the manufacturing cycle.

8. Production control : After planning, the next managerial production function is to control the
production according to the production plans because production plans cannot be activated unless
they are properly guided and controlled. For this purpose, production manager has to regulate work
assignment, review work process, check and remove discrepancies, if any, in the actual and planned
performances.

Thus production control involves the following stages :

Planning — setting targets of production.

Routing — to decide the route or flow-of production activity.
Dispatching — to issue materials and authorizations for the use of machines and plant services.
Follow-up — it compares the actual production with the targeted production. Deviations are found out
and corrected and reasons are investigated.

9. Inventory Control : Inventory control deals with the control over rawmaterials, work-in-progress,
finished products, stores, supplies, tools, and so is included in production management.
The raw materials, supplies etc. should be purchased at right time, of right quality, in right quantity,
from right source and at right price. This five ‘R’s consideration enables the scientific purchases.
Store-keeping is also an important aspect of inventory control. The raw materials, work-in-progress,
finished goods, supplies, tools etc. should be stored efficiently. The different levels of inventory
should be managed properly and the issue of materials to departments should be made promptly and
effectively. Proper records should also be kept for various items of inventory control.

10. Quality control : The other important decision taken by the production manager concerns quality
control. Product quality refers to the composite product characteristics of engineering and
manufacturing that determines the degree to which the product in use will meet the expectations of
the customers. Quality control can be ensured through the techniques of inspection and statistical
quality control.

11. Maintenance and Replacement : In this we cover preventive methods to avoid machine break-
downs, maintenance, policies regarding repair and replacement decisions. Maintenance manpower is
to be scheduled and repair jobs are to be sequenced. There are some preventive replacements also.
Machine condition is to be constantly monitored. Effective maintenance is a crucial problem for India
which can help better capacity utilization and make operations systems productive enough.

12. Cost Reduction and Control : Cost reduction ultimately improves productivity. The industry
becomes competitive. Essentially cost reduction and cost elimination are productivity techniques.
Value engineering, budgetary control, standard costing, cost control of labour and materials etc. help
to keep costs optimal.

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Production System.
A system may have many components and variation in one component is likely to affect the other
components of the system e.g. change in rate of production will affect inventory, overtime hours etc.
Production system is the framework within which the production activities of an organization are
carried out. At one end of system are inputs and at the other end output. Input and output are linked
by certain processes or operations or activities imparting value to the inputs. These processes,
operations or activities may be called production systems. The nature of production system may differ
from company to company or from plant to plant in the same firm.

Elements of Production System

Inputs : Inputs are the physical and human resources utilised in the production process. They consist
of raw materials, parts, capital equipment’s, human efforts etc.

• Conversion Process : It refers to a series of operations which are performed on materials and
parts
• Outputs : Outputs are the prodl1;cts or completed parts resulting from the conversion process.
Output generates revenue.
• Storage : Storage take place after the receipt of inputs, between one operation and the other
and after the output.
• Transportation : Inputs are transported from one operation to another in the production
process.
• Information : It provides system control through measurement, comparison, feedback, and
corrective action.

Types of Production Systems

There are two main types of production systems : (i) Continuous System (ii) Intermittent System

i) Flow or Continuous System : According to Buffa, “Continuous flow production situations are
those where the facilities are standardised as to routings and flow since inputs are standardised.
Therefore a standard set of processes and sequences of process can be adopted”. Thus continuous or
flow production refers to the manufacturing of large quantities of a single or at most a very few
varieties of products with a standard set of processes and sequences. The mass production is carried
on continuously for stock in anticipation of demand.

Characteristics :
i. The volume of output is generally large (mass production) and goodsare produced in
anticipation of demand.

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ii. The product design and the operations sequence are standardised i.e. identical products are
produced identical products are produced.
iii. Special purpose automatic machines are used to perform standardised operations.
iv. Machine capacities are balanced so that materials are fed at one end of the process and finished
product is received at the other end.
v. Fixed path materials handling equipment is used due to the predetermined sequence of
operations.
vi. Product layout designed according to a separate line for each product is considered.

Merits

• The main advantage of continuous system is that work-in-progress inventory is minimum.

• The quality of output is kept uniform because each stage develops skill through repetition of
work.
• Any delay at any stage is automatically detected.
• Handling of materials is reduced due to the set pattern of production line. Mostly the materials
are handled through conveyer belts, roller conveyers, pipe lines, overhead cranes etc.
• Control over materials, cost and output is simplified. The work can be done by semi-skilled
workers because of their Specialization

Demerits :
Continuous system, however, is very rigid and if there is a fault in one operation the entire process is
disturbed. Due to continuous flow, it becomes necessary to avoid piling up of work or any blockage
on the line. Unless the fault is cleared immediately, it will force the preceding as well as the subsequent
stages to be stopped. Moreover, it is essential to maintain standby equipments to meet any breakdowns
resulting in production stoppages. Thus investments in machines are fairly high.

Continuous production is of the following types :

(a) Mass Production : Mass production refers to the manufacturing of standardised parts or
components on a large scale. Mass production system offers economies of scale as the volume of
output is large. Quality of products tends to be uniform and high due to standardisation and
mechanisation. In a properly designed and equipped process, individual expertise plays a less
prominent role.

(b) Process Production : Production is carried on continuously through a uniform and standardised
sequence of operations. Highly sophisticated and automatic machines are used. Process production is
employed in bulk processing of certain materials. The typical processing Industries are fertilizers
plants, petrochemical plants and milk dairies which have highly automated systems and sophisticated
controls. They are not labour intensive and the worker is just an operator to monitor the system and
take corrective steps if called for.

On the basis of the nature of production process, flow production may be classified into Analytical
and Synthetic Production.

In Analytical Process of production, a raw material is broken into different products e.g. crude oil is
analysed into gas, naptha, petrol etc. Similarly, coal is processed to obtain coke, coal gas, coal tar etc

Synthetic Process of production involves the mixing of two or more materials to manufacture a
product for instance, lauric acid, myristic acid, stearic acid are synthesised to manufacture soap.

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(c) Assembly Lines : Assembly line a type of flow production which is developed in the automobile
industry in the USA. A manufacturing unit prefers to develop and employ assembly line because it
helps to improve the efficiency of production. In an assembly line, each machine must directly receive
material from the previous machine and pass it directly to the next machine. Machine and equipment
should be arranged in such a manner that every operator has a free and safe access to each machine.
Space should be provided for free movement of fork lifts, trucks etc. which deliver materials and
collect finished products.

(ii) Intermittent Production System

According to Buffa, “Intermittent situations are those where the facilities must be flexible enough to
handle a variety of products and sizes or where the basic nature of the activity imposes change of
important characteristics of the input (e.g. change. in the product design). In instances such as these,
no single sequence pattern of operations is appropriate, so the relative location of the operation must
be a compromise that is best for all inputs considered together”. In the industries following the
intermittent production system, some components may be made for inventory but they are combined
differently for different customers. The finished product is heterogenous but within a range of
standardized options assembled by the producers. Since production is partly for stock and partly for
consumer demand, there are problems to be met in scheduling, forecasting, control and coordination.
Characteristics :
• The flow of production is intermittent, not continuous.
• The volume of production is generally small
• A wide variety of products are produced.
• General purpose, machines and equipment’s are used so as to be adaptable to a wide variety
of operations.
• No single sequence of operations is used and periodical adjustments are made to suit different
jobs or batches.
• Process layout is most suited

Intermittent system is much more complex than continuous production because every product has to
be treated differently under the constraint of limited resources. Intermittent system can be -effective
in situations which satisfy the following conditions :

i. The production centres should be located in such a manner so that they can handle a wide
range of inputs.
ii. Transportation facilities between production centres should be flexible enough to
accommodate variety of routes for different inputs.
iii. It should be provided with necessary storage facility

Intermittent Production May be of two types :

(a) Job Production : Job or unit production involves the manufacturing of single complete unit with
the use of a group of operators and process as per the customer’s order. This is a ‘special order’ type
of production. Each job or product is different from the other and no repetition is involved. The
product is usually costly and non-standardised. Customers do not make demand for exactly the same
product on a continuing basis and therefore production becomes intermittent. Each product is a class
by itself and constitutes a separate job for production process. Ship building, electric power plant,
dam construction etc. are common examples of job production.

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Characteristics :

i. The product manufactured is custom-made or non-standardised.

ii. Volume of output is generally small.
iii. Variable path materials handling equipment are used.
iv. A wide range of general purpose machines like grinders, drilling, press, shaper etc. is used.

Merits :
It is flexible and can be adopted easily to changes in product design. A fault in one operation does not
result into complete stoppage of the process. Besides it is cost effective and time-effective since the
nature of the operations in a group are similar. There is reduced material handling since machines are
close in a cell. The waiting period between operations is also reduced. This also results in a reduced
work-in-progress inventory.

Demerits :
Job shop manufacturing is the most complex system of production e.g. in building a ship thousands
of individual parts must be fabricated and assembled. A complex schedule of activities is required to
ensure smooth flow of work without any bottlenecks. Raw materials and work-in-progress inventories
are high due to uneven and irregular flow of work. Work loads are unbalanced, speed of work is slow
and unit costs are high.

b) Batch Production : It is defined as “The manufacture of a product in small or large batches or lots
at intervals by a series of operations, each operation being carried out on the whole batch before any
subsequent operation is performed”. The batch production is a mixture of mass production and job
production. Under it machines turn out different products at intervals, each product being produced
for comparatively short time using mass production methods.

Both job production and batch production are similar in nature, except that in batch production the
quantity of product manufactured is comparatively large.

Demerits :
Work-in-progress inventory is high and large storage space is required. Due to frequent changes in
product design no standard sequence of operation can be used. Machine set-ups and tooling
arrangements have to be changed frequently. The main problem in batch production is the idle time
between one operation and the other. The work has to wait until a particular operation is carried out
on the whole batch.

Benefits of Production Management

The production is the core function of any business organisation. Production function creates goods
and services and organisations exist primarily to create goods and/or to provide services. Without
production function, there would be no need for any other function such as marketing, finance or
human resource function. Also, more than 50 per cent of employees in a business organisation have
jobs in the area of production. Moreover, the production function is responsible for a major portion
of assets in most organisations. Consumption of goods and services is an integral part of any society
and production function facilitates creation of goods and services for the benefit of people in the
society.

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Responsibilities of Production/Operations Managers

In an organization production manager has to administer a great variety of activities.
1. He assembles appropriate resources and direct the use of these resources, be they people,
machines, processing etc. in transforming material and time of people into products and
services.
2. Managers also have to respond to other forces from the external environment such as
government regulation, labour organization as well as local, regional, national and
international economic conditions.
3. Managers have to pay more attention not only to what their customers might buy but also to
increasing government regulations and behaviour of consumer and environmental protection
groups.
4. The manager should be able to channelise the production process in a manner which ensures
most efficient use of the resources to the best advantage for the enterprise. He is responsible
for producing right quantity of material at the right time.
5. He should be able to do something real and constructive about production problems. He should
be well conversant with the ways and means to attain the desired goals.
6. The nature of problems associated in production management are such that the Production
Manager should have the capability as well as the aptitude to use qualitative and quantitative
methods of analysis to get the desired solutions

The following are the major responsibilities of production/operations managers :

(i) Meeting requirements of quality demanded by customers.

(ii) Establishing realistic delivery or completion dates.
(iii) Producing the required volume of products to meet the demand. (iv) Selection and application of
most economic methods or processes.
(v) Controlling the cost of inputs and conversion process and thereby keeping the cost of outputs
within
the desired limits.

Decisions of Production Management.

The production/operations managers manage all activities of the production/operations systems
which convert inputs into the desired outputs (goods and services). The production/operations
managers have the ultimate responsibility for the creation of goods or provision of services.
Even though the kind of jobs that production/operations managers oversee vary from
organisation to organisation, (because of the different products or services involved) their job
is essentially managerial. They must co-ordinate the use of resources through the managerial
process of planning, organising, staffing, directing (or influencing) and controlling.

Decisions of production/operations management

The problems involved in production management require two major types of decisions relating
to :
(i) Design of the production system and
(ii) Operation and control of the production system.

Decisions related to the design of production system are long-run decisions whereas, decisions
related to operations and control of the production system are short-run decisions. The problems

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involve the relative balance of the emphasis on such factors as cost, service and reliability of
both functional and time performance, which depends on the basic purposes of the total
enterprise and on the general nature of goods and services produced. In general, manufacturing
organisations emphasise more on cost, consistent with quality and delivery commitments
whereas, service organisations may emphasise reliability and service, consistent with cost
objectives (for example, hospitals).

Long-Run Decisions
Long-run decisions related to the design of the production system are:
(i) Selection and Design of Products: Product selections and designs with productive
capability (i.e., producibility of products) are interdependent.
(ii) Selection of Equipment and Processes: Selection of the most economic equipment and
processes among the various alternatives considered, the firm's capability to invest in capital
assets and its basic approach to production (i.e., job, batch, mass or continuous production)
must be considered.
(iii) Production Design of Parts Processed: Production design aims at selection of equipment,
processes, and tools for economic production which set limits on the cost of outputs.
(iv) Job Design: It involves basic organisation of work as well as matching workers to their
jobs in order to reduce fatigue and improve productivity.
(v) Location of the System: It is a trade-off decision since there is no one best location for a
productive system to be located. The balance of cost factors determined by various
considerations is critical.
(vi) Facility Layout: This involves decisions related to design capacity, basic modes of
production, shifts of working, use of overtime and subcontracting. In addition, operations and
equipment must be located in relation to each other such that the overall material handling cost
is minimised. Other factors involved are heating, lighting and other utility requirements, the
allocation of storage space, washing space and the design of the building to house the layout.

Short-Run Decisions
Short-run decisions related to the operations and control of the system are :
(i) Inventory and Production Control: Decisions made are concerned with allocation of
productive capacity consistent with demand and inventory policy. Feasible schedules must be
worked out and the load on machines and labour and the flow of production must be controlled.
(ii) Maintenance and Reliability of the System: Decisions must be made regarding the
maintenance effort, maintenance policy and practice recognising the fact that machine down
time may lead to idling of labour and production stoppage resulting in lost sales.
(iii) Quality Control: Decisions must be made to set permissible levels of risk that bad parts
are produced and shipped or the risk that good parts are scrapped due to sampling inspection.
Inspection costs must be balanced with the probable losses due to passing defective materials
or products. Decisions regarding controlling the quality of on-going processes must be taken.
(iv) Labour Control: Labour is the major cost element in most products and services. Hence,
work measurement and wage incentive systems must be developed to control labour costs and
to increase labour productivity.
(v) Cost Control and Improvement: Day-to-day decisions which involve the balance of
labour, material and overhead costs must be made by production supervisors.

Operations management: Concept and Functions

Operations management has been gaining increased recognition in recent years because of the
following reasons:
(i) The application of operations management concepts in service operations.
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(ii) The growing importance of quality.

(iii) The introduction of operation management concepts to other areas such as
marketing and human resources and
(iv) The realization that the operations management function can add value to the end
product.

Operations management functions:

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

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

The selection of location is a key-decision as large investment is made in building plant and
Machinery. An improper location of plant may lead to waste of all the investments made in
plant and machinery equipment’s. Hence, location of plant should be based on the company’s
expansion.

2. Plant layout and material handling

Plant layout refers to the physical arrangement of facilities. It is the configuration of
departments,
Work centers and equipment in the conversion process. The overall objective of the plant layout
Is to design a physical arrangement that meets the required output quality and quantity most
Economically.

3. Product design
Product design deals with conversion of ideas into reality. Every business organization have to
Design, develop and introduce new products as a survival and growth strategy. Developing the
New products and launching them in the market is the biggest challenge faced by the
organizations. Product design and development provides link between marketing, customer
needs and expectations and the activities required to manufacture the product.

4. Process design
Process design is a macroscopic decision-making of an overall process route for converting the
Raw material into finished goods. These decisions encompass the selection of a process, choice
of technology, process flow analysis and layout of the facilities. Hence, the important decisions
In process design are to analyze the workflow for converting raw material into finished product
And to select the workstation for each included in the workflow.

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5. Production planning and control

Production planning and control can be defined as the process of planning the production in
advance, setting the exact route of each item, fixing the starting and finishing dates for each
item, to give production orders to shops and to follow up the progress of products according to
orders.
The principle of production planning and control lies in the statement ‘first plan your work
And then work on your plan’. Main functions of production planning and control includes
Planning, routing, scheduling, dispatching and follow-up.

6. Quality control
Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of
Quality in a product or service’. It is a systematic control of various factors that affect the
quality of the product. Quality control aims at prevention of defects at the source, relies on
effective Feedback system and corrective action procedure.

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

8. Maintenance management
In modern industry, equipment and machinery are a very important part of the total productive
Effort. Therefore, their idleness or downtime becomes are very expensive. Hence, it is very
Important that the plant machinery should be properly maintained.

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Unit -II : Plant location and layout

Meaning and definition
A plant is a place, where men, materials, money, machinery etc. are brought together for
manufacturing products. The objective of minimisation of cost of production can be achieved
only when the plant is of the right size and at a right place where economies of all kinds in
production are available. The planning for ‘where’ to locate the operations facilities should start
from ‘what’ are organization’s objectives, priorities, goals and the strategies required to achieve
the same in the general socio-economic-techno-business-legal environment currently available
and expected to be available in the long-term future.
Facility Location is the right location for the manufacturing facility, it will have sufficient
access to the customers, workers, transportation, etc. A manufacturing unit is the place where
all inputs such as raw material, equipment, skilled labors, etc. come together and manufacture
products for customers. Facility locations involve numerous aspects, such as the location of
manufacturing plants, assembly locations as well as distribution centres. Facility location refers
to establishment of the physical unit of production process.

Importance of Facility Decision

Decision of facility location (generally, facility refer to service organization and factory or plant
refers to manufacturing organization) is important to any organization whether it is
manufacturing or service. Facility location has a significant impact on firm's operation as well
as cost structure. Once the location is decided and plant is installed, it is highly expensive to
alter the location if it is later known that the location decision was not correct.

Location decision is a long-term commitment.

An established company might need the factory location planning for following reason:
• The availability and cost of resources like labor, raw materials and other supporting resources
may change.
• The geography of demand may shift. It may be desirable to change facility location to provide
before service to the customer.
• As the new market is opened, the added capacity should be located so that the market is served
effectively.
• Development of new technologies.
• Socio–Political situations, economic conditions or government policy may change.

Factors affecting location decision (selection of a location)

The production function is associated with conversion of input to desired output by using the
appropriate technology i.e. conversion process. The inputs are fed to conversion process, while
outputs are marketed. Here, the important factors are input, conversion process and market
and these are the primary factors affecting location decision. However other minor factors too
are important for location decision.

1. Nature of the input (raw material):

In some cases, it is beneficial to locate the factory (plant) near to raw material. If the cost of
transportation of raw material is very high comparison to the transportation of finished goods,
it is suitable to establish the factory near to input resources. For example cement factory is
established near the sources of lime because major input is lime which is very bulky. Similarly,

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sugar factory is established nearer to sugar cane farm. Other examples are oil refineries, steel
industries, and paper industries which are established nearer to source of raw material.

Availability of Fuel and Power : Because of the wide spread of electric power, in most cases
fuel (coal, oil etc.) has not remained a deciding factors for plant location. It is of course essential
that electric power should remain available continuously, in proper quantity and at reasonable
rates.
Availability of Water : Water is used for processing, as in paper and chemical industries, and
is also required for drinking and sanitary purposes. Depending upon the nature of the plant,
water should be available in adequate quantity and should be of proper quality (clean and pure).
A chemical, fertilizer, thermal power station etc. should not be set-up at a location which IS
famous for water shortage.

2. Nature of output (product or service):

In some cases it is beneficial to locate the facility nearer to market or potential customer.
Service produced by hotels, golf course, church, temples, schools, hospitals, are usually located
near the market or the recipients because these services cannot be transported or keep in stock.
These facilities should be located within the reach of consumers.

In manufacturing organization, when the product are potential of being damaged or spoiled in
course of transportation it is beneficial to establish plant nearer to market. Furthermore, a plant
being nearer to the market can catch a big share of the market and can render quick service to
the customer. In some cases the transportation of final product to market may be costly
compared to transportation of raw material to industry and transportation cost has significant
effect, in such case it is beneficial to establish plant nearer to market. For examples soft drink
companies like Coca Cola and Pepsi are established nearer to market.

3. Nature of technology employed:

Conversion process and the technology employed also determine the facility location decisions.
The conversion process, which produces unfriendly conditions to the people and environment,
are usually located in remote areas i.e. far from consumer and the final product and service are
transported to the market. The nuclear plant and airport are the good examples.

4. Availability of labors and their skill

Stable labor forces of right kind, adequate size (number), and reasonable rates with proper
attitude towards works are a few factors which govern the plant location to a major extent. The
purpose of management is to face less boycotts, strikes or lockouts and to achieve lower labor
cost per unit of production.

5. Transport facilities:
Good transportation facility is an important factor of determination of location. Basic mode of
transportation like air, road, rail, water, pipelines are preferred based on the nature of raw
material and finished goods. A lot of money is spend on transporting the raw material and
finished goods. The location should minimize the cost of transportation.

6. Availability of services:
Services like gas, electricity, water, drainage, waste disposal, communication and other external
amenities like shop, community services, communication system etc. are also important

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7. Suitability of land and climate:

The topography (geography) of the land also affects plant location. Similarly the climatic
conditions e.g. rain fall, humidity, average temperature are also critical factor while
determining the location decisions.

8. Opportunity for expansion:

The long range prospective of expansion opportunity must be considered while making location
decision. The location should be flexible enough to cover the expansion program.

9. Political, cultural and economic situation and regional regulations:

The political instability may jeopardize the business. Socio-cultural situation like women,
foreign worker restriction of working should be considered. The economic condition of locality
is important factor to be considered for business like gambling, casino, insurance companies or
private educational institutions. Similarly, the study must be made of local regulations before
determining the location decisions.

10. Special grants, regional tax and import (export) barriers:

Some local authorities and central government offer special grants, low interest loan, low rental
or taxes and other inducement in the hope of attracting certain industries to a particular location.
Location of companies to foreign countries to avoid export difficulties are now commonly
accepted practices.
After identify the several key location requirement management should find the alternative
locations that are consistent with these requirement. These alternative locations are subjected
to qualitative and quantitative analysis before determining the exact location decisions.

Sargant Florence’s theory of Plant location

Prof. Sargant Florence evolved an inductive theory for explaining the causes of industrial
location. He found that the problems of industrial location are more related to the distribution
of the occupied the population of the country than its geographical areas. His theory of location
is based on two new concepts -location factor and co-efficient of localization.

(a) Location Factor:

• It is an index of the degree of concentration of an industry in a particular region.
• This index is calculated by taking the percentage of all workers in a particular industry
found in a certain region and dividing it by the proportion in that particular region of
the total industrial workers in the country.
• Where an industry is evenly distributed throughout the. country, the location factor for
each region would be unity. If the industry is not evenly distributed, the location factor
will be either above unity or below unity.
• Regions showing location factors above unity or below unity would indicate that such
regions have a higher share or a lower share of the industry than what should have been
the case.

(b) Coefficient of Localization:

• It indicates the tendency of a particular industry to concentrate or disperse anywhere in
the country.

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• It can be obtained for the industry by dividing the positive or negative deviations of the
regional the proportion of workers in the particular industry from the corresponding
regional the proportion of workers in all industries by 100.
• Industries that are concentrated in certain regions will have a high co-efficient of
localization, and industries that are dispersed in different regions will have a low co-
efficient of location.
• By calculating the coefficients of locations for all industries, they can be divided into
the categories of the high, medium, and low co-efficient industries.
• Accordingly, the locational significance of an industry can be shown and the the
problem of investigation can be made easier.
• A low coefficient of localization for a particular industry indicates that it can easily
thrive in various regions.

Weber’s theory of location

Weber's Theory of Industrial Location, also known as the Weberian theory of industrial location
or the least-cost theory, was developed by Alfred Weber in 1909. This theory seeks to explain
why certain industries locate in specific areas, taking into account factors such as transportation
costs, labor costs, and the nature of the product being manufactured.
Alfred Weber, a German economist, enunciated a systematic theory of industrial location in
1909. Weber’s theory of location is purely deductive in its approach. He analyzed the factors
that determine the location of industry and classified these factors into two divisions. These
are:
(i) Primary causes of regional distribution of industry (regional factors)
(ii) Secondary causes (agglomerative and deglomerative factors) that are responsible for
redistribution of industry.
(i) Primary Causes (Regional Factors)
According to Weber, transport costs and labour costs are the two regional factors on which his
pure theory is based. Assuming that there are no other factors that influence the distribution of
industry, except transportation costs. Then it is clear that the location of industry will be pulled
to those locations which have the lowest transportation costs. The key factors that determine
transportation costs are
(i) the weight to be transported and
(ii) the distance to be covered.
Weber lists some more factors which influence the transportation costs such as – (a) the type of
transportation system and the extent of its use, (b) the nature of the region and kinds of roads,
(c) the nature of goods themselves, i.e., the qualities which, besides weight, determine the
facility of transportation.
However, the location of the place of production must be determined in relation to the place of
consumption and to the most advantageously located material deposits. Thus, ‘locational
figures’ are created. These locational figures depends upon (a) the type of material deposits and
(b) the nature of transformation into products.
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Weber classifies and calls those raw materials, which are available practically everywhere as
‘ubiquities’ (like brick-clay, water, etc) and ‘localised’ (like iron-ore, minerals, wood, etc)
which are available only in certain regions. It is clear that localized materials play a more
important role on the industry than the ubiquities. Further, regarding the nature of the
transformation of materials into products, Weber categorized the raw materials as ‘pure’ and
‘weight losing’. Pure materials impart their total weight to the products (eg. cotton, wool, etc)
and the materials are said to be ‘weight losing’ if only a part enters into the product (eg. wood,
coal, etc.). Hence, the location of industries using weight-losing materials is drawn towards
their deposits and that of industries using pure-materials towards the consumption centres.
Weber further examines the cause of deviation of industrial location from the centres of least
transport costs. The existence of differences in labour costs leads an industry to deviate from
the optimal point of transport orientation. Geographical distribution of the population would
give rise to differences in wages for labour. Naturally, the transport oriented location of an
industry is drawn out and attracted towards the cheaper labour centres. Such migration of an
industry from a point of minimum transport costs to a cheaper labour centre may be likely to
occur only where the savings in the cost of labour are larger than the additional costs of
transport which it ought to incur.
(ii) Secondary Causes (Agglomerative and Deglomerative Factors)
An agglomerative factor is an advantage or a cheapening of production or marketing which
results from the fact that production is carried on at one place. A deglomerative factor is a
cheapening of production which results from the decentralization of production i.e., production
in more than one place. To some extent these agglomerative and deglomerative factors also
contribute to local accumulation and distribution of industry. These factors will operate only
within the general framework formed by the two regional factors, i.e., costs of transportation
and costs of labour. The advantages which could be derived in this context are external
economies.
The pulls which the agglomerative factors possess to attract an industry to a particular point are
mainly dependent on two factors. Firstly, on ‘the index of manufacture’ (the proportion of
manufacturing costs to the total weight of the product) and secondly, on the ‘locational weight’
(the total weight to be transported during all the stages of production). To deduce a general
principle, Weber uses the concept of “co-efficient of manufacture” which is the ratio of
manufacturing cost to locational weight. Agglomeration is encouraged with high co-efficient
of manufacture and deglomeration with low co-efficient of manufacture and these tendencies
are inherent in their nature.

Cost Factor in location

The costs associated with a decision on plant layout are :
1. Cost of movement of materials from one work area to another.
2. Cost of space.
3. Cost of production delay, if any, which are indirect costs.
4. Cost of spoilage of materials, if any, when the materials are stacked or stored in
conditions which deteriorate the quality of the material.
5. Cost of labour dissatisfaction and health risks.
6. Cost of changes required, if the operational conditions change in the future. This is a
long-term cost.

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Plant layout Principles

Plant layout means the disposition of the various facilities (equipments, materials, human
resources) and utilities of the plant within the area of the site (location decision) selected
previously. Plant layout begins with the design of the factory building and goes up to the
location and movement of individual work table. All the facilities like equipments, raw
materials, machinery, tools, fixtures, workers etc. are given a proper place so that the objective
of lay out will meet. There are various layout principles; however considerable arts & skill are
required in designing a good plant layout. The research work is being continued in order to
develop a scientific approach for solving plant layout problems.

Principles Of Plant Layout

The few principles for sound plant layouts are:
• Integration
• Minimum movement & material handling
• Smooth & continuous flow
• Cubic space utilization
• Safe & improved environment
• Flexibility

Integration: It means, integration of production centers facilities like workers, machinery, raw
material etc in a logical & balance manner.
Minimum movement and material handling: The number of movements of workers &
material should be minimized. It is better to transport material in optimum bulk rather than in
small amounts.
Smooth and continuous flow: Bottlenecks, congestion points & back tracking should be
removed by proper line balancing technique.
Cubic space utilization: Besides using the floor space of a room, if the ceiling height is also
utilized, more materials can be accommodated in the same room. Boxes or bags containing raw
material or goods can be stocked one above the other to store more items in the same room.
Overhead material handling equipments save a lot of valuable floor space.
Safe and improved environments: Working places should be safe, well ventilated and free
from dust, noise, fumes, odor and other hazardous conditions. This will increase the operating
efficiency of the workers and also improve their morale. All these lead to satisfaction amongst
the workers & thus better employer- employee relationship.
Flexibility: In automotive and other industries, where models of product change after some
time, it is better to permit it all possible flexibility in the layout. The machinery is arranged in
such a way that the changes of the production process can be achieved in the least cost or
disturbance

Different types of facilities

A layout furnishes details of the building to accommodate various facilities (like workers,
materials, machinery etc). In addition, it integrates various aspects of the design of production
system. The information required for plant lying out includes, dimensions of work places,
sequence of operations, flow pattern of materials, storage space for raw material, in process
inventory and finished goods, offices, toilets etc. There is no single universal technique leading
to best layout. Various techniques independently or in conjunction with other techniques may
be employed at different stages involved in plant or factory layout. The word plant or factory
can be taken more or less as synonyms.

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Organization of physical facilities

Factors to be considered for layout design
While deciding his factory or unit or establishment or store, the following factors are to be
considered in mind:
a) Factory building: The nature and size of the building determines the floor space available for
layout. While designing the special requirements, e.g. air conditioning, dust control, humidity
control etc. must be kept in mind.
b) Nature of product: product layout is suitable for uniform products whereas process layout is
more appropriate for custom-made products.
c) Production process: In assembly line industries, product layout is better. In job order or
intermittent manufacturing on the other hand, process layout is desirable.
d) Type of machinery: General purpose machines are often arranged as per process layout while
special purpose machines are arranged according to product layout
e) Repairs and maintenance: machines should be so arranged that adequate space is available
between them for movement of equipment and people required for repairing the machines.
f) Human needs: Adequate arrangement should be made for cloakroom, washroom, lockers,
drinking water, toilets and other employee facilities, proper provision should be made for
disposal of effluents, if any.
g) Plant environment: Heat, light, noise, ventilation and other aspects should be duly
considered, e.g. paint shops and plating section should be located in another hall so that
dangerous fumes can be removed through proper ventilation etc. Adequate safety arrangement
should also be made.
Thus, the layout should be conducive to health and safety of employees. It should ensure free
and efficient flow of men and materials. Future expansion and diversification may also be
considered while planning factory layout
Building, Sanitation, Lighting, Air Conditioning and Safety

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Unit III: Production Planning and Control

Meaning and Definition
Planning and control are basic managerial functions which are essential to every organized
activity. Proper planning and control of manufacturing activities or the production system is
equally essential for efficient and economical production. Economy and productivity are to a
large extent directly proportional to the thoroughness with which the planning and control
functions are performed. In a modem industrial enterprise, production is a complex system and
steps must be taken to ensure that goods are produced in the right quantity and quality, at the
right time and place and by the most efficient methods possible. This is the task of production
planning and control.
Production planning is concerned with deciding in advance what is to be produced, when to be
produced, where to be produced and how to be produced. It involves foreseeing every step in
the process of production so as to avoid all difficulties and inefficiency in the operation of the
plant.
Production planning: It has been defined as the technique of forecasting or picturing ahead
every step in a long series of separate operations, each step to be taken in the right place, of the
right degree, and at the right time, and each operation to be done at maximum efficiency.
Production Control measures the actual performance of the production units and taking
remedial action called for to see that the production actually achieved is not less than the target
or standard set in advance. Production control aims at achieving production targets, optimum
use of available resources, increased profits through productivity, better and more economic
goods and services etc. An effective production control system requires reliable information,
sound organisation structure, a high degree of standardisation and trained personnel for its
successful operation
Production control: It may be defined as “the process of planning production in advance of
operations; establishing the exact route of each individual item, part of assembly; setting,
starting and finishing dates for each important item, assembly, and the finished products, and
releasing the necessary orders as well as initiating the required follow-up to effectivate the
smooth functioning of the enterprise.”

Characteristics of Production Planning and Control

Production planning and control (PPC) is a crucial function in manufacturing and operations
management that involves various activities to ensure the efficient and effective production of
goods or services. The main characteristics of production planning and control include:

1. Forecasting: PPC relies on demand forecasting to estimate future product demand. This
information helps in making decisions about production schedules, resource allocation,
and inventory management.

2. Planning: Planning involves creating a detailed production plan based on forecasts and
available resources. It includes determining what to produce, when to produce it, and
how to produce it, taking into account factors like materials, labor, and equipment.

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3. Scheduling: Scheduling is a key aspect of PPC. It involves creating a detailed timetable

for production activities, specifying when each task or job should start and finish.
Scheduling helps optimize resource utilization and meet production deadlines.

4. Capacity Planning: PPC considers the organization's production capacity, which

involves assessing the ability to meet production demand with the available resources.
This includes evaluating the capacity of machines, labor, and facilities.

5. Inventory Management: PPC is responsible for maintaining an optimal level of

inventory. It aims to strike a balance between carrying too much inventory (which ties
up capital) and having too little (which can lead to production disruptions).

6. Quality Control: Ensuring product quality is a key characteristic of PPC. It involves

implementing quality control measures throughout the production process to minimize
defects and rework.

7. Resource Allocation: PPC allocates resources, including labor, equipment, and

materials, to different production tasks. It ensures that resources are used efficiently and
effectively.

8. Cost Control: Cost control is essential in PPC to manage production costs effectively.
This includes monitoring and minimizing waste, optimizing resource utilization, and
controlling expenses.

9. Integration: PPC integrates various functions within an organization, such as marketing,

finance, inventory management, and production. It aligns production activities with
overall business goals and objectives.

10. Feedback and Monitoring: Continuous monitoring and feedback are crucial in PPC.
Performance metrics and key performance indicators (KPIs) are used to track progress
and make necessary adjustments to the production plan and schedule.

11. Lean Principles: Many organizations incorporate lean manufacturing principles into
their PPC processes to eliminate waste, reduce lead times, and enhance efficiency.

12. Just-in-Time (JIT) Manufacturing: JIT principles are often applied in PPC to minimize
inventory levels, reduce carrying costs, and improve production efficiency by delivering
materials and components as needed.

Objectives of Production Planning and Control

The main objective of production planning and control is to ensure the coordinated flow of
work so that the required number of products are manufactured in the required quantity and of
required quality at the required time at optimum efficiency. In other words, production planning
and control aims at the following purposes :

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(i) Continuous Flow of Production : It tries to achieve a smooth and continuous production by
eliminating successfully all sorts of bottlenecks in the process of production through well-
planned routing and scheduling requirements relating to production work.
(ii) Planned Requirements of Resources : It seeks to ensure the availability of all the inputs i.e.
materials, machines, tools, equipment and manpower in the required quantity, of the required
quality and at the required time so that desired targets of production may be achieved.
(iii) Co-ordinated work Schedules : The production activities planned and carried out in a
manufacturing organizations as per the master schedule. The production planning and control
tries to ensure that the schedules to be issued to the various departments/ units/supervisors are
in coordination with the master schedule.
(iv) Optimum Inventory : It aims at minimum investment in inventories consistent with
continuous flow of production.
(v) Increased Productivity : It aims at increased productivity by increasing efficiency and by
being economical. This is achieved by optimising the use of productive resources and
eliminating wastage and spoilage.
(vi) Customer Satisfaction : It also aims at satisfying customers requirements by producing the
items as per the specifications or desires of the customers. It seeks to ensure delivery of products
on time by co-ordinating the production operations with customers’ orders.
(vii) Production and Employment Stabilization : Production planning and control aims at
ensuring production and employment levels that are relatively stable and consistent with the
quantity of sales.
(viii) Evaluation of Performance : The process of production planning and control is expected
to keep a constant check on operations by judging the performance of various individuals and
workshops and taking suitable corrective measures if there is any deviation between planned
and actual operations.

Stages of Production Planning and Control,

Production planning can be done at three stages or levels namely Factory Planning, Process
Planning and Operation Planning which are as follows:
(i) Factory Planning : At this level of planning, the sequence of work tasks is planned in terms
of building machines and equipment required for manufacturing the desired goods and services.
The relationship of workplaces in terms of departments is also planned at this stage taking into
consideration the space available for the purpose. This stage deals with plant location and
layout.
(ii) Process Planning : There are many operations involved in factory planning for
transforming the inputs into some desired end product. In process planning these operations are
located and the sequence of these operations in the production process is determined, Plans are
also made for the layout of work centres in each process.
(iii) Operation Planning : It is concerned with planning the details of the methods required to
perform each operation viz. selection of work centres, designing of tools required for various
operations. Then the sequences of work elements involved in each operation are planned.

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Specifications about each transfer, work centres, nature of tools required and the time necessary
for the completion of each operation are prescribed.
Production control starts with some particular goal and formulation of some general strategy
for the accomplishment of desired objectives. There are three levels of production control
namely programming, ordering and dispatching.
- Programming plans the output of products for the factory as a whole.
- Ordering plans the output of components from the suppliers and processing
departments.
- Dispatching considers each processing department in turn and plans the output from
the machine, tools and other work centres so as to complete the orders by due date.

Scope of Production Planning & Control

The scope and functions of Production planning and control are as under.
1. Order Preparation: Once an order, through the sales department, is received for execution,
activities like preparation of the work-order, converting the same into shop-order and then
releasing the same to various departments for planning action at their end for their concerned
activities get started.

2. Materials Planning: Material Requirement Planning (MRP) is based on the orders on hand,
the inventory position of the finished goods & raw materials; the expected demand from
marketing/sales department, the capacity of various production shops and bills of materials, the
lead time and constantly following up of the status with purchase and stores departments against
specific shop orders is done.

3. Routing (or Process Planning): Process Planning means fixing the process of
manufacturing/sequence of operations, the tools, and fixtures required and also the measuring
instrument and gauges for inspection/quality control so as to produce the right quality of
products at the most economical cost and for delivering the product timely to a buyer.

4. Scheduling: Scheduling of manufacturing order takes care of the following:

(a) Preparation of machine loads.
(b) Fixation of calendar dates of various operations/sequence of operations to be performed on
the jobs & follow-up the same.
(c) Coordination with sales to confirm delivery dates of new items and keeping them informed
about the periodical despatch schedules.

5. Dispatching: Dispatching concerns preparation and distribution of show orders and

manufacturing instructions to the concerned departments. The instruments and show orders
received by various departments is an authority for them to perform the work according to that
schedule.

6. Progressing: Progressing means control, i.e., collection of data from various manufacturing
shops, recording the progress of work and comparing progress against the plan.

7. Expediting: Expediting means chasing intensively the bottle neck areas causing
delays/interruptions in carrying out smooth production and taking appropriate actions from
time to time and keeping the concerned authorities well informed about the progress of planned

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targets. Also to communicate the sales department promptly about the failure in delivering
commitments, if any.

Factors affecting Production Planning and Control

The nature of production control operations varies from organisation to organisation. The
following factors affect the nature and magnitude of production control methods in an
organisation :
(i) Nature of production : In job-oriented manufacturing, products and operations are
designed for some particular order which mayor may not be repeated in future. Here
production usually requires more time, whereas in a continuous manufacturing system
inventory problems are more complex but control operations are rather simple due to fixed
process. In mixed stock and custom manufacturing systems the problem of control is further
complicated due to simultaneous scheduling of combined process.
(ii) Nature of operations/activities : In intermittent manufacturing system the operations are
markedly varied in terms of their nature, sequence and duration. Due to this the control
procedure requires continuous modifications and adjustments to suit the requirements of each
order.
(iii) Magnitude of operations : Centralised control secures the most effective coordination but
as an organisation grows in size, decentralisation of some production control function becomes
necessary. The degree to which the performance of an activity should be decentralised depends
upon the scope of operations and convenience of their locations.

Production Planning System

Planning and Control System meaning
No single system of production planning and control is good for all types of industries. The
nature of PPC varies from firm to firm depending upon the type of production process. In a
manufacturing industry, raw materials are covered into components, semi-finished products and
finished products. But some firms are engaged in the assembling of products. An assembling
industry combines together a number of components or parts to make the finished product, e.g.
bicycle, typewriter, fan, scooter, etc.
1. PPC in Process industry
Production planning and control in process industry is relatively simple. Routing is almost
automatic and uniform because standardised techniques and specialised equipment are used in
production processes. The product is standardized and goods are produced for stock. Therefore,
scheduling is easy and department schedules can be prepared from the master schedule on a
continuing basis. Dispatching involves repetitive orders issued to ensure a steady flow of
materials through the plant. In process industry, decentralised dispatching can be used so that
each foreman can issue orders and instructions to each operator and machine under his charge
as per the circumstances of his work-station. The sequence of operations being uniform,
responsibility for quality control can be delegated to individual production units to ensure that
the products manufactured conform to the specifications laid down in advance. Thus, the main
task of production planning and control in process industry is to maintain a continuous and

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uniform flow of work at the predetermined rate so that there is full utilisation of plant capacity
and the work is completed in time. Therefore, it is known as ‘flow control’
2. PPC in Job Production Industry
Production, planning and control is relatively difficult in job production industry. Every order
is of a different type and it entails a particular sequence of operations. There is not standardised
route plan and a new route has to be prepared for every order. Specific orders are assigned to
different workstations according to the capacities available with them. Production, schedules
are drawn up according to relative urgency of order. An order received later may have to be
supplied earlier. Sometimes, it may not be possible to schedule all operations relating to an
order simultaneously. Dispatching and follow up are also order-oriented. For every order fresh
instructions and follow up measures have to be undertaken. Therefore, production control is
job production system may be called ‘Order control’.

3. PPC in Intermittent Production Industry

In case of intermittent production, raw materials are converted into components or parts for
stock but they are combined according to the customer’s orders. The products are manufactured
usually in large batches. Every batch differs from others but all units within a batch are
identical. A number of hetrogenous finished products are manufactured within a limited range
of options. Therefore, production planning and control in intermittent manufacturing is a
mixture of those used in process industry and job order production.
There is a standardised components and production schedules are continuous. But the routes
and schedules for intermediate operations have to be changed every time. In order to avoid
delays and bottlenecks in the production process, great care needs to be taken in dispatching.
Before issuing orders and instructions need for new materials and tools, overloading and
underloading of particular machines/operators and other problems must be anticipated. As
product are diversified and several orders are being handled simultaneously in different work-
centres, follow up is a cumbersome task in intermittent manufacturing. Follow up may be
organised either according to product or process. Follow up by product is suitable for process
or continuous production system. It is relatively simple because there is an automatic flow of
work from one operation to another and the follow up mart has simply to report and remove
breakdown, delays, shortage of materials and tools that obstruct the smooth flow of production.
But in intermittent production system, follow up by process is used. In every department, the
follow up men check the progress of work passing through that department. The follow up men
do not require knowledge and information about all the departments. But they have to be more
alert as the flow of work from one operation to another is not automatic.
Quality has to be controlled both during the manufacture of components and during their
conversion into the finished product. In practice, a combination of flow and order controls
known as block control may be used. Flow control is employed to produce standardised
components and order control is used for the manufacture of finished products.

Role of Production Planning and Control in Manufacturing Industry.

The system of production planning and control serves as the nervous system of a plant. It is a
co-ordinating agency to co-ordinate the activities of engineering, purchasing, production,
selling and stock control departments. An efficient system of production planning and control
helps in providing better and more economic goods to customers at lower investment. It is

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essential in all plants irrespective of their nature and size. The principal Roles of production
planning and control are summarized below :
1. To provide Better Service to Customers : Production planning and control, through
proper scheduling and expediting of work, helps in providing better services to
customers in terms of better quality of goods at reasonable prices as per promised
delivery dates. Delivery in time and proper quality, both help in winning the confidence
of customers, improving relations with customers and promoting profitable repeat
orders.
2. Better Control of Inventory : A sound system of production planning and control helps
in maintaining inventory at proper levels and, thereby, minimising investment in
inventory. It requires lower inventory of work in-progress and less finished stock to give
efficient service to customers. It also helps in exercising better control over raw-material
inventory, which contributes to more effective purchasing.
3. More Effective Use of Equipment : An efficient system of production planning and
control makes for the most effective use of equipment. It provides information to the
management on regular basis pertaining to the present position of all orders in process,
equipment and personnel requirements for next few weeks. Also, unnecessary
purchases of equipment and materials can be avoided. Thus, it is possible to ensure
proper utilization of equipment and other resources.
4. Reduced Idle Time : Production planning and control helps in reducing idle time i.e.
loss of time by workers waiting for materials and other facilities; because it ensures that
materials and other facilities are available to the workers in time as per the production
schedule. Consequently, less man-hours are lost, which has a positive impact on the cost
of production.
5. Improved Plant Morale : An effective system of production planning and control co-
ordinates the activities of all the departments involved in the production activity. It
ensures even flow of work and avoids rush orders. It avoids ‘speeding up’ of workers
and maintains healthy working conditions in the plant. Thus, there is improved plant
morale as a byproduct.
6. Good Public Image : A proper system of production planning and control is helpful in
keeping systematised operations in an organisation. Such an organisation is in a position
to meet its orders in time to the satisfaction of its customers. Customers satisfaction
leads to increased sales, increased profits, industrial harmony and, ultimately, good
public image of the enterprise.
7. Lower Capital Requirements : Under a sound system of production planning and
control, everything relating to production is planned well in advance of operations.
Where, when and what is required in the form of input is known before the actual
production process starts. Inputs are made available as per schedule which ensures even
flow of production without any bottlenecks. Facilities are used more effectively and
inventory levels are kept as per schedule neither more nor less. Thus, production
planning and control helps, in minimising capital investment in equipment and
inventories.

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Unit IV: Inventory Management

Inventory Management – Concepts
The term ‘inventory’ originates from the French word ‘Inventaire’ and Latin word
‘Inventariom”, which implies a list of things found.

The term ‘inventory’ can be defined as,

“The term inventory includes materials like – raw, in process, finished packaging, spares and
others; stocked in order to meet an unexpected demand or distribution in the future.”

Inventory management is the branch of business management that covers the planning and
control of the inventory. Priority planning determines what materials are needed and when they
are needed in order to meet customers’ demands.

Classification of Inventory
Materials flow from suppliers, through a manufacturing organization, to the customers. The
progressive states of a material are classified as raw materials, semi-finished goods, finished
goods, and work-in process (WIP).

Raw Materials
Purchased items or extracted materials that are converted via the manufacturing process into
components and/or products. Raw materials appear in the bottom level of BOM. They are
stored in the warehouse and are non-phantom items.

Semi-finished Goods
Semi-finished goods are items that have been stored uncompleted, awaiting final operations
that will adapt them to different uses or customer specifications. Semi-finished goods are made
under the instruction of a shop order, using the components issued by a picking order, and
stored in the warehouse when finished. They are the items between the top and bottom levels
in a management BOM (rather than engineering BOM) and are non-phantoms. Semi-finished
goods are not sold to the customers.

Finished Goods
A finished good is a product sold as a completed item or repair part, i.e., any item subject to a
customer order or sales forecast. Finished goods are non-phantoms and are stored in the
warehouse before they are shipped.

Work-In-Process (WIP)
Products in various stages of completion throughout the plant, including all material from raw
material that has been released for initial processing up to completely processed material
waiting for inspection and acceptance as finished goods. WIP inventory is temporarily stored
on the shop floor and appears as a phantom in the BOM.

Maintenance, Repair, and Operational Supplies (MRO)

Items used in support of general operations and maintenance such as maintenance supplies,
spare parts, and consumables used in the manufacturing process and supporting operations.
These items are used in production but do not become part of the product.

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Objectives of inventory management

The primary objectives of inventory management are:
(i) To minimize the possibility of disruption in the production schedule of a firm for want of
raw material, stock and spares.
(ii)To keep down capital investment in inventories.

The effective inventory management has following objectives

i. Maintain sufficient stock of raw material in the period of short supply and anticipate
price changes.
ii. Ensure a continuous supply of material to production department facilitating
uninterrupted production.
iii. Minimize the carrying cost and time.
iv. Maintain sufficient stock of finished goods for smooth sales operations.
v. Ensure that materials are available for use in production and production services as
and when required.
vi. Ensure that finished goods are available for delivery to customers to fulfill orders,
smooth sales operation and efficient customer service.
vii. Minimize investment in inventories and minimize the carrying cost and time.
viii. Protect the inventory against deterioration, obsolescence and unauthorized use.
ix. Maintain sufficient stock of raw material in period of short supply and anticipate
price changes.
x. Control investment in inventories and keep it at an optimum level.

Factors Affecting Inventory Control Policy.

The factors affecting material planning and inventory control policy are:
• Macro factors: Global factors such as price trends, business cycles, government’s import and
export policies etc., are called macro factors. Credit policy of the government is a critical factor
as banks follow these guidelines only while extending financial support to a business entity.
• Micro factors: These are essentially the factors existing within the organisation such as
corporate policy on inventory holding, production plan, investments etc., For any organisation,
factors such as lead time of procurement, acceptable inventory levels, working capital,
seasonality, delegation of power are micro factors
Inventory costs:
Ordering Cost: Ordering costs are costs incurred on placing and receiving a new shipment of
inventories.
Ordering costs are the costs associated with placing an order with the factory or a supplier. The
ordering cost does not depend on the quantity ordered. It is a composite of all costs related to
placing purchase orders or preparing shop orders, including
1. Paperwork,
2. Work station setups,
3. Inspection, scrap, and rework associated with setups,
4. Record keeping for work-in-process.

Carrying Cost: Carrying costs represent costs incurred on holding inventory in hand. These
include opportunity cost of money held-up in inventories, storage costs such as warehouse rent,

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insurance, spoilage costs, etc. Carrying cost is the total of costs related to maintaining the
inventory, including
1. Capital cost invested in inventory, or foregone earnings of alternate investment,
2. Storage costs for space, equipment, and people,
3. Taxes and insurance on inventory,
4. Obsolescence caused by market, design, or competitors’ productchanges,
5. Deterioration from long-term storage and handling,
6. Record keeping for inventory
Basic EOQ Model
The EOQ refers to the order size that will result in the lowest total of order and carrying costs
for an item of inventory. If a firm place unnecessary orders it will incur unneeded order costs.
If a firm places too few order, it must maintain large stocks of goods and will have excessive
carrying cost. By calculating an economic order quantity, the firm identifies the number of units
to order that result in the lowest total of these two costs.

Reorder Point
The reorder point is the level of inventory at which the firm places an order in the amount of
EOQ. If the firm places the order when the inventory reaches the reorder point, the new goods
will arrive before the firm runs out of goods to sell.

Lead time This is the amount of time between placing an order and receiving goods. This
information is usually provided by the purchasing department. The time to allow for an order
to arrive may be estimated from a check of the company’s record and the time taken in the past
for different suppliers to fill orders

Re-order Level
Also known as the ‘ordering level’ the reorder level is that level of stock at which a purchase
requisition is initiated by the storekeeper for replenishing the stock. This level is set between
the maximum and the minimum level in such a way that before the material ordered for are
received into the stores, there is sufficient quantity on hand to cover both normal and abnormal
circumstances.

Re-Order Quantity
The quantity, which is ordered when the stock of an item falls to the reorder level, is known as
the reorder quantity or the EOQ or the economic lot size. Although it is not a stock level as
such, the reorder quantity has a direct bearing upon the stock level in as much as it is necessary
to consider the maximum and minimum stock level in determining the quantity to be ordered.
The re-order quantity should be such that, when it is added to the minimum quantity, the
maximum level is not exceeded. the re-order quantity depends upon two important factors viz,
order costs and inventory carrying costs.

ABC Analysis.
The ABC inventory control technique is based on the principle that a small portion of the items
may typically represent the bulk of money value of the total inventory used in the production
process, while a relatively large number of items may from a small part of the money value of
stores. The money value is ascertained by multiplying the quantity of material of each item by
its unit price.

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According to this approach to inventory control high value items are more closely controlled
than low value items. Each item of inventory is given A, B or C denomination depending upon
the amount spent for that particular item. “A” or the highest value items should be under the
tight control and under responsibility of the most experienced personnel, while “C” or the
lowest value may be under simple physical control.
It may also be clear with the help of the following examples:
“A” Category – 5% to 10% of the items represent 70% to 75% of the money value. “B”
Category – 15% to 20% of the items represent 15% to 20% of the money.
“C” Category – The remaining number of the items represent 5% to 10% of the money value.
The relative position of these items show that items of category A should be under the
maximum control, items of category B may not be given that much attention and item C may
be under a loose control.

Advantages of ABC Analysis

1. It ensures a closer and a more strict control over such items, which are having a sizable
investment in there.
2. It releases working capital, which would otherwise have been locked up for a more profitable
channel of investment.
3. It reduces inventory-carrying cost.
4. It enables the relaxation of control for the ‘C’ items and thus makes it possible for a sufficient
buffer stock to be created.
5. It enables the maintenance of high inventory turnover rate.

Quality Management - Quality Concepts

In business, engineering, and manufacturing, quality has a pragmatic interpretation as the
noninferiority or superiority of something; it's also defined as being suitable for its intended
while satisfying customer expectations.

Quality is the degree to which an object or entity (e.g., process, product, or service) satisfies a
specified set of attributes or requirements. Quality is the degree to which a set of inherent
characteristics fulfils requirements.

The ISO 8402-1986 standard defines quality as: “The totality of features and characteristics of
a product or service that bears its ability to satisfy stated or implied needs.”

“Quality in a product or service is not what the supplier puts in. It is what the customer gets out
and is willing to pay for.” – Peter Drucker

Quality in manufacturing, a measure of excellence or a state of being free from defects,

deficiencies and significant variations. It is brought about by strict and consistent commitment
to certain standards that achieve uniformity of a product in order to satisfy specific customer or
user requirements.

Some attributes used to help define quality are:

1. Freshness: Some products are perishable, i.e., the quality declines over time. Vegetables fall
”into this category. Fashion items also are subject to obsolescence. At the other extreme, ”the
value associated with some products increases with age, as is the case with antiques and red
wine.

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2. Reliability: The quality associated with a product often increases with the dependability of
the product customer experience. Patients expect the hospitals to have competent staff.
Customers expect telephones to work. Ni-Cd Batteries manufactured by ECIL should be as
reliable as other internationally manufactured batteries.
3. Durability: The quality attribute that implies product performance under adverse conditions.
Eveready’s Red commercials are designed to convey the durability of its batteries.
4. Safety: This is an attribute of quality that measures the likelihood of harm from goods or
service. What is safe can be a controversial issue. For instance, is a gun with a safety clip safe?
Is the packaging of a product tamper proof?
5. Environmental Friendly: As is the case with safety, this quality attribute has both societal
aspects and is individual specific. The requirements for being considered an environmental
friendly product are becoming more stringent. For example, firms must now also focus on how
a product is disposed off after its useful life.
6. Serviceability: This attribute relates to the ease and cost associated with servicing a product
after the sale has been made. Products are now being increasingly designed so that they do not
need service, such as car batteries. But many others do require service and this capability must
be both designed into the product and the post-sale service system.
7. Aesthetics: A product’s appearance, feel, sound, taste, or smell reflects its aesthetics.
Aesthetics are hard to define; it is customer specific and sometimes situation specific. What is
aesthetically pleasing to one individual may be considered ugly by another.
8. Attribute Consistency: The attributes associated with a product should be internally
consistent. It would make little sense to build a Maruti 800 with airfoils, or a biodegradable
cigarette filter. Products with inconsistent combinations of features aren’t likely to match the
needs of their buyers.

Difference between Inspections, Quality Control

Quality Assurances,
Quality Assurance – The systematic or planned actions necessary to offer sufficient reliability
so that a particular service or product will meet the specified requirements.
Total Quality management
Total Quality Management (TQM) is a management framework based on the belief that an
organization can build long-term success by having all its members, from low-level workers to
its highest ranking executives, focus on improving quality and, thus, delivering customer
satisfaction.
TQM is considered a customer-focused process and aims for continual improvement of
business operations. It strives to ensure all associated employees work toward the common
goals of improving product or service quality, as well as improving the procedures that are in
place for production.
A core definition of total quality management (TQM) describes a management approach to
long-term success through customer satisfaction. In a TQM effort, all members of an
organization participate in improving processes, products, services, and the culture in which
they work.
Total quality management consists of organization-wide efforts to "install and make permanent
climate where employees continuously improve their ability to provide on demand products
and services that customers will find of particular value."

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TQM has a strong emphasis on improving quality within a process, rather than inspecting
quality into a process. This not only reduces the time needed to fix errors, but makes it less
necessary to employ a team of quality assurance personnel.
In a TQM effort, all members of an organization participate in improving processes, products,
services, and the culture in which they work. In the logistics sphere, TQM is an approach that
integrates all quality-related functions and processes companywide to improve the quality and
performance of the finished product.
Total quality management (TQM) is the continual process of detecting and reducing or
eliminating errors in manufacturing, streamlining supply chain management, improving the
customer experience, and ensuring that employees are up to speed with training.
TQM can have an important and beneficial effect on employee and organizational development.
By having all employees focus on quality management and continuous improvement,
companies can establish and uphold cultural values that create long-term success to both
customers and the organization itself.

Principles of TQM
The eight principles are:
1 Customer focus.
2 Leadership.
3 Involvement of people.
4 Process approach.
5 System approach to management.
6 Continuous improvement.
7 Factual approach to decision making.
8 Mutually beneficial supplier relationships.

Objectives of TQM
• Decrease of mistakes in all operating areas,
• Early mistake recognition,
• Mistake prevention as a preventive step,
• Avoidance of wastes,
• Reduction of the lead times,
• Increase of the flexibility and profitability,
• Better capture and conversion of the customer's needs,

Characteristics of TQM
• Customer Focused. Quality begins and ends with the customer. ...
• Involved Employees.
• Process Oriented.
• Mutually Dependent Systems.
• Strategic Approach.
• Continuous Improvement.
• Data-Driven Decisions.
• Effective Communications.

Companies using TQM

Companies as diverse as Ford Motor Company, Toyota, Motorola, and the Xerox Corporation
use this methodology. With its focus on the customer, it can create or deepen customer loyalty
to the organisation.

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Pillars of TQM
Product, Process, Organization, Leadership, and Commitment.

Obstacles of TQM
The Total Quality Management (TQM) obstacles or roadblocks are; Lack of Management
Commitment, Inability to Change Organizational Culture, Improper Planning, Lack of
Continuous Training and Education, Incompatible Organizational Structure and Isolated
Individuals and Departments, Ineffective Measurement Techniques

Barriers to TQM implementation

• Lack of management commitment.
• Inability to change organizational culture.
• Improper planning.
• Lack of continuous training and education.
• Incompatible organizational structure and isolated individuals and departments.
Control Charts: acceptance sampling
The control chart was invented by Walter A. Shewhart working for Bell Labs in the 1920s. The
company's engineers had been seeking to improve the reliability of their telephony transmission
systems.

Control charts, also known as Shewhart charts or process-behavior charts, are a statistical
process control tool used to determine if a manufacturing or business process is in a state of
control. It is more appropriate to say that the control charts are the graphical device for
Statistical Process Monitoring. The control chart is a graph used to study how a process changes
over time. Data are plotted in time order. A control chart always has a central line for the
average, an upper line for the upper control limit, and a lower line for the lower control limit.
These lines are determined from historical data.
Types of Control Charts
Control charts fall into two categories: Variable and Attribute Control Charts.
• Variable data are data that can be measured on a continuous scale such as a thermometer, a
weighing scale, or a tape rule.
• Attribute data are data that are counted, for example, as good or defective, as possessing or
not possessing a particular characteristic.
The type of control chart you use will depend on the type of data you are working with.
• It is always preferable to use variable data.
• Variable data will provide better information about the process than attribute data.
• Additionally, variable data require fewer samples to draw meaningful conclusions.

Variable control charts

Variables control charts plot quality characteristics that are numerical (for example, weight, the
diameter of a bearing, or temperature of the furnace).
There are two types of variables control charts: charts for data collected in subgroups, and
charts for individual measurements. For subgrouped data, the points represent a statistic of
subgroups such as the mean, range, or standard deviation. For individual measurements, the
points represent the individual observations or a statistic such as the moving range between
successive observations.

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Unit V

Maintenance &Waste management, Introduction – Meaning

Objectives of Waste management

Types of maintenance

Breakdown, Spares planning and control,

Preventive routine, Relative Advantages

Maintenance Scheduling

Equipment reliability and Modern Scientific Maintenance Methods

Waste Management–Scrap and surplus disposal, Salvage and recovery

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