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Production Systems
AndOperations Management I
Anubha Walia
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1. MANAGING OPERATIONS
Nature and scope of production/operation management
Relationship with other functional areas
Standardisation and simplification
Reliability and redundancy
Value engineering Ergonomic considerations
Product (and service) design for differentiation
2. PROCESS DESIGNING
Types of production systems and layouts
Capacity requirements planning
Facilities, location and influencing factors; evaluation of alternatives JIT, FMS, and Group Technology
3. PRODUCTIVITY AND WORK STUDY
Method study: Basic procedure, charts, diagram
Work measurement & Time study
Work sampling, learning curve, production standards
Aggregate production planning; heuristic methods 4. PROCESS CONTROL
Inventory management: Basic concepts; selective inventory control models; orderingsystems; material requirement planning; operations scheduling: Meaning; dynamicand static scheduling; design rules
Quality control; variables and attributes
Process control and acceptance sampling Maintenance: Facilities; total productive maintenance
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Production
Inputs (6Ms-Man, Machine, Method, Material,
Money, Management)
Process- Conversion
Output-Good / Services
Production is heart of Org Fin, Mktg, HR
Material Mgmt dependant
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(Input Conversion / Transformation Output)
Input Transforming
Resources
Facilities
Staff
Output
Good orServices
Volume
VarietyVariation
Visibility
Input
Transformed
Resources
Material
Information
Customer
The Transformation
Process
Physical PropertiesInformational Properties
Possession
LocationStorage/Accommodation
Physiological State
Psychological State
Environment :- *Customer * Competitors *Suppliers*Government regulations * Technology * Economy
Monitoring & Control
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Production Management Function
Planning- Course of Action. Pdt planning,
facility planning, Designing
Organizing- Est structure of tasks andassigning authority.
Controlling ensure actual performance is in
accordance with planned performance. Weprepare standard
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Introduction
Operations management is the management of
an organizations productive resources or its
production system. A production system takes inputs and converts
them into outputs.
The conversion process is the predominantactivity of a production system.
The primary concern of an operations manager
is the activities of the conversion process.
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Organizational Model
MarketingMarketing
MISMISEngineeringEngineering
HRMHRM
QAQA
AccountingAccounting
SalesSales
FinanceFinance
OMOM
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Some inter-functional relationships between the
operations function and other core and
support functions
Engineering/technicalfunction
Accounting
and financefunction
Humanresourcesfunction
Informationtechnology(IT) function
Marketingfunction
Product/servicedevelopment
function
Financial analysisfor performanceand decisions
Provisionof relevantdata
Analysis of newtechnology options Understanding of
process technologyneeds
Understanding of thecapabilities and
constraints of theoperations process
New product andservice ideas
Understanding of thecapabilities and
constraints of theoperations process
Marketrequirements
Provision of systems fordesign, planning and
control, and improvement
Understanding
of infrastucturaland systemneeds
Recruitmentdevelopmentand training
Understanding of humanresource needs
Operationsfunction
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Objective of PM
Optimal use of resources
Max use of Manpower and resource
Quality of good at minimal cost
Contributing towards all round productivity
through Decision Making & QT
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SCOPE of POM
1- Activities relating to designing or
formulation of the prod system
Designing tools & drawingDesigning Development and installation equipment
Selection of overall plan
Location planPlant layout
Material Handling system
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2 Activities relating to analyzing and
controlling of prod operation after the prod syshas been activatedProd Planning Prep of short term prod schedules,
plan for maintaining records of RM finished good-
semi finished stockProd Controlling Work assignment, check and
remove discrepancies (control on inventory RM,purchase parts, finished goods), Control on WIP and
quality through process control
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Scope of POM
A) GENERAL PHASE
1Operations Management
(Input Conversion / Transformation
Output)
2Strategic Role ( Strategy and performance
objectives)
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Scope of POM Cont
B) DESIGN PHASE
3 Design of Products and Services
4 Design of Operations Networka) Capacity Decision
b) Layout Decision
c) Location Decision
5 Process Technology
6 Job Design & Work Organization
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Scope of POM Cont
C) PLANNING & CONTROL
7 Capacity Planning and Control
8 Inventory Planning and Control
10 MRP ( Material Requirement Planning )
11 Quality Planning and Control12 Project Planning and Control
13 JIT ( Just In Time) Planning and Control
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Scope of POM Cont
D) IMPROVEMENT
14 Failure Prevention & Recovery
15 TQM ( Total Quality Management)
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Scope of POM Cont
E) OPERATION CHALLENGES
a) Globalization and Environmental Protection
b) Social Responsibility
c) Technology Awareness
d) Knowledge Management
e) Industrial Safety and Security
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Why Should you study POM
A business education is incomplete without anunderstanding of modern approaches to managingoperations.
Operations management provides a systematic wayof looking at organizational processes.
Operations management presents interesting career
opportunities. The concepts and tools of OM are widely used in
managing other functions of a business.
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They are alloperations
Retail
operation
Back office
operation in
a bank
Take-out /
restaurant
operation
Kitchen unit
manufacturing
operation
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The operations function is fashionable!
The consultancy services market% of world revenues of 40 largest firms
Marketing/sales
2
Operations and process
management
31
Corporate strategy
17
IT strategy
17
Benefits/Actuarial
16
Organizational design11
Financial
6
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POM
Plan, design and operate production system / subsystems
that create and deliver the firms primary products and
services and to achieve organizational goals
Note that:
Operations management deals with process
Management in a broad, systems sense
Subsystems are operations too Multiple goals: efficiency, productivity, cost minimization
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Managers Need Knowledge Of
Production processes
Operations management processes
Decision making tools
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Analytical Tools Used In
Operations
Forecasting methods
Optimization models
Queuing analysis
Decision analysis
Simulation
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Operations Management as aOperations Management as a
FunctionFunction
Figure 1.3Figure 1.3
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Operations Management As aOperations Management As a
FunctionFunction Skill Areas Quantitative methods Organizational
behavior General management Information systems Economics International
business Business ethics
and law
Figure 1.3Figure 1.3
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The position of the operations function
Marketing Operations
ChurchCall onnewcomers
Manageappeals
Retranslatescriptures
Conductweddings
Advertise ontelevision
Paysuppliers
Designhamburgers
Makehamburgers
Sell tostores
Pay staffDesign newfurniture
Assemblefurniture
Identifyneeds
Raisecapital
Developproduct
Make anddistribute
Accounting
and finance
Product
development
Fast food
chain
Furniture
manufacturer
Process
perspective
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Continuum of CharacteristicsContinuum of Characteristics
More like amanufacturingorganization
More likea service
organization
Physical, durable product Output that can be
inventoried Low customer contact
Long response time Regional, national, or
international markets Large facilities Capital intensive
Quality easily measured
Intangible, perishable
product Output that cannot be
inventoried
High customer contact Short response time Local markets Small facilities Labor intensive
Quality not easily measuredFigure 1.4Figure 1.4
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Physical / Informational Output
Physical Outputs
Seller no longer owns
when sold
Replication requires
manufacturing
Output exists in single
location Wears Out
Informational Outputs
Seller continues to
possess after sale and
can sell again
Replication at negligible
cost and without limit
Output can exist inmultiple locations
simultaneously
Does not wear out
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The output from most types of operation is a
mixture of goods and services
Cr
udeoilproduction
Pure goodsTangible
Can be storedProduction precedes
consumptionLow customer
contactCan be transported
Quality is evident
IntangibleCannot be storedProduction andconsumption are
simultaneousHigh customer contactCannot be transportedQuality difficult to
judge
Pure services
Alumi
niumsmelting
Specialistm
achinetool
manufa
cturer
Restaurant
Computersystems
services
Ma
nagement
consultancy
Psychother
apyclinic
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Facilitating Good Concept
Often confusion in trying to classify
organization as manufacturer or service
Facilitating good concept avoids thisambiguity
All organizations defined as service
The tangible part of the service is defined asfacilitating good
Pure Services
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The Range From Services to
Products
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Classification and Evolution of
Economic Offerings
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Comparison of Alternative
Economic OfferingsEconomicOffering
Commodities Goods Services Experiences
Value added by Extracting Producing Delivering Staging
Form of output Fungible Tangible Intangible Memorable
Keycharacteristics
Natural Standardized Customized Personalized
Buyer Market User Client Guest
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A Typology of Operations
IMPLICATIONS IMPLICATIONS
High Low Visibility
High LowVariation in demand
High LowVariety
Low HighVolume
Time lag betweenproduction andconsumptionStandardized
Low contact skills
High staff utilization
CentralizationLow unit costs
Short waiting toleranceSatisfaction governed bycustomer perception
Customer contact skillsneededReceived variety is high
High unit cost
Changing capacity
Anticipation
FlexibilityIn touch with demand
High unit cost
FlexibleComplex
Match customer needs
High unit cost
Low repetition
Each staff member
performs more of jobLess systemization
High unit costs
Stable
Routine
Predictable
High utilizationLow unit costs
Well defined
Routine
Standardized
Regular
Low unit costs
High repeatabilitySpecialization
SystemizationCapital intensive
Low unit cost
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Japanese Production System
Quality comes first
Continuous improvement of products &
processes Eliminate all forms of waste
7 waste Concept is called LEAN
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Lean:
A systematic approach to identifying and eliminating waste {non-value-added activities) through continuous improvement in pursuit of
perfection by flowing the product at the pull of the customer.
Lean champion:
Subject matter expert in the tools of lean typically chosen to leadlean training, lean projects, and lean transformation.
Lean enterprise:
Any organization that continually strives to eliminate waste,reduce costs, and improve quality, on-time delivery, and service levels.
Understanding lean
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Lean production:
The opposite of mass production.
Muda:
A Japanese word, usually translated as waste, that refers to
those elements of production that do not add value to the product.
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Taiichi Ohno's original enumeration of the seven wastes plus
underutilized people. These are:
Eight wastes
1. Overproduction: Making more, "earlier, or faster than the next
operation needs it.
2. Waitingfor the next process, worker, material, information, or
equipment.3. Transportation: unnecessary transport of materials.
4. Over-processings of anything that does not add value.
5. Inventories more than the absolute minimum required to meet
customer demand. (KANBAN CARD)
6. Motion: unnecessary movement (like waiting) of people.7. Production ofdefective parts or information.
8. Not fully utilizing employees brain power, skills, experience,
talents and creativity.
Value- Added and
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Value Added andNonvalue- Added Steps
Value-Added Step:
Customers are willing to pay for it.
It physically changes the product.
Its done right the first time.
Nonvalue -Added Step: Is not essential to produce output.
Does not add value to the output.
Includes:
Defects, errors, omissions.
Preparation/setup, control/inspection.
Over- production, processing,inventory.
Transporting, motion, waiting, delays.
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Operations Management Today
Service economy
Environmental awareness
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D. Operations Management,
Productivity & Competitiveness
(1990-93) (1982-93)
Productivity Labor cost
growth (%) increase (%)
U.S. 2.5 16.1
Canada 2.4 16.2
Japan 1.8 123.9
Germany 1.2 100.8Sweden 4.2 26.3
U.K. 4.5 27.0
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Operations Management Uses
apply quality tools to tax work
project management used on merger
inventory theory for personal purchases
job design improves home chores
flexible spending accounts analyzed as
inventory models
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POM Models
Verbal Models- Express in words therelationship among variable a motorist asksyou to give directions for the nearest fast foodstation.
Schematic Pictorial relationship map
Iconic Physical replica of process eg arch
model of new building
Mathematical functional relationship amongvariables
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Productivity & Wastivity
Effectiveness of PM is measured by efficiency
through which the i/p are converted into o/p
Productivity output / input Standard / Actual Wastivity
1/Productivity
Amt of waste generated in the system. If we couldmeasure waste, then it becomes a tool for measuring
the efficiency of the i/p call wastivity
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Example of waste
Idling of resources material waiting in the
form of inventory in store, job order waiting to
be processed Production of Defective good and services
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Productivity problem In a manf unit the standard time allowed for the
production of a unit is 5 hrs. If in a particular month126 units are produced by employing 4 persons and theallowable delays are found to be 44 man hours, find the
productivity and wastivity Earned Standard Hrs 630 hrs
Std time 5hrs, prod 126 unit = 5x126=630hrs
Available Man hr = 756 hrs
Manpower emp 4 person, Monthly working hr 4x25x8=800 hrs
Allowed delay Actual Man hr 800-44 = 756
Productivity ESH/AWH = 630/756x100=83.3%
Wastivity 100-83.3 16.6%
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ERGONOMICS British term systematic study of how people
physically interact with the working environment, aswell as their equipment, facilities, and pdt.
Alternative name is human factor, becoz people differin size, age, there are significant design question thatmust be decided
Eg- AT&T Henry Dreyfuss designers created one ofthe first single unit mouth and ear telephone that wasused by both adult and kids
Ergonomics starts with physical efficiency, issue ofsafety and comfort
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Plant Layout & Location
Factory Place in which the factors of
production land, labour, capital and
enterprises are brought together for creation ofgood and service. The term plant layout is used
with factory layout
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Optimal Criteria for Selecting Plant location
Criteria is to achieve max ROI return on investmentover long run
ROI depends on Profit Margin and Investment Turnover
ROI (Average) = IT x PM
IT =~ long run investment PM= ~ long run profit margin
IT = SR / TA SR = Sales Revenue TA Total Assests PM = P / SR P = ~long run profit SR Sales Rev
ROI = (SR / TA) x (P / SR) = P / TA
P = SR TC were TC is Total Cost
SR depends upon the market and not location hence ROI isdirectly proportional to TC/TA
THUS, to MAX ROR, the location must be chosen so as to minimise the TA(land, building, equipment, material, cash) and TC (cost of material, transpcost, labour cost, conversion cost)
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Factors Affecting Facility Location
Nearness to raw material
Nearness to Markets
Availability of Labour Availability of Fuel and Power
Availability of Water
Climatic Conditions Government Policy
Land
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Factors Affecting Facility Location
Community Attitude
Security
Transport Facilities
Momentum of an early start
Personal Factors
Communication Facilities
Other Considerations
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Facility Location
Manufacturing
raw materials
labormarkets
Services
proximity to customers
Noxious facilities
remote locations
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Decision Stages & Factors
Affecting Facility Location
Identify set of alternatives
Reduce set using evaluation procedures
Hierarchy of decisionsregional
local
site
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Regional Decision
Market proximity
Proximity to raw materials
Availability of utilities
Labor supply & unionization
International locations also include
national taxes
legal restrictions
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Local Decision
Taxes
Economic incentives
Attractiveness of community
Compatible industry
Transportation network
Government policy & attitude
Environmental regulations
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Site Decision
Space for expansion
Proximity of other industry
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Planar Location
Median (Steiner-Weber) problem
travel time proportional to distance
Center-of-gravity problem
travel time proportional to squared distance
Min transportation cost
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Example
Locate facility to minimize distance to regionsin city
Customer Round Trips x y
Center i per Month Coord Coord1 30 1 4
2 50 2 5
3 20 3 3
4 60 3 65 30 5 2
6 40 7 4
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Formulation & Solution
x=3.48
[30(1)+50(2)+20(3)+60(3)+30(5)+40(7)]/[30+50+20+60+30+40]
y=4.00
[30(1)+50(5)+20(3)+60(6)+30(2)+40(4)]/[30+50+20+60+30+40]
Optimal solution
x= iw ix[ ] iw[ ], y= iw iy[ ] iw[ ]
Minimize iw ix x( )2 + iy y( )2
i=1
6
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Work Method
k h d
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Work Method
Construction of charts such as workers
machine charts, simulation charts and activity
charts, time study.
The choice of charts depends on
Production process
Workers at a fixed place
Workers interacting with equipment
Workers interacting with other workers
d i
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Production process - PP
Obj of studying PP is to identify delays, transport distance,
process.
Main philosophy is to eliminate any step that does not add value
to product
Process chart is prepared O Operation, Transportation,
Inspection, delay, storage
Ask foll question
What is done?, Must it be done? What would happen if not
done? Where is the task done? Must it be done at that location?
How is the task done?Can someone else do?
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Operation (an activitythat directly adds value)
Inspection (a check of
some sort)
Transport (a movement
of some thing)
Delay (a wait, e.g. for materials)
Storage (deliberate storage,
as opposed to a delay)
Process mapping symbols derived
from Scientific Management
Decision (exercising discretion)
Process mapping symbols derived
from Systems Analysis
Direction of flow
Input or Output from the process
Activity
Beginning or end of process
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Project Processes
One-off, complex, large scale, high workcontent products
Specially made, every one customized Defined start and finish: time, quality
and cost objectives
Many different skills have to becoordinated
Fixed position layout, resourcesbrought to product
Flow process chart for on day on an
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Flow process chart for on day on anadventure holiday
Flow process chart
Activity .. . Location .
Description of element
1 Get up
2 Go to washroom
3 Wash, brush teeth
4 Return to bedroom
5 Dress
6 Go to dining room
7 Await serving
8 Eat
9 Go to rifle range
10 Await instructor and equipment
11 Check equipment
12 Rifle shooting
T pes of Prod ction S stem (PS)
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Types of Production System (PS)
2 types = Continuous and Intermittent PS
CPS Continuous physical flow of material.
Standard pdts are manuf which are large in dd.
Standardized I/p and sequence of operations,
machine tools and equipment are used. Less
supervision, Possibility of Rigid Quality
Control
CPS are of two types- Mass production and
Process production
Mass and Process
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Mass and Process
Mass One type of product or max 2 or 3 type
of pdt are manf in large quantities and muchemphasis is not given to consumer order.
Process This system is used for manf those
items whose demand is continuous or high.Here single Raw material can be transformed
into different kinds of pdt a different stage of
the production. (oil refinery to kerosene,gasoline
Intermittent PS
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Intermittent PS Good are manf specifically to fulfill order by
customers rather than producing against stock.Eg switch gear
Two types Job and Batch production
Job production of a single complete unit byone operator or a group operators eg bridge
construction whole project considered as one
operation. Require skilled labour Batch Items are processed in lots. Printing
press
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Jobbing Processes
Very small quantities: one-offs, or only a few
required
Specially made. High variety, low repetition.
Strangers
Skill requirements are usually very broad
Skilled jobber, or team of jobbers complete wholeproduct
Fixed position or process layout (routing decided
by jobbers)
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Batch Processes
Higher volumes and lower variety than forjobbing
Standard products, repeating demand. Butcan make specials
Specialized, narrower skills
Set-ups (changeovers) at each stage of
production Process or cellular layout, predetermined
planned routing
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Mass (Line) Processes
Higher volumes than Batch
Standard, repeat products (runners)
Low and/or narrow skills
No set-ups, or almost instantaneous
ones
Cell or product layout: a fixed
sequence of operations
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Continuous Process
Extremely high volumes and low variety:often single product
Standard, repeat products (runners)
Highly captial-intensive and automated
Few changeovers required
Difficult and expensive to start and stop
the process Product layout: usually flow along
conveyors or pipes
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VolumeLow High VolumeLow High
Variety
Low
High
Variety
Low
High
Project
Jobbing
Batch
Mass
Contin-
-uous
Professional
service
Service shop
Mass service
Service process
types
Manufacturing process
types
Different process types are appropriate for different
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Different process types are appropriate for different
Volume-Variety combinations
High
Variety
Low
Low Volume High
Project
Jobbing
Mass
Continuous
Batch
Different process types are appropriate for different
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Different process types are appropriate for different
Volume-Variety combinations
High
Variety
Low
Low Volume High
Professional services
Mass services
Service shops
Pl t it
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Plant capacity
Capacity may be defined as the max or limitingcapability of a production unit to produce ina
specified period.
This is expressed in terms of o/p per unit oftime.
Measure of capacity different org used
different measure of capacity. Steel plant-tons,
beer cans produced, auto plant auto parts
Capacity Planning
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Capacity Planning
Designed capacity i.e maximum capacity that
a producing unit can produce under idealcondition.
Whenever the existing dd changes or addition
of new product has been made, then re-assessment of capacity at various stage ofproduction, depending upon the process details(i.e identifying ways of meeting desired
capacity through better utilization, higherefficiency, overtime, adding machinery orshifts
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Break-even Analysis
Production cost = fixed cost + (variable cost x output rate)
= FC + (VC x Q)
Revenue = revenue x units sold = p x Q
At break-even point Production cost = Revenue
Solve for break-even quantity, Q
Q = FC/ (p - VC)
LAYOUT TYPES
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LAYOUT TYPES LINE LAYOUT all equipment reqd for one part or pdt
are grouped together in one department in sequence ofthe operation performed higher rate of o/p as no
interruption, high division of work, less inspection,
lower material handling cost, better machine utilization
S, U, L shape Process / FUNCTIONAL LAYOUT The product is
fabricated by moving it from one dept to another dept
acc to sequence of operation to be performed ( high
degree of pdt can be manf, flexibility to change, mach
breakdown do
FMS Flexible Manf System
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FMS- Flexible Manf System
The age of mass prod is gone and era of
flexible prod is being started as competitive
world is there pdt introduced, phase out results
to lower order quantities.
Rapid intro of new pdt
Quick modification in pdt
Consistently Q Control
Ability to produce variety of pdt
Increase productivity
Saves labour cost
Shorter preparation time for new pdt.
Recommended