Production may be defined as the process of transforming a set of input into output having the desired utility and quality. It is value addition process.
Productivity is the arithmetic ratio of amount produced to the amount of resources used.
Productivity refers to the efficiency of any production system.
Production is an absolute term and refers only to the output (irrespective of input), whereas
Productivity is a relative term and is a measure of output per unit of input.
Total productivity = total output (TO) / total input (Gives a complete picture of the organisation)
Partial productivity: Helpful in pinpointing areas of improvement
Labour prod = TO / Labour input ; Material prod = TO / Material input ; Energy prod = TO / Energy input
JIT refers to “just in time” production system or “Zero Inventory” system. i.e. producing or procuring just enough parts or material only when they are needed.
This technique was made famous by Toyota Motor Company.
The prime objective of JIT is elimination of waste
Cause under this the
products are assembled just before they are sold,
subassemblies are made just before assemblies are needed,
parts are fabricated just before subassemblies are needed
This not only reduces the inventory carrying cost but also leads to elimination of waste & improved quality thereby increasing the overall productivity.
How it leads to elimination of waste?
In JIT each operation is synchronized with those subsequent to it. We can’t afford to reject a part at any stage because all the subsequent operations will be affected. Therefore every part produced has to be of good quality.
JIT requires not only “Zero inventory” but also “Zero Defect” & “Do it right the first time” policies.
7 types of waste-: Waste of….
Defective parts, overproduction, transportation, motion,
Waiting, processing, stocking
Kanban is a Japanese term which means “a card carrying request for production or withdrawal of parts”.
It is used with JIT. It is a simple information system for controlling production.
Parts are never produced until the kanban is received i.e. just before when they are actually needed.
Production is automatically controlled even if there is variation in demand.
Thus production is “PULLED” by “Demand Requirements” rather than being
“PUSHED” by “Inventory building Requirements”.
MRP VS JIT ……
MRP = Push system
JIT = Pull system
ie in MRP material is pushed into production to meet future needs
while in JIT material is pulled through production to meet current needs
MRP is based on forecast & planning is a bit complex
Planning in JIT is easy as one needs to plan only a smoothened production flow
MRP involves lot sizes at all levels of the product & is capable of taking sudden variations in demand and supply
JIT is a single unit production & is not capable of taking large & sudden variations
In MRP there is not much stress on vendor relations while it is an important element of JIT
MRP = suitable for Job or Batch production
JIT = suitable for Mass or Flow production
MRP is the technique for converting the master production schedule for end products into a detailed schedule for dependent demand items i.e raw materials & components which make up the final product
It deals in determining….
What components are needed
How many are needed
When they are needed
& When they should be ordered to meet the requirements on time
The purpose of MRP is to ensure that all the required material and components are available at right time and in right quantity.
MRP – a technique for determining the quantity & timing of dependent demand items
(gives time phased net requirement of dependent demand inventory)
( Dependent demand = demand for an item depends on another item
In MRP we work backwards from the MPS )
INPUTS to MRP -:
Master Production Schedule (MPS) Bill Of Material (BOM) Inventory Status file
OUTPUT of MRP -:
Planned Order Release
1 -> What do we want to produce, in what quantity & when
2 -> What components are required to make it & how many ( ‘explodes’ the end item
requirement into component requirements)
3 -> How many are already available
4 -> When to order & how much to order
(eg. if we are making a stool, we require 4 legs and 1 seat for each stool. Now if the demand for stool is 5 for the next month we require 16 legs & 5 seats. Also if 6 legs are already available then we need to order only 10)
Loading – Assigning specific jobs to each work center
Sequencing – Determining the order of processing of all jobs at each work center
Scheduling – Establishing start and finish times of all jobs at each work center
Dispatching – Releasing orders and instructions according to the production plan
Expediting – Monitoring progress and taking corrective actions to minimize deviations
Routing – Establishing the path followed by each job from one machine to another
Rules & Tools
Loading – Gantt Chart
Sequencing – Case I – n jobs on a single machine => EDD, SPT, LPT, FCFS, LCFS
Case II – n jobs on more than 1 m/c => Johnsons method
Scheduling – Gantt Chart
If the project consists of a large no of activities CPM/PERT is used
1– completing each job as soon as possible by assigning earliest available time slot
(shorter lead time for jobs)
2– completing each job just when it is due by assigning latest available time slot
(helps in reducing inventory / (WIP))
Loading – It is the study of relationship between LOAD & CAPACITY at work centers
Scheduling = time phase of Loading
Gantt Chart – Used for both ; Loading as well as Scheduling
Sequencing – determining optimum sequence amongst (n!)^m sequences
– SPT => Minimizes Flow time
– EDD => Minimizes maximum Tardiness
Routing – related to plant layout, material handling, temporary storage
Assignment – Hungarian method
Production Planning & Control
-is the process of co-ordinating all the production activities
to have effective utilization of available resources ie. man, money, material and machinery
so that production objectives are met in time
It essentially has 2 parts..
1st is Production Planning in which we formulate a detailed production plan considering the demand of products & availability of resources.
Next comes Production Control in which we keep a check that there is no deviation between the actual and planned proceses & take corrective actions accordingly.
(Tools - Routing, Loading, Scheduling, Dispatching, Expediting)
Forecasting Estimation of demand
Product design Determining product specification
Process planning (or Routing) Finding the most economical process of doing the work
Material & tool req. planning Determining material & tool requirements
Loading Assigning of work to manpower & machinery
Sequencing Determining in what sequence
Scheduling when each task is to be carried out
Dispatching Release of work orders
Control Phase Progress Reporting & Corrective action
A production system is encompassed by 4 factors – Quantity ; Quality ; Time ; Cost
Design Capacity > System Capacity > Actual Output
1.-> planned or theoretical max rate of output under ideal operating conditions
2.-> Max output considering limitations due to product mix, quality requirements,
3.-> limitation due to breakdown of machines, labor absenteeism
System Efficiency = Actual output / System capacity
Inventory – may be defined as a detailed list of all the movable items which are required
to manufacture a product
– Direct inventories – which form an integral part of finished product
– raw material, work in process, finished goods
– Indirect inventories – which do not form an integral part but help raw material to get
converted into finished prod – tools, lubricants, paper stationary
Inventory Control – aims at achieving an optimum balance between the 2 objectives of
- minimizing the investment in inventory
- maximizing the service level
Too much inventory creates a problem of storage, maintenance and huge investment
Whereas, low inventory leads to increased chances of stoppage of production and disruption of production schedule and delivery promises
-Hence the need of Inventory Control
Cost associated with inventory
Ordering cost – cost incurred for calling quotations, salaries of employees involved in purchasing, inspection, accounting, transportation cost ( >> 1 / Q )
Inventory Carrying cost – cost associated with holding a given level of inventory like
Storage cost, spoilage, deterioration, obsolescence, depreciation, insurance (>> Q )
Shortage cost – loss of - future sales, customer goodwill, profit contribution by lost sales
Inventory Models – Deterministic & Probabilistic
Inventory Control Systems –
Fixed Quantity system (Q – system) (Two Bin system)
Fixed Period system (P – system ) (Periodic Review system)
In this system order quantity is fixed but time interval of ordering varies depending on demand
In this system ordering interval is fixed but ordering quantity vary with changes in demand
Selective Inventory Control
ABC analysis is an inventory control tool in which we divide the inventory items into 3 groups on the basis of their Annual Rupee Usage
(ie on the basis of “ monetary value of the total annual consumption ” of different items.)
(ie total quantity consumed in a year * unit cost of item)
A class items are the high value items which constitute about 10% of the total no. of items but account for about 70% of the total money spent on inventories.
These items require rigid control & should be ordered more frequently in less quantity in order to reduce the capital locked up at any time.
B class items are the middle level items which do not require as much close control as A class items and represent about 20% of the total items as well as 20% of the total expenditure on items.
C class items are the low valued items which constitute about 70% of the total quantity but account for only about 10% of the total expenditure. These items require less control & should be ordered less frequently & in large quantities in order to reduce paper work & take advantage of quantity discount.
- Based on Pareto principle
- -Reason for using ABC analysis is that inventory of any organization consists of thousands of items& it is not possible to pay equal attention to each & every one of them. ABC analysis therefore enables the management to concentrate efforts on items which are of critical importance.
H M L = High ; Medium ; Low value ( on the basis of unit cost & not on consumption)
V E D = Vital ; Essential ; Desirable ( Criticality of the item)
S D E = Scarce ; Difficult ; Easy ( Availability)
F S N = Fast ; Slow ; Non moving (Frequency of use)
Vital – without which production will come to halt ; Essential – reduced efficiency or performance
Enterprise Resource Planning is the process of integrating all the departments and their functions in any organization such as finance accounting, human resource management, production & material management.
Under this we create a single software program which can be used by every department and it uses a common database. So that it provides a seamless flow of information in no time.
6 sigma is a quality improvement program with a goal to reduce the no. of defects to as low as 3.4 parts per million.
It makes use of Normal Distribution to predict defective rates.
Six Sigma quality is a benchmark of excellence for product & process quality popularized by Motorola.
Here Sigma i.e. Standard Deviation is used to designate the spread of any process about the mean or average. And the value indicates how well the process is performing. The higher is this value the better is the process.
A product is said to be of six sigma quality if there are not more than 3.4 million defects per million.
6Si Vs TQM – 6S is a quantitative tool. It actually measures the output of the processes.
GT is a manufacturing philosophy in which similar parts are identified & grouped together to take advantage of their similarities in design attributes or manufacturing processes.
design attributes = geometric shape & size
manuf. attributes = processing steps required )
In group layout different machines are arranged in groups or “cells” such that each cell is capable of carrying out all the operations required in a family of product.
This helps in reducing …
Material handling time and cost
Used in Batch production systems
CE may be defined as an improved product development practice in which various phases of product development move concurrently or in parallel rather than sequentially.
It helps in….
reducing product development time & cost
& achieve higher quality
It is based on cross functional team approach & bring together people from several functional areas so that they start interacting from the beginning itself perform their task in parallel.
Conceptual design Detailed design Prototyping & testing
Preproduction & process planning manufacturing marketing
Value analysis- value analysis involves the examination of the function of a product or service relative to its price in order to provide
the necessary function reliably at lowest cost.
Value analysis & Value engineering - Both aim at eliminating unnecessary cost
Value analysis – applied to existing product
Value engineering – applied at design stage
BLAST Define functions
CREATE Create alternatives
REFINE Develop the best alternative
Value = Function /Cost
A business practice characterized by the endless pursuit of waste elimination. A manufacturer that is lean uses the minimum amount of manpower, materials, money, machines, space etc. to get the job done on time.
LEAN ENTERPRISE: A Lean Enterprise is an organization that is engaged in the endless pursuit of waste elimination. A Lean Enterprise has a culture that does not tolerate waste of any kind
Flexible Manufacturing System (FMS)
An integrated manufacturing capability to produce small numbers of a great variety of items at low unit cost; an FMS is also characterized by low changeover time and rapid response time.
A Flexible Manufacturing System is capable of processing a variety of jobs simultaneously.
It generally consists of a group of processing stations (usually CNC machines); interconnected by means of an automated handling and storage system and controlled by an integrated computer system.
(a fully automated system consisting of automated workstations, automated material handling and computer control)
FMS fill the gap between high production transfer lines and low production CNC machines
Low Medium High Production Volume
Stand alone CNC m/c
(FMS rely on Group Technology approach in their design (cell = group of m/c)
It aims at making the manufacturing agile enough to respond quickly to any change in product demand, customer needs.
It integrates management, technology and workforce making the system flexible enough to meet the rapidly changing customer needs effectively and economically.
(make use principles of Lean Production on a broad scale)
Computer Integrated Manufacturing (CIM)
CIM aims at complete automation of the manufacturing process
from order receipt to design, production and delivery.
CIM can be viewed as integration of 3 major manufacturing functions namely-
· Product and process design
· Production planning and control
· Production process
CIM makes use of…
CAD, CAM, CAPP,
automated material handling systems and
computerized business systems for order entry, payroll and billing.
They are also called factories of future with complete automation and no human intervention at all
CAPP – Computer Aided Process Planning
It helps in determining the processing steps required to make a part after designing is completed through CAD.
CAM – use NC, CNC m/c
Types of Production systems
Job -> Manufacturing one or few quantities of product designed & produced as per the specifications of the customer
Eg – Turbines, boilers, ships, aircrafts => Low volume ; High variety
Batch -> Manufacturing a limited number of similar products at regular intervals
Eg – Machine tools, components and part manufacturing, glassware, clothes, forging and
casting processes etc
Mass -> Continuous and repetitive production of similar products
Eg – Automobiles, plastic goods => High volume ; Low variety
Process or Flow -> Similar to mass production, except that the plant, equipment and layout are primarily designed to manufacture a specific product only.
Eg – Chemical plants, Paper mills, oil, petrol
Types of Layout
Functional or Process Layout
Product or Line
1 - > Suitable for Batch production
All machines performing similar type of operations are grouped at one location. Eg all lathes, milling machines
Greater flexibility & variety
Less machines ; Lower investment ; Higher utilization of production facilities
Increased material handling
Longer process time
2 -> Suitable for Mass production
Machines arranged in the sequence of operations required by a product
Reduced material handling cost
Shorter processing times
Less skilled labors required
Breakdown of one machine in the sequence may disrupt the whole production
3 -> Generally used .
Various parts produced in Functional layout eg machining, welding etc
Final assembly of product is done in a Product layout
4 -> Product remain in a fixed location & man, machinery & tools are brought to this
location. Eg – Aircrafts, ships
Computer Aided layout
CRAFT - > Computerized Relative Allocation of Facilities
It repetitively considers exchange between location until no further cost reduction is possible
BATCH Production MASS Production PROCESS or flow Production
Functional or Fixed layout Functional or Group layout Line The entire factory is designed like one huge machine to produce a specific product at certain rate
Machineries Equipments & Material handling devices
General purpose General purpose with some special purpose equipment Machineries and equipments designed for specific product The entire ‘factory’ is completely integrated at all stage and generally there are no isolated equipments
High High Less NO WIP between operation stages
MRP MRP JIT JIT
Job Evaluation = process of determining the worth of any job depending on factors
such as- skills, effort, responsibility demanded by the job (worth in
Job Ranking - jobs are ranked in terms of their importance
Job Classification - jobs allocated to predefined categories
Point Rating - weightage points are assigned to various factors required by the job
eg. education, experience, working conditions etc. (Quantitative method)
Merit Raring = Assessing the worth of the person performing the job.
Evaluating the performance (also called performance appraisal)
Ranking – employee ranked according to performance
Check list – “Yes” or “No”
Both Job evaluation & Merit rating help in determining a sound wage structure in any org
1 -> min pay
2 -> reward over & above his min. pay depending on his performance
Ergonomics – Study of human beings w.r.t their interaction with products, equipments
and work environment.
It aims at designing the things people use & the environment in which they use them such that it causes
minimum stress & minimum fatigue,
and enhance efficiency & effectiveness of doing work
(just one) Aim => Designing for human use
Derived from Greek word Ergon = work ; Nomos = laws => law of work
Also called Human engineering
Prediction & Forecasting
Both deal with estimation of a future event
Prediction is largely subjective in nature and depends a lot on individual judgment and perception
Forecasting is a quantitative technique and is based on systematic calculations making use of past data
Short term (<1 year) – Moving Average eg. Material planning, budgeting
Long term (>1 year) – Delphi method eg. Capacity planning, investment planning
Types of Forecasting Techniques
Forecasting Techniques can be broadly classified as-
I. Subjective techniques
Sales Force Estimates –Aggregate of estimates given by sales personnel
Customer survey – opinions collected from prospective buyers
Executive opinion – opinion of experts is sought
Delphi method – a panel of experts is asked a set of questions and the response
to one questionnaire is used to produce the next questionnaire. It is an
iterative process and continued until a consensus is reached.
II. Objective techniques
1. Time Series Methods
i. Moving Average
ii. Weighted Moving Average
iii. Exponential Smoothing method
2. Causal Methods
i. Regression and Correlation analysis
Time Series model
Time series is just a collection of past values of the variable to be forecasted
Identifies the historical pattern of the event and project or extrapolates it into future
It tries to establish cause and effect relationship between the event and some related parameter. Eg demand for cement can be related to growth of construction industry
demand for cold drinks can be related to change in temperature
In time series we consider the data with respect to time only whereas in causal methods we consider the data with respect to some other variable
Regression analysis or Least square method –
Regression analysis establishes a relationship between variables.
(fit a straight line to a given scatter)
Eg simple linear regression model gives a linear equation of the form y = a +bx
Correlation analysis – determines the degree of closeness of the relationship between two variables.
(correlation can be explained in terms of correlation coefficient, which is a number varying between –1 to +1. If y increases with increase of x, then it is positive and if y decreases with increase x, then it is negative. If the correlation coefficient is 1, then all the values of x and y are perfectly correlated and we would expect all the values to lie on regression line. If the value is zero then there is no relationship between x and y. (Higher the value of coefficient, higher the linearity between x and y))
Time series model
Simple Average – useless
Moving Average – Fresh avg calculated at the end of each period by adding the most
recent data and deleting the old one (eg. 3 month MA; 5 month MA)
Weighted Moving Average – More weightage given to recent data (eg 0.5, 0.3, 0.2)
Exponential Smoothing Method – similar to weighted ma; weights assigned in expo form
The above methods give trend. There are certain other factors which we need to take into account-
Trend (upward or downward)
Cyclic fluctuations (economic cycles)
Seasonal variations (climatic conditions, festivals)
Irregular variations (natural calamities like earthquake, flood, draught)
F = T.C.S.R
Mean Absolute Deviation
MAD = (Sum of absolute value of forecast error for all periods) / (no. of periods)
BIAS = (Sum of forecast error for all periods) / (no. of periods)
Optimisation – An optimum point is one at which the conditions are most favourable.
Optimum point may represent MAXIMUM or MINIMUM position
Operations Research is the application of mathematical techniques to solve complex problems.
1) Linear Programming
i) Graphical method
ii) Simplex method
iii) Transportation model
2) Queuing theory
It is an optimization technique in which the mathematical functions indicating the objective and the constraints are linear.
Application – Allocation of limited resources in best possible way; for eg product mix
2 decision variables = > Graphical method
More than 2 decision variables => Simplex method
While solving a set of m number of linear equations with (n+m) variables, any n number of variables are assigned zero values while the remaining m variables satisfy linear equations
Basic variables – Variables which satisfy the set of equations
Non-Basic variables – Variables to which zero values are assigned
Basic solution – solution obtained by basic variable
Basic Feasible solution – basic solution in which all the basic variables are non-negative
If during any iteration, value of one or more basic variable becomes equal to zero, it said that degeneracy has set in.
(non-basic variables in any case are assigned zero value; if along with them one or more basic variable too becomes zero => degeneracy )
Iteration will go into loop, giving same solution again and again.
If it’s a maximization problem all constraints should be in ‘≤ ’ form and vice versa
The R.H.S of all inequations should be constant
Whenever the constraint is in ‘≤ ’ form it is converted into equation by adding a non-negative variable called Slack variable.
(it indicates the difference between amount of resource available and amount actually used)
Whenever the constraint is in ‘≥ ’ form it is converted into equation by subtracting a non-negative variable called Surplus variable.
(it indicates the amount of resource used over and above the minimum amount to be used)
Whenever we are having surplus variable, an Artificial variable needs to be added
(this is to avoid surplus variable taking negative values. For eg if all the decision variables in any constraint equation are assigned zero values, value of surplus variable would become negative. (eg. 3x1 + 4x2 – s1 = 20 ; if x1=x2=0 => s1= -20)
Big M method – In this method a very large value (M) is assigned as the coefficient for the Artificial variable (-M for maximization, +M for minimization problems)
ð Maximize : 2x1 – 4x2
ð Subject to : 3x1 + 5x2 ≥ 15
4x1 + 9x2 ≤ 30
ð Maximize : 2x1 – 4x2 + 0s1 + 0s2 –Ma1
ð Subject to : 3x1 + 5x2 – s1 + a1 = 15
4x1 + 9x2 + s2 = 30
Converting Primal problem into dual
If primal is a maximization problem, its dual would be a minimization problem and vice-versa
If primal contains m decision variables and n constraints; its dual would contain n decision variable and m constraints
Maximize z = 5x1 + 2x2
Minimize z` = 15w1 + 20w2 + 10w3
Subject to : 3x1 + 4x2 ≤ 15
Subject to: 3w1 + 2w2 + 5w3 ≥ 5 2x1 + 2x2 ≤ 20 4w1 + 2w2 – 3w3 ≥ 2 5x1 – 3x2 ≤ 10
It is to the study the effect of changes in the parameters of optimum solution
Eg profit per unit (or cost per unit), availability of resources (or consumption of resources) etc may change with time (depending on market conditions, etc.).
Sensitivity analysis is to study the effect of these changes, ie how our current optimal solution will change with the change in any of the parameters.
Steps in simplex method
1) Prepare initial basic feasible solution
2) Check for optimality
How ?…. Check the index row (ie the bottom row)
In case of Maximization all the values in index row should be Non-positive (0 or -)
In case of Minimization all the values in index row should be Non-negative (0 or +)
3) If not optimal prepare next iteration table
It is just a special form of linear programming problem
Step 1 -: Determine initial basic feasible solution
a) North-West corner method
b) Least Cost method
c) Penalty Cost Method (or Vogel’s Approximation method (VAM))
(in VAM penalty of not allocating to lowest cost value is also considered.
The difference between lowest and next lowest cost in each row and column
are called penalty values. Allocate max amount to max penalty.)
Step 2 -: Test for Optimality
Degeneracy occurs when total no of allocated base cells is less than (m+n–1 )
It is overcome by assigning a infinitesimally small positive value (ε) to a suitable cell
(m,n = no. of rows & columns or no. of supply & demand points)
Optimize the total cost of providing service plus the loss due to delay in waiting for service.
Generally Rate of arrival assumed to follow Poisson distribution,
Service time –Exponential distribution
It is a numerical technique for conducting experiments with mathematical models which describe the behaviour of a complex system.
Eg Monte – Carlo technique for simulation by generating random numbers
Project – any task which has a definite beginning and end and consists of separate but inter-related activities which requires resources to achieve the objective.
Four elements of any project – Goal, Time, Resources, Environment
Critical Path Method (CPM)
Program Evaluation & Review Technique (PERT)
CPM/PERT are the scheduling techniques which are used to plan, schedule and control a project consisting of inter-related activities.
CPM – Activity times are assumed to be constant
PERT – Activity times are assumed to be probabilistic
Critical path = The longest path in the network
CPM – Used in case where long developed and stable technology exists
eg construction projects
PERT – Used in cases which involves new and first of its kind programs (takes into account uncertainties and variations)
eg R & D projects
In PERT probability of project completion time follows Normal distribution
Activity times follow Beta distribution
A problem solving tool in the form of a vertical bar graph showing the bars in descending order of significance from left to right.
A Pareto Chart helps in distinguishing the “vital few” from the “trivial many” on which we should focus our improvement activities.
The 80/20 rules comes from the Pareto Principle, stating that 20% of the items account for 80% of the activity (problems, sales, defects, etc.).
Eg – ABC analysis used for inventory control
CAUSE AND EFFECT DIAGRAM: A problem solving tool used to identify relationships between effects and multiple causes (also Fishbone Diagram, Ishikawa Diagram).
Japanese term for “continuous improvement” & signifies a never ending pursuit for improving the processes by reducing costs, reducing delivery time, improving quality, creating a better workplace, better products & greater value to the society.
Jig – Guide the tool as well as clamp the workpiece
Fixture – Only clamp the workpiece
Break Even Point – is that point (on cost vs quantity graph) at which sales income equals the total cost ie at which profit is zero.
Software maintenance –
Business Process Reengineering – The fundamental rethinking and radical redsigning of the existing business process
Pokayoke: Japanese term for 'mistake-proofing'. These are the mistake-proofing and fool-proofing devices made by designing parts, processes, or procedures so that no mistake can take place.
Baka-yoke - a manufacturing technique of preventing mistakes by designing the manufacturing process, equipment, and tools so that an operation literally cannot be performed incorrectly; the term "poka-yoke" is sometimes referred to as a system where only a warning is provided.
COUNTERCLOCKWISE FLOW: A basic principle of Lean manufacturing cell layout is that the flow of material and the motion of people should be from right to left, or counterclockwise. The origin of this idea came from the design of lathes and machine tools with the chucks on the left side, making it easier for right-handed people to load from right to left
CHAKU-CHAKU LINE: A production line where the only human activity is to 'chaku' or 'load' the machines. The machines eject the finished parts automatically using hanedashi, so that the operators do not have to wait.
Karoshi - death from overwork
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