Transcript PRODUCTION AND OPERATIONS MANAGEMENT SHARDA UNIVERSITY • Program : MBA • Term: II • Credits: PREM NATH PANDAY [email protected] 10/31/2015 SHARDA Topics Cover Lectures UNIT 1 1.Introduction Meaning and function of ProductionManagement, Production system Production Organization.

PRODUCTION AND OPERATIONS
MANAGEMENT
SHARDA UNIVERSITY
• Program :
MBA
• Term:
II
• Credits:
3
PREM NATH PANDAY
[email protected]
10/31/2015
SHARDA
1
Topics
Cover
Lectures
UNIT 1
1.Introduction Meaning and function of Production
8
Management, Production system Production Organization Chart, Decision Making in Production Operation,
Production Departments with various other departments and their importance.
2. Strategies
Responsibility of Production Manger. Interdependencies of Operation strategies and decision making produce to stock
and produce to order strategies, concept of using mixed strategies, advantages of having mixed strategies.
3. Long term planning/strategy
Facility location and facility layout. Factors affecting the location of facility,
different types of layouts, product focused, process
Focused, cellular and mixed layouts. Introduction to the methods for determining the location and layout of a facility.
4. Intermediate term planning/ strategy
Capacities Planning, aggregate planning, hire and fire strategy etc.
Identification and segregation of the operations based on the strategy selected.
8
UNIT3
5. Shop floor control Resource planning, sequencing and scheduling, concept of JIT, manufacturing and assembly
line balancing, preparation of Gantt Chart.
6. Project Management
CPM, PERT forward pass and backward pass computations, resource leveling, resource allocation, and crashing of the
project.
8
UNIT4
7. Inventory Management
8
Inventory definition, types and models, managing the inventory, classification of inventories, MPS, MRP, ERP.
8. Work Study & Productivity
Productivity improving techniques, Cost reduction approach, Work and Method study, Work Order, Production Control
and its importance
UNIT 5
9. Quality Concepts
Production Quality Concepts and Internal Customer Approach, Introduction to the tools of quality management.
10. Safety Management
Evolution of safety concepts, Electrical & Chemical hazards, ionizing and non ionizing Radiation, Personal
protection, Material handling and shop floor design concepts, Environmental safety, fire prevention, introduction to
OHSAS standards.
UNIT 2
10/31/2015
SHARDA
8
2
1.Introduction Meaning and function of Production
Management, Production system Production Organization Chart, Decision Making
in Production Operation,
Production Departments with various other departments and their importance.
2. Strategies
Responsibility of Production Manger. Interdependencies of Operation strategies and
decision making produce to stock and produce to order strategies, concept of using
mixed strategies, advantages of having mixed strategies.
3. Long term planning/strategy
Facility location and facility layout. Factors affecting the location of facility,
different types of layouts, product focused, process
Focused, cellular and mixed layouts. Introduction to the methods for determining the location
and layout of a facility.
4. Intermediate term planning/ strategy
Capacities Planning, aggregate planning, hire and fire strategy etc.
Identification and segregation of the operations based on the strategy selected.
5. Shop floor control Resource planning, sequencing and scheduling, concept of JIT,
manufacturing and assembly line balancing, preparation of Gantt Chart.
6. Project Management
CPM, PERT forward pass and backward pass computations, resource leveling, resource
allocation, and crashing of the project.
10/31/2015
SHARDA
3
PRODUCTION AND OPERATIONS MANAGEMENT
3. Long term planning/strategy
Facility location and facility layout. Factors
affecting the location of facility, different types of
layouts, product focused, process Focused, cellular
and mixed layouts. Introduction to the methods for
determining the location and layout of a facility.
4. Intermediate term planning/ strategy
Capacities Planning, aggregate planning, hire and
fire strategy etc.
Identification and segregation of the operations
based on the strategy selected.
10/31/2015
SHARDA
4
What is Operations Management?
Defined
Operations management (OM) is
defined as the design, operation, and
improvement of the systems that create
and deliver the firm’s primary products
and services
10/31/2015
SHARDA
5
Why Study Operations Management?
Systematic Approach
to Org. Processes
Business Education
Operations
Management
Career Opportunities
Cross-Functional
Applications
10/31/2015
SHARDA
6
What is a Transformation Process?
Defined AS
A transformation process is defined as a
user of resources to transform inputs into
some desired outputs
10/31/2015
SHARDA
7
Transformations
• Physical--manufacturing
• Locational--transportation
• Exchange--retailing
• Storage--warehousing
• Physiological--health care
• Informational--telecommunications
10/31/2015
SHARDA
8
OM in the Organization Chart
Finance
Operations
Marketing
Plant
Manager
Operations
Manager
Director
Manufacturing, Production control,
Quality assurance, Engineering,
Purchasing, Maintenance, etc
10/31/2015
SHARDA
9
Core Services is Defined
Core services are basic things that
customers want from products they
purchase
10/31/2015
SHARDA
10
Core Services Performance Objectives
Quality
Flexibility
Operations
Management
Speed
Price (or cost
Reduction)
10/31/2015
SHARDA
11
Value-Added Services Defined
Value-added services differentiate
the organization from competitors
and build relationships that bind
customers to the firm in a positive
way
10/31/2015
SHARDA
12
Value-Added Service Categories
Problem Solving
Information
Operations
Management
Sales Support
Field Support
10/31/2015
SHARDA
13
The Importance of Operations
Management
• Synergies must exist with other
functional areas of the
organization
• Operations account for 60-80% of
the direct expenses that burden a
firms profit.
10/31/2015
SHARDA
14
Questions?
10/31/2015
SHARDA
15
HISTORICAL EVOLUTION OF PRODUCTION AND
OPERATIONS MANAGEMENT
• Production management becomes the
acceptable term from 1930s to 1950s. As
F.W. Taylor’s works become more widely
known, managers developed techniques that
focussed on economic efficiency in
manufacturing. Workers were studied in
great detail to eliminate wasteful efforts and
achieve greater efficiency. At the same time,
psychologists, socialists and other social
scientists began to study people and human
behaviour in the working environment.
10/31/2015
SHARDA
16
HISTORICAL EVOLUTION OF PRODUCTION AND
OPERATIONS MANAGEMENT
• With the 1970s emerges two distinct
changes in our views. The most obvious of
these, reflected in the new name operations
management was a shift in the service and
manufacturing sectors of the economy. As
service sector became more prominent, the
change from ‘production’ to ‘operations’
emphasized the broadening of our field to
service organizations. The second, more
suitable change was the beginning of an
emphasis on synthesis, rather than just
analysis, in management practices.
10/31/2015
SHARDA
17
Historical Development of OM
•
•
•
•
•
•
Scientific Management by Taylor
Moving assembly Line
Operations Research
OM and Information Technology
OM in Service
Integration of Manufacturing and Services
10/31/2015
SHARDA
18
Historical Development of OM
• JIT and TQC
• Manufacturing Strategy Paradigm
• Service Quality and Productivity
• Total Quality Management and
Quality Certification
10/31/2015
SHARDA
19
Historical Development of OM (cont’d)
• Business Process Reengineering
• Supply Chain Management
• Electronic Commerce
10/31/2015
SHARDA
20
Current Issues in OM
• Coordinate the relationships between
mutually supportive but separate
organizations.
• Optimizing global supplier, production, and
distribution networks.
• Increased co-production of goods and
services
10/31/2015
SHARDA
21
Current Issues in OM (cont’d)
• Managing the customers experience
during the service encounter
• Raising the awareness of operations
as a significant competitive weapon
10/31/2015
SHARDA
22
PRODUCTION AND OPERATIONS
MANAGEMENT
Long term planning / strategy
• Facility location and facility layout.
Factors affecting the location of facility,
different types of layouts, product
focused, process focused, cellular and
mixed layouts. Introduction to the
methods for determining the location
and layout of a facility.
10/31/2015
SHARDA
23
Facility location and facility layout
• It is a long-term strategic decision, which
cannot be changed once taken. An
optimum location can reduce the cost of
production and distribution to a great extent.
Thus great care and appropriate planning is
required to select the most appropriate
location
10/31/2015
SHARDA
24
• Factors affecting
the location of
facility, different
types of layouts
10/31/2015
SHARDA
25
Questions?
10/31/2015
SHARDA
26
LOCATIONAL ANALYSIS
• Locational analysis is a dynamic process where
entrepreneur analyses and compares the
appropriateness or otherwise of alternative sites
with the aim of selecting the best site for a given
enterprise. It consists the following:
• (a) Demographic Analysis: It involves study of
population in the area in terms of total population
(in no.), age composition, per capita income,
educational level, occupational structure etc.
• (b) Trade Area Analysis: It is an analysis of the
geographic area that provides continued clientele
to the firm. He would also see the feasibility of
accessing the trade area from alternative sites.
10/31/2015
SHARDA
27
LOCATIONAL ANALYSIS
• (c) Competitive Analysis: It helps to judge
the nature, location, size and quality of
competition in a given trade area.
• (d) Traffic analysis: To have a rough idea
about the number of potential customers
passing by the proposed site during the
working hours of the shop, the traffic
analysis aims at judging the alternative sites
in terms of pedestrian and vehicular traffic
passing a site.
10/31/2015
SHARDA
28
LOCATIONAL ANALYSIS
• (e) Site economics: Alternative sites are
evaluated in terms of establishment costs
and operational costs under this. Costs of
establishment is basically cost incurred for
permanent physical facilities but operational
costs are incurred for running business on
day to day basis, they are also called as
running costs.
10/31/2015
SHARDA
29
SELECTION CRITERIA
• The important considerations for selecting a
suitable location are given as follows:
• a) Natural or climatic conditions.
• b) Availability and nearness to the sources of raw
material.
• c) Transport costs-in obtaining raw material and
also distribution or marketing finished products to
the ultimate users.
• d) Access to market: small businesses in retail or
wholesale or services should be located within the
vicinity of densely populated areas.
10/31/2015
SHARDA
30
SELECTION CRITERIA
• e) Availability of Infrastructural facilities such
as developed industrial sheds or sites, link
roads, nearness to railway stations, airports
or sea ports, availability of electricity, water,
public utilities, civil amenities and means of
communication are important, especially for
small scale businesses.
10/31/2015
SHARDA
31
SELECTION CRITERIA
• f) Availability of skilled and non-skilled
labour and technically qualified and trained
managers.
• g) Banking and financial institutions are
located nearby.
• h) Locations with links: to develop industrial
areas or business centers result in savings
and cost reductions in transport overheads,
miscellaneous expenses.
• i) Strategic considerations of safety and
security should be given due importance.
10/31/2015
SHARDA
32
SELECTION CRITERIA
• j) Government influences: Both positive and
negative incentives to motivate an
entrepreneur to choose a particular location
are made available. Positive includes cheap
overhead facilities like electricity, banking
transport, tax relief, subsidies and
liberalization. Negative incentives are in form
of restrictions for setting up industries in urban
areas for reasons of pollution control and
decentralization of industries.
• k) Residence of small business entrepreneurs
want to set up nearby their homelands
10/31/2015
SHARDA
33
CHECK PROGRESS
• The factor least important to consider when
selecting a location for a new furniture store is
• a. The weather of the community
• b. The future of the community
• c. The other businesses in the community
• d. The age distribution of the population in the
community
10/31/2015
SHARDA
34
CHECK PROGRESS
• 2. When selecting a site for a business it is
important to
• a. Purchase the property when possible
• b. Lease the property to avoid the problem of
mortgage payments
• c. Rent or buy the property, whichever must
be done in order to obtain the specific site
• d. Make comparisons
10/31/2015
SHARDA
35
PLANT LAYOUT
• The efficiency of production depends on
how well the various machines; production
facilities and employee’s amenities are
located in a plant. Only the properly laid out
plant can ensure the smooth and rapid
movement of material, from the raw material
stage to the end product stage. Plant layout
encompasses new layout as well as
improvement in the existing layout.
10/31/2015
SHARDA
36
PLANT LAYOUT
• It may be defined as a technique of locating
machines, processes and plant services
within the factory so as to achieve the right
quantity and quality of output at the lowest
possible cost of manufacturing. It involves a
judicious arrangement of production facilities
so that workflow is direct.
10/31/2015
SHARDA
37
PLANT LAYOUT
• A plant layout can be defined as follows:
• Plant layout refers to the arrangement of
physical facilities such as machinery,
equipment, furniture etc. with in the factory
building in such a manner so as to have
quickest flow of material at the lowest cost
and with the least amount of handling in
processing the product from the receipt of
material to the shipment of the finished
product.
10/31/2015
SHARDA
38
ESSENTIALS - Facility location and facility layout
• An efficient plant layout is one that can be
instrumental in achieving the following
objectives:
• a) Proper and efficient utilization of available
floor space
• b) To ensure that work proceeds from one
point to another point without any delay
• c) Provide enough production capacity.
• d) Reduce material handling costs
• e)
Reduce hazards to
personnel
10/31/2015
SHARDA
39
ESSENTIALS - Facility location and facility layout
•
•
•
•
•
•
•
•
•
f) Utilize labour efficiently
g) Increase employee morale
h) Reduce accidents
i) Provide for volume and product flexibility
j) Provide ease of supervision and control
k) Provide for employee safety and health
l) Allow ease of maintenance
m) Allow high machine or equipment utilization
n) Improve productivity
10/31/2015
SHARDA
40
Facility location and facility layout
• The efficiency of production depends on
how well the various machines;
production facilities and amenities are
located in a plant. An ideal plant layout
should provide the optimum relationship
among the output, floor area and
manufacturing process.
10/31/2015
SHARDA
41
Facility location and facility layout
• From the point of view of plant layout, we can
classify small business into three categories i.e.
• (a) manufacturing units
• (b) traders
• (c) service establishments.
• Designing of layout is different in all above three
categories e.g. manufacturing unit may follow
one of Product, Process, and fixed position or
combined layout, as the case may be.
10/31/2015
SHARDA
42
Facility location and facility layout
• Plant layout is applicable to all types of
industries or plants. At the end, the
layout should be conducive to health
and safety of employees. It should
ensure free and efficient flow of men
and materials. Future expansion and
diversification may also be considered
while planning factory layout.
10/31/2015
SHARDA
43
Factors affecting the location of facility,
different types of layouts,
• From the point of view of plant layout,
we can classify small business or unit
into three categories:
• 1. Manufacturing units
• 2. Traders
• 3. Service Establishments
10/31/2015
SHARDA
44
Manufacturing units
• In case of manufacturing unit, plant
layout may be of four types:
• (a) Product or line layout
• (b) Process or functional layout
• (c) Fixed position or location layout
• (d) Combined or group layout
10/31/2015
SHARDA
45
Traders
• When two outlets carry almost same
merchandise, customers usually buy in the
one that is more appealing to them. Thus,
customers are attracted and kept by good
layout i.e. good lighting, attractive colours,
good ventilation, air-conditioning, modern
design and arrangement and even music. All
of these things mean customer convenience,
customer appeal and greater business
volume.
10/31/2015
SHARDA
46
Traders
• The customer is always impressed by
service, efficiency and quality. Hence, the
layout is essential for handling merchandise,
which is arranged as per the space available
and the type and magnitude of goods to be
sold keeping in mind the convenience of
customers.
10/31/2015
SHARDA
47
Traders
• There are three kinds of layouts in retail
operations today.
• 1. Self service or modified self service layout
• 2. Full service layout
• 3. Special layouts
10/31/2015
SHARDA
48
Services centers and establishment
• Services establishments such as motels, hotels,
restaurants, must give due attention to client
convenience, quality of service, efficiency in
delivering services and pleasing office ambience.
In today’s environment, the clients look for ease in
approaching different departments of a service
organization and hence the layout should be
designed in a fashion, which allows clients quick
and convenient access to the facilities offered by
a service establishment.
10/31/2015
SHARDA
49
Product focused, Process
focused, Cellular and Mixed
layouts
10/31/2015
SHARDA
50
Questions?
10/31/2015
SHARDA
51
Process Selection and System
Design
Forecasting
Capacity
Planning
Product and
Service Design
Technological
Change
10/31/2015
Facilities and
Equipment
Layout
Process
Selection
SHARDA
Work
Design
52
Process Strategy
• Key aspects of process strategy
–
Capital intensive – equipment/labor
–
Process flexibility
–
Technology
–
Adjust to changes
10/31/2015
–
Design
–
Volume
–
technology
SHARDA
53
Technology
• Technology: The application of
scientific discoveries to the
development and improvement of
products and services and operations
processes.
• Technology innovation: The discovery
and development of new or improved
products, services, or processes for
producing or providing
them.
10/31/2015
SHARDA
54
Kinds of Technology
• Operations management is primarily
concerned with three kinds of technology:
– Product and service technology
– Process technology
– Information technology
• All three have a major impact on:
– Costs
– Productivity
– Competitiveness
10/31/2015
SHARDA
55
Technology Competitive Advantage
• Innovations in
– Products and services
• Cell phones
• PDAs
• Wireless computing
– Processing technology
• Increasing productivity
• Increasing quality
• Lowering costs
10/31/2015
SHARDA
56
Technology Acquisition
• Technology can have benefits but …
• Technology risks include:
– What technology will and will not do
– Technical issues
– Economic issues
•
•
•
•
10/31/2015
Initial costs, space, cash flow, maintenance
Consultants and/or skilled employees
Integration cost, time resources
Training, safety, job loss
SHARDA
57
Process Selection
Batch
• Variety
– How much
• Flexibility
– What degree
• Volume
Job Shop
Repetitive
– Expected output
Continuous
10/31/2015
SHARDA
58
Process Types
• Job shop
– Small scale
• Batch
– Moderate volume
• Repetitive/assembly line
– High volumes of standardized goods or
services
• Continuous
– Very high volumes of non-discrete goods
10/31/2015
SHARDA
59
Product – Process Matrix
Dimension
Job variety
Very High
Moderate
Low
Very low
Process
flexibility
Very High
Moderate
Low
Very low
Unit cost
Very High
Moderate
Low
Very low
Volume of
output
Very High
Low
High
Very low
10/31/2015
SHARDA
60
Product and Process Profiling
• Process selection can involve substantial
investment in
– Equipment
– Layout of facilities
• Product profiling: Linking key product or service
requirements to process capabilities
• Key dimensions
– Range of products or services
– Expected order sizes
– Pricing strategies
– Expected schedule changes
10/31/2015
SHARDA
– Order winning requirements
61
Automation
• Automation: Machinery that has sensing
and control devices that enables it to
operate
– Fixed automation
– Programmable automation
10/31/2015
SHARDA
62
Automation
• Computer-aided design and
manufacturing systems (CAD/CAM)
• Numerically controlled (NC) machines
• Robot
• Manufacturing cell
• Flexible manufacturing systems(FMS)
• Computer-integrated manufacturing (CIM)
10/31/2015
SHARDA
63
Facilities Layout
• Layout: the configuration of
departments, work centers, and
equipment, with particular emphasis on
movement of work (customers or
materials) through the system
• Product layouts
• Process layouts
• Fixed-Position layout
• Combination layouts
10/31/2015
SHARDA
64
Objective of Layout Design
1. Facilitate attainment of product or service
quality
2. Use workers and space efficiently
3. Avoid bottlenecks
4. Minimize unnecessary material handling
costs
5. Eliminate unnecessary movement of
workers or materials
6. Minimize production time or customer
service time
10/31/2015
SHARDA
65
7. Design for safety
Importance of Layout Decisions
• Requires substantial investments of
money and effort
• Involves long-term commitments
• Has significant impact on cost and
efficiency of short-term operations
10/31/2015
SHARDA
66
The Need for Layout Decisions
Inefficient operations
Changes in the design
of products or services
For Example:
High Cost
Bottlenecks
Accidents
The introduction of new
products or services
Safety hazards
10/31/2015
SHARDA
67
The Need for Layout Design
(Cont’d)
Changes in
environmental
or other legal
requirements
Changes in volume of
output or mix of
products
Morale problems
Changes in methods
and equipment
10/31/2015
SHARDA
68
Basic Layout Types
• Product layouts
• Process layouts
• Fixed-Position layout
• Combination layouts
10/31/2015
SHARDA
69
Basic Layout Types
• Product layout
–
Layout that uses standardized processing
operations to achieve smooth, rapid, highvolume flow
• Process layout
–
Layout that can handle varied processing
requirements
• Fixed Position layout
–
10/31/2015
Layout in which the product or project
remains stationary, and workers, materials,
and equipment are moved as needed
SHARDA
70
Product Layout
Raw
materials
or customer
Material
and/or
labor
Station
1
Material
and/or
labor
Station
2
Material
and/or
labor
Station
3
Station
4
Finished
item
Material
and/or
labor
Used for Repetitive or Continuous Processing
10/31/2015
SHARDA
71
Advantages of Product Layout
•
•
•
•
•
•
•
High rate of output
Low unit cost
Labor specialization
Low material handling cost
High utilization of labor and equipment
Established routing and scheduling
Routing accounting and purchasing
10/31/2015
SHARDA
72
Disadvantages of Product Layout
• Creates dull, repetitive jobs
• Poorly skilled workers may not
maintain equipment or quality of output
• Fairly inflexible to changes in volume
• Highly susceptible to shutdowns
• Needs preventive maintenance
• Individual incentive plans are
impractical
10/31/2015
SHARDA
73
A U-Shaped Production Line
In
1
2
3
4
5
Workers
6
Out
10/31/2015
10
9
8
SHARDA
7
74
Process Layout
Process Layout
(functional)
Dept. A
Dept. C
Dept. E
Dept. B
Dept. D
Dept. F
Used for Intermittent processing
Job Shop or Batch Processes
10/31/2015
SHARDA
75
Product Layout
Product Layout
(sequential)
Work
Station 1
Work
Station 2
Work
Station 3
Used for Repetitive Processing
Repetitive or Continuous Processes
10/31/2015
SHARDA
76
Advantages of Process Layouts
• Can handle a variety of processing
requirements
• Not particularly vulnerable to equipment
failures
• Equipment used is less costly
• Possible to use individual incentive
plans
10/31/2015
SHARDA
77
Disadvantages of Process Layouts
•
•
•
•
•
In-process inventory costs can be high
Challenging routing and scheduling
Equipment utilization rates are low
Material handling slow and inefficient
Complexities often reduce span of
supervision
• Special attention for each product or
customer
• Accounting and purchasing are more
involved
10/31/2015
SHARDA
78
Fixed Position Layouts
• Fixed Position Layout: Layout in which the
product or project remains stationary, and
workers, materials, and equipment are
moved as needed.
• Nature of the product dictates this type of
layout
– Weight
– Size
– Bulk
• Large construction projects
10/31/2015
SHARDA
79
Cellular Layouts
• Cellular Production
–
Layout in which machines are grouped
into a cell that can process items that
have similar processing requirements
• Group Technology
–
10/31/2015
The grouping into part families of items
with similar design or manufacturing
characteristics
SHARDA
80
Functional vs. Cellular Layouts
Dimension
Functional
Cellular
Number of moves
between departments
many
few
Travel distances
longer
shorter
Travel paths
variable
fixed
Job waiting times
greater
shorter
Throughput time
higher
lower
Amount of work in
process
higher
lower
Supervision difficulty
higher
lower
Scheduling complexity
higher
lower
Equipment
10/31/2015 utilization
lower
SHARDA
higher
81
Service Layouts
• Warehouse and storage layouts
• Retail layouts
• Office layouts
Service layouts must be aesthetically
pleasing as well as functional
10/31/2015
SHARDA
82
Warehouse and storage layouts - Material
Handling
Warehouse Storage systems and
Material Handling are:
1. Manual Stacking using bulk storage
method
2. Selective Racking systems
3. Very Narrow Aisle
4. Automated Storage & retrieval (ASRL)
10/31/2015
SHARDA
83
Questions?
10/31/2015
SHARDA
84
Basic information needed to design a warehouse
Weight
Number of
movements
Volume
Equipment
Staff
10/31/2015
SHARDA
Handling Capacity
85
Storage warehouses
• Building design determined mainly by packaging
sizes and materials handling equipment
• “Very narrow aisle” (VNA) widths
• Fully automated 5,000 m2 to 10,000 m2 storage
buildings now operated with only five or six people
on site at any one time
10/31/2015
SHARDA
86
Warehouse design and efficiency
Design parameters
Traditional warehouses
Height of eaves
10 metres
18 to 32 metres
Storage
 Pallets in lanes
 Fully automated storage
 The goods dictate
stacking height the
& retrieval
 Storage height
independent of goods
 Wide aisles for forklift
 Very narrow aisles for
turning circle
Automated warehouses
picker-stackers
Equipment
Pallet racking
Interior space
Standard “box” according
to site
Multi-depth and purpose built
Operations dictate the
design
Store space
utilisation
50% to 75%
Above 95%
10/31/2015
SHARDA
87
Using cross-docking centres
Supplier
End-point
delivery
10/31/2015
Supplier
Supplier
End-point End-point End-point End-point
delivery
delivery
delivery
delivery
SHARDA
End-point
delivery
88
Fully integrated cross-docking centre (CDC)
and enterprise resource planning system
CDC
WMS
HQ
Warehouse Materials Purchasing Marketing Financial
& sales
reporting &
& logistics & resource system
control
system
planning
system
Customer order
Truck route
Advance data
communication
10/31/2015
SHARDA
Data warehouse
and system backups
89
Transshipment
bay
Storage locations
10/31/2015
Dock
levellers
FLOW
SHARDA
DISPATCH
ADMIN.
UNPACKING &
INSPECTION
Dock
levellers
90
Dock levellers
Administration
UNPACKING &
INSPECTION
10/31/2015
DISPATCH
FLO W
SHARDA
Storage locations
Transhipment
bay
91
STORES / STOCKYARD LENGTH OF FLOW
SLOW MOVING
ITEMS
MEDIUM RATE
MOVING ITEMS
FAST MOVING
ITEMS
ENTRANCE
10/31/2015
EXIT
SHARDA
92
A number of distinct areas
Receiving bay
Marshalling area
Dispatch bay
Fast moving pallet area
Control point/office
Slow moving parts
Area for materials handling
equipment
Heavy goods area
Unpacking area
Inspection area
10/31/2015
Bin area (used to hold
small items)
High value items security
cage
SHARDA
93
Which other factors to consider?
Inherent safety
Clearly marked signs
Staff comfort
Good communication
Accessibility
Use of space
Long term flexibility
10/31/2015
SHARDA
94
Advantages of a fixed stock location system
Warehouse staff can quickly familiarise
themselves with the layout and location
If stored in code order, similar items will be
stored together
This may prompt suggestion of alternatives
It may also prompt variety reduction
It does not require a sophisticated system to
keep track of which items are currently in store
10/31/2015
SHARDA
95
Advantages of a random stock location system
Most economical in terms of use of space
Quick receipt, handling and put-away of goods
Gives storekeeper greater flexibility
Copes better with changing space requirements
Can reduce storage costs
10/31/2015
SHARDA
96
There are four main goals for warehouse management
operations, they are to maximise completion of orders on
time-in-full and to minimise:
• The cost of warehouse activities
• The time that materials stay in the warehouse
• Response time to demand from the next stage in
the supply chain and errors in dispatched loads
Whilst preserving the quality, value and security of the
stored
items.
10/31/2015
SHARDA
97
Forklift
truck
Hand trolley
Pallet
truck
10/31/2015
SHARDA
98
The principles of efficient materials handling
Removing unnecessary movement
Plan layout and handling simultaneously to reduce
handling time and costs
Arrange handling/movement to minimize the number
of pick-up and put-down movements
Use sealed unit loads, pallets or containers wherever
possible
10/31/2015
SHARDA
99
Space utilisation and racking design
2 back-to-back
double depth racks
2 back-to-back
double depth racks
Aisle
2 back-to-back
single depth
racks
2 back-to-back
double depth racks
Aisle
2 back-to-back
single depth
racks
Aisle
2 back-to-back
single depth
racks
Aisle
Pallet racks
Double depth
10/31/2015
Single depth
Access space
Access space
SHARDA
<Storage space>
>Storage<
space
100
Pallets
10/31/2015
SHARDA
101
Post pallets
Shelving
10/31/2015
SHARDA
102
Compactor
shelving
10/31/2015
SHARDA
103
Mezzanine Storage
10/31/2015
SHARDA
104
Steel or
plastic
storage bins
First In First Out
(FIFO) type racking
Carousel
storage unit
10/31/2015
SHARDA
105
Semi-automated handling equipment:
conveyor systems
10/31/2015
SHARDA
106
Unloading, putting away and picking
equipment
Picker-stacker truck
Forklift trucks
Maximum
height
15m.
Pantograph
10/31/2015
Reach SHARDA
truck
107
Comparing space requirements for pickerstackers and standard forklift trucks
Picker-stackers
Forklift trucks
Guide rails for
automatic steering
Picker-stacker:
Forklift:
10/31/2015
Access Storage
Access
Storage
SHARDA
Single depth pallet racks
108
Highly-automated fixed handling
equipment
Maximum
height: 40 m.
Pickerstacker
crane
Automatically
guided vehicle
10/31/2015
SHARDA
109
Materials, unit loads and quantities handled
Vehicle types and sizes, and vehicle movements
Site access, and site roads and flows
Areas for vehicle maneuver and parking
Loading dock types
Environment
Control and security
Loading by equipment, and
Separate or combined goods-in and dispatch areas
10/31/2015
SHARDA
110
Impact of the type of materials handled on
the layout of the warehouse
The type of handling equipment needed
Space needed for consolidation/deconsolidation
of loads (kitting/breaking bulk)
Space required for marshalling or collecting full
vehicle loads prior to dispatch
Quality/certification waiting areas and control
requirements
10/31/2015
SHARDA
111
Loading bay arrangements and
equipment
Canopied loading bays
Dock shelters
Other dock fittings
10/31/2015
SHARDA
112
The Design of stockyards
Surface
Drainage
Security
Artificial Lighting
Control Point/Office
Stockyard layout and access
requirements
10/31/2015
SHARDA
113
Warehouse operations - Principles of order
picking and dispatch
At least one location for every product line handled
within the smallest possible area
Movement of picking staff and replenishment staff
kept to a minimum
Congestion should be minimized
Picking and replenishment operations should be
separated to minimize congestion
There should be no stock-outs
Required service levels should be achieved
10/31/2015
SHARDA
114
Popularity storage
Fast-moving stock is placed nearest to the
order marshalling and despatch areas
Order picking stock
Reserve
stock
10/31/2015
slow
movers
medium
movers
SHARDA
fast
movers
Order
marshalling
and
despatch
area
115
Vertical separation of reserve stock
and order-picking stock
Reserve stock
Reserve stock
Reserve stock
Picking stock
10/31/2015
SHARDA
116
Horizontal separation of reserve stock
and order-picking stock
Above view of pallet racking
Reserve stock
10/31/2015
Picking stock
SHARDA
117
Separation, by aisle, of order-picking and
replenishment operations to minimize congestion
Replenish
Pick
Replenish
Pick
Replenish
10/31/2015
SHARDA
118
Picking stock location
The quantity of each product to be picked
The destination of the picked goods
Action in the event of shortage/stock-out
The next location to visit
10/31/2015
SHARDA
119
The pick rate - the number of picks per hour
Order throughput/case throughput/pallet throughput
Service levels
Error rates
The number of stocks-outs in a given period
10/31/2015
SHARDA
120
ADVANTAGES OF HIGH TECHNOLOGY
WAREHOUSES
a) High density of storage by utilizing the
cubic space available and with the help of
narrow aisles.
b) Tighter inventory control through
computerization resulting in higher
inventory accuracy
c) Reduced access in the aisles, improving
the security of the material
10/31/2015
SHARDA
121
ADVANTAGES OF HIGH TECHNOLOGY
WAREHOUSES
d) Increased space utilizations via random storage
versus dedicated space allocated to different
parts.
e) Ability to tie the storage system to the
manufacturing and the distribution systems via
computer control, permitting a higher level of
system performance
e) Better utilization of storage and retrieval
equipment.
f) Reduction in manpower.
10/31/2015
SHARDA
122
COLOR CODING OF MATERIAL
Standard Specification for
Colour Coding uniformly is to
be followed for all the plants
and services.
10/31/2015
SHARDA
123
Office layouts
10/31/2015
SHARDA
124
Office layouts
• Office life wasn't always about peeking over your
cubicle wall like a curious prairie dog; once upon
a time offices were veritable fields of desks.
• A lot has changed in office design since Fredrick
Taylor set to work in the late 20th century making
offices more efficient. Over at Wired they've put
together a mini history of the modern workspace,
complete with diagrams of how offices have been
laid out over the last century. It's not only a
fascinating look at how our workspaces have
been arranged but fun way to see how your
present workspace falls into the spectrum of office
design.
10/31/2015
SHARDA
125
10/31/2015
SHARDA
126
10/31/2015
SHARDA
127
10/31/2015
SHARDA
128
Retail layouts
• one of the key questions –
“what goods / services to offer
the shopper?”
• Primary job as a needs satisfier
10/31/2015
SHARDA
129
Retail layouts
10/31/2015
SHARDA
130
Retail layouts
10/31/2015
SHARDA
131
Retail layouts
10/31/2015
SHARDA
132
Retail layouts
10/31/2015
SHARDA
133
Retail layouts
10/31/2015
SHARDA
134
Retail layouts
10/31/2015
SHARDA
135
Retail layouts
10/31/2015
SHARDA
136
PRODUCTION AND OPERATIONS
MANAGEMENT
• 4. Intermediate term planning/ strategy
• Capacities Planning, aggregate planning,
hire and fire strategy etc.
• Identification and segregation of the
operations based on the strategy
selected.
10/31/2015
SHARDA
137
Questions?
10/31/2015
SHARDA
138
Capacities
Planning,
Aggregate
Planning
10/31/2015
SHARDA
139
Production control
• Production control: Production control is the
process of planning production in advance of
operations, establishing the extract route of
each individual item part or assembly,
setting, starting and finishing for each
important item, assembly or the finishing
production and releasing the necessary
orders as well as initiating the necessary
follow-up to have the smooth function of the
enterprise. The production control is of
complicated
nature in
small industries. 140
10/31/2015
SHARDA
Production control
• The production planning and control department
can function at its best in small scale unit only when
the
• work manager,
• the purchase manager,
• the personnel manager and the
• financial controller assist in planning production
activities.
• The production controller directly reports to the
works manager but in small scale unit, all the three
functions namely material control, planning and
control are often performed by the entrepreneur
himself production control starts with dispatching
and ends up with corrective actions.
10/31/2015
SHARDA
141
Production control
• Gorden and Carson observe production; planning
and control involve generally the organization and
planning of manufacturing process. Especially it
consists of the
• planning of routing,
• scheduling,
• dispatching inspection,
• and coordination,
• control of materials, methods machines, tools and
operating times.
• The ultimate objective is the organization of the
supply and movement of materials and labour,
machines utilization and related activities, in order
to bring about the desired manufacturing results in
terms
of quality, quantity,
time and place.
10/31/2015
SHARDA
142
Capacities Planning, aggregate planning
• Production planning without production
control is like a bank without a bank
manager, planning initiates action while
control is an adjusting process, providing
corrective measures for planned
development. Production control regulates
and stimulates the orderly how of materials
in the manufacturing process from the
beginning to the end.
10/31/2015
SHARDA
143
Production planning and control can facilitate
• (1) Optimum Utilization of Capacity: With the help of
Production Planning and Control [PPC] the
entrepreneur can schedule his tasks and production
runs and thereby ensure that his productive
capacity does not remain idle and there is no undue
queuing up of tasks via proper allocation of tasks to
the production facilities. No order goes unattended
and no machine remains idle.
• (2) Inventory control: Proper PPC will help the
entrepreneur to resort to just- in- time systems and
thereby reduce the overall inventory. It will enable
him to ensure that the right supplies are available at
the right time.
10/31/2015
SHARDA
144
Production planning and control can facilitate
• (3) Economy in production time: PPC will
help the entrepreneur to reduce the cycle
time and increase the turnover via proper
scheduling.
• (4) Ensure quality: A good PPC will provide
for adherence to the quality standards so that
quality of output is ensured.
10/31/2015
SHARDA
145
Production planning and control can facilitate
• To sum up we may say that PPC is of
immense value to the entrepreneur in
capacity utilization and inventory control.
More importantly it improves his response
time and quality.
• As such effective PPC contributes to
time, quality and cost parameters of
entrepreneurial success.
10/31/2015
SHARDA
146
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Production planning: Production planning
may be defined as the technique of
foreseeing every step in a long series of
separate operations, each step to be taken at
the right time and in the right place and each
operation to be performed in maximum
efficiency.
• It helps entrepreneur to work out the quantity
of material manpower, machine and money
requires for producing predetermined level of
output in given period of time.
10/31/2015
SHARDA
147
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Routing: Under this, the operations, their
path and sequence are established. To
perform these operations the proper class of
machines and personnel required are also
worked out. The main aim of routing is to
determine the best and cheapest sequence
of operations and to ensure that this
sequence is strictly followed. In small
enterprises, this job is usually done by
entrepreneur himself in a rather adhoc
10/31/2015
SHARDA
148
manner.
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Routing procedure involves following different
activities.
• (1) An analysis of the article to determine what to
make and what to buy.
• (2) To determine the quality and type of material
• (3) Determining the manufacturing operations and
their sequence.
• (4) A determination of lot sizes
• (5) Determination of scrap factors
• (6) An analysis of cost of the article
• (7) Organization of production control forms.
10/31/2015
SHARDA
149
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Scheduling: It means working out of time
that should be required to perform each
operation and also the time necessary to
perform the entire series as routed, making
allowances for all factors concerned. It
mainly concerns with time element and
priorities of a job. The pattern of scheduling
differs from one job to another which is
explained as below:
10/31/2015
SHARDA
150
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Production schedule: The main aim is to
schedule that amount of work which can easily
be handled by plant and equipment without
interference. Its not independent decision as it
takes into account following factors.
• (1) Physical plant facilities of the type required to
process the material being scheduled.
• (2) Personnel who possess the desired skills
and experience to operate the equipment and
perform the type of work involved.
• (3) Necessary materials and purchased parts.
10/31/2015
SHARDA
151
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Master Schedule: Scheduling usually starts with preparation of master
schedule which is weekly or monthly break-down of the production
requirement for each product for a definite time period, by having this
as a running record of total production requirements the entrepreneur
is in better position to shift the production from one product to another
as per the changed production requirements. This forms a base for all
subsequent scheduling acclivities. A master schedule is followed by
operator schedule which fixes total time required to do a piece of work
with a given machine or which shows the time required to do each
detailed operation of a given job with a given machine or process.
10/31/2015
SHARDA
152
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Manufacturing schedule: It is prepared
on the basis of type of manufacturing
process involved. It is very useful where
single or few products are manufactured
repeatedly at regular intervals. Thus it
would show the required quality of each
product and sequence in which the same
to be operated
10/31/2015
SHARDA
153
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Scheduling of Job order manufacturing:
Scheduling acquires greater importance in
job order manufacturing. This will enable the
speedy execution of job at each center point.
As far as small scale industry is concerned
scheduling is of utmost importance as it
brings out efficiency in the operations and
reduces cost price.
10/31/2015
SHARDA
154
STEPS OF PRODUCTION PLANNING AND
CONTROL
• The small entrepreneur should maintain four types
of schedules to have a close scrutiny o all stages
namely an enquiry schedule,
• a production schedule,
• a shop schedule and
• an arrears schedule
out of above four, a shop schedule is the most
important most suited to the needs of small scale
industry as it enables a foreman to see at a glance.
• 1. The total load on any section
• 2. The operational sequence
• 3.
10/31/2015
The stage, which any
SHARDA
job has reached.
155
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Loading: The next step is the execution of the schedule plan as per the
route chalked out it includes the assignment of the work to the
operators at their machines or work places. So loading determines who
will do the work as routing determines where and scheduling
determines when it shall be done.
• Gantt Charts are most commonly used in small industries in order to
determine the existing load and also to foresee how fast a job can be
done. The usefulness of their technique lies in the fact that they
compare what has been done and what ought to have been done.
10/31/2015
SHARDA
156
STEPS OF PRODUCTION PLANNING AND
CONTROL
•
Dispatching: Dispatching involves issue of production orders for starting the
operations. Necessary authority and conformation is given for:
•
1. Movement of materials to different workstations.
•
2. Movement of tools and fixtures necessary for each operation.
•
3. Beginning of work on each operation.
•
4. Recording of time and cost involved in each operation
•
5. Movement of work from one operation to another in accordance with the route
sheet.
•
6. Inspecting or supervision of work
•
Dispatching is an important step as it translates production plans into production..
10/31/2015
SHARDA
157
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Follow up: Every production programme involves
determination of the progress of work, removing
bottlenecks in the flow of work and ensuring that
the productive operations are taking place in
accordance with the plans. It spots delays or
deviations from the production plans. It helps to
reveal detects in routing and scheduling,
misunderstanding of orders and instruction, under
loading or overloading of work etc.
• All problems or deviations are investigated and
remedial measurer are undertaken to ensure the
completion
10/31/2015
of work by the
SHARDA
planned date.
158
STEPS OF PRODUCTION PLANNING AND
CONTROL
• Inspection: This is mainly to ensure the quality of
goods. It can be required as effective agency of
production control.
• Corrective measures: Corrective action may involve
any of those activities of adjusting the route,
rescheduling of work changing the workloads,
repairs and maintenance of machinery or
equipment, control over inventories of the cause of
deviation is the poor performance of the
employees. Certain personnel decisions like
training, transfer, demotion etc. may have to be
taken. Alternate methods may be suggested to
handle peak loads.
10/31/2015
SHARDA
159
•
•
•
•
•
•
•
•
•
•
STEPS OF PRODUCTION PLANNING AND
CONTROL - CHECK YOUR PROGRESS
Activity 1: Circle the key words, which do not belong to this
lesson.
Dispatching Plant Layout Inspection
Productivity Index Loading Marketing Mix
Activity 2: Match the following
Routing Working out of time that should be required to
perform each operation
Scheduling To assign the work to the operations at machines
or work place
Loading To determine the best and cheapest sequence of
operations
Activity 3: Explain the meaning of following key words in your
own words
(a) Production planning (b) Production control
(c) Routing (d) Scheduling
10/31/2015
SHARDA
160
Strategic Capacity Planning
• Capacity can be defined as the ability to
hold, receive, store, or accommodate
• Strategic capacity planning is an approach
for determining the overall capacity level of
capital intensive resources, including
facilities, equipment, and overall labor force
size
10/31/2015
SHARDA
161
Capacity Utilization
Capacityused
Capacityutilization rate 
Best operating lev el
• Where
• Capacity used
–
rate of output actually achieved
• Best operating level
–
10/31/2015
capacity for which the process was designed
SHARDA
162
Best Operating Level
Example: Engineers design engines and assembly lines to operate
at an ideal or “best operating level” to maximize output and
minimize ware
Average
unit cost
of output
Underutilization
Over utilization
Best Operating
Level
10/31/2015
SHARDA
Volume
163
Example of Capacity Utilization
• During one week of production, a plant
produced 83 units of a product. Its historic
highest or best utilization recorded was 120
units per week. What is this plant’s capacity
utilization rate?

Answer:
Capacity utilization rate =
Capacity used .
Best operating level
= 83/120
=0.69 or 69%
10/31/2015
SHARDA
164
Economies & Diseconomies of Scale
Economies of Scale and the Experience Curve working
Average
unit cost
of output
100-unit
plant
200-unit
plant
300-unit
plant
400-unit
plant
Diseconomies of Scale start working
10/31/2015
SHARDA
Volume
165
The Experience
Curve
As plants produce more products, they
gain experience in the best production
methods and reduce their costs per unit
Yesterday
Cost or
price
per unit
Today
Tomorrow
Total accumulated production of units
10/31/2015
SHARDA
166
Capacity Focus
• The concept of the focused factory holds
that production facilities work best when
they focus on a fairly limited set of
production objectives
• Plants Within Plants (PWP)
– Extend focus concept to operating level
10/31/2015
SHARDA
167
Capacity Flexibility
• Flexible plants
• Flexible processes
• Flexible workers
10/31/2015
SHARDA
168
Capacity Planning: Balance
Unbalanced stages of production
Units
per
month
Stage 1
Stage 2
6,000
7,000
Stage 3
5,000
Maintaining System Balance: Output of one stage is the
exact input requirements for the next stage
Balanced stages of production
Units
per
month
10/31/2015
Stage 1
Stage 2
6,000
6,000
SHARDA
Stage 3
6,000
169
Capacity Planning
• Frequency of Capacity Additions
• External Sources of Capacity
10/31/2015
SHARDA
170
Determining Capacity Requirements
• 1. Forecast sales within each individual
product line
• 2. Calculate equipment and labor
requirements to meet the forecasts
• 3. Project equipment and labor availability
over the planning horizon
10/31/2015
SHARDA
171
Example of Capacity Requirements
A manufacturer produces two lines of mustard,
Fancy Fine and Generic line. Each is sold in
small and family-size plastic bottles.
The following table shows forecast demand for
the next four years.
Year:
FancyFine
Small (000s)
Family (000s)
Generic
Small (000s)
Family (000s)
10/31/2015
1
2
3
4
50
35
60
50
80
70
100
90
100
80
110
90
120
100
140
110
SHARDA
172
Example of Capacity Requirements (Continued): Product
from a Capacity Viewpoint
• Question: Are we really producing two
different types of mustards from the
standpoint of capacity requirements?
• Answer: No, it’s the same product just
packaged differently.
10/31/2015
SHARDA
173
Example of Capacity Requirements (Continued) :
Equipment and Labor Requirements
Year:
Small (000s)
Family (000s)
1
150
115
2
170
140
3
200
170
4
240
200
•Three 100,000 units-per-year machines are available
for small-bottle production. Two operators required
per machine.
•Two 120,000 units-per-year machines are available
for family-sized-bottle production. Three operators
required per machine.
10/31/2015
SHARDA
174
175
Question: What are the Year 1 values for capacity, machine,
and labor?
Year:
1
150
115
2
170
140
3
200
170
4
240
200
Mach. Cap.
Mach. Cap.
300,000
240,000
Labor
Labor
6
6
Small (000s)
Family (000s)
Small
Family-size
150,000/300,000=50%
Small
Percent capacity used
Machine requirement
Labor requirement
Family-size
Percent capacity used
Machine requirement
Labor requirement
10/31/2015
At 1 machine for 100,000, it takes 1.5
machines for 150,000
50.00%
1.50
3.00
47.92%
0.96
2.88
SHARDA
At 2 operators for 100,000, it
takes 3 operators for 150,000
175
©The McGraw-Hill Companies, Inc., 2004
17
Question: What are the values for columns 2, 3 and 4 in the table
below?
Year:
1
2
3
4
Small (000s)
Family (000s)
Small
Family-size
Small
Percent capacity used
Machine requirement
Labor requirement
Family-size
Percent capacity used
Machine requirement
Labor requirement
10/31/2015
150
115
170
140
200
170
240
200
Mach. Cap.
Mach. Cap.
300,000
240,000
Labor
Labor
6
6
50.00% 56.67%
1.50 1.70
3.00 3.40
66.67%
2.00
4.00
80.00%
2.40
4.80
47.92% 58.33%
0.96 1.17
2.88 3.50
70.83%
1.42
4.25
83.33%
1.67
5.00
SHARDA
176
Example of a Decision Tree Problem
A glass factory specializing in crystal is experiencing a
substantial backlog, and the firm's management is considering
three courses of action:
A) Arrange for subcontracting
B) Construct new facilities
C) Do nothing (no change)
The correct choice depends largely upon demand, which may
be low, medium, or high. By consensus, management
estimates the respective demand probabilities as 0.1, 0.5, and
0.4.
10/31/2015
SHARDA
177
Example of a Decision Tree Problem
(Continued): The Payoff Table
The management also estimates the profits when
choosing from the three alternatives (A, B, and C)
under the differing probable levels of demand.
These profits, in thousands of dollars are presented
in the table below:
A
B
C
10/31/2015
0.1
Low
10
-120
20
0.5
Medium
50
25
40
SHARDA
0.4
High
90
200
60
178
Example of a Decision Tree Problem (Continued): Step 1.
We start by drawing the three decisions
A
B
C
10/31/2015
SHARDA
179
Example of Decision Tree Problem (Continued): Step 2.
Add our possible states of nature, probabilities, and
payoffs
A
B
High demand (0.4)
$90k
Medium demand (0.5)
$50k
Low demand (0.1)
$10k
High demand (0.4)
$200k
Medium demand (0.5)
Low demand (0.1)
$25k
-$120k
C
10/31/2015
High demand (0.4)
$60k
Medium demand (0.5)
$40k
Low demand (0.1)
$20k
SHARDA
180
Example of Decision Tree Problem (Continued): Step 3.
Determine the expected value of each decision
$62k
High demand (0.4)
$90k
Medium demand (0.5)
$50k
Low demand (0.1)
$10k
A
EVA=0.4(90)+0.5(50)+0.1(10)=$62k
10/31/2015
SHARDA
181
Example of Decision Tree Problem (Continued):
Step 4. Make decision
$62k
A
B
$80.5k
High demand (0.4)
$90k
Medium demand (0.5)
$50k
Low demand (0.1)
$10k
High demand (0.4)
$200k
Medium demand (0.5)
Low demand (0.1)
$25k
-$120k
C
$46k
High demand (0.4)
$60k
Medium demand (0.5)
$40k
Low demand (0.1)
$20k
Alternative B generates the greatest expected profit, so
our
choice is B or to construct
a new facility
10/31/2015
SHARDA
182
Planning Service Capacity vs. Manufacturing
Capacity
• Time: Goods can not be stored for later use and
capacity must be available to provide a service
when it is needed
• Location: Service goods must be at the customer
demand point and capacity must be located near
the customer
• Volatility of Demand: Much greater than in
manufacturing
10/31/2015
SHARDA
183
Capacity Utilization &
Service Quality
• Best operating point is near 70% of
capacity
• From 70% to 100% of service capacity,
what do you think happens to service
quality?
10/31/2015
SHARDA
184
Hire and Fire strategy in POM
• Three options are open to the department in its aggregate
planning:
• 1 The present method, which is to maintain a medium-level
full-time staff and schedule work during off-seasons (such
as rebuilding baseball fields during the winter months) and
to use part-time help during peak demands.
• 2 Maintain a lower level of staff over the year and
subcontract all additional work presently done by full-time
staff (still using part-time help).
• 3 Maintain an administrative staff only and subcontract all
work, including part-time help. (This would entail contracts
to landscaping firms and pool maintenance companies as
well as to newly created private firms to employ and supply
part-time help.)
10/31/2015
SHARDA
185
Hire and Fire strategy in POM
• A. Develop a level workforce plan that uses
only the overtime and under time
alternatives. Maximize the use of overtime
during the peak period so as to minimize the
workforce level and amount of under time.
• B. Prepare a chase strategy without using
overtime and under time.
• C. Propose an effective mixed-strategy plan.
10/31/2015
SHARDA
186
PRODUCTION PLANNING AND CONTROL
• Manufacturing planning and control entails
the acquisition and allocation of limited
resources to production activities so as to
satisfy customer demand over a specified
time horizon. As such, planning and control
problems are inherently optimization
problems where the objective is to develop a
plan that meets demand at minimum cost or
that fills the demand that maximizes profit.
10/31/2015
SHARDA
187
PRODUCTION PLANNING AND CONTROL
• Manufacturing planning and control address
decisions on the acquisition, utilization and
allocation of production resources to satisfy
customer requirements in the most efficient
and effective way. Typical decisions include
work force level, production lot sizes,
assignment of overtime and sequencing of
production runs.
10/31/2015
SHARDA
188
Planning decisions
• Any planning problem starts with a specification of
customer demand that is to be met by the
production plan. In most contexts, future demand is
at best only partially known, and often is not known
at all. Consequently, one relies on a forecast for
the future demand. To the extent that any forecast
is inevitably inaccurate, one must decide how to
account for or react to this demand uncertainty.
The optimization models described in this article
treat demand as being known; as such they must
be periodically revised and rerun to account for
forecast updates.
10/31/2015
SHARDA
189
Planning decisions
• A key choice is what planning decisions to
include in the model. By definition,
production-planning models include
decisions on production and inventory
quantities. But in addition, there might be
resource acquisition and allocation decision,
such as adding to the work force and
upgrading the training of the current work
force.
10/31/2015
SHARDA
190
AGREGATE PLANNING
• Aggregate planning is an operational activity which does an aggregate
plan for the production process, in advance of 2 to 18 months, to give an
idea to management as to what quantity of materials and other
resources are to be procured and when, so that the total of the
organization is kept to the minimum over that period.
• The quantity of outsourcing, subcontracting of items, overtime of labor,
numbers to be hired and fired in each period and the amount of
inventory to be held in stock and to be backlogged for each period are
decided. All of these activities are done within the framework of the
company ethics, policies, and long term commitment to the society,
community and the country of operation.
10/31/2015
SHARDA
191
AGREGATE PLANNING
• Aggregate planning has certain prerequired inputs
which are inevitable. They include:
• Information about the resources and the facilities
available.
• Demand forecast for the period for which the
planning has to be done.
• Cost of various alternatives and resources. This
includes cost of holding inventory, ordering cost,
cost of production through various production
alternatives like subcontracting, backordering and
overtime.
• Organizational policies regarding the usage of
above alternatives. SHARDA
10/31/2015
192
AGREGATE PLANNING
• "Aggregate Planning is concerned with matching
supply and demand of output over the medium
time range, up to approximately 12 months into
the future. Term aggregate implies that the
planning is done for a single overall measure of
output or, at the most, a few aggregated product
categories. The aim of aggregate planning is to
set overall output levels in the near to medium
future in the face of fluctuating or uncertain
demands. Aggregate planning might seek to
influence demand as well as supply."
10/31/2015
SHARDA
193
• Intermediate term planning/ strategy
• Capacities Planning, aggregate
planning, hire and fire strategy etc.
• Identification and segregation of the
operations based on the strategy
selected.
10/31/2015
SHARDA
194
Identification and segregation of the
operations based on the strategy selected
• Minimizing Risks - Business Objects Access
Control
• In order to establish a control environment to
address all possible risks, we first had to identify
current risks.”
• The practical operation is possible only when
conflicts are identified by Business Objects
Access Control.”
• “Efforts to reduce inventory and operational costs
are a regular part of the business operations,
and it is obvious that the employees’ ability to
flexibly deal with ever-changing results can be
improved.”
10/31/2015
SHARDA
195
Verifying the Effectiveness
of Internal Control
• “One major reason is that awareness of
entire group optimization can raise among
employees by linking all systems. Having
a culture of understanding regarding how
things work in other departments is very
advantageous.”
10/31/2015
SHARDA
196
Increasing Efficiency and Cost
Savings
•
•
•
•
•
By doing so results can be :
• in Reducing its closing period
• in Reducing inventory
• in Reducing operational cost
• in Reducing system operation cost
10/31/2015
SHARDA
197
• Minimizing Risks Business Objects
Access Control
10/31/2015
SHARDA
198
Identify current risks.”
• It is important to note that this is a process
that has no finish line. While a risk
assessment—the process of identifying
and quantifying risks—might take place on
an infrequent basis (e.g., annually), the
risk management process—the ongoing
process of mitigating the risks to the
organization—should be ingrained into the
institution’s culture to be most effective.
10/31/2015
SHARDA
199
Establish Risk Assessment Criteria
• Steps
• 1. Decide on the number of data asset risk
criticality levels to establish:
• 2. Starting only with what is already known about
the institution/industry, determine the risk
assessment criteria for identifying critical data
asset levels
• Note: Although nothing in this phase is generally
repeated, it is possible at any time in the ongoing
risk assessment process to either research or
discover an additional useful criterion or specific
question to be answered and add it to the set
already in use.
10/31/2015
SHARDA
200
Apply the Critical Asset Criteria to Classify Data
Collections and Related Resources
Steps
• 1. Classify institutional / Industrial files,
databases, tables, and other data collections
according to the highest level of critical asset
it contains.
• 2. Classify other related information
resources (e.g., information systems, servers,
network segments, desktop computers, offline
storage facilities) according to the level of risk
criticality already assigned to the data asset.
10/31/2015
SHARDA
201
Develop Initial Security Strategies
Goals: Once the information assets have been
classified, strategic planning for the rest of the
risk management process can begin.
Vulnerabilities can be identified, and the
process of mitigating the threats that can exploit
those vulnerabilities can begin. An institution /
Industrial can decide to specifically focus on the
very highest risks, or it may decide to focus first
on mitigating risks broadly (or both). The mere
process of bringing management together to
discuss the organization’s strategy about risk
mitigation can be extremely fruitful
10/31/2015
SHARDA
202
Strategic Perspective—Senior
Management
• Steps
• 1. Identify senior management to interview and to
include in the process, making sure to include
key stakeholders in administrative, academic,
and research components.
• 2. Use the Assessment Tool as a planning guide
to understand senior management’s priorities and
areas of concern as well as management’s “risk
appetite” (the degree of risk that management will
be willing to accept without applying further
resources to mitigate the risk)
10/31/2015
SHARDA
203
Operational Perspective—Departmental
Management
• Steps
• 1. Identify a representative group of
departmental management to interview
(including management of mission-critical
areas)
• 2. Discuss their views on critical assets and
relative priorities
• 3. Identify areas of risk
• 4. Identify security requirements for the
most important assets
10/31/2015
SHARDA
204
Practice Perspective—Staff
• Steps
• 1. Identify representative staff within these
mission-critical areas to interview
• 2. Discuss their views on critical assets and
relative priorities
• 3. Identify areas of risks
• 4. Identify security requirements for the most
important assets
• 5. Capture knowledge of current security
practices and organizational vulnerabilities
10/31/2015
SHARDA
205
Consolidated View of Security
Requirements
• Steps
• 1. Select critical assets
• 2. Refine and prioritize security requirements for
critical assets (availability, confidentiality, integrity)
• 3. Identify current protection strategies for critical
assets (include an evaluation of the resources
currently applied to mitigate the risks and estimate
the additional resources that might need to be
applied to enhance the risk management process)
10/31/2015
SHARDA
206
Technological View—Identify
Infrastructure Vulnerabilities
• Goals: To identify areas of potential
exposure associated with the systems.
10/31/2015
SHARDA
207
Key Technology Components
• Steps
• 1. With management, identify all systems
associated with critical assets
• 2. Identify key technology components for
each critical asset and system;
• 3. Select specific technology components
for evaluation
• 4. Decide on the evaluation approach
10/31/2015
SHARDA
208
Selected Technology Components
Evaluation
• Steps
• 1. Coordinating with management, run
vulnerability evaluation tools on
selected infrastructure components
• 2. Review technology vulnerabilities and
summarize results
10/31/2015
SHARDA
209
Risk Analysis—Develop Security Strategy
and Plans
• Goals: After identifying key information systems
resources and evaluating the degree of
vulnerability with the systems, quantitatively
determine the level of risk associated with each
system and system component. This information
may then be used to prioritize the allocation of
resources to ensure appropriate mitigation of the
highest risks and to make appropriate
management decisions about the degree of risk
that the organization will be willing to accept.
10/31/2015
SHARDA
210
Risk Assessment
• Steps
• 1. Assess the potential impact of threats
(and vulnerabilities) to critical assets
(qualitative and / or quantitative)
• 2. Evaluate the likelihood of occurrence of
the threats (high, medium, low)
• 3. Create a consolidated analysis of risks,
based on the impact value to critical
assets and the likelihood of occurrence
10/31/2015
SHARDA
211
Protection Strategy and Mitigation Plans
• Steps
• 1. Develop strategies for improving the
organizations security-related practices
• 2. Develop risk mitigation plans to costeffectively reduce risks to critical assets
• 3. Develop specific action plans to improve
security practices and to mitigate risks to
critical assets, taking into consideration the
cost benefit and the organization’s risk
appetite
10/31/2015
SHARDA
212
Changing purchase agenda
Value improvement:
•
•
•
•
•
Revenue growth through new products
Improving customer value propositions
Early supplier involvement in NPD
Faster new product introduction
Co-branding and advertising
Value
Risk
Cost
Purchasing cost reduction:
•
•
•
•
•
•
Supply base reduction
Product standardization
Global sourcing
Outsourcing and ‘offshoring’
Electronic auctions
Contractmanagement
10/31/2015
Risk management:
SHARDA
•
•
•
•
•
•
•
•
Single vs multiple sourcing
Performance based contracting
Corporate Social Responsibility
Sustainable purchasing
Supplier auditing
Supplier Quality Assurance
Supplier financial position
Intellectual Property (IP) protection
213
Conflicts are identified by Business
Objects Access Control.”
•
•
•
•
First identify business problems with:
poor leadership,
weak strategy selection,
superficial planning,
business management issues and lack of
organization to solve them
10/31/2015
SHARDA
214
Effective vs. Poor Leadership
• Effective leadership ensures the business has
selected good business strategies, creates
plans with depth to planning analysis, a well
designed business organization, efficiently
operated and managed for continuous
improvement.
• Poor leadership will not do the above and in
particular:
• Gather insufficient external and internal
information for strategy and planning
• Wrong people involved in setting strategies and
direction
• Lack of depth of thinking to generate good
strategies and plans
10/31/2015
SHARDA
215
Business Management – Financial
Control
• To make money requires good financial management and
to ensure that the business considers the financial impact
of decisions. Poor financial management is:
• Little or no financial forecasting and planning
• Lack of consideration of expenses in relation to income –
spending too much money
• Insufficient profit margin
• Little or no consideration of cash flow; when money
actually comes in and when money actually goes out
• Growth is paid for with debt and servicing the debt
becomes an excessive burden
10/31/2015
SHARDA
216
Organization - Policies
• Business must comply with all applicable
laws including company, health and
safety, employment, taxation and have
appropriate company policies. Key
problems are likely to be no policies and/or
contracts for:
• Customers
• Suppliers
• Staff, contractors or temporary staff
10/31/2015
SHARDA
217
Organization - Staff
• If problems exist here then staff management is likely to be haphazard
at best and abysmal at worst:
• Setting either unclear objectives or no objectives; what is
expected and by when and inconsistent follow through
• Setting either unclear or no expectations about the quality of
the deliverables and the level of detail required
• Changing the completion criteria before completion of tasks
• Micro management of tasks
• Lack of timely guidance and course correction for complex
tasks
• Inconsistent behaviour, too friendly, too strict, too generous, too
mean
• Perceived or real inequality in treatment of staff, with impulsive
or reactive decision-making
• Unclear or no procedures in place to address recruitment, staff
discipline or performance problems
• Staff specialist knowledge leaves business vulnerable to staff
10/31/2015
SHARDA
218
being
unavailable [holiday, sick…]
or leaving and the business
Business Management - Sales
• Business management needs to focus on sales and
financial control. Marketing and sales ranges from
identifying target markets and customers to techniques
for closing the sale. Key problems are little or no:
• Marketing or creating brand awareness
• Differentiation of marketing channels [web presence,
email, brochure, radio, TV, newspaper, magazines…]
• Consideration of sales channels [web, telephone, inperson, retail, licensing to third-party…]
• Management measures associated with markets, target
customers, contact management, sales, repeat sales
• Consideration of what demographic information should
be captured to identify new customers or channels
10/31/2015
SHARDA
219
Efforts to reduce inventory and
operational costs
• As" our economy migrates from recession to
recovery, cash will remain king. As a result, financial
stakeholders are mandating that improvements be
made to working capital metrics. Since the
investment in inventory makes up the largest portion
of working capital, leveraging inventory performance
and related technologies to support working capital
optimization.
Examples:
• Reduce working capital deficit - free up cash to
finance day-to-day operations
• Reduce end-to-end financial supply chain costs
• Lower inventory holding and financing costs
• Achieve faster cash-to-cash cycles
10/31/2015
SHARDA
220
The Inventory Control
• The Inventory Control application captures
information needed to provide analysis of inventory
as it pertains to turnover ratios, accuracy, excess
and obsolescence and transaction activity for
inventory investment.
The Inventory Control application also provides the
ability to monitor inventory transactions, analyze
inventory levels, classify (ABC) inventory for
positive control and maintain a history of inventory
use as a guide for better planning.
10/31/2015
SHARDA
221
Questions?
10/31/2015
SHARDA
222
Why CHECK Inventory??
Too much Inventory carrying/holding
charges i.e. taxes, insurance, storage
facility, obsolescence, depreciation,
Working Capital etc.
To little Inventory too
frequent ordering, loss of
quantity discount, higher
transportation charge
10/31/2015
SHARDA
223
Inventories
Lot-Size Inventories To save Cost of buying,
Inspection, Transport,
Handling, Quantity
Discounts (EOQ)
10/31/2015
SHARDA
224
Objectives of Inventory/Need of Inventory
(Control)
* To economies,
* To maintain adequate Inventory so as
to avoid stoppages & To avoid Excess
inventory holding there by reducing the
material handling cost, chances of
obsolescence (date of expiry , storage
loss, Pilferage etc.)
10/31/2015
SHARDA
225
Objectives of Inventory/Need of Inventory
(Control)
• To fix various Inventory levels such as EOQ, Max.
Level, Min. Level, Optimum Level, Re-ordering
Level, Safety Stock Level.
• To avoid slow moving and non-moving, surplus and
obsolete stock
• To avoid blocking of the capital amount : (Minimum
investment in the inventory)
• To reduce Transportation cost.
• To earn highest satisfaction level - patient service
10/31/2015
SHARDA
226
Cost associated with Inventory
• Item costItem cost + getting it into the Hospital
[Transportation, Custom duties, Insurance
etc. Landed Price]
• Carrying Costs
• Capital cost
• Storage Cost
10/31/2015
SHARDA
227
Cost associated with Inventory
Risk Cost
» Obsolescence
» Damages
» Pilferage
» Deterioration/Dissipation etc
Ordering costs
• Teardown cost
• Lost capacity Cost
• Purchase Order Cost
Stock out Cost
[when lead-time exceeds forecast]
10/31/2015
SHARDA
228
ABC Analysis
• (always better Control)
• On the basis of annual consumption value
A- 75% of total Inv. value (very few in No. 1015%)
B-10% of total Inv. value (75%-85% in No.)
C- 15% of total Inv.value(15% in No.)
• Best alteration to ‘A’ items
• Hourly alteration to ‘B’ items
• Less alteration to ‘C’ items
10/31/2015
SHARDA
229
H-M-L Classification
[unit value of the item]
• Items Costing Rs.15,000/- and as
where ‘H’ (High Value)
• Item Costing Rs.1500-Rs.15,000/‘M’ (medium value)
• Items costing below Rs. 1,500/ L
(Low Value)
10/31/2015
SHARDA
230
VED Classification
Vital, Essential And Desirable
Sustainable development indicators (SDI)
• When dealing with the complete range of
complex systems in use for safety of
equipment, every minute detail is taken
into account in planning for maintenance
with Vital, Essential And Desirable
Spare Parts and logistic support. The
maintenance infrastructure and logistic
support services necessary for efficient
equipment working.
10/31/2015
SHARDA
231
VED Classification
Vital, Essential And Desirable
Sustainable development
indicators (SDI)
• External / Internal Equipment
Monitoring Devices
• Central Maintenance Workshop /
Laboratory
• Other Logistic support systems
10/31/2015
SHARDA
232
SDE Classification
Scarce, Difficult and Easy
• Scarce- They may not be easily
available
• Difficult- may be difficult to procure
from few manufacturers , lead time is
too much.
• Easy- not much of problems
10/31/2015
SHARDA
233
G-O-L-F classification
Govt., Ordinary, Local and foreign- pertain to
sources of procurement
• Certain items through Govt.
Agencies (STC/MMTC)
• Procedural delays, lead time may be
high
• Keep higher stocks
10/31/2015
SHARDA
234
F- S- N Classification {Fast, Slow,
Non Moving }
•
•
•
•
Relates to consumption pattern
Sufficient stocks for F Items
Critical analysis for ‘S’ items
Timely action to use / dispose off to
prevent loss due to obsolescence
10/31/2015
SHARDA
235
SOS Classification
{Seasonal Off Seasonal}
• Relates seasonality
• Organizations affected by seasonal
variations need to identify and measure
this seasonality to help with planning for
temporary increases or decreases in labor
requirements, inventory, training, periodic
maintenance, and so forth.
• Apart from these the organizations need to
know if the they experience at more or less
than
the seasonal variations
rate.
10/31/2015
SHARDA
236
Lean Production
• Lean Production can be defined as an
integrated set of activities designed to
achieve high-volume production using
minimal inventories (raw materials, work
in process, and finished goods)
• Lean Production also involves the
elimination of waste in production effort
• Lean Production also involves the timing
of production resources (i.e., parts arrive
at10/31/2015
the next workstation
“just
in
time”)
SHARDA
237
Here the customer starts the
process, pulling an inventory
item from Final Assembly…
Pull System
Then sub-assembly
work is pulled forward
by that demand…
Fab
Vendor
Fab
Vendor
Fab
Vendor
Fab
Vendor
238
Sub
Customers
Final
Assembly
Sub
The process continues
throughout the entire
production process and supply
chain
10/31/2015
SHARDA
CLASS EXERCISE:
In a restaurant wide variety foods are offered to the customers, to suit the
needs the locality the restaurant work from 9-00am to 1-00pm and 4.pm to 800pm. The restaurant is famous for its food stuffs. The items that are served
can be categorized as
(a) Those involving preparation time of 1/2 an hour or more.
(b) Those require about 5 to 10 minutes for preparation.
(c) Those are from packed/canned, which does not require any preparation
time. Stuff that has not been consumed in any one day are scrap and cannot
be stored for use on the next day. Materials required for (a) and (b) we have to
be ordered a day in advance; if delivery is required in the morning, while
delivery of packed/canned food is usually made in the afternoon. A certain
amount of cold storage at the restaurant is available, and the management is
prepared to expand the facility, if necessary. How would you use Production
Planning and control procedure to:
(i) Study Customers preferences and demand patterns?
(ii) Determine the number of foodstuff the restaurant should plan under each
Category to ensure of maximum Customer satisfaction and minimum scrap.
(iii) Exercise a control function to provide effective waitresses service?
10/31/2015
SHARDA
239
IMPORTANT QUESTIONS:
1. Distinguish between Product, Service and Project.
2. Define Production Planning and Control and state the objective of production Planning
and control department.
3. What advantages are desired from efficient Production? Operations Management.
4. Briefly discuss the functions of Production Management.
5. Describe with the use of organization structure the importance of Production
Management function and its relationship with other departments in the organization.
6. Explain the steps in Planning Production in the case of Line Production and Job
Production. What are the specific problems in each one of the above and how can there
be tackled.
7. Recommend a suitable Production Planning and control system by a unit undertaking
design and fabrication of steel transmission towers. Each order is tailor made to
Customers requirements. Your proposal, among other things, should cover
(a) Production of the nature of work from the print of view of production Planning and
control.
(b) Pre Production Planning
(c) Work order and feed back system
(d) Cost estimation and Control
(e) Planning and Control techniques particularly of importance for this type of work.
8. Distinguish in clean terms between mass, batch and unit production. In what ways
Production Planning and control system differ between the three types?
9. The term “Operations Management” implies the applicability of production concept to
10/31/2015
SHARDA
240
a much wider variety of human endeavors'. Explain?
Assignment - 2
• Q.1. Explain Operations Management from systems
concept. What are the important decisions in
operations management?
• Q. 2. How does the production and operations
management function distinguish itself from the other
functions of management?
• Q.3. Mention situations in (a) Banking (b) Advertising,
(c) Agriculture, and ( d) Hospital industry where
production and operations management is involved.
Describe the inputs, outputs, process and utilities.
• Q. 4. Presentation in the class - on any topic having
10-15 slides
10/31/2015
SHARDA
241
Questions?
10/31/2015
SHARDA
242
YOU and ME!!
10/31/2015
SHARDA
243