Operations Management (OM)

Operations Management (OM) aims to manage processes engaged in production, distribution of

products/ or services. Therefore, it includes set of activities (including product creation,
development, production, distribution and reverse logistics).

The creation of goods or services involves transforming or converting inputs into outputs. Various
inputs such as capital, labor, and information are used to create goods or services using one or
more transformation processes (e.g., storing, transporting, and repairing). To ensure that the
desired outputs are obtained, an organization takes measurements at various points in the
transformation process (feedback) and then compares them with previously established standards
to determine whether corrective action is needed (control).

Operations management inclusive all operations within the organization (viz. Managing
purchases, Material Management (MM) and inventory control, Production Planning and
Production Management (PP/PM) Quality Control (QC) and Quality Assurance (QA), storage,
Sales and Distribution (S&D) and logistics Management and evaluations). The prime focus
during the operation management is on efficiency and effectiveness of processes. Therefore, OM
includes substantial measurement and analysis of internal processes. Ultimately, the nature of
how operations management is carried out in an organization depends very much on the nature
of products or services in the organization, For example, In the domain of retail, manufacturing,
wholesale, etc. successful operation management involves several decisions in accordance to
time and space. We can broadly classify them as Design/ Strategic decisions and operations
decisions.

Importance of Operations Management

1. Budgeting: Budgets must be periodically prepared to plan financial requirements. Budgets
must sometimes be adjusted, and performance relative to a budget must be evaluated.

2. Economic analysis of investment proposals: Evaluation of alternative investments in plant

and equipment requires inputs from both operations and finance people.

3. Provision of funds: The necessary funding of operations and the amount and timing of
funding can be important and even critical when funds are tight. Careful planning can help avoid
cash-flow problems.

Design Decisions
Design or strategic decision involves the following critical issues:

1. What operational activities should be carried out by the nodal firm and what should be
outsourced?
2. How to select entities/ partners to perform outsourced operational activities and what should
be the nature of the relationship with those entities? Should the relationship be transactional in
nature or should it be a long-term partnership?

3. Decisions pertaining to the capacity and location of the various Production/ Operational
facilities/ Plant Locations.

Operations decisions
Once supply chain design decisions are in place, the firm has to take decisions regarding the
management of supply chain operations for shorter horizons. This involves tactical decisions,
which have horizons of about three months to a year, and operations decisions, which usually
have a horizon ranging from a day to a month. Both tactical and operations decisions involve the
following areas:

1. Demand Forecasting

2. Procurement Planning and Control

3. Production Planning and Control

4. Distribution Planning and Control

5. Inventory Management

6. Transportation Management

7. Customer Order Processing

8. Relationship Management with Partners in the Chain

Location Decisions
As with capacity planning, Operation managers need to follow a three-step procedure when
making facility location decisions. These steps are as follows:
Step 1: Identify Dominant Location Factors. Identify the location factors that are dominant for
the business. This requires managerial judgment and knowledge.
Step 2: Develop Location Alternatives. Once identification of factors is done, operation manager
can identify location alternatives that satisfy the selected factors.
Step 3: Evaluate Location Alternatives. After a set of location alternatives have been identified,
managers evaluate them and make a final selection. This is not easy because one location may be
preferred based on one set of factors, whereas another may be better based on a second set of
factors.

Definition
Operation Management - OM is the branch of management science concerned with the study
of the factors involved in the successful management of an organization’s day-to-day operations.
It seeks to develop and apply the methods and techniques needed to design and implement
systems which will enable the efficiency and effectiveness of these operations to be improved.
Operational problems can range from purchasing, through manufacturing to the final distribution
of the products. The last 10 years has witnessed the re-emergence of Operations Management as
a critical function in the growth and profitability of organizations. The ability to deliver products
and services fast and right first time while cutting costs has become fundamental to not only the
competitiveness of a business, but also its survival.
Decision Process: The thought process of selecting a logical choice from the available options.
When trying to make a good decision, a person must weigh the positives and negatives of each
option, and consider all the alternatives. For effective decision making, a person must be able to
forecast the outcome of each option as well, and based on all these items, determine which
option is the best for that particular situation.
Operational Decisions: A type of short term decision by a company in lieu of long term
strategies at the time of acquisition of company assets. These involve the day-to-day operations
of the company, and therefore need to be addressed before any grand scheme issues.

Models: An abstraction of reality; a simplified representation of something.

Technology: refers to the application of scientific discoveries to the development and

improvement of goods and services. It can involve knowledge, materials, methods, and
equipment. The term high technology refers to the most advanced and developed machines and
methods. Operations management is primarily concerned with three kinds of technology: product
and service technology, process technology, and information technology (IT). All three can have
a major impact on costs, productivity, and competitiveness.
E-business: Use of the Internet to transact business.

E-commerce: Consumer-to-business transactions.

Competitiveness: How effectively an organization meets the wants and needs of customers
relative to others that offer similar goods or services.\

Scope of operations management

The scope of operations management ranges across the organization. Operations management
people are involved in product and service design, process selection, selection and management
of technology, design of work systems, location planning, facilities planning, and quality
improvement of the organization’s products or services. The operations function includes many
interrelated activities, such as forecasting, capacity planning, scheduling, managing inventories,
assuring quality, motivating employees, deciding where to locate facilities, and more.
Under Operation Management, Decision making is consider as the process of selection of best
course of action among alternatives (Selection of Best Product/ Service, Plant Location ,
Selection of vendor/ supplier etc.) and supports managerial functions (such as planning,
organizing, directing an controlling) through “right” decision making

Role of an Operation Manager

The following set of activities are required to be examined while formularizing the decision
making for Operation Management.
1. Pervasive Function: Decision making is essential in each level of management. Top level
management makes strategic decisions such as planning, organizing, directing and controlling.
Middle level management makes tactical decisions such as division of works, fixation of
authority and responsibility, integration of efforts etc. Operating level management makes
regular operating decisions such s preparation of schedule of daily works, divisions of works,
delegation of authority etc. Thus, decision making function is performed in all the levels of
management according to needs. This is necessary to bring uniformity and smoothness in the
organizational performance.
2. Indispensable Component: Decision making is known as an inseparable part of management
functions. It is one of the essential processes for successful operation of business. It determines
all management functions and covers every part of the organizational structure. Every manager
from top level to the first line is involved in the decision making process according to the nature
of works.

Cross disciplinary importance of Operations Management

Legal department must be consulted on contracts with employees, customers, suppliers, and
transporters, as well as on liability and environmental issues.
Accounting supplies information to management on costs of labor, materials, and overhead, and
may provide reports on items such as scrap, downtime, and inventories.
Management information systems (MIS) is concerned with providing management with the
information it needs to effectively manage. This occurs mainly through designing systems to
 capture relevant information and designing reports. MIS is also important for managing the
control and decision-making tools used in operations management.

Human Resources department is concerned with recruitment and training of personnel, labor
relations, contract negotiations, wage and salary administration, assisting in manpower
projections, and ensuring the health and safety of employees.
Public Relations have responsibility for building and maintaining a positive public image of the
organization. Good public relations provide many potential benefits. An obvious one is in the
marketplace. Other potential benefits include public awareness of the organization as a good
place to work (labor supply), improved chances of approval of zoning change requests,
community acceptance of expansion plans, and instilling a positive attitude among employees.

Characteristic of efficient Operational Management:

Following are some priorities which operational management needs to consider.

• Acquire capabilities to tolerate product proliferation: Every organization needs to understand

customer needs and incorporate them into new product initiatives. In order to satisfy the
expectations of customers, organizations needs to change their process accordingly.
• Relate operation system to customer/market: Before choosing a particular operation system
an organization needs to consider the demand of their valuable customers. In other words,
choices related to manufacturing and services cannot be made on the basis of internal
conveniences but instead customer be central to the demand. If customer has difficulty in using
the product then it should be rectified.
• Develop system and procedures that promote learning: Continuous improvement is very
important for the organization. These improvements do not take place in isolation but because of
continuous learning by the employees in an organization.

Operation Strategy implementation Process

Strategy formulation process involves following steps:

Step 1: Understand the Competitive Market Dynamics

Step 2: Identify Order-qualifying and Order-winning attributes

Step 3: Identify Strategic Options for Sustaining Competitive Advantage

Step 4: Arrive at the Operations Strategy

Location decision
Facility location is the process of determining a geographic site for a firm’s operations.
Managers of both service and manufacturing organizations must weigh many factors when
assessing the desirability of a particular site, including proximity to customers and suppliers,
labor costs, and transportation costs.
Location conditions are complex and each comprises a different Characteristic of a tangible (i.e.
Freight rates, production costs) and non-tangible (i.e. reliability, frequency security, quality)
nature.
Location conditions are hard to measure. Tangible cost based factors such as wages and products
costs can be quantified precisely into what makes locations better to compare. On the other hand
non-tangible features, which refer to such characteristics as reliability, availability and security,
can only be measured along an ordinal or even nominal scale. Other non-tangible features like
the percentage of employees that are unionized can be measured as well. To sum this up non-
tangible features are very important for business location decisions.

It is appropriate to divide the factors, which influence the plant location or facility location on
the basis of the nature of the organization as

1. General locational factors, which include controllable and uncontrollable factors for all type
of organizations.
2. Specific locational factors specifically required for manufacturing and service organizations.

Location factors can be further divided into two categories: Dominant factors are those derived
from competitive priorities (cost, quality, time, and flexibility) and have a particularly strong
impact on sales or costs. Secondary factors also are important, but management may downplay
or even ignore some of them if other factors are more important.

General Locational Factors

Following are the general factors required for location of plant in case of all types of
organisations.

CONTROLLABLE FACTORS
1. Proximity to markets.
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
6. External economies
7. Capital

Factors influencing plant location

UNCONTROLLABLE FACTORS
1. Government policy
2. Climate conditions
3. Supporting industries and services
4. Community and labor attitudes
5. Community Infrastructure

CONTROLLABLE FACTORS
1. Proximity to markets:

Every company is expected to serve its customers by providing goods and services at the time
needed and at reasonable price organizations may choose to locate facilities close to the market
or away from the market depending upon the product. When the buyers for the product are
concentrated, it is advisable to locate the facilities close to the market. Locating nearer to the
market is preferred if

• The products are delicate and susceptible to spoilage.

• After sales services are promptly required very often.
• Transportation cost is high and increase the cost significantly.
• Shelf life of the product is low.

Nearness to the market ensures a consistent supply of goods to customers and reduces the cost of
transportation.

2. Supply of raw material:

It is essential for the organization to get raw material in right qualities and time in order to have
an uninterrupted production. This factor becomes very important if the materials are perishable
and cost of transportation is very high. General guidelines suggested by Yaseen regarding effects
of raw materials on plant location are:

• When a single raw material is used without loss of weight, locate the plant at the raw
material source, at the market or at any point in between.
• When weight loosing raw material is demanded, locate the plant at the raw material
source.
• When raw material is universally available, locate close to the market area.
• If the raw materials are processed from variety of locations, the plant may be situated so
as to minimize total transportation costs.

Nearness to raw material is important in case of industries such as sugar, cement, jute and cotton
textiles.
3. Transportation facilities:

Speedy transport facilities ensure timely supply of raw materials to the company and finished
goods to the customers. The transport facility is a prerequisite for the location of the plant. There
are five basic modes of physical transportation, air, road, rail, water and pipeline. Goods that are
mainly intended for exports demand a location near to the port or large airport. The choice of
transport method and hence the location will depend on relative costs, convenience, and
suitability. Thus transportation cost to value added is one of the criteria for plant location.
4. Infrastructure availability:

The basic infrastructure facilities like power, water and waste disposal, etc., become the
prominent factors in deciding the location. Certain types of industries are power hungry e.g.,
aluminum and steel and they should be located close to the power station or location where
uninterrupted power supply is assured throughout the year. The non-availability of power may
become a survival problem for such industries. Process industries like paper, chemical, cement,
etc., require continuous. Supply of water in large amount and good quality, and mineral content
of water becomes an important factor. A waste disposal facility for process industries is an
important factor, which influences the plant location.
5. Labor and wages:

The problem of securing adequate number of labor and with skills specific is a factor to be
considered both at territorial as well as at community level during plant location. Importing labor
is usually costly and involve administrative problem. The history of labor relations in a
prospective community is to be studied. Prospective community is to be studied. Productivity of
labor is also an important factor to be considered. Prevailing wage pattern, cost of living and
industrial relation and bargaining power of the unions’ forms in important considerations.

6. External economies of scale:

External economies of scale can be described as urbanization and locational economies of scale.
It refers to advantages of a company by setting up operations in a large city while the second one
refers to the “settling down” among other companies of related Industries. In the case of
urbanization economies, firms derive from locating in larger cities rather than in smaller ones in
a search of having access to a large pool of labor, transport facilities, and as well to increase their
markets for selling their products and have access to a much wider range of business services.
Location economies of scale in the manufacturing sector have evolved over time and have
mainly increased competition due to production facilities and lower production costs as a result
of lower transportation and logistical costs. This led to manufacturing districts where many
companies of related industries are located more or less in the same area. As large corporations
have realized that inventories and warehouses have become a major cost factor, they have tried
reducing inventory costs by launching “Just in Time” production system (the so called Kanban
System). This high efficient production system was one main factor in the Japanese car industry
for being so successful. Just in time ensures to get spare parts from suppliers within just a few
hours after ordering. To fulfill these criteria corporations have to be located in the same area
increasing their market and service for large corporations.
7. Capital:

By looking at capital as a location condition, it is important to distinguish the physiology of fixed

capital in buildings and equipment from financial capital. Fixed capital costs as building and
construction costs vary from region to region. But on the other hand buildings can also be rented
and existing plants can be expanded. Financial capital is highly mobile and does not very much
influence decisions. For example, large Multinational Corporations such as Coca- Cola operate
in many different countries and can raise capital where interest rates are lowest and conditions
are most suitable.
Capital becomes a main factor when it comes to venture capital. In that case young, fast growing
(or not) high tech firms are concerned which usually have not many fixed assets. These firms
particularly need access to financial capital and also skilled educated employees.

UNCONTROLLABLE FACTORS
8. Government policy:

The policies of the state governments and local bodies concerning labor laws, building codes,
safety, etc., are the factors that demand attention. In order to have a balanced regional growth of
industries, both central and state governments in our country offer the package of incentives to
entrepreneurs in particular locations. The incentive package may be in the form of exemption
from a safes tax and excise duties for a specific period, soft loan from financial institutions,
subsidy in electricity charges and investment subsidy. Some of these incentives may tempt to
locate the plant to avail these facilities offered.

9. Climatic conditions:

The geology of the area needs to be considered together with climatic conditions (humidity,
temperature). Climates greatly influence human efficiency and behavior. Some industries require
specific climatic conditions e.g., textile mill will require humidity.
10. Supporting industries and services:

Now a day the manufacturing organization will not make all the components and parts by itself
and it subcontracts the work to vendors. So, the source of supply of component parts will be the
one of the factors that influences the location.
The various services like communications, banking services professional consultancy services
and other civil amenities services will play a vital role in selection of a location.
11. Community and labor attitudes:

Community attitude towards their work and towards the prospective industries can make or mar
the industry. Community attitudes towards supporting trade union activities are important
criteria. Facility location in specific location is not desirable even though all factors are favoring
because of labor attitude towards management, which brings very often the strikes and lockouts.
12. Community infrastructure and amenity:

All manufacturing activities require access to a community infrastructure, most notably

economic overhead capital, such as roads, railways, port facilities, power lines and service
facilities and social overhead capital like schools, universities and hospitals.
These factors are also needed to be considered by location decisions as infrastructure is
enormously expensive to build and for most manufacturing activities the existing stock of
infrastructure provides physical restrictions on location possibilities.

Specific Locational Factors for Manufacturing Organization

DOMINANT FACTORS

Factors dominating location decisions for new manufacturing plants can be broadly classified in
six groups. They are listed in the order of their importance as follows.

1. Favorable labor climate

2. Proximity to markets
3. Quality of life
4. Proximity to suppliers and resources
5. Utilities, taxes, and real estate costs

1. Favorable labor climate:

A favorable labor climate may be the most important factor in location decisions for labour-
intensive firms in industries such as textiles, furniture, and consumer electronics. Labor climate
includes wage rates, training requirements, attitudes toward work, worker productivity, and
union strength. Many executives consider weak unions or al low probability of union organizing
efforts as a distinct advantage.

2. Proximity to markets:
After determining where the demand for goods and services is greatest, management must select
a location for the facility that will supply that demand. Locating near markets is particularly
important when the final goods are bulky or heavy and outbound transportation rates are high.
For example, manufacturers of products such as plastic pipe and heavy metals all emphasize
proximity to their markets.

3. Quality of life:
Good schools, recreational facilities, cultural events, and an attractive lifestyle contribute to
quality of life. This factor is relatively unimportant on its own, but it can make the difference in
location decisions.

4. Proximity to suppliers and resources:

In many companies, plants supply parts to other facilities or rely on other facilities for
management and staff support. These require frequent coordination and communication, which
can become more difficult as distance increases.

5. Utilities, taxes, and real estate costs:

Other important factors that may emerge include utility costs (telephone, energy, and water),
local and state taxes, financing incentives offered by local or state governments, relocation costs,
and land costs.

SECONDARY FACTORS
There are some other factors needed to be considered, including room for expansion,
construction costs, accessibility to multiple modes of transportation, the cost of shuffling people
and materials between plants, competition from other firms for the workforce, community
attitudes, and many others. For global operations, firms are emphasizing local employee skills
and education and the local infrastructure.

Specific Locational Factors for Service Organization

DOMINANT FACTORS

The factors considered for manufacturers are also applied to service providers, with one
important addition the impact of location on sales and customer satisfaction. Customers usually
look about how close a service facility is, particularly if the process requires considerable
customer contact.
PROXIMITY TO CUSTOMERS

Location is a key factor in determining how conveniently customers can carry on business with a
firm. For example, few people would like to go to remotely located dry cleaner or supermarket if
another is more convenient. Thus the influence of location on revenues tends to be the dominant
factor.
TRANSPORTATION COSTS AND PROXIMITY TO MARKETS

For warehousing and distribution operations, transportation costs and proximity to markets are
extremely important. With a warehouse nearby, many firms can hold inventory closer to the
customer, thus reducing delivery time and promoting sales.
LOCATION OF COMPETITORS

One complication in estimating the sales potential at different location is the impact of
competitors. Management must not only consider the current location of competitors but also try
to anticipate their reaction to the firm’s new location. Avoiding areas where competitors are
already well established often pays. However, in some industries, such as new-car sales
showrooms and fast- food chains, locating near competitors is actually advantageous. The
strategy is to create a critical mass, whereby several competing firms clustered in one location
attract more customers than the total number who would shop at the same stores at scattered
locations. Recognizing this effect, some firms use a follow –the leader strategy when selecting
new sites.
SECONDARY FACTORS

Retailers also must consider the level of retail activity, residential density, traffic flow, and site
visibility. Retail activity in the area is important, as shoppers often decide on impulse to go
shopping or to eat in a restaurant. Traffic flows and visibility are important because businesses’
customers arrive in cars. Visibility involves distance from the street and size of nearby buildings
and signs. High residential density ensures nighttime and weekend business when the population
in the area fits the firm’s competitive priorities and target market segment.

Facility Layout
After the site location decision has been made, the next focus in production planning is the
facility’s layout. The goal is to determine the most efficient and effective design for the
particular production process. A manufacturer might opt for a U-shaped production line, for
example, rather than a long, straight one, to allow products and workers to move more quickly
from one area to another.
Service organizations must also consider layout, but they are more concerned with how it affects
customer behavior. It may be more convenient for a hospital to place its freight elevators in the
center of the building, for example, but doing so may block the flow of patients, visitors, and
medical personnel between floors and departments.
There are four main types of facility layouts: process, product, fixed-position, and cellular.

The process layout arranges workflow around the production process. All workers performing
similar tasks are grouped together. Products pass from one workstation to another (but not
necessarily to every workstation). For example, all grinding would be done in one area, all
assembling in another, and all inspection in yet another. The process layout is best for firms that
produce small numbers of a wide variety of products, typically using general-purpose machines
that can be changed rapidly to new operations for different product designs. For example, a
manufacturer of custom machinery would use a process layout.
Products that require a continuous or repetitive production process use the product (or
assembly-line) layout. When large quantities of a product must be processed on an ongoing
basis, the workstations or departments are arranged in a line with products moving along the line.
Automobile and appliance manufacturers, as well as food-processing plants, usually use a
product layout. Service companies may also use a product layout for routine processing
operations.

A fixed-position layout lets the product stay in one place while workers and machinery move to
it as needed. Products that are impossible to move—ships, airplanes, and construction projects—
are typically produced using a fixed-position layout. Limited space at the project site often
means that parts of the product must be assembled at other sites, transported to the fixed site, and
then assembled. The fixed-position layout is also common for on-site services such as
housecleaning services, pest control, and landscaping.
Cellular layouts combine some aspects of both product and fixed-position layouts. Work cells
are small, self-contained production units that include several machines and workers arranged in
a compact, sequential order. Each work cell performs all or most of the tasks necessary to
complete a manufacturing order. There are usually five to 10 workers in a cell, and they are
trained to be able to do any of the steps in the production process. The goal is to create a team
environment wherein team members are involved in production from beginning to end.

DESIGNING PROCESS LAYOUTS

The analysis involved in the design of production lines and assembly lines relates primarily to
timing, coordination, and balance among individual stages in the process.For process layouts, the
relative arrangement of departments and machines is the critical factor because of the large
amount of transportation and handling involved.

PROCEDURE FOR DESIGNING PROCESS LAYOUTS

Process layout design determines the best relative locations of functional work centers. Work
centers that interact frequently, with movement of material or people, should be located close
together, whereas those that have little interaction can be spatially separated. One approach of
designing an efficient functional layout is described below.
1. List and describe each functional work centre.
2. Obtain a drawing and description of the facility being designed.
3. Identify and estimate the amount of material and personnel flow among work centers
4. Use structured analytical methods to obtain a good general layout.
5. Evaluate and modify the layout, incorporating details such as machine orientation, storage
area location, and equipment access.

The first step in the layout process is to identify and describe each work centre. The description
should include the primary function of the work centre; drilling, new accounts, or cashier; its
major components, including equipment and number of personnel; and the space required. The
description should also include any special access needs (such as access to running water or an
elevator) or restrictions (it must be in a clean area or away from heat).
For a new facility, the spatial configuration of the work centers and the size and shape of the
facility are determined simultaneously. Determining the locations of special structures and
fixtures such as elevators, loading docks, and bathrooms becomes part of the layout process.

However, in many cases the facility and its characteristics are a given. In these situations, it is
necessary to obtain a drawing of the facility being designed, including shape and dimensions,
locations of fixed structures, and restrictions on activities, such as weight limits on certain parts
of a floor or foundation.

Relationship flow diagram

To minimize transport times and material-handling costs, we would like to place close together
those work centers that have the greatest flow of materials and people between them. To estimate
the flows between work centers, it is helpful to begin by drawing relationship diagram as shown
in the above figure.

For manufacturing systems, material flows and transporting costs can be estimated reasonably
well using historical routings for products or through work sampling techniques applied to
workers or jobs. The flow of people, especially in a service system such as a business office or a
university administration building, may be difficult to estimate precisely, although work
sampling can be used to obtain rough estimates.
The amounts and/or costs of flows among work centers are usually presented using a flow
matrix, a flow-cost matrix, or a proximity chart.

1. Flow Matrix
A flow matrix is a matrix of the estimated amounts of flow between each pair of work centers.
The flow may be materials (expressed as the number of loads transported) or people who move
between centers. Each work centre corresponds to one row and one column, and the element fij
designates the amount of flow from work centre (row) I to work centre (column) Normally, the
direction of flow between work centers is not important, only the total amount, so fij and fji can
be combined and the flows represented using only the upper right half of a matrix.

2. Flow-cost Matrix
A basic assumption of facility layout is that the cost of moving materials or people between work
centers is a function of distance travelled. Although more complicated cost functions can be
accommodated, often we assume that the per unit cost of material and personnel flows between
work centers is proportional to the distance between the centers. So for each type of flow
between each pair of departments, i and j, we estimate the cost per unit per unit distance, cij

1.Proximity Chart
Proximity charts (relationship charts) are distinguished from flow and flow-cost matrices by the
fact that they describe qualitatively the desirability or need for work centers to be close together,
rather than providing quantitative measures of flow and cost. These charts are used when it is
difficult to measure or estimate precise amounts or costs of flow among work centers.
This is common when the primary flows involve people and do not have a direct cost but rather
an indirect cost, such as when employees in a corporate headquarters move among departments
(payroll, printing, information systems) to carry out their work.

Site selection process

Site selection involves measuring the needs of a new project against the merits of potential
locations. The site selection, or facility location, decision is triggered when organisations seek to
locate, relocate or expand their operations. The process involves the identification of alternative
potentially viable locations, analysis thereof, followed by evaluation and ranking of the sites.
Part of the business activities of the project team is to search for and select the optimal location.
A four-phase approach is usually followed for site selection, including screening, site work,
negotiations and finalisation, as shown in Figure 1. The screening phase will include a fatal flaw
analysis to reduce the list of candidate sites to only those that are viable. Site work and
negotiations will be necessary to obtain the information that will be used in the selection and
acquisition stage.

Site selection criteria

Site selection criteria are aspects of a proposed site that are important to the success of a project
and which can be used for the assessment of sites. Any number of criteria may be selected to
evaluate, compare and prioritise the candidate sites.

Site selection criteria consist of ‘must’ criteria and ‘wish’ criteria. Projects differ and therefore
the most applicable selection criteria will also differ from project to project. It is essential that
the relevant ‘must’ and ‘wish’ criteria are identified and agreed before candidate sites are
identified to eliminate bias.

An overview of typical ‘must’ and ‘wish’ criteria is presented in Figure 2. Note that this is not an
exhaustive list of criteria, but rather a starting point for developing your own criteria.
‘Must’ criteria
‘Must’ criteria are used in the initial screening phase of site selection. All ‘must’ criteria must be
fully satisfied for a candidate site to be considered further. For instance, if a plant layout requires
a minimum area of 5 hectares, any potential site smaller than this cut-off point should be
eliminated from the list. ‘Must’ criteria for site selection typically include:

1.Suitable size: Site size must be larger than the minimum plant layout requirement. Sites
should also not be significantly bigger than the required size as this impacts on affordability,
unless future plant expansions are likely;
2.Availability: The site should be available for purchase and free from encumbrances, such as
contamination or legal disputes. These matters can take a long time to resolve;
3.Affordability: The asking price for the site should be realistic and based on a valuation
thereof. The selection team should set a maximum price that they would be willing to pay from
the impact it has on the profitability of the project;
4. Accessibility: The site should be accessible for bringing the process equipment to site, and for
feed material and product logistics. Ideally, access should not necessitate the construction of
new roads, rail spurs or bridges;
5.Political stability: This may be applicable if a development in a foreign country is considered.
It can involve continued government support for a project or physical security of a facility;
and
6.Proximity to primary feedstock and/or market: The project prefeasibility study will
determine how important it is to have the plant site near the primary feedstock or market,
depending on the type of project.
Try to identify at least three, and not more than five, criteria in the ‘must’ category which are
applicable to your project.

‘Wish’ criteria
Once the screening of candidate sites has been completed using the ‘must’ criteria, a shortlist can
be drawn up of sites for further evaluation. Site specific information will be required for
evaluating the sites against the ‘wish’ criteria. For this reason, it is prudent to engage the services
of engineering, hydrogeology and other specialists with knowledge of the sites. If heavy
equipment is to be installed, or contamination of groundwater under a site is suspected, it may
prove necessary to conduct some physical testing on the sites. Tests could include core sampling,
auger samples, soil-vapour testing and groundwater analysis.
1. Business ‘wishes’: These include criteria relating to the business strategy, ease of operation
and business risk reduction. The objectives for the site in the medium- to long-term should be
considered here. Business ‘wishes’ could include:

• Proximity to feed material, or customers, being the reciprocal of the must criteria;
• Process integration requirements;
• Governmental support;
• Tax incentives (special development zone);
• Nearest (industrial) neighbors
• Supply chain requirements;
• Product stability/life; and
• Future plant expansion.
2. Infrastructure & Services ‘wishes’: These include the availability of infrastructure and
services that would otherwise have to be supplied as part of the project. Pre-existing
infrastructure might reduce the time to completion of the project significantly and decrease the
required capital expenditure. Infrastructure and services ‘wishes’ could include:

• Housing;
• Electricity supply;
• Water supply;
• Town infrastructure;
• Policing and security;
• Fire brigade;
• Airport;
• Hospital and/or clinic; and
• Proximity to support services.
3.Environmental ‘wishes’: These include criteria with an environmental flavour and relate to
the environmental conditions and requirements, the ability of the environment to accommodate
a process plant and waste disposal facilities. Expect some overlap with infrastructure &
services and social ‘wishes’. Environmental ‘wishes’ could include:

• Climatic conditions;
• Assimilative capacity of the receiving environment;
• Specific regional air quality requirements;
• Water supply;
• Effluent treatment facility;
• Hazardous waste disposal facility;
• Secondary safety zone; and
• Regional history of natural disasters, i.e. fires, floods and seismic activity.
4. Social ‘wishes’: These include criteria relating to the quality of life of workers and the
community, and the availability of suitably qualified manpower for the complex. It also deals
with the presence of sites of historical and cultural significance on or around the candidate
site. Social ‘wishes’ could include:

• Quality of life for workers/expats;

• Political climate;
• Manpower availability;
• Labour cost;
• Labour union activity;
• Historic landmarks;
• Proximity of housing to site;
• Training facilities to support project;
• Sites of cultural significance; and
• Security requirements.
5. Geological ‘wishes’: These include criteria of a geological and hydrogeological nature and
aim to give an indication of the ease of construction and of current or future groundwater
challenges. Geological wishes could include:
• Topography of the land;
• Soil type (piling requirements);
• Underground structures;
• Number and type of industrial and other neighbours;
• Groundwater quality;
• Direction of groundwater flow; and
• Pollution originating from neighbouring facilities.

The criteria listed in the different categories are examples. In many cases, the specific
requirements of a project may dictate site selection criteria.

Scheduling in Production and Operation Management

Scheduling can be defined as “prescribing of when and where each operation necessary to
manufacture the product is to be performed.” It is also defined as “establishing of times at which
to begin and complete each event or operation comprising a procedure”. The principle aim of
scheduling is to plan the sequence of work so that production can be systematically arranged
towards the end of completion of all products by due date.

Principles of Scheduling
1. The principle of optimum task size: Scheduling tends to achieve maximum efficiency
when the task sizes are small, and all tasks of same order of magnitude.
2. Principle of optimum production plan: The planning should be such that it imposes an
equal load on all plants.
3. Principle of optimum sequence: Scheduling tends to achieve the maximum efficiency when
the work is planned so that work hours are normally used in the same sequence.

Inputs to Scheduling
1.Performance standards: The information regarding the performance standards (standard times
for operations) helps to know the capacity in order to assign required machine hours to the
facility.
2. Units in which loading and scheduling is to be expressed.
3. Effective capacity of the work centre.
4. Demand pattern and extent of flexibility to be provided for rush orders.
5. Overlapping of operations.
6. Individual job schedules.

Scheduling Strategies
Scheduling strategies vary widely among firms and range from ‘no scheduling’ to very
sophisticated approaches. These strategies are grouped into four classes:
1. Detailed scheduling: Detailed scheduling for specific jobs that are arrived from customers
is impracticable in actual manufacturing situation. Changes in orders, equipment
breakdown, and unforeseen events deviate the plans.
2. Cumulative scheduling: Cumulative scheduling of total work load is useful especially for
long range planning of capacity needs. This may load the current period excessively and
under load future periods. It has some means to control the jobs.
3. Cumulative detailed: Cumulative detailed combination is both feasible and practical
approach. If master schedule has fixed and flexible portions.
4. Priority decision rules: Priority decision rules are scheduling guides that are used
independently and in conjunction with one of the above strategies, i.e., first come first serve.
These are useful in reducing Work-In-Process (WIP) inventory.

Types of Scheduling
Types of scheduling can be categorized as forward scheduling and backward scheduling.

1. Forward scheduling

It is commonly used in job shops where customers place their orders on “needed as soon as
possible” basis. Forward scheduling determines start and finish times of next priority job by
assigning it the earliest available time slot and from that time, determines when the job will be
finished in that work centre. Since the job and its components start as early as possible, they will
typically be completed before they are due at the subsequent work centers in the routing. The
forward method generates in the process inventory that are needed at subsequent work centers
and higher inventory cost. Forward scheduling is simple to use and it gets jobs done in shorter
lead times, compared to backward scheduling.
2. Backward scheduling

It is often used in assembly type industries and commit in advance to specific delivery dates.
Backward scheduling determines the start and finish times for waiting jobs by assigning them to
the latest available time slot that will enable each job to be completed just when it is due, but
done before. By assigning jobs as late as possible, backward scheduling minimizes inventories
since a job is not completed until it must go directly to the next work centre on its routing.
Forward and backward scheduling methods are shown in the following figure.
Forward and backward scheduling

Loading
A load means the quantity of work, and allocating the quantity of work to the processes
necessary to manufacture each item is called loading.

It is performed in the CRP (Capacity Requirements Planning) of the manufacturing planning.

Each item planned in MRP is first explored to the processes necessary to manufacture it, which
is usually called process explosion. Next loading is performed for the explored process. In
loading, each load is usually piled up by time (hour), by which a setup time and a real operating
time are determined. The real operating time may be set by manufacturing lot or by real
operating time per item unit. In the former case, the time of hour is piled up as load, while in the
latter case, loading is performed after calculating the real operating time per manufacturing unit
by multiplying the number of manufacturing items by real operating time.
In addition, the calculated load is piled up for a certain period, which is determined by selecting
either the earliest start date or the last start date as a base date. This method enables loading for
each process or each period.

LOADING JOBS
Loading means the assignment of Jobs to work or processing centers.

Operations Managers assign jobs to work centers so that cost and completion times are kept to
a minimum
Work centers are areas in a business in which productive resources are organized and work is
completed.

• It may be a single machine, a group of machines, or an area where a particular type of work
is done.
• The work centers can be organized in a variety of ways including by function in a job-shop
configuration; or by product in a flow, assembly line, or group-technology-cell
configuration
• A characteristic that distinguishes one scheduling system from another is how capacity is
considered in determining the schedule.
• The scheduling systems can use Infinite Loading or Finite Loading

Infinite loading:
• Ignores capacity constraints, but helps identify bottlenecks in a proposed schedule to enable
proactive management
• With infinite loading jobs are assigned to work centers without regard for capacity of the
work center.
• Jobs are loaded at work centers according to the chosen priority rule.
• Priority rules are appropriate for use under the infinite loading approach.
• This is known as vertical loading.

Finite loading:
• Allows only as much work to be assigned as can be done with available capacity – but doesn’t
prepare for inevitable slippage
• Finite loading considers the capacity of each work center and compares the processing time so
that process time does not exceed capacity.
• With finite loading the scheduler loads the job that has the highest priority on all work centers
it will require.
• Then the job with the next highest priority is loaded on all required work centers, and so on.
• This process is referred to as horizontal loading

Sequencing of operation
The Sequence of Operation is the organizing narration of the facility's integrated EMCS
functions that will determine the ability of the laboratory to perform in an energy-efficient
manner. The importance of describing the function of the laboratory facility's environmental
systems with detailed, comprehensive control strategies cannot be overemphasized. Topics that
affect energy efficiency and should be addressed by the sequence of operation control strategies
include:

• Systems and equipment controlled;

• System initiation;
• Modes of operation, cooling heating, ventilation;
• Occupied periods;
• Unoccupied periods;
• Set points for temperature, pressure, humidity;
• Set-back routines;
• Optimal starts;
• Time limited control of equipment;
• Override sequences;
• Alarm point ranges; and
• Control vs. monitoring point descriptions.
It is to plan the order of the operation by process, regarding the fixed orders through the
Operation Order Release Planning. It is to grasp the progress status of the operation, to consider
the priority, setup time, and etc., and to make an operation sequencing list.

Monitoring and Control

The domain of operations monitoring and control concerns all activities related to the actual
transportation process. It is also known as real-time control, or operations management.
The supply basis for each operating day is known as a production plan, composed of the planned
work of each available resource (e.g. vehicles and drivers). It includes for instance all dated
journeys planned on the considered day, including occasional services.

The transportation control process supposes a frequent detection of the operating resources (in
particular vehicle identification and location tracking). Such collected information is compared
to the planned data (e.g. work plan for a vehicle or a driver), thus providing a monitoring of these
resources.

The monitored data is used for:

• Controlling the various resource assignments (e.g. vehicle assignment to a dated block);
• Assisting drivers and controllers to respect the plan (e.g. schedule adherence, interchange
control);
• Alerting on possible disturbances (e.g. delay thresholds, incidents);
• Helping the design of corrective control actions according to the service objectives and
overall control strategy; the model describes a range of such control actions (e.g. departure
lag);
• Activation of various associated processes (e.g. traffic light priority, track switching);
• Passenger information on the actual service (e.g. automatic display of the expected
waiting time at stop points); and
• Follow-up and quality statistics.

Statistical quality control

Statistical techniques are applied to determine the extent to which the product meets the
standards of quality and precision and the extent to which its quality deviates from the standard
quality. Walter S. Schewhart and Harold F.Dodge of the Bell Laboratories U.S.A. introduced the
concept of Statistical Quality Control (SQC) shortly after First World War I. Law of probability
is the base of SQC. SQC can be described as a system for controlling the quality of production
within specified limits.
Under inspection plan, quality is checked after the production has already taken place, thus
resulting in loss from rejecting the final products not meeting the quality standards. In SQC,
quality is checked at every level of production so that remedial actions may be taken at early
stage. SQC aims not only to determine the magnitude of chance cause variation but also to detect
assignable causes of variation which helps manufacturing organizations to install statistical
control at various stages of production

Statistical quality control, the use of statistical methods in the monitoring and maintaining of the
quality of products and services. One method, referred to as acceptance sampling, can be used
when a decision must be made to accept or reject a group of parts or items based on the quality
found in a sample. A second method, referred to as statistical process control, uses graphical
displays known as control charts to determine whether a process should be continued or should
be adjusted to achieve the desired quality.

TOOLS OF STATISTICAL QUALITY CONTROL

• Histograms.
• Check Sheets.
• Pareto Charts.
• Cause and Effect Diagrams.
• Defect Concentration Diagrams.
• Scatter Diagrams.
• Control Charts.
Quality Circles (Q.C)
Meaning of Quality Circles:
Conceptually Quality Circles can be described as a small group of employees of the same work
area, doing similar work that meets voluntarily and regularly to iden-tify, analyse and resolve
work related problems.

This small group with every member of the circle participating to the full carries on the
activities, utilising problem solving techniques to achieve control or improvement in the work
area and also help self and mutual development in the process.

The concept of the Quality Circle is based on “respect for the human individual” as against the
traditional assumption based on suspicion and mistrust between management and its em-ployees.

Quality circles built mutual trust and create greater understanding between the manage-ment and
the workers. Cooperation and not confrontation is the key element in its operation. Quality
Circles aims at building people, developing them, arousing genuine interest and dedication to
their work to improve quality, productivity, cost reduction etc.
Thus we can say that a quality circle is a group of 5 to 8 employees performing similar work,
who volunteer themselves to meet regularly, to identify the cause of their on-the-job problems,
employ advanced problem-solving techniques to reach solutions and implement them.
The con-cept is based on the premise that the people who do a job everyday know more about it
than anyone else and hence their voluntary involvement is the best way to solve their work
related problems.
The Quality Circle concept provides an opportunity to the circle members to use their wis-dom,
creativity and experience in bringing about improvements in the work they are engaged in by
converting the challenging problems into opportunities and it contributes to the develop-ment of
the employees and in turn benefits the organisation as well. The concept encourages the sense of
belongingness in circle members and they feel that they have an important role to play in the
organisation.

Characteristics of Effective Quality Circle

1. The atmosphere should be informal, comfortable and relaxed. The members should feel
involved and interested.

2. Everyone should participate.

3. The objectives should be clear to the members.

4. The members should listen to each other.

5. The group should feel comfortable even when there are disagreements.

6. The decisions should generally be taken by a kind of consensus and voting should be
minimum.
7. When an action is required to be taken, clear assignments should be made and ac-cepted by all
the members.
8. The leader should not dominate the group. The main idea should not be as to who controls but
how to get the job done.
9. Until a final solution is found and results are attained feedback is necessary.

Objectives of Quality Circle

• To improve quality, productivity, safety and cost reduction.
• To give chance to the employees to use their wisdom and creativity.
• To encourage team spirit, cohesive culture among different levels and sections of the
employees.
• To promote self and mutual development including leadership quality,
• To fulfill the self-esteem and motivational needs of employees.
• To improve the quality of work-life of employees.

Implementation of Quality Circles in an Organisation:

For the success of Quality Circle programme, following actions are necessary in the
Organisation:

• Few managers representing production, quality control, design, process planning form the
Quality Circle (Q.C.) steering committee. This acts as a policy making body and will monitor
the Q.C. in the Organisation.
• Top management must attend the orientation courses designed for them.
• A committed top and middle management is necessary.
• A facilitator must be appointed, who serves as a link between top management, Q.C.,
steering committee, middle management circle leaders and circle members. Facilita-tor will
coordinate training courses; get the support from all concerned including top management
Q.C., steering committee, circle leader and circle members to help the circle leader in
conducting the meetings, and to provide necessary resources.

Duties of Circle Leader

• He must assume the responsibility of guiding the members.
• He must make his members sure about what is going on.
• He must channelise the discussions.
• Every member is allowed equal opportunity.
• Specific task be assigned to each member.
• He must work in coordination with facilitator.

Steps for Setting up Quality Circle

• First of all Mangers, Supervisors and Foreman must be made to understand the concept and
activities of Q.C.
• Management’s total support and commitment should be made known to everyone in the
organisation.
• Steering committee is formed with the top management personnel to give direction to
Quality Circle activities.
• A facilitator (or sometimes known as promoter) is selected from the senior manage-ment
level, who will serve as coordinator and advisor to the circle.
• Supervisor and foreman are then trained to act as Q.C. leaders.
• Members of each circle must be selected from the persons who are doing similar type of
work or belong to the same department or section.
• Membership to the circle is voluntary.
• First few meetings of the circle are held with a view to train them.
• To start with, only one to two circles should be formed in an organisation, and then increase
the number gradually as more and more experience is gained.
• Meetings must be held regularly, may be once in a week initially and once in a month on
completion of basic training of members.
• Everyone’s suggestion or problem matching with the circle’s objectives is discussed.
• Total participation of team members must be encouraged.
• Recommendations of the circle must be considered and decisions should be taken without
delay.

Benefits of Quality Circles (Q.C.):

• Through the forum of Q.C. the chronic problems-of organisations which really create hurdles
in work get resolved by the grass root employees of organisation, whose knowl-edge and
experience otherwise is not fully utilized.
• With such a capable work force, any organisation can easily undertake more difficult and
challenging assignments for its growth and profit.
• As the employees gain experience they take more challenging projects, in due course they
undertake projects on cost reduction, material handling, quality improvement, preventing
wastage, improving delivery schedule, improving customer service, im-proving inspection
and test methods, preventing accidents improving design and pro-cess etc.
• Cost reduction.
• Increased productivity.
• Improved quality.
• Better communication.
• Better house-keeping.
• Increased team work.
• Smooth working.
• Better mutual trust.
• Greater sense of belongingness.
• Increased safety.
• Better human relations.

Total Quality Management (TQM)

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. Total quality
management aims to hold all parties involved in the production process accountable for the
overall quality of the final product or service.

TQM was developed by William Deming, a management consultant whose work had a great
impact on Japanese manufacturing. While TQM shares much in common with the Six Sigma
improvement process, it is not the same as Six Sigma. TQM focuses on ensuring that internal
guidelines and process standards reduce errors, while Six Sigma looks to reduce defects.

• Total quality management (TQM) is an ongoing process of detecting and reducing or

eliminating errors.
• It is used to streamline supply chain management, improve customer service, and ensure that
employees are trained.
• The focus is to improve the quality of an organization's outputs, including goods and
services, through continual improvement of internal practices.
• Total quality management aims to hold all parties involved in the production process
accountable for the overall quality of the final product or service.

Principles of Total Quality Management

1. Customer focus

The first of the Total Quality Management principles puts the focus back on the people buying
your product or service. Your customers determine the quality of your product. If your product
fulfills a need and lasts as long as or longer than expected, customers know that they have spent
their money on a quality product.

When you understand what your customer wants or needs, you have a better chance of figuring
out how to get the right materials, people, and processes in place to meet and exceed their
expectations.
To implement this TQM principle:

• Research and understand your customers’ needs and expectations.

• Align your organization’s objectives with customer needs.
• Communicate with customers, measure satisfaction, and use the results to find ways to
improve processes.
• Manage customer relationships.
• Find a balance for satisfying customers and other interested parties (such as owners,
employees, suppliers, and investors).

2. Total employee commitment

You can’t increase productivity, processes, or sales without the total commitment of all
employees. They need to understand the vision and goals that have been communicated. They
must be sufficiently trained and given the proper resources to complete tasks in order to be
committed to reaching goals on time.
To implement this TQM principle:

• Clearly communicate and acknowledge the importance of each individual contribution to the
completed product.
• Stress that each team or individual accepts ownership and give them the responsibility and
opportunity to solve problems when they arise.
• Encourage employees to self-evaluate performance against personal goals and objectives,
and make modifications as necessary to improve workflow.
• Acknowledge successes and optimized performance to build confidence in your employees
and your stakeholders.
• Make responsibilities clear, provide adequate training, and make sure your resources are used
as efficiently as possible.
• Encourage people to continually seek opportunities to learn and move into other roles to
increase their knowledge, competence, and experience.
• Create an environment where employees can openly discuss problems and suggest ways to
solve them.
The key benefits of total employee commitment include:

• Increased employee retention because employees are motivated, committed, and actively
involved in working toward customer satisfaction
• Individual and team innovation and creativity in problem-solving and process improvement
• Employees who take pride and accountability for their own work
• Enthusiasm for active participation and contribution to continual improvement

3. Process approach

Adhering to processes is critical in quality management. Processes ensure that the proper steps
are taken at the right time to ensure consistency and speed up production.

To implement this TQM principle:

• Use Total Quality Management tools such as process flowcharts to define and delineate clear
roles and responsibilities so everybody knows who does what at certain times.
• Create a visual action plan so everybody can easily see the specific activities that need to be
completed to achieve the desired result.
• Analyze and measure current activities to see where improvements can be made or where
steps in the process are creating bottlenecks.
• Evaluate the impact your processes and activities may have on your customers, suppliers, and
all stakeholders.

Benefits of a process approach include:

• Faster development and production cycles, lower costs, and increased revenue
• More consistency and predictable outcomes
• Focus on continued improvements and success

4. Integrated system

Typically a business has many different departments, each with their own specific functions and
purposes. These departments and functions should be interconnected with horizontal processes
that should be the focus of Total Quality Management. But sometimes these departments and
functions operate in isolated silos.

In an integrated system, everybody in every department should have a thorough understanding of

policies, standards, objectives, and processes. Integrated systems help the company to look for
continual improvement in order to achieve an edge over the competition.
To implement this TQM principle:

• Promote a work culture focused on quality.

• Use flowcharts and other visual aids to help employees understand how their functions fit in
with the rest of the company.
• Use as-is process analysis to see where improvements can be made.
• Make training available for employees who need to learn new processes and who want to
explore opportunities for advancement.
Benefits include:

• Focus on quality that will help your business achieve excellence and meet or exceed
customer expectations

5. Strategic and systematic approach

The International Organization for Standardization (ISO) describes this principle as:

“Identifying, understanding and managing interrelated processes as a system contributes to the

organization’s effectiveness and efficiency in achieving its objectives.”
Multiple processes within a development or production cycle are managed as a system of
processes in an effort to increase efficiency.
To implement this TQM principle:

• Provide your people with the proper training and resources that will help them complete their
individual steps in the process.
• Continually improve processes and products, and upgrade equipment as necessary to reach
goals.
• Make continual improvement a measurable objective for all employees.
• Recognize, acknowledge, and reward innovations and process improvements.
Benefits include:
• An ability to quickly identify, react, and fix process bottlenecks or breakdowns
• Overall improved organizational capabilities and improved performance

6. Continual improvement

Optimal efficiency and complete customer satisfaction doesn’t happen in a day—your business
should continually find ways to improve processes and adapt your products and services as
customer needs shift. As previously stated, the other Total Quality Management principles
should help your business keep an eye toward continual improvement.
To implement this TQM principle:

• Implement policies to establish product, process, and system improvements as measurable

goals for individuals, teams, and departments.
• Recognize, acknowledge, and encourage innovation to improve processes and development.
• Encourage employees to participate in available training sessions to learn and take on new
and additional roles.
Benefits include:

• Improved knowledge and capabilities to increase performance

• Improvement goals strategically aligned with organizational capabilities and goals
• Quick reaction times to recognize and fix bottlenecks and broken processes

7. Fact-based decision-making

Analysis and data gathering lead to better decisions based on the available information. Making
informed decisions leads to a better understanding of customers and your market.
To implement this TQM principle:

• Analyze and check data to ensure that it is reliable and accurate.

• Make relevant data available to stakeholders.
• Use valid methods to gather and analyze data.
• Make decisions based on the facts learned from the data in addition to your experience and
intuition.
Benefits include:

• Ability to make informed decisions

• Ability to analyze and defend past decisions by referencing factual records
• Ability to change past decisions based on data review

8. Communications

Everybody in your organization needs to be aware of plans, strategies, and methods that will be
used to achieve goals. There is a greater risk of failure if you don’t have a good communication
plan.

To implement this TQM principle:

• Establish an official line of communication so that all employees know about updates, policy
changes, and new processes.
• Where possible, involve employees in decision-making.
• Make sure everybody in every department understands their roles and how they fit in with the
rest of the company.

Benefits include:

• Boost in morale and motivation when employees understand how their contributions help the
company achieve its goals
• Interdepartmental coordination and cooperation
• Elimination of silos
• Ability to more accurately measure the effectiveness of current policies and procedures
• Higher motivation from employees to achieve goals because they are part of the decision-
making process
Successful implementation of these Total Quality Management concepts will not come
overnight. Because TQM often represents a large cultural shift, you may want to implement
these changes in phases to lessen the impact.

IMPORTANT FACTORS IN TOTAL QUALITY MANAGEMENT

1. COMMITMENT AND UNDERSTANDING FROM EMPLOYEES

It is key to ensure that all employees within your organization know about the Total Quality
Management (TQM) policies and make them an fundamental part of their work. Your employees
should know your corporate goals and recognize the importance of these goals to the overall
success of your organization. Employees need to know what is expected from them and why. It
may sound like a no-brainer but too often this is not driven home by management. When
employees understand and share the same vision as management a world of potential is
unleashed. If they are in the dark, commitment is lacking and policies will not be successfully
deployed.
2. QUALITY IMPROVEMENT CULTURE

The organizational culture needs to be modernized on a continuous basis to encourage employee

feedback. Your employees are full of valuable knowledge- embrace it! Listen to those executing
the processes that keep your business moving daily. If employees have an idea on how to
improve operations, they need to know management respects their ideas or they will not share.

3. CONTINUOUS IMPROVEMENT IN PROCESS

There is no standing still. If you are not moving forward, you are moving backwards. Total
Quality Management (TQM) is a continuous process and not a program. This requires constant
improvement in all the related policies, procedures and controls established by management. Do
your research. Keep your ear to the market and make an effort to routinely revise all aspects of
your operation. There should be a constant effort to improve proficiency – which will result in
constant scopes for improvement (even if some improvements are small).
4. FOCUS ON CUSTOMER REQUIREMENTS

In today’s market, customers require and expect perfect goods and services with zero defects.
Focusing on customer requirements is significant to long term survival and essential in order to
build relationships with customers. People do business based on emotion. Competitors will
always be a risk. Keep your customers close and happy. Make sure precise requirements of all
customers are documented and understood by everyone that touches the account.
5. EFFECTIVE CONTROL

It is essential to monitor and measure the performance of the business. It’s easy to forget how
many times in a year an employee does not conform to a controlled procedure or how many
times a piece of equipment was down due to unplanned maintenance. If strict documentation is
maintained, you will be able to objectively quantify areas for improvement and focus your
efforts where they will provide the greatest return of both your time and financial resources.

Six Sigma
Six Sigma is a quality-control methodology developed in 1986 by Motorola, Inc. The method
uses a data-driven review to limit mistakes or defects in a corporate or business process. Six
Sigma emphasizes cycle-time improvement while at the same time reducing manufacturing
defects to a level of no more than 3.4 occurrences per million units or events. In other words, the
system is a method to work faster with fewer mistakes.
Six Sigma points to the fact that, mathematically, it would take a six-standard-deviation event
from the mean for an error to happen. Because only 3.4 out of a million randomly (and normally)
distributed, events along a bell curve would fall outside of six-standard-deviations (where sigma
stands in for "standard deviation").

• Six Sigma is a quality-control methodology developed in 1986 by Motorola, Inc.

• It was originally developed as a management method to work faster with fewer mistakes.
• It has now become an industry standard with certifications offered to practitioners

In recent years, Six Sigma has evolved into a more general business-management philosophy,
focused on meeting customer requirements, improving customer retention, and improving and
sustaining business products and services. Six Sigma applies to all industries. Many vendors,
including Motorola itself, offer Six Sigma training with the special certifications carrying the
names of yellow belt, green belt, and black belt.

Understanding Six Sigma

Six Sigma represents a management ideology, which focuses on statistical improvements to a
business process. It advocates for qualitative measurements of success over qualitative markers.
Therefore, practitioners of Six Sigma are those business people who use statistics, financial
analysis, and project management to achieve improved business functionality.

Six Sigma evolved to define numerous ideas within the business sphere and is sometimes
confusing. First, it's a statistical benchmark. Any business process, which produces less than 3.4
defects per 1 million chances, is considered efficient. A defect is anything produced outside of
consumer satisfaction.
Second, it is a training and certification program, which teaches the core principles of Six Sigma.
Practitioners may achieve the Six Sigma certification belt levels, ranging from white belt to
black belt. Finally, it's a philosophy, which promotes the idea that all business processes can be
measured and optimized.

Steps of Six Sigma

True believers and practitioners in the Six Sigma method follow an approach called DMAIC,
which stands for define, measure, analyze, improve, and control. It is a statistically driven
methodology that companies implement as a mental framework for business process
improvement. The ideology behind DMAIC is that a business may solve any seemingly
unsolvable problem by following the DMAIC steps.

• A team of people, led by a Six Sigma champion, defines a faulty process on which to focus,
decided through an analysis of company goals and requirements. This definition outlines the
problem, goals, and deliverables for the project.
• The team measures the initial performance of the process. These statistical measures make up
a list of potential inputs, which may cause the problem and help the team understand the
process's benchmark performance.
• Then the team analyzes the process by isolating each input, or potential reason for the failure,
and testing it as the root of the problem. Through analysis, the team identifies the reason for
process error.
• From there, the team works to improve system performance.
• Finally, the team adds controls to the process to ensure it does not regress and become
ineffective once again.

ISO 9000
ISO 9000 is a set of international standards, established by the International Organization for
Standardization, as the basis for quality management systems and quality assurance.

ISO 9000 standards were developed to help manufacturers effectively document the quality
system elements that need to be implemented to maintain an efficient quality system. They are
increasingly being applied to any organization or industry. ISO 9001 is now being used as a basis
for quality management—in the service sector, education, and government—because it can help
organizations satisfy their customers, meet regulatory requirements, and achieve continual
improvement.
The ISO 9000 series, or family of standards, was originally published in 1987, by the
International Organization for Standardization. They first gained popularity in Europe, and then
spread to the U.S. in the 1990s. As the world’s view of quality assurance has evolved, these
standards have been revised, in 2000 and 2008.
Today, quality management is understood to be about processes that need to be properly
managed, both technically and in terms of human resources. Current versions of ISO 9000 and
ISO 9001 were published in September 2015.

ISO 9000 Guidelines

 Individuals and organizations cannot be certified to ISO 9000—it simply lays out the
fundamentals and vocabulary of quality management systems. ISO 9001 is the only standard
within the ISO 9000 family to which organizations can certify, which is a process that takes over
a year and requires substantial documentation to demonstrate conformity.
The ISO 9000 family contains these standards:

I. ISO 9001:2015: Quality Management Systems—Requirements

II. ISO 9000:2015: Quality Management Systems—Fundamentals and Vocabulary (definitions)
III. ISO 9004:2009: Quality Management Systems—Managing for the Sustained Success of an
Organization (continuous improvement)
IV. ISO 19011:2011: Guidelines for Auditing Management Systems
• ISO 9000 is a set of internationally recognized standards for quality assurance and
management.
• ISO 9000 lays out best practices, guidelines, and a standard vocabulary for quality
management systems.
• ISO 9001 is the only certifiable portion of these standards, with updates published in the year
2015.

ISO 9000:2015 principles of Quality Management

The ISO 9000:2015 and ISO 9001:2015 standards are based on seven quality management
principles that senior management can apply to promote organizational improvement.
1. Customer focus
• Understand the needs of existing and future customers
• Align organizational objectives with customer needs and expectations
• Meet customer requirements
• Measure customer satisfaction
• Manage customer relationships
• Aim to exceed customer expectations
• Learn more about the customer experience and customer satisfaction
2. Leadership
• Establish a vision and direction for the organization
• Set challenging goals
• Model organizational values
• Establish trust
• Equip and empower employees
• Recognize employee contributions
• Learn more about leadership
3. Engagement of people
• Ensure that people’s abilities are used and valued
• Make people accountable
• Enable participation in continual improvement
• Evaluate individual performance
• Enable learning and knowledge sharing
• Enable open discussion of problems and constraints
• Learn more about employee involvement
4. Process approach
• Manage activities as processes
• Measure the capability of activities
• Identify linkages between activities
• Prioritize improvement opportunities
• Deploy resources effectively
• Learn more about a process view of work and see process analysis tools
5. Improvement
• Improve organizational performance and capabilities
• Align improvement activities
• Empower people to make improvements
• Measure improvement consistently
• Celebrate improvements
• Learn more about approaches to continual improvement
6. Evidence-based decision making
• Ensure the accessibility of accurate and reliable data
• Use appropriate methods to analyze data
• Make decisions based on analysis
• Balance data analysis with practical experience
• See tools for decision making
7. Relationship management
• Identify and select suppliers to manage costs, optimize resources, and create value
• Establish relationships considering both the short and long term
• Share expertise, resources, information, and plans with partners
• Collaborate on improvement and development activities
• Recognize supplier successes
• Learn more about supplier quality and see resources related to managing the supply chain

Kaizen
Kaizen is a Japanese term meaning "change for the better" or "continuous improvement." It is a
Japanese business philosophy regarding the processes that continuously improve operations and
involve all employees. Kaizen sees improvement in productivity as a gradual and methodical
process.
The concept of kaizen encompasses a wide range of ideas. It involves making the work
environment more efficient and effective by creating a team atmosphere, improving everyday
procedures, ensuring employee engagement, and making a job more fulfilling, less tiring, and
safer.
Some of the key objectives of the kaizen philosophy include quality control, just-in-time
delivery, standardized work, the use of efficient equipment, and the elimination of waste. The
overall goal of kaizen is to make small changes over a period of time to create improvements
within a company. That doesn't mean alterations happen slowly; it simply recognizes that small
changes now can have huge impacts in the future. Improvements can come from any employee at
any time. The idea is that everyone has a stake in the company's success and everyone should
strive, at all times, to help make the business model better.
Many companies have adopted the kaizen concept. Most notably, Toyota employs the kaizen
philosophy within its organization and has esteemed it as one of its core values. Within its
production system, Toyota encourages and empowers all employees to identify areas of potential
improvement and create viable solutions.

• Kaizen is a Japanese business philosophy that focuses on gradually improving productivity

by involving all employees and by making the work environment more efficient.
• Kaizen translates to "change for the better" or "continuous improvement."
• The small changes used in kaizen can involve quality control, just-in-time delivery,
standardized work, the use of efficient equipment, and the elimination of waste.
• Changes can come from any employee anytime and don’t have to happen slowly, although
kaizen recognizes that small changes now can have big future impacts.

Elements of Kaizen

• Team work
• Personnel discipline
• Improved Moral
• Quality circle
• Suggestions for improvement

Kaizen Process
The continuous cycle of Kaizen activity has six phases:

• Identify a problem or opportunity

• Analyze the process
• Develop an optimal solution
• Implement the solution
• Study the results and adjust
• Standardize the solution
Three pillars of Kaizen
Kaizen’s pillars or major activities are 5S, standardization, and waste elimination.

Housekeeping and 5S are basic activities for any continuous improvement effort. Employees
acquire self-discipline by practicing 5S daily. Without discipline, it is impossible to sustain a
continuous improvement culture. The 5S purpose is to create a visual workplace. The objective
is to make problems visible, which is quite uncomfortable. It is normal to try to hide problems to
avoid undesired questions from the boss or dealing with them. 5S and visual management make
the out-of-standard situation easy to recognize, and employees can easily correct it.
When we fail to achieve the expected results, it is because the process fails. Many times, it fails
because there is no standard. Each individual has a way to do things. Standard work is the
safest, highest quality, and most efficient way to execute a particular task. Standardization is the
practice of setting, communicating, following, and improving standards and standard work. The
best way to achieve consistent results and minimize mistakes is to follow the standard work.
To improve the results, we have to improve the process. But we need to have standards in place
before we try to improve it. That is why standardization is one of the earlier steps on the lean
journey. Visual management is a way to standardize, it helps to recognize defects, inventory,
waiting times, and other types of waste. Waste elimination is a cost-effective way to improve
processes and reduce operating costs.
The first steps on the lean journey are to stabilize the process, create standards, and visual
management. Process stabilization is achieved by practicing 5S and waste identification.
Standards produce a clear image of the desired condition. You cannot fix what you don’t see. By
making conditions out of standard visible, 5S, standards, and waste elimination are the pillars of
kaizen or continuous improvement.

Benchmarking
Benchmarking, is a tool of strategic management, which allows the organization to set goals and
measure productivity, on the basis of the best industry practices. It is a practice in which quality
level is used as a point of reference to evaluate things by making a comparison.

The process helps in comparing and gauging the processes, programs, strategies and performance
metrics with the standard measurements or to other similar companies. It is concerned with the
analysis of three major dimensions:

• Quality
• Time
• Cost

It is a useful technique for enhancing the organisation’s performance by identifying and

implementing the finest process and practices, for achieving them.
The process involves repeatedly evaluating the aspects of performance with the similar
measurements of its peers, identifying the gaps, discovering new methods for filling gaps and
also for excelling the condition, so that the gaps might prove positive for the organisation.

Benefits of Benchmarking
• Improving employee understanding of cost structures and internal processes
• Encouraging team-building and cooperation in the interests of becoming more competitive
• Enhancing familiarity with key performance metrics and opportunities for improvement
company-wide
In essence, benchmarking helps employees understand how one small piece of a company’s
processes or products can be the key to major success, just as one employee’s contributions can
lead to a big win.

Types of Benchmarking
Internal Benchmarking: When measurement and comparison of key operations between teams,
groups and individuals are made within the organization, the benchmarking is said to be internal.
External Benchmarking: When measurement and comparison of key operations are made with
the competitors, then, it is called as external benchmarking.
Further, the process is sub-classified as:

1. Process Benchmarking
2. Performance Benchmarking
3. Strategic Benchmarking

Application of Benchmarking
The process entails looking outside the organization to study what others do to achieve their
performance level and also the processes they use. So, the approach helps in determining the
processes behind the exceptional performance. It can be applied in the following areas:

• Human Resource Management

• Product Development
• Product Distribution
• Maintenance Operations
• Plant utilisation levels
• Customer Services

Process of Benchmarking
• Identifying the need for Benchmarking
• Understanding the existing process and practices
• Obtaining support and approval from the top management.
• Identifying best practices.
• Making a comparison between the firm’s processes and performance with those of rivals.
• Preparation of report, regarding the differences in standard and actual results.
• Implementing steps necessary for filling gaps in performance.
• Evaluation and review

Benchmarking does not provide a solution to all the problems rather it analyses the situations and
processes and helps in improving the performance.

Operations research
Operations research (OR) is an analytical method of problem-solving and decision-making that is
useful in the management of organizations. In operations research, problems are broken down
into basic components and then solved in defined steps by mathematical analysis.
The process of operations research can be broadly broken down into the following steps:

• Identifying a problem that needs to be solved.

• Constructing a model around the problem that resembles the real world and variables.
• Using the model to derive solutions to the problem.
• Testing each solution on the model and analyzing its success.
• Implementing the solution to the actual problem.

Disciplines that are similar to, or overlap with, operations research include statistical analysis,
management science, game theory, optimization theory, artificial intelligence and network
analysis. All of these techniques have the goal of solving complex problems and improving
quantitative decisions.
The concept of operations research arose during World War II by military planners. After the
war, the techniques used in their operations research were applied to addressing problems in
business, the government and society.

Characteristics of operations research

There are three primary characteristics of all operations research efforts:

Optimization- The purpose of operations research is to achieve the best performance under the
given circumstances. Optimization also involves comparing and narrowing down potential
options.
Simulation- This involves building models or replications in order to try out and test solutions
before applying them.
Probability and statistics- This includes using mathematical algorithms and data to uncover
helpful insights and risks, make reliable predictions and test possible solutions.

Importance of operations research

The field of operations research provides a more powerful approach to decision making than
ordinary software and data analytics tools. Employing operations research professionals can help
companies achieve more complete datasets, consider all available options, predict all possible
outcomes and estimate risk. Additionally, operations research can be tailored to specific business
processes or use cases to determine which techniques are most appropriate to solve the problem.

Uses of operations research

Operations research can be applied to a variety of use cases, including:

• Scheduling and time management.

• Urban and agricultural planning.
• Enterprise resource planning (ERP) and supply chain management (SCM).
• Inventory management.
• Network optimization and engineering.
• Packet routing optimization.
• Risk management.

Techniques of Operation Research:

Important techniques of Operation Research are being described hereunder:

(i) Inventory Control Models:

Operation Research study involves balancing inventory costs against one or more of the
following costs:

• Shortage costs.
• Ordering costs.
• Storage costs.
• Interest costs.

This study helps in taking decisions about:

• How much to purchase.

• When to order.
• Whether to manufacture or to purchase i.e., make and buy decisions.

The most well-known use is in the form of Economic Order Quantity equation for finding
economic lot size.
(ii) Waiting Line Models:

These models are used for minimizing the waiting time and idle time together with the costs
associated there with.

Waiting line models are of two types:

• Queuing theory, which is applicable for determining the number of service facilities and/or
the timing of arrivals for servicing.
• Sequencing theory which is applicable for determining the sequence of the servicing.

(iii) Replacement Models:

These models are used for determining the time of replacement or maintenance of item, which
may either:

• Become obsolete, or
• Become inefficient for use, and
• Become beyond economical to repair or maintain.

(iv) Allocation Models:

These models are used to solve the problems arising when:

• There are number of activities which are to be performed and there are number of alternative
ways of doing them,
• The resources or facilities are limited, which do not allow each activity to be performed in
best possible way. Thus these models help to combine activities and available resources so as
to optimise and get a solution to obtain an overall effectiveness.
(v) Competitive Strategies:

Such type of strategies are adopted where, efficiency of deci-sion of one agency is dependent on
the decision of another agency. Examples of such strategies are game of cards or chess, fixing of
prices in a competitive market where these strategies are termed as “theory”.
(vi) Linear Programming Technique:

These techniques are used for solving operation problems having many variables subject to
certain restrictions. In such problems, objectives are—profit, costs, quantities manufactured etc.
whereas restrictions may be e.g. policies of government, capacity of the plant, demand of the
product, availability of raw materials, water or power and storage capacity etc.
(vii) Sequencing Models:

These are concerned with the selection of an appropriate sequence of performing a series of jobs
to be done on a service facility or machine so as to optimise some efficiency measure of
performance of the system.
(viii) Simulation Models:

Simulation is an experimental method used to study behaviour over time.

(ix) Network Models:

This is an approach to planning, scheduling and controlling complex projects.

Limitations of Operations Research:
• These do not take into account qualitative and emotional factors.
• These are applicable to only specific categories of decision-making problems.
• These are required to be interpreted correctly.
• Due to conventional thinking, changes face lot of resistance from workers and
some-times even from employer.
• Models are only idealised representation of reality and not be regarded as absolute.

Transportation Problem
The Transportation Method of linear programming is applied to the problems related to the study
of the efficient transportation routes i.e. how efficiently the product from different sources of
production is transported to the different destinations, such as the total transportation cost is
minimum.
Here origin means the place where the product is originated or manufactured for the ultimate
sales while the places where the product is required to be sold is called destination. For solving
the transportation problem, the following steps are to be systematically followed:
1. Obtaining the initial feasible solution, which means identifying the solution that satisfies the
requirements of demand and supply. There are several methods through which the initial feasible
solution can be obtained; these are:
• North-West Corner
• Least Cost Method
• Vogel’s Approximation Method
2.Testing the optimality of the initial feasible solution. Once the feasible solution is obtained,
the next step is to check whether it is optimum or not. There are two methods used for testing the
optimality:
• Stepping-stone Method
• Modified Distribution Method (MODI)
3.The final step is to revise the solution until the optimum solution is obtained.

Queuing Theory
Queuing theory is the mathematical study of the congestion and delays of waiting in line.
Queuing theory (or "queueing theory") examines every component of waiting in line to be
served, including the arrival process, service process, number of servers, number of system
places, and the number of customers—which might be people, data packets, cars, etc.
As a branch of operations research, queuing theory can help users make informed business
decisions on how to build efficient and cost-effective workflow systems. Real-life applications of
queuing theory cover a wide range of applications, such as how to provide faster customer
service, improve traffic flow, efficiently ship orders from a warehouse, and design of
telecommunications systems, from data networks to call centers.
Queuing Theory Works
Queues happen when resources are limited. In fact, queues make economic sense; no queues
would equate to costly overcapacity. Queuing theory helps in the design of balanced systems that
serve customers quickly and efficiently but do not cost too much to be sustainable. All queuing
systems are broken down into the entities queuing for an activity.

At its most elementary level, queuing theory involves the analysis of arrivals at a facility, such as
a bank or fast food restaurant, then the service requirements of that facility, e.g., tellers or
attendants.
The origin of queuing theory can be traced back to the early 1900s, found in a study of the
Copenhagen telephone exchange by Agner Krarup Erlang, a Danish engineer, statistician and,
mathematician. His work led to the Erlang theory of efficient networks and the field of telephone
network analysis.

• Queuing theory is the study of congestion and waiting in line.

• The theory can help with creating an efficient and cost-effective workflow, allowing the user
to improve traffic flow.
• Queuing theory assesses two key aspects—customer arrival at the facility and service
requirements.
• Often used as an operations management tool, queuing theory can address staffing,
scheduling, and customer service shortfalls.

Benefits of Queuing Theory

By applying queuing theory, a business can develop more efficient queuing systems, processes,
pricing mechanisms, staffing solutions, and arrival management strategies to reduce customer
wait times and increase the number of customers that can be served.
Queuing theory as an operations management technique is commonly used to determine and
streamline staffing needs, scheduling, and inventory, which helps improve overall customer
service. It is often used by Six Sigma practitioners to improve processes.

Program Evaluation Review Technique (PERT)

PERT makes use of simple statistical mathematics in order to come up with a probability
distribution for the completion dates of the project milestones, it was designed to provide:

1. Management information on actual and impending problems in completing a project;

2. A continuous status report on active projects for achieving established objectives, completion
dates, and the probability of reaching both; and
3. Notation of most and least critical component activities within each project.

PERT presented a comprehensive illustration of all major project activities and their
interdependencies. In fact, it even provided time requirements needed for completing each
component activity. It focused managerial attention on those business activities most vital in
meeting the project completion date and identified which resources could be used more
effectively if transferred to other phases of a project.

• PERT charts were first created by the U.S. Navy's Special Projects Office in 1957 to guide
the Polaris nuclear submarine project.
• A PERT chart uses circles or rectangles called nodes to represent project events or
milestones. These nodes are linked by vectors, or lines, that represent various tasks.
• A PERT chart allows managers to evaluate the time and resources necessary to manage a
project.

Stages of PERT
PERT planning involves the following steps:

a) Identify activities and milestones - the tasks required to complete the project, and the events
that mark the beginning and end of each activity, are listed in a table.

b) Determine the proper sequence of the activities - this step may be combined with step 1, if
the order in which activities must be performed is relatively easy to determine.
c) Construct a network diagram - using the results of steps 1 and 2, a network diagram is
drawn which shows activities as arrowed lines, and milestones as circles. Software packages are
available that can automatically produce a network diagram from tabular information.
d) Estimate the time required for each activity - any consistent unit of time can be used,
although days and weeks are a common.
e) Determine the critical path - the critical path is determined by adding the activity times for
each sequence and determining the longest path in the project.\ If the activity time for activities
in other paths is significantly extended, the critical path may change. The amount of time that a
non-critical path activity can be extended without delaying the project is referred to as its slack
time.

Advantages of using PERT

• PERT chart explicitly defines and makes visible dependencies (precedence relationships)
between the work breakdown structure (commonly WBS) elements.
• PERT facilitates identification of the critical path and makes this visible.
• PERT facilitates identification of early start, late start, and slack for each activity.
• PERT provides for potentially reduced project duration due to better understanding of
dependencies leading to improved overlapping of activities and tasks where feasible.
• The large amount of project data can be organized & presented in diagram for use in decision
making.
• PERT can provide a probability of completing before a given time.

Disadvantages of using PERT

• There can be potentially hundreds or thousands of activities and individual dependency
relationships.
• PERT is not easily scalable for smaller projects.
• The network charts tend to be large and unwieldy requiring several pages to print and
requiring specially sized paper.
• The lack of a timeframe on most PERT/CPM charts makes it harder to show status although
colours can help (e.g., specific colour for completed nodes)

CRITICAL PATH METHOD (CPM)

CPM is a deterministic approach of network technique where duration of each activity involved
in completion of project is known with certainty. Certain activity times would be known in cases
of projects which are repetitive or are not new for an organization. For example an IT firm
specializing in creating software for different banks would apply CPM for a new banking
project. As company has already created software for other banks so creating software for new
bank would involve similar tasks for which completion time is known with high certainty.
The purpose of CPM technique is to:
• Find scheduled project completion time.
• Scheduled start and finish times for each activity.
• Identification of most important or critical activities which should be completed within
scheduled time without delaying the project.
• Identification of non-critical activities which can be delayed by specific time without
delaying the completion of project from its scheduled time.
To achieve objectives of CPM certain terms have to be understood:

Earliest Start Time (EST) of an activity indicates the time at which an activity can start as soon
as possible.
Earliest Finish Time (EFT) of an activity indicates the earliest possible time at which an
activity can be completed. It is the sum of EST and duration of that activity.
Calculation of EST is governed by forward path rule. This rule states that for calculating EST we
should move forward from first event to the last event in a network diagram. As an activity
cannot start until all preceding activities have been completed so EST of an activity is equal to
the largest EFT of immediate preceding activity.
Latest Finish Time (LFT) of an activity indicates finish of an activity as late as possible without
having an effect on scheduled finish of entire project.
Latest Start Time (LST) of an activity indicates start of an activity as late as possible without
having an effect on scheduled finish of entire project. LST is the difference of LFT and duration
of particular activity.
Calculation of LFT is governed by backward path rule. This rule states that for calculating LFT
we should move backwards from last event to the first event in a network diagram. As purpose is
to finish an activity as early as possible so LFT for an activity is the smallest of latest start time
of immediate succeeding activities.
Slack is determined after finding out all earliest and latest times by moving forward and
backward in a network diagram. Slack indicates idle time of an activity with which it can be
delayed without increasing the project completion time.
 Difference between PERT and CPM:
S.No. PERT CPM
1. PERT is that technique of project management CPM is that technique of project management
which is used to manage uncertain (i.e., time is which is used to manage only certain (i.e.,
not known) activities of any project time is known) activities of any project

2. It is event oriented technique which means that It is activity oriented technique which means
network is constructed on the basis of event. that network is constructed on the basis of
activities.

3 It is a probability model. It is a deterministic model.

4 It majorly focuses on time as meeting time target It majorly focuses on Time-cost trade off as
or estimation of percent completion is more minimizing cost is more important.
important.
5 It is appropriate for high precision time It is appropriate for reasonable time
estimation. estimation.
6 It has Non-repetitive nature of job It has repetitive nature of job.
7 There is no chance of crashing as there is no There may be crashing because of certain time
certainty of time. boundation.

8 It doesn’t use any dummy activities. It uses dummy activities for representing
sequence of activities.

9 It is suitable for projects which required research It is suitable for construction projects
and development