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CMR COLLEGE OF ENGINEERING & TECHONOLOGY
(AUTONOMOUS )
COURSE OUTCOMES
Arrange the types of production systems such as Flow shop, job shop, Batch manufacturing in Production Management.
Interpret process design and decisions for standardization.
Outline various Plant Location and Layout Models.
Identify Johnson’s rule scheduling strategy and Procedure.
Analyze modern Production Management tools to increase the Quality of Production.
Syllabus Unit-I: Introduction to Operations Management
Unit II: Product & Process Design and Plant Location & Layout
Unit III: Scheduling and Work Study
Unit IV : Materials Management
Unit V:Quality Control &Modern Production Management Tools
UNIT I Introduction to Operations Management:
Functional Subsystems of Organization.
Definition, Systems Concept of Production.
Types of Production Systems – Flow Shop, Job Shop, Batch Manufacturing.
The Project, Productivity.
Strategic Management – Corporate Strategic, Generic competitive Strategies, Functional Strategies.
Gross Domestic Product and its impact
World Class Manufacturing.
Introduction to Operations Management
Production is the creation of goods and services
“Production is the organization activity of transformation resources into finished products in the form of goods and services”.
Operation Management is the set of activities that create value in the form of goods and services by transforming inputs in to outputs.
Production and Operation Management
Production and operation management is defined as the design, operation, and improvement of transformation process, which converts the various inputs into the desired outputs of products and services.
According to E.S.Buffa “Production management deals
with decision making related to production process so that result the goods or services are produced according to specifications in the amounts and by the scheduled demanded and at minimum cost.’’
Production/Operation management is the process which combines and transforms various resources used in the production/operation subsystem of the organization into value added products/services in a controlled manner as per the policies of the organization.
Objectives of production/operations management(i) Maximum customer satisfaction through quality,
reliability, cost and delivery time.
(ii) Minimum scrap/rework resulting in better product quality.
(iii) Minimum possible inventory levels (i.e.,optimum inventory levels).
(iv) Maximum utilisation of all kinds of resources needed.
(v) Minimum cash outflow.
(vi) Maximum employee satisfaction.
(vii) Maximum possible production (i.e., outputs).
(viii) Higher operating efficiency.
(ix) Minimum production cycle time.
(x) Maximum possible profit or return on investment.
(xi) Concern for protection of environment.
(xii) Maximum possible productivity.
Scope of production operation management
Functional subsystems of organization
production
Marketing
Personnel
Finance
The marketing function of an organization aims to promote its products among customers. Which helps to obtain substantial sales order.
The financial function provides authorization and control to all other subsystems to utilize money more effectively through a well designed mechanism.
The personal function is a supporting function which plans and provides manpower to all other subsystems.
System concept of production System is an arrangement or assembly of inter-
dependent processes (activities) that are based on some logic and function.
It operates as a whole and is designed (build) with an intension to achieve (fulfil) some objective or do some work.
The production system of an organization is that part, which produces products of an organization.
It is that activity whereby resources, flowing within a defined system, are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management
"The methods, procedure or arrangement which includes all functions required to accumulate (gather) the inputs, process or reprocess the inputs, and deliver the marketable output (goods).“
Production system consists of three main components
Inputs,
Conversion Process
Output.
Production system
Characteristics of production system Production is an organized activity, so every production
system has an objective.
The system transforms the various inputs to useful outputs.
It does not operate in isolation from the other organization system.
There exists a feedback about the activities, which is essential to control and improve system performance.
Types of production systems
Production systems can be classified as
Job-shop production
Batch production
Mass and Continuous production systems.
Project type
Classification of production systems
Job-Shop Production
Job-shop production are characterized bymanufacturing one or few quantity of productsdesigned and produced as per the specification ofcustomers within prefixed time and cost.
The distinguishing feature of this is low volume andhigh variety of products.
A job-shop comprises of general-purpose machinesarranged into different departments. Each jobdemands unique technological requirements,demands processing on machines in a certainsequence.
This type of system has more flexibility. But this system result into more set-up time , more in-process inventory ,complex scheduling
Example-Tailors shop, Repair shops
Characteristics of job shop
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order priorities.
Advantages
1. Because of general purpose machines and facilities variety of products can be produced.
2. Operators will become more skilled and competent, as each job gives them learning opportunities.
3. Full potential of operators can be utilized.
4. Opportunity exists for Creative methods and innovative ideas.
Limitations
1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.
Batch Production American Production and Inventory Control Society
(APICS) defines Batch Production as a form of manufacturing in which the job pass through the functional departments in lots or batches and each lot may have a different routing.
It is characterized by the manufacture of limited number of products produced at regular intervals and stocked awaiting sales.
Shoe manufacturing ,Bottling plant , Cloth manufacturing
Characteristics of Batch Production 1. Shorter production runs.
2. Plant and machinery are flexible.
3. Plant and machinery set up is used for the production of item in a batch and change of set up is required for processing the next batch.
4. Manufacturing lead-time and cost are lower as compared to job order production
Advantages1. Better utilization of plant and machinery.
2. Promotes functional specialization.
3. Cost per unit is lower as compared to job order production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of products.
6. Job satisfaction exists for operators.
Limitations1. Material handling is complex because of irregular and
longer flows.
2. Production planning and control is complex.
3. Work in process inventory is higher compared to continuous production.
4. Higher set up costs due to frequent changes in set up.
Mass Production Manufacture of discrete parts or assemblies using a
continuous process are called mass production.
This production system is justified by very large volume of production.
The machines are arranged in a line or product layout. Product and process standardization exists and all outputs follow the same path.
Ex- Auto Manufacturing ,TV Manufacturing ,Cigarettes
Characteristics of Mass Production
Standardization of product and process sequence.
Dedicated special purpose machines having higher production capacities and output rates.
Large volume of products.
Shorter cycle time of production.
Lower in process inventory.
Perfectly balanced production lines.
Flow of materials, components and parts is continuous and without any back tracking.
Production planning and control is easy.
Material handling can be completely automatic
Advantages Higher rate of production with reduced cycle time.
Higher capacity utilization due to line balancing.
Less skilled operators are required.
Low process inventory.
Manufacturing cost per unit is low.
Limitations Breakdown of one machine will stop an entire
production line.
Line layout needs major change with the changes in the product design.
High investment in production facilities.
The cycle time is determined by the slowest operation
Continuous production Production facilities are arranged as per the sequence
of production operations from the first operations to the finished product.
The items are made to flow through the sequence of operations through material handling devices such as conveyors, transfer devices, etc.
Ex -Oil refining, Fertilizer production, Chemical processing etc.
Characteristics Dedicated plant and equipment with zero flexibility.
Material handling is fully automated.
Process follows a predetermined sequence of operations.
Component materials cannot be readily identified with final product.
Planning and scheduling is a routine action.
Advantages Standardization of product and process sequence.
Higher rate of production with reduced cycle time.
Higher capacity utilization due to line balancing.
Manpower is not required for material handling as it is completely automatic.
Person with limited skills can be used on the production line.
Unit cost is lower due to high volume of production.
Limitations Flexibility to accommodate and process number of
products does not exist.
Very high investment for setting flow lines.
Product differentiation is limited.
Project A project refers to the process of creating a complex
one 0f a kind product or service with a set of welldefined tasks in terms of resources required and time phasing.
Project production consists of many activities where the activities are interlinked, time phased and resources committed.
Ship construction, dam construction, bridge construction,
The resources, namely, manpower, machines, material are brought to the workplace where the product is manufactured.
There is no movement of the product.
PRODUCTIVITY Productivity is a relationship between the output
(product/service) and input (resources consumed in providing them) of a business system.
The ratio of aggregate output to the aggregate input is called productivity.
Productivity = Output/Input
For survival of any organization, this productivity ratio
must be at least 1.
If it is more than 1, the organization is in a comfortable
position.
Importance It helps to cut down cost per unit and thereby improve
the profits.
Gains from productivity can be transferred to the consumers in form of lower priced Products or better quality products.
A more productive entrepreneur can have better chances to exploit expert opportunities.
It would generate more employment opportunity.
Overall productivity reflects the efficiency of production system.
Strategies for improving the productivity Increased output for the same input.
Decreased input for the same output.
Proportionate increase in the output is more than the Proportionate increase in the input.
Proportionate increase in the input is more than the Proportionate decrease in the input.
Simultaneous increase in output with decrease in the input.
Productivity Measurement:
Productivity may be measured either on aggregate basis or on individual basis, which are called
1.Total Productivity
2.Partial Productivity
1.Total productivity Index/measure = Total Output
Total Input
Total production of goods and services Labour+material+capital+Energy+management
2.Partial productivity indices, depending upon factors used, it measures the efficiency of individual factor of production.
Labour productivity Index/Measure = Output in unit
Man hours worked
Management productivity Index/Measure=
Output
Total cost of management
Machine productivity Index/Measure = Total output
Machine hours worked
Land productivity Index/Measure = Total output
Area of Land used
• Capital productivity
• Material productivity
A furniture manufacturing company has provided the following data. Compare the labour, raw materials and supplies and total productivity of 2017 and 2018.
Output: Sales value of production in dollar ($)
22,000 (in 2017 ) and 35,000 (in 2018)
2017 2018
Inputs: Labour 10,000 15,000
Raw materials and
Supplies 8,000 12,500
Capital equipment
depreciation 700 1,200
Others 2,200 4,800
The input and output data for an industry given in the table. Find out various productivity measures like total, multifactor and partial measure.
Output Input
Finished units 10,000 Human 3,000
Work in progress 2,500 Material 153
Dividends 1,000 Capital 10,000
Energy 540
Other Expenses 1,500
Strategic Management Strategy is a tactical course of action which is designed
to achieve long term objectives.
Strategy of a business enterprise consists of what management decides about the future direction and scope of the business.
It entails managerial choice among alternative action programmes, competitive moves and different business approaches to achieve enterprise objectives.
Levels of Strategy
Corporate Strategy Corporate strategy – Which describes a company’s
overall direction towards growth by managingbusiness and product lines.
At this level, strategic decisions relate to organization-wide policies and are taken care by top-levelmanagement (BOD) with a vision of determining
‘Where the company wants to be?’
Corporate strategy is the highest strategic plan of the organization, which defines the company goals and defines ways of the achievement within strategic management.
It has two main aspects- Formulation of Strategy (strategic planning) and Strategy Implementation
The three main types of corporate strategies
Stable growth strategy
Growth Strategy
Retrenchment Strategy
A stability strategy is a corporate strategy in which an organization continues to do what it is currently doing.
This strategy include continuing to serve the same clients by offering the same product or service, maintaining market share, and sustaining the organization's current business operations
Growth Strategy
A growth strategy is when an organization expands the number of markets served or products offered, either through its current business or through new business.
There are 4 types of growth strategies.
1. Concentration on a singe product or service.
2. Concentric diversification( adding new products that are similar to the present products)
3. Vertical diversification
4. Horizontal diversification( Buys one of its competitors through mergers)
5. Conglomerate diversification( adding new products)
Retrenchment Strategy
These are used during economic recessions and during poor financial performance. These are short term strategies. This category of strategy includes
Turn around strategy
Disinvestment strategy
Liquidation strategy
Business/ generic competitive strategy A business strategy is a set of competitive moves
and actions that business uses to attract customers, compete successfully, strengthening performance, and achieve organisational goals.
A strategic business unit is an operating unit in an organization that sell a distinct set of products or services to an identifiable group of customers in competition with a we defined set of competitors.
The generic competitive strategies describe how a company pursues competitive advantage across its chosen market scope.
There are three types of generic strategies
Overall cost leadership strategy
Differentiation strategy
Focus strategy
Functional Strategies Functional strategy is an approach a functional area
takes to achieve corporate and business unit and strategies by maximizing resources productivity.
The Functional strategies include the activates of the functional areas.
Gross domestic product and its impact GDP of a nation is the sum of values of goods and
services produced in that nation in a year.
Product & Process Design and Plant Location & Layout
Aggregate planning (Introduction)Product Design and Analysis (Definition), New product development-its concepts, Steps of
Product Design, Process Planning and Design- Selection of Process, Process Selection Decision, Process Planning Design, Responsibilities of Process
Planning Engineer
Location & Plant Layout: Factors Influencing Plant Location,
Single Facility Location Problem. Plant Layout- Plant layout introduction, Classification
of Layout Advantages and limitations of Product Layout, Advantages and limitations of Group Technology
Layout, Layout Design Procedures
Aggregate planning is the process of developing, analyzing, and maintaining a preliminary, approximate schedule of the overall operations of an organization.
The aggregate plan generally contains targeted sales forecasts, production levels, inventory levels, and customer backlogs.
This schedule is intended to satisfy the demand forecast at a minimum cost.
Intermediate-range capacity planning, usually covering 2 to 12 months.
The goal of aggregate planning is to achieve a production plan that will effectively utilize the organization’s resources to satisfy expected demand.
Shortrange
Intermediate range
Long range
Now 2 months 1 Year
Aggregate planning begins with a forecast of aggregate demand for the intermediate range.
This is followed by a general plan to meet demand requirements by setting output, employment, and finished-goods inventory or service capacities.
Aggregate planning strategies
Basic Strategies
Level capacity strategy:
Maintaining a steady rate of regular-time output while meeting variations in demand by a combination of options such as: inventories, overtime, part-time workers, subcontracting and back orders.
Advantages
Stable output rates and workforce levels
Disadvantages
Greater inventory costs
Increased overtime and idle time
Resource utilizations vary over time
Chase demand strategy:
Matching capacity to demand; the planned output for a period is set at the expected demand for that period.
Advantages
Investment in inventory is low
Labor utilization is high
Disadvantages
The cost of adjusting output rates and/or workforce levels
Techniques
Product design
Product design is conceptualization of an idea about a product and transformation of the idea into a reality.
Product design is concerned with the form and function of a product.
Form design involves the determination of what a product would look like i.e the shape and appearance of the product.
Functional design deal with what the product will perform and how its performs.
Aspects of product design Design for Function
Design for Making
Design for Selling
Objectives of product design To ensure growth of the organization
Profit generation in the long run
To achieve the desired product quality
To reduce the development time and cost to the minimum
To ensure productivity or manufacturability
To meet new customer requirements
Factors influencing product design Customers requirements
Convenience of the operator or user
Type of materials used
Work methods & equipments
Cost / price ratio
Product Quality
Process Quality
Effect on existing products
Packaging
Characteristics of good product design
Function and performance
Appearance
Reliability
Maintainability
Simplification
Standardization
Safety
Specification
productivity
Modules of product design and Analysis Process planning and design
Value analysis/ Value engineering
Standardization& Simplification
Make or Buy decision
Ergonomic consideration in product design
Concurrent engineering
New product development New product development (NPD) is the process of
bringing a new product to the market place.
New product development is described in the literature as the transformation of a market opportunity into a product available for sale and it can be tangible or intangible.
Causes for new product development Increased competition
Advances in the technology
Environmental changes
Product reaches the end of its product life cycle
Types of new products Incremental or derivative products
Next generation or platform products
Breaking through or radical products
New product development strategies
New product development process
Idea Screening
Idea Generation
Concept Development
Business Analysis
Product Development .
Market Testing
Commercialization
PROCESS PLANNING & DESIGN
Process planning is concerned with planning the conversion or transformation processes needed to convert the materials into finished products
It refers to the complete description of specific stages in production process and the linkages between the stages that enable the production system to produce products or services.
Process planning is required mostly for new products or services.
Process planning consists of two parts
1. Process design
2. Operations design
Process design is concerned with the overall sequence of operations required to achieve the product specifications.
It specifies the type of work stations that are to be used, the machines and equipment necessary and the quantities in which each are required.
Operations design is concerned with the design of the individual manufacturing operations .
It consists of examining the man-machine relationship in the manufacturing process for converting the raw materials into the finished or semi-finished product
Operations design must specify how much of man and machine time is required for each unit of production.
a) Selection of Process b) Process Selection Decisions c) Process Planning Design d) Responsibilities of process Planning engineer
a) Selection of Process Process Selection decisions determine the type of
productive process to be used and the appropriate span ofthat process.
Process selection is sometimes viewed as layout problemor series of relatively low-level decisions.
Process decisions affects costs, quality, delivery andflexibility of operations.
b) Process Selection DecisionsProcesses can be classified and selected according toproduct flow and type of customer order.
The customer order is 2 types –
(1) Make-to-Order – aims to manufacture products only onorders
(2) Make-to-Stock – aims to produce products in advanceand has ready stock for any demand.
Process characteritics matrix
c) Process Planning Design It is complete determination of the specific technological
process steps and their sequence to be followed to produce products at the desired quality, quantity and cost.
This task is generally managed by process engineer
The basic input for process planning can be classified into
1.Product Information
2. Production System Information
Factors Effecting Process Selection Decisions6 factors mainly influence process selection from among theprocesses
1)Market Conditions
2)Capital requirements
3)Labour
4)Management Skills
5)Raw Materials and
6)Technology.
Product Information include – Product design, productionvolume, market environment, quality requirements andmajor technological selection.
Production System Information include – Resourceavailability and Technological capabilities.
Steps in Process Planning1. Analyse the part’s print to get the overall picture of what
is wanted.
2. Make recommendations or consult with Product engineers on design changes
3. List the basic operations required to produce the part of the drawing or specifications
4. Determine the most practical and economical manufacturing method and the form of tooling required for each operation.
5. Devise the best way to combine the operations and put them in sequence
6.Specify the gauging required for the process.
Process Design & Development
Process Design:• It is concerned with the overall sequence of operations
required to achieve the product specifications.
• It specified the type of work stations to be used, themachines and equipment necessary to carry out theoperations.
The sequence in process design depends on following:
(a) Nature of the product
(b) Materials available
(c) Quantities produced & to be produced
(d) Available Physical layout of the plant and
(e) Technology Required
PLANT LOCATION AND PLANT LAYOUT
Plant Location: It is a function of determining where the plant should be located for maximum operating economy and effectiveness.
Plant location decision are very important because they have direct bearing on factors like-financial, employment and distribution patterns.
IMPORTANCE OF LOCATION PLANNING:
Location planning decision are very crucial and important for all types of businessunits. This is because it involves cost, selling price and demand of the product. It isnon-recurring heavy expenditure.
Large companies take help from different professionals like Lawyers, Accountantsand Environmentalists etc for selecting proper location of plant.
Points to be considered Important for Location Planning are:
1. Expansion
2. Cost Advantage
3. Discovery of Raw-material
4. Additional Facilities
5. Mergers
IMPORTANCE OF LOCATION PLANNING Location planning decision are very crucial and important
for all types of business units. This is because it involves cost, selling price and demand of the product. It is non-recurring heavy expenditure.
Large companies take help from different professionals like Lawyers, Accountants and Environmentalists etc for selecting proper location of plant.
LOCATION MODELS:
1. Factor Rating Method
2. Weighted Factor Rating Method
3. Load-Distance Method
4. Centre of Gravity Method
5. Break-Even Analysis.
1.Factor Rating MethodThe process of selecting a new facility location involves a series of following steps:
1. Identify the important location factors.
2. Rate each factor according to its relative importance, i.e ., higher the ratings is indicative of prominent factor.
3. Assign each location according to the merits of the location for each factor.
4. Calculate the rating for each location by multiplying factor assigned to each location with basic factors considered.
5. Find the sum of product calculated for each factor and select best location having highest total score.
2. Weighted Factor Rating Method:
In this method to merge quantitative and qualitative factors, factors are assigned weights based on relative importance and weightage score for each site using a preference matrix is calculated.
The site with the highest weighted score is selected as the best choice.
3. Load-Distance Method:The load-distance method is a mathematical model used to evaluate locations
based on proximity factors.
The objective is to select a location that minimizes the total weighted loadsmoving into and out of the facility.
The distance between two points is expressed by assigning the points to gridcoordinates on a map.
An alternative approach is to use time rather than distance.
4. Centre of Gravity Method:
The centre of gravity is defined to be the location thatminimizes the weighted distance between thewarehouse and its supply and distribution points,where the distance is weighted by the number of tonessupplied or consumed.
Centre of gravity is based primarily on costconsiderations. This method can be used to assistmanagers in balancing cost and service objectives.
5. Break-Even Analysis:It implies that at some point in the operations, total revenue equals total cost.
Break even analysis is concerned with finding the point at which revenues andcosts agree exactly.
It is called ‘Break-even Point’.
Break-even point is the volume of output at which neither a profit is made nor aloss is incurred.
It is calculated as
BEP = Fixed Cost / Contribution * 100 ; Contribution = Sales – Variable Cost
PLANT LAYOUT:
It is a floor plan of the physical facilities which are used inproduction.
Layout planning refers to the generation of several possible plansfor the spatial arrangement of physical facilities and the onewhich minimizes the distance between departments is selected.
Objectives of Plant Layout:1. Minimize investment in the equipment
2. Minimize overall production time
3. Utilize existing space most effectively
4. Provide for employee convenience, safety and comfort.
5. Maintain flexibility of arrangement and operation
6. Minimize materials-handling cost
7. Facilitate the manufacturing process
8. Facilitate the organizational structure
Plant layout
Principles of plant layout
Types of layoutsProduct or line layout
Process or functional layout
Fixed position or location layout
Combined or group layout
Product or line layout
In this type of layout the machines and equipments are arranged in one line depending upon the sequence of operations required for the product
It is also called as line layout
The material moves one machine to another machine sequentially without any back tracking or deviation. i.e
The output of one machine becomes input of the next machine
It is used for mass production of standardized products.
Process layout In this type of layout the machines of a similar type are
arranged together at one place.
Eg. Machines performing drilling operations are arranged in the drilling department , machines performing casting operations be grouped in the casting department.
This type of layout is used for batch production.
It is preferred when the product is not standardized and quantity produced is relatively small
Fixed position layout
Group technology layout Group technology (GT) is the analysis and
comparisons of items to group them into families with similar characteristics.
Group layout is a combination of the product layout and process layout.
It combines the advantages of both layout systems
This technique is very useful for companies that produce variety of parts in small batches to enable them to take advantage and economics of flow line layout.
There are three methods that can be used to form part families.
1. Manual visual inspection
2.Production flow analysis
3.Cclassification and coding
Advantages of Group Technology
Better space utilisation
Reduced material handling effort
Reduction in production time
Reduction in number of machine operations and numerical control programming time.
Reduced work in progress inventory
Easy identification of bottle neck
Disadvantages of group technology Machines may required their own individual stock of
materials.
In adequacies in employees education, training & involvement could come in the way of proper implementation.
If the product mix is completely dissimilar then we may not have meaningful cell formation.
Layout Design Procedures:Designing a layout is a specialized activity and should be carried out systematically. Various steps followed in layout design are:
1. Statement of specific objectives, scope and factors to be considered.
2. Collection of basic data on sale forecasts, production volumes & schedules, operations to be performed & their sequences, Parts lists, Work measurements, existing layouts, building raw materials.
3. Preparation of various kinds of charts such as – flow process charts, flow diagram, string diagram and templates etc.
4. Designing the production process and Planning the material flow pattern and developing overall materials handling plan.
5. Calculation of requirement of work centers and equipment and planning of individual work centers.
6. Selection of materials handling equipment and determining the storage requirements.
7. Determination of routing, space requirements for each work station, service dept., employee facilities etc.
8. Draw building specifications to fit the requirements of the layout.
9. Preparation of detailed layout plan and get approval of top management
10. Preparation of work schedule for installation of layout.
Scheduling and Work Study
SCHEDULING:Aggregate Planning (Introduction); Scheduling Introduction;Johnson’s Problem; Extension of Johnson’s Rule; Job ShopScheduling; Types of Scheduling; Schedule Generation; HeuristicProcedures; Priority Dispatching Rules; Two Jobs & MachinesScheduling
WORK STUDY:Introduction; Method Study; Steps in Method Study; Recording;Selected Recording Techniques; Examine Steps; Principles ofMotion Economy; Time Study; Work Sampling.
SCHEDULING:• It refers to setting up of operations processing times so that
jobs will be completed by the time they are due.
• Main objective of scheduling operation is to provide the bestservice to the customers through efficient use of firm’s
resources.
• The activity of scheduling enables the management of a firm toallocate the firm’s resources optimally over a period of time inorder to accomplish specific tasks.
• Scheduling can be either medium-range or short-rangeplanning activity on basis of strategic and tactical decisionsmade in organization.
PURPOSE OF SCHEDULING:• Scheduling of operations is essential to firms as they can
minimize service delays and thus, maximize customersatisfaction.
• Proper scheduling enables firms allocate their productioncapacity to meet their customer requirements on time.
• If a firm schedules too much capacity there would unnecessaryidling time of machines resulting in wastage of resources (asmachines are capital intensive).
• Low Capacity may result in incomplete jobs at specified time,resulting in poor service to customers.
• Thus it is must that firms develop schedules with optimumamount of resources to meet customer requirements.
• EX: Schools have schedules (for classes, teachers, office/adminschedules, assignment and exam schedules) – to optimize useof available facilities and time.
SCHEDULING ACTIVITIES:1. Routing – following a Work Flow.
2. Loading – assigning jobs based on Capacity Limitations
3. Dispatching - giving orders to start Production Process.
4. Earliest Due Date – prioritize jobs according to EDD.
5. Longest Processing Time6. Shortest Processing Time7. First in First Serve - Processing jobs in order of their arrival.Ex: Petrol stations (1st come Customer served 1st irrespective of Volume ofPetrol)
8. Slack Time Remaining.
Slack Time = difference between time remaining in Due Date andthe processing time required.
Shortest slack time jobs dispatched first.
PROBLEMS ON SCHEDULING:Dhruva Printer Works is involved in printing and binding works. The company has gotorders from four of its customers – A, B, C and D at the beginning of a week.The processing time and due date of these jobs is given below
Develop the order in which these jobs are to be processed by using the followingdispatching rules:1. Earliest Due Date2. Longest Processing Time3. Shortest Processing Time4. First In First Serve5. Slack Time RemainingAlso, calculate the average delay of a job in each case.
Job Processing Time (days)
Due Date (Days hence)
A 3 4
B 5 7
C 4 6
D 2 5
PROBLEMS ON SCHEDULING:The processing time and due date of these jobs is given below
Develop the order in which these jobs are to be processed by using the followingdispatching rules:
1. Earliest Due Date
2. Longest Processing Time
3. Shortest Processing Time
4. First In First Serve
5. Slack Time Remaining
Also, calculate the average delay of a job in each case.
Job Due Dateno. of days remaining
A 8 7B 3 4C 7 5D 9 2E 6 6
TECHNIQUES OF SCHEDULING:
1. Single Machine Scheduling: Consists of N jobs with samesingle operation on each of the jobs.
2. Johnson’s 2 machine Algorithm:Scheduling when operation sequence involves 2 machines andprocessing time depends on the jobs loaded.
If backlog orders available – selecting best sequence fromavailable alternative sequences for processing the jobs.
3. Index Method:A technique for loading and allocating different jobs to differentmachines.
Normally, orders are assigned to best machine till it is loaded toits full capacity, remaining orders to next machine, and so on.
4. Critical Path Analysis:It is a technique used to schedule large projects whererelationships between different activities are complicated than asimple chain of activities to complete one after another.
CPA can be used for both simple and complex projects.
Ex: Simple – Overhauling a machine, construction of small shed.
5. Critical Ratio Scheduling:Technique for establishing and maintaining priorities among thejobs in the factory.
This technique uses Critical Ratios which set up a timerelationship between when a product is required and when it canbe made available.
FLOW SHOP SCHEDULING:Here, there are N jobs and each requires processing on Mdifferent machines.The order in which machines are required to process a job iscalled Process Sequence of that job.The process sequences of all jobs are same but, Processing Timeson each of the machines is different.Characteristics of Flow Shop Scheduling:1. A set of multiple-operation jobs is available for processing at
time Zero.2. Set-up times for the operations are sequence independent, and
are included in processing times.3. Job descriptors are known in advance4. M different machines are continuously available.5. Each individual operation of jobs is processed till itscompletion without break.
JOHNSON’S ALGORITHM:The time complexity function of flow shop problem is exponential innature i.e., function grows exponentially with problem size as flowshop handles many machines with each machine handling manyoperations.
To address this problem with 2 machines with each handling manyoperations, Johnson came up with a solution to achieve optimal (Ideal)solution in a definite time.
Consider following flow shop problem
Job i
Machine 1 Machine 2
1 t11 t12
2 t21 t22
3 t31 t32
4 t41 t42
5 t51 t52
Algorithm:Step 1: Find the minimum among various ti1 and ti2
Step 2a : If the minimum processing time requires Machine 1, placeassociated job in the First available position in the sequence. Go toStep 3.
Step 2b : If the minimum processing time requires Machine 2, place theassociated job in the Last available position in the sequence. Go toStep 3.
Step 3: Remove the assigned job from consideration and return to Step1 until all positions in the sequence are filled.
Example: Consider the following 2 machines and 6 job flow shop schedulingproblem. Using Johnson’s algorithm, obtain the optimal sequence which willminimize the MAKESPAN.
SOLUTION:
Job Machine 1 Machine 21 5 42 2 33 13 144 10 15 8 96 12 11
Stage Unscheduled Jobs Minimum tjk Assignment Sequence of Operation
1 1,2,3,4,5,6 t42 4=[6] XXXXX4
2 1,2,3,5,6 t21 2=[1] 2XXXX4
3 1,3,5,6 t12 1=[5] 2XXX14
4 3,5,6 t51 5=[2] 25XX14
5 3,6 t62 6=[4] 25X614
6 3 t31 3=[3] 253614
The Optimal Sequence is 2-5-3-6-1-4The MAKESPAN is determined as shown below:Time-in on Machine 2 =MAX [Machine 1 Time-out OR Machine 2 Time-out of previous Job]
The MAKESPAN for this Schedule is 53.This MAKESPAN can also be done using GANTT Chart.
JOBPROCESSING TIME OF 2 MACHINES
IDLE TIME ON MACHINE 2MACHINE 1 MACHINE 2
TIME-IN TIME-OUT TIME-IN TIME-OUT2 0 2 2 5 --5 2 10 10 19 53 10 23 23 37 46 23 35 37 48 01 35 40 48 52 0
4 40 50 52 53 0
Job Machine 1 Machine 2
2 2 3
5 8 93 13 14
6 12 111 5 4
4 10 1
Sequence of OperationXXXXX42XXXX42XXX1425XX1425X614
253614
EXAMPLE: Consider 2 Machines and 5 Jobs flow shop Problem
ANSWER:Optimal Sequence – 21354
Makespan = 47
Job Machine 1 Machine 21 7 82 1 43 15 124 8 55 11 6
EXTENSION OF JOHNSON’S ALGORITHM:This algorithm is an extension from - 2 machine problem to N machines with
each machine doing many operations.
One can extend Johnson’s Algo if any one of the following 2 conditions are
satisfied:
If min ti1 >= max ti2 (MIN of machine 1 >= MAX of machine 2)
ORIf min ti3 >= max ti2 (MIN of machine 3 >= MAX of machine 2)
The objective is to obtain optimal sequence for the data given
Then
ADD Machine 1 jobs to Machine 2 Jobs sequentially
And
ADD Machine 2 jobs with Machine 3 Jobs sequentially.
EXAMPLE: Consider 3 Machines and 5 Jobs flow shop Problem
Answer :Optimal Sequence – 32514MakeSpan = 51 units
MakeSpan = 51 units.
Find the OPTIMAL SEQUENCE and MAKESPAN for following 3 machines and5 jobs
ANSWER:Optimal Sequence – 41235MakeSpan = 92 units.
Job Machine 1 Machine 2 Machine 31 8 5 42 10 6 93 6 2 84 7 3 65 11 4 5
Job Machine 1 Machine 2 Machine 31 11 10 122 13 8 203 15 6 154 12 7 195 20 9 7
JOB SHOP SCHEDULING:• Here we assume that each job has M different operations.• If some jobs are having less than M operations, required number of dummy
operations with zero process times are assumed.• By this assumption, the condition of equal number of operations for all jobs
is ensured.• In Job Scheduling problem, the process sequences of the jobs are not the
same.• Hence, the flow of each job on job shop scheduling is not unidirectional.
The Time complexity function of the job shop problem is Combinatorial innature. Hence, Heuristic (more practical, hands-on) approaches are popular inthis area.
Unlike Flow Shop model, there is no initial machine that performs only thefirst operation of a job, nor is there a terminal machine that performs only lastoperation of a job.In Job Shop case, different jobs will have different operation sequence. So wecannot assume a straight flow for the job shop problem.
TYPES OF SCHEDULES:For any Job Shop problem, infinite number of feasible schedules are possible,because we can insert any arbitrary amount of Idle time at any machinebetween adjacent pairs of operations.
Idle times are not useful in any sense and in fact, lead to Non-Optimal solutionwhile minimizing the MAKESPAN measure.
The different types of Schedules are:1. Schedule Generation2. Heuristic Procedures – (Ideal / More practical / hands on)
- Priority Dispatching Rules – in case of a tie – use priority rule.• Shortest Processing Time
• First Come First Served
• MWKR (Most work remaining)
• MOPNR (most operations remaining): largest no. of successor operations
• LWKR (Least work remaining)
• RANDOM (Random).
3. Two Jobs and M machines Scheduling – (by graphical method).
WORK STUDY:It deals with the techniques of method study and workmeasurement, which are employed to ensure the best possible useof human, machine and materials resources in carrying out aspecified activity.
Work Study is concerned with finding better ways of doing workand avoiding waste in all its forms.
The main objective is – “to ensure the best possible use ofhuman, machine and materials resources available to theorganization for accomplishment of the work upon which it isengaged”.
OBJECTIVES:1. To analyze the present method of doing a job,
systematically in order to develop a new and bettermethod.
2. To measure the work content of a job by measuringthe time required to do the job for a qualified workerand hence to establish standard time.
3. To increase the productivity by ensuring the bestpossible use of human, machine and materialresources and to achieve best quality product/serviceat minimum possible cost.
4. To improve operational efficiency.
BENEFITS OF WORK STUDY:1. Increased Productivity and operational efficiency.
2. Reduced manufacturing costs
3. Improved work place layout
4. Better manpower planning and capacity planning
5. Fair wages to employees
6. Better working conditions to employees
7. Improved work flow.
8. Reduced material handling costs
9. Provides a standard of performance to measure labourefficiency
10. Better industrial relations and employee morale.
11. Basis for sound incentive scheme
12. Provides better job satisfaction to employees.
TIME STUDY:It is concerned with the establishment of TimeStandards for a qualified worker to perform a specifiedjob at a defined level of performance.
Method Study should always PRECEDE Time Studybefore any attempt is made to measure and setstandards for various jobs concerned.
METHOD STUDY:It is a systematic recording, analysis and criticalexamination of existing and proposed ways of doing workand the development and application of easier and newproduction methods.It can be applied to any field of work, but importantly it isused to improve Productivity.It is concerned with finding the facts about a situation andafter a critical examination of these facts, developing a newand better method of doing that work.It is defined as the existing and proposed ways of doingwork and development and application of easier and moreproductive methods.
OBJECTIVES OF METHOD STUDY:
1. To study the existing proposed method of doing anyjob, operation or activity.
2. To develop an improved method to improveproductivity and to reduce operating costs
3. To reduce excessive material handling or movementand thereby reduce fatigue to workmen
4. To improve utilization of resources.
5. To eliminate wasteful and inefficient work.
6. To standardize work methods or processes, workingconditions, machinery, equipments and tools.
ADVANTAGES:1. Work Simplification2. Improved working method (cheaper method)3. Better product quality and Improved work flow4. Improved workplace layout5. Improved equipment design and Less fatigue to
operator.6. Better working conditions/environment7. Better material handling and lesser material handling
cost8. Optimum utilization of all resources.9. Higher safety and higher job satisfaction to workmen10.Reduced manufacturing cost and higher productivity.
Factors Facilitating Method Study: (why to usemethod study)
1. High Operating Cost
2. High wastage and scrap
3. Excessive movement of materials & workmen
4. Excessive production bottlenecks
5. Excessive rejections & rework
6. Complaints about quality
7. Complaints about poor working conditions
8. Increasing number of accidents
9. Excessive use of overtime.
METHOD STUDY PROCEDURE:
1. Select: Select the work to be studied.
2. Record: Record all relevant facts of the present (orproposed) method by direct observation
3. Examine: Examine the facts critically in sequence,using special critical examination sheet.
4. Develop: Develop the best method i.e., the mostpractical, economic and effective method underprevailing circumstances.
5. Install: Install the method as standard practice.
6. Maintain: Maintain that standard practice by regularroutine check.
Recording Techniques Information RecordedA: CHARTS1. Outline Process Chart Principle Operations and inspection of the processes
2. Flow Process ChartActivities of men, material or equipment are analyzed into 5 events - Operation, Transport, Inspection, Delay and Storage
3. Two-handed Process Chart Movement of 2 hands or limbs of the operator.
4. Multiple Activity ChartSimultaneous/Interrelated activities of operators and/or machines on a common time scale
5. Simultaneous Motion CycleMovement of body parts of the operator, expressed in terms of therbligs on a common time scale.
(SIMO) ChartB. DIAGRAMS & MODELS:1. Flow Diagram Path of men, materials and equipments on a scale model
2. String DiagramSame as above except for the variation that it uses string to trace the path.
C. PHOTOGRAPHIC AIDS:
1. CyclegraphMovement of hand obtained by exposing a photographic plate to the light emitted from small bulbs attached to operator's fingers
2. Chrono-cyclegraphsModification of cyclegraph in which recording is made using flash lights
FLOW PROCESS CHART – SYMBOLS USED:
MOTION ECONOMY & WORK EFFICIENCY:Most workers do not enjoy making unnecessary or wasted motions,particularly if they result in unnecessary fatigue. In addition to providing somesocial and psychological rewards, a job should be reasonably efficient. MotionStudy helps to reduce fatigue and waste motions.
MOTION STUDY:It is the science of eliminating wastefulness resulting from using unnecessary,ill-directed and inefficient motion. The aim of motion study is to find andperpetuate the scheme of least waste methods of labour.
PRINCIPLES OF MOTION ECONOMY:
The principles of motion economy form a set of rulesand suggestions to improve the manual work inmanufacturing and reduce fatigue and unnecessarymovements by the worker, which can lead to thereduction in the work related trauma.
They are divided under 4 groups – (a) Effective use ofthe human body,
(b) Arrangement of the workplace.
(c ) Design of Tools and Equipment and (d) TimeConservation
TIME STUDY:This was proposed by F.W. Taylor and was latermodified to include a performance rating (PR)adjustment.
This is most widely used means of Work measurement.Time Study is concerned with the determination of theamount of time required to perform a unit of work.
It consists of the process of observing and recording thetime required to perform each element of an operationso as to determine the reasonable time in which thework should be completed.
OBJECTIVE OF TIME STUDY:
1. To furnish a basis of comparison for determining operativeeffectiveness.
2. To set labour standard for satisfactory performance.
3. To compare alternative methods in method study in order to selectthe best method.
4. To determine standard costs.
5. To determine equipment and labour requirements
6. To determine basic times/normal times
7. To determine the number of machines an operator can handle.
8. To balance the work of operators in production or assembly lines
9. To provide a basis for setting piece rate or incentive wages.
10. To set the completion schedules for individual operation or jobs
11. To determine the cycle time for completion of a job.
The steps of Time Study are as follows:Step 1: First select the job to be studied. Breakdown the work content of thejob into smallest possible elements. Then inform the worker and define thebest method.
Step 2: Observe the time for appropriate number of cycles (such as 25 to 50).
Step 3: Determine the average cycle time (CT).
CT=⅀ Times /No. of Cycles.
Step 4: Determine the Normal Time (NT).
NT = CT * PR
Step 5: Determine the Standard time .
ST=NT(AF)
Where AF = 1 / (1- % Allowance). (AF = Allowance Factor).
Therefore ST = NT / (1 - %Allowance)
WORK SAMPLING: or ACTIVITY SAMPLING orRATIO-DELAY METHOD
Work Sampling is a work measurement technique thatrandomly samples the work of one or more employees atperiodic intervals to determine the proportion of totaloperations that is accounted for in one particular activity.
These studies are frequently used to estimate thepercentage of time spent by the employees in unavoidabledelays (commonly called ratio-delay studies), repairingfinished products from an operation, and supplyingmaterial to an operation.
USES OF WORK SAMPLING TECHNIQUE:1. To estimate the percentage of protracted time period
consumed by various activity states of a resource such asequipment, machines or operators.
2. To determine the allowances for inclusion in standard times3. To indicate the nature of the distribution of work activities
within a gang operation.4. To estimate the percentage of utilization of groups of similar
machines or equipment5. To indicate how materials handling equipment are being used.6. To provide a basis for indirect labour time standards.7. To determine the productive and non productive utilization of
clerical operations.8. To determine the standard time for a repetitive operation as an
attention to stop watch method.
MATERIALS MANAGEMENT
Contents Integrated Materials Management
Components of Integrated Materials Management – MaterialsPlanning, Inventory Control, Purchase Management, StoresManagement.
Inventory Control – Inventory Decisions, Costs Trade Off.
Techniques of Inventory Control - ABC, XYZ, VED, FSN andSDE Analyses.
Models of Inventory; Operation of Inventory Systems; QuantityDiscount. Implementation of Purchase Inventory Model.
Purchasing Management.Stores Management – Incoming Materials Control, StoresAccounting, Obsolete Surplus & Scrap Management.
INTEGRATED MATERIALS MANAGEMENT:
It refers to management of resources in an integrativemanner to make way for national economic development,through efficient utilization of MIS, advancedtechnologies and innovative, economic materials formanufacturing.
The management needs to develop a comprehensivematerials management system to establish a pathway forthe most effective use of the resources through newtechnological advancements, methods and concepts.
FUNCTIONS:1. Decide on the purchase of materials
2. Ensure the centralization of power.
3. Coordinate all functions of the departments
4. Ensure quick and accurate decision-making
5. Ensure data analysis by Electronic Data Processing (EDP)and use of computing technology
6. Emphasise on the opportunity for growth.
ADVANTAGES:
Integrated Materials Management will result in following advantages:
1. Better Accountability
2. Better Coordination
3. Better Performance
4. Adaptability to Computerized Systems.
COMPONENTS OF IMM:
They can be classified into following methods:
1. Materials Planning
2. Inventory Control
3. Purchase Management
4. Stores Management
I) MATERIALS PLANNING:It is a scientific technique of determining inadvance the requirements of raw materials,ancillary parts and components, spares etc asdirected by the production programme.
It is the subsystem in the overall planning activity.There are many factors which influence theactivity of material planning. These factors can beclassified as macro and micro systems
1. MACRO FACTORS: - Price Trends, Governmentimport policies, Business Cycles etc.
2. MICRO FACTORS: - Plant capacity utilization,rejection rates, lead times, inventory levels, workingcapital, delegation of powers and communication, etc.
TECHNIQUES OF PLANNING MATERIALS:
The following 2 techniques are most commonly used inplanning materials for the given period. They are
1. Materials Requirement Planning (MRP)
2. Requirement based on past consumption.
II) INVENTORY CONTROL:
It is a planned approach of determining what to order,when to order and how much to order and how much tostock so that costs associated with buying and storing areoptimal without interrupting production and sales.
The most widely used method of inventory control isknown as ABC analysis. In this, the total inventory iscategorised into 3 sub-heads and then proper exercise isexercised for each sub-heads. This Includes
• ABC Analysis
• Fixed EOQ
• Lead Time Analysis
• Setting Safety Stock and Reorder Level.
III) PURCHASE MANAGEMENT:Purchasing is an important function of materials management. Inany industry purchase means buying of equipment, materials, tools,parts, etc. required for industry.
The importance of the purchase function varies with nature and sizeof industry. In small industry, this function is performed by worksmanager and in large manufacturing concern, this is done byseparate department.
The tasks under purchasing are listed below:
• Evaluating and rating suppliers
• Selection of suppliers
• Finalization of terms of purchase
• Placement of purchase orders and Follow-up.
• Approval of payments to suppliers.
OBJECTIVES of Purchasing Department:
1. Lower Costs
2. Reduce Risk and ensure the security of thesupply
3. Manage Relationships
4. Improve Quality
5. Pursue Innovation
6. Leverage Technology
IV) STORES MANAGEMENT:Stores play a vital role in the operations of company. Itis in direct touch with the user departments in its day-to-day activities. The most important purpose served bythe stores is to provide uninterrupted service to themanufacturing divisions. Further, stores are oftenequated directly with money, as money is locked up inthe stores.The different tasks under stores are listed below:1. Physical control of materials2. Preservation of stores3. Minimization of obsolescence and damage through
handling
TYPES OF STORES:
• Centralized stores i.e. materials are supplied to all departments by one store
• Decentralized stores i.e. for each department there is a separate store
• Centralized stores with sub-stores, i.e. there is one central store which holds the stocks in general with separate sub stores for each department which gets supply from the central stores.
Merits & Demerits of Centralized Store:
Merits:
• Better control & layout.
• Technical skill is high & supervision is better.
• Less storage space is needed because stocks should be kept as low as possible.
• Replenishment should be quicker.
• As maintenance of record of same material need not be required in different departments, less clerical work, stationery & other costs is involved.
Demerits:
• Cost of internal transport is higher.
• In the flow of materials to production, possibility of bottle-neck is there.
• Risk of obsolescence is greater.
• All the production departments are affected by any disturbance.
Purchasing Management:
The purchasing department occupies a vitaland a unique position in the organizationof an Industrial concern becausepurchasing is one of the main functions inthe success of a modern manufacturingconcern.
The purchasing function is a liaison agencywhich operates between the factory andoutside vendors on all matters ofprocurement.
The different parameters of purchasing are as follows:
• Purchasing items with right price
• Purchasing items with right quantity
• Purchasing items at right time so that the items areavailable when needed.
• Purchasing items from right source. The dependabilityof vendors are estimated using vendor rating. Thelocation of vendors, nature of items, mode oftransportation, vendor’s commitments to due dates,etc. should be taken into account
TYPES OF PURCHASE SYSTEMS:The whole system of purchasing, in terms of phases or grouping of related
activities can be classified as follows:
1) Pre-Purchase (Ordering) System
2) Ordering System
3) Post-Purchase (Ordering) System.
i) Pre-Purchase System : this includes making requisitions, requirementprogrammes, selection of supplies, obtain quotations and evaluating them.
ii) Ordering System: Once the decision on supplier and the rates are finalized,the order is placed with the selected supplier. The next task is to place order.
iii) Post Purchase System: The activities which are included under this systemare follow-up procedure, receipt and checking invoices.
SPECIAL PURCHASE MODES:
1. Forward Buying
2. Tender Buying
3. Blanket Order
4. Zero Stock.
5. Rate Contract
STORES MANAGEMENT:
The purchased materials are to be stored instores/warehouses and issued for production as and whenthey are required. Stores contain inventory mainly toprovide uninterrupted supply of materials to theproduction divisions. Thus, stores play a vital role inoperation of any production system.
The functions of stores are as follows:
1. It receives raw materials, tools, equipment and othernecessary materials and accounts them
2. It makes arrangement to store and preserve the itemsin good conditions for later use.
3. It maintains a proper account on issue of items ondemand from shop floor/production division.
4. It maintains a classification and codification systemto minimize obsolescence, surplus and scrap ofitems.
5. It provides information reports to support purchaseactivities to take place at right times.
STORES ACCOUNTING:The issues of the stores are accounted using one of the following methods:
1. FIFO method
2. LIFO method
3. Average Cost method
4. Standard Cost method
5. Market Price method
OBSOLETE, SURPLUS & SCRAP MANAGEMENTThe materials and parts which are used in industries for carrying out productionactivity become obsolete because of so many reasons. This in turn results insurplus and scrap.
Obsolete stocks are those items which are not damaged and have economicworth but are not suitable for the company’s specific operations.
Example: Changes in product design, wrong codification, technologicaladvancements and food and drug effectiveness has lapsed over time.
Surplus Stocks are those materials which have no immediate use or at least in theforeseeable future. They might have accumulated due to faulty planning,forecasting and purchasing. In short, surplus stocks are the items which are inexcess of their requirement.
Scrap Stocks are those items which are generated in the course of manufacturingor producing goods and materials. The extent of scrap and its value may varyfrom product to product and process to process. In some cases, the value of scrapgenerated maybe insignificant whereas in some other cases, it may be significant.However, in the overall context of the business and as a percentage of total valueof production, the scrap value is generally not significant so as to apply to manychecks, balances and restrictions or to ask for too much reporting about them.
INVENTORY CONTROL/MANAGEMENT:Inventory control is a planned approach of determining what toorder, when to order and how much to order and how much tostock so that costs associated with buying and storing areoptimal without interrupting production and sales.
Inventory is essential to provide flexibility in operating asystem.The inventory can be classified into Raw Materials Inventory,In-Process Inventory and Finished Goods Inventory.Raw Materials Inventory remove dependency betweensuppliers and plants.The Work-in Process inventories remove dependency betweenmachines of a product line.The finished goods inventory remove dependency betweenplant and its customers/market.
OBJECTIVES:1. To ensure adequate supply of products to customer and avoid
shortages as far as possible.2. To make sure that the financial investment in inventories is minimum.
(i.e., to see that working capital is blocked to minimum).3. To minimize the Carrying Cost of the Inventory.4. To minimize inactive, surplus, waste, scrap, obsolete, spoilage
materials.5. Efficient purchasing, storing, consumption and accounting for
materials.6. To maintain timely record of inventories of all the items and to
maintain the stock within the desired limits7. To ensure timely action for replenishment8. To provide a reserve stock for variations in lead times of delivery of
materials9. To provide a scientific base for both short-term and long-term
planning of materials.10. To maximize ROI.
FACTORS AFFECTING INVENTORY:Inventory Management is influenced by several factors, which differ from personto person, Org. To Org., place to place and in many more ways. However, thecommon factors often affect the decisions on inventory management are asfollows:
1. Economic Parameters – Purchase Price, Production Cost, Selling Price,Procurement Cost, Carrying Cost, Shortage cost, and operating andinformation processing cost.
2. Demand
3. Ordering Cycle and its review. (Continuous/Periodic).
4. Delivery Lags/Leads time
5. Time Horizon
6. Number of stages in Inventory
7. Number of Items
8. Availability and conditions.
9. Government’s/Company’s policy
MODELS OF INVENTORY: Basically 2 types
1. Deterministic Models (EOQ Models).
2. Probabilistic Models.
1. Deterministic Models are as follows:
a. Purchase model with instant replenishment without shortages
b. Manufacturing model without shortages
c. Purchase model with instant replenishment and with shortages
d. Manufacturing model with Shortages.
2. Probabilistic Models are as follows:
a. Probabilistic Model with Continuous Demand
b. Single Period Decision Model.
c. Multi Period Decision Modelsi. Continuous Review (Fixed Quantity or Q System)
ii. Periodic Review (P System)
INVENTORY COSTS:
SET-UP COST: Costs associated with setting up the machinery beforestarting production and is independent of qty. Ordered for production
ORDERING COST: Cost associated with ordering of raw materials forproduction. Advertisement, consumption of stationary, postage, telephonecharges, rent for space used by purchase department, travellingexpenditure, etc .
PROCUREMENT COST: cost of purchasing or producing a unit ofitem. This cost is very important when discounts are allowed.
PURCHASE COST: Cost incurred for purchasing an item
PRODUCTION COST: Cost incurred for producing or manufacturing orfabricating a product when the item is produced in-house.
INVENTORY COSTS:
CARRYING COST/HOLDING COST: Cost associated with storage,such as rent, interest on the money locked up, insurance of storedequipment, production, taxes, depreciation of equipment, etc.
SHORTAGE/STOCK-OUT COST: Penalty cost for running out ofstock (item that cannot be supplied on customer’s demand). This costincludes the loss of potential profit through sale of items and loss ofgoodwill in terms of permanent loss of customers and loss of associatedprofits in future sales.
SALVAGE COST/SELLING PRICE: When demand is affected by thequantity stocked, managers often think of clearing stocks and thus try toincrease the profits.
BENEFITS OF INVENTORY CONTROL:1. Improvement in customer’s relationship because of the timely
delivery of goods and service.
2. Smooth and uninterrupted production and hence, no stock out
3. Efficient utilization of working capital. Helps in minimising lossdue to deterioration, obsolescence damage and pilferage.
4. Economy in purchasing
5. Eliminates the possibility of duplicate ordering.
Inventory Decisions – are 2 types1. When to replenish the inventory of that item.
2. How much of an item to order when the inventory of that item isto be replenished.
TECHNIQUES OF INVENTORY CONTROL:1. ABC Analysis2. HML Analysis3. VED Analysis4. FSN Analysis5. SDE Analysis
I) ABC ANALYSIS:• The ABC analysis provides a mechanism for identifying items that will have a
significant impact on overall inventory cost, and also provides a mechanism for identifying different categories of stock that will require different management and controls.
• The ABC analysis suggests that inventories of an organization are not of equal value. Thus, the inventory is grouped into three categories (A, B, and C) in order of their estimated importance.
'A' items are very important for an organization.'B' items are important, but of course less important than 'A' items and moreimportant than 'C' items. Therefore, 'B' items are intergroup items.'C' items are marginally important
ABC analysis divides an inventory into three categories—
"A items" with very tight control and accurate records,
"B items" with less tightly controlled and good records, and
"C items" with the simplest controls possible and minimal records.
OR ABC Analysis can also be shown as:ABC Analysis is similar to the Pareto principle.
• 'A' items typically account for a large proportion of the overall value but a small percentage of the number of items.Examples of ABC class are
• 'A' items – 20% of the items accounts for 70% of the annual consumption value of the items
• 'B' items – 30% of the items accounts for 25% of the annual consumption value of the items
• 'C' items – 50% of the items accounts for 5% of the annual consumption value of the items
UNIT -V
Contents Introduction
Control Charts – for variables & attributes.
Acceptance Sampling – Operating characteristics curve, single & double sampling plan,
Acceptance Sampling by variables,
Nomogram Method for single sampling planSix Sigma – Types, Approaches and Benefits
Modern Production Management Tools:
JIT, TQM, ISO 9000 series, Poka Yoke, Kaizen, BPR, SCM and Lean Manufacturing.
STATISTICAL QUALITY CONTROL (SQC):
Measurement of data in statistical quality is divided intoVariable Data and Attribute Data.
Variable Data is continuous in nature and is measurable.
Ex: Dimension, Weight, Age, Income
Mean-Range (X - R charts); Mean-Std.Dev (X - σ) Charts areused for process control.
Attribute Data is discrete in nature and is in binary form.
Ex: Accept/Reject, etc
Exception to Discrete Data – MONEY. Though this appears tobe continuous Money is considered under Discrete data.
P, np and c Charts are used for process control for Defectivesand Defects.
DEFECTIVE: it is the item or product or system thatcontains number of defects.
They are counted in a lot or sample. The number ofdefectives is the limiting factor for accepting a sampleor a lot. Defectives are focal in a c-Chart.
DEFECT: it is an error or mistake or non-conformanceto the specification or poor functioning. They arecounted on individual items. Severity or number ofdefects is a limit for each individual item. Defects arefocal point in s p-Chart.
CONTROL CHARTS:
These are one of the 7 tools of SQC – Flow Charts, Checksheets,Histograms/Pareto Charts, Scatter Diagram, Control Charts,Cause-and-effect diagram and Run Charts.
Control Charts are employed to control the process – i.e.,
• Controlling, Monitoring the process and performance;
• gaining insight about the process;
• Identifying & reducing variation
• Identifying the presence of trends, shifts & other patterns inprocess.
• Determining process capability.
UPPER Control Limit (UCL) is µ+3 in X-bar - R chart it is X-bar+ A2 R-bar
LOWER Control Limit (LCL) is µ-3 in X-bar - R chart it is X-bar- A2 R-bar
ACCEPTANCE SAMPLING:
A sample does not necessarily represent true condition ofthe lot as it involves biased human decision in drawingsample from the lot and inspecting it.
The sample that is acceptable with desirablecharacteristics of homogeneity, adequacy, independenceand representativeness is called Acceptance Sampling
Acceptance Sampling is used to check whether to acceptor reject a lot of material that has already beenmanufactured.
Factors Affecting Selection of Sample:
1. Size of Population
2. Resources available
3. Degree of Accuracy & Precision required
4. Homogeneity/Heterogeneity of population
5. Nature of Inspection
6. Method of selecting Sample
7. Nature & requirement of customers
Methods of Acceptance Sampling:1. Single Sampling
2. Double Sampling
3. Multi/Sequential Sampling
SAMPLING RISKS:There are 2 types of sampling risks – producer’s and consumer’s risk.
Producer’s Risk:
The risk of “rejecting an acceptable lot” is producer’s risk and is denoted by
Alpha α
Consumer’s Risk:
The risk of “accepting a rejectable lot” is called consumer’s risk and is denoted by
Beta β.
Operating Characteristic Curve (OC curve):It is a graphical representation of the relationship between the probability of
acceptance P (a) and the percentage defective (p).
The 3 parameters on which OC curve depends are:
1. Size of the entire lot, N.
2. Size of the Sample, n.
3. Number of defectives in the sample, c.
What is Six Sigma?- It is Set of techniques and tools used for process improvement.
- It seeks to improve quality output of process by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business process
- A process that follows Six Sigma reduces defects to 99.99966% (which is 3.4 defects in one million opportunities.-DPMO)
- Introduced by Bill Smith when working at Motorola in 1986.
Source: iSixsigma
Why Six Sigma?- For Operational excellence – following Quality process to
achieve standard output, customer satisfaction and increase in profits.
- For Efficiency in manufacturing - reduction in costs, process cycle time, downtime and defects.
- For Managerial Excellence – increased emphasis on strong and passionate management leadership and support with clear-cut commitment to making necessary and immediate decisions.
- Clear Focus on achieving measurable and quantifiable targets and financial returns with verifiable data and statistical methods than just assumptions and guesswork.
How Six Sigma? - Six Sigma doctrine asserts • Continuous efforts to achieve stable and predictable process
results (e.g., by reducing process variation) are of vital importance to business success.
• Manufacturing and business processes have characteristics that can be measured, analyzed, controlled and improved.
• Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management.
• Through 2 methodologies : DMAIC and DMADV
DMAIC – Define, Measure, Analyze, Improve, Control
DMADV – Define, Measure, Analyze, Design, Verify
DMAIC:• Define the system - the voice of the customer from their feedback or direct
interaction and their requirements, and the project goals, specifically.
• Measure key aspects - of the current process and collect relevant data; calculate Process Capability in “as-is” condition.
• Analyze - the data to investigate and verify cause-and-effect relationships.- Identify Root Causes of errors or defects- Confirm critical Root Causes- Implement Corrective measures
• Improve or Optimize - the current process based upon data analysis using techniques such as design of experiments or mistake proofing, and standard work to create a new, future state process.
• Control - the future state process to ensure that any deviations from the target are corrected before they result in defects. Implement control systems such as statistical process control, production boards, visual workplaces, and continuously monitor the process
DMADV:
• Define - design goals that are consistent with customer demands and the enterprise strategy.
• Measure - and identify CTQs (characteristics that are Critical To Quality), Measure product capabilities, production process capability, and measure risks.
• Analyze - to develop and design alternatives
• Design - an improved alternative, best suited per analysis in the previous step
• Verify - the design, set up pilot runs, implement the production process and hand it over to the process owner(s).
QUALITY MANAGEMENT TOOLS AND METHODS
• Within the individual phases of a DMAIC or DMADV project, Six Sigma utilizes many established quality-management tools that are also used outside Six Sigma.
The following are the main methods for Study:JIT – Just-in-TimeKAIZEN – Continuous ImprovementTQM – Total Quality ManagementISO 9000 SeriesPOKA YOKEBPR – Business Process ReengineeringSCM – Supply Chain ManagementLEAN MANUFACTURING – Lean Six Sigma.
KAIZEN: Kaizen is the practice of continuous improvement. - Kaizen was originally introduced to the West by Masaaki Imai in 1986. - It is an important pillar of an organization’s long-term competitive strategy- Kaizen eliminates waste – by using standardized processes and activities.-Kaizen is not a strategy – it is a means to achieve corporate strategy.-3 principles of Continuous Improvement–Challenge, Kaizen and Go-and-See.
commandments of Improvement Abandon fixed ideas
Think of ways to make it possible
No excuses needed
Go for the simple solution, not the perfect one
Correct mistakes right away
Use your wits, not your wallet
Problems are opportunities
Repeat “why?” five times
Seek ideas from many people
There is no end to improvement
Kaizen Principles:
- People are Important Organizational Asset
- Processes should evolve by gradual improvement rather than radical change
- Improvement should be based on statistical/quantitative evaluation of process performance.
- Resources, measurements, rewards and incentives all need to be aligned.
- Continuous improvement enables changing customer needs to be taken into account
- Continuous improvement enables new technologies to be introduced.
The KAIZEN ProcessThe quick and easy kaizen process works as follows:
The employee identifies a problem, waste, or an opportunity for improvement and writes it down.
The employee develops an improvement idea and discusses it with his or her supervisor.
The supervisor reviews the idea quickly and encourages immediate action.
The employee implements the idea. If a larger improvement idea is approved, the employee should take leadership to implement the idea.
The idea is written up on a simple form ASAP.
Supervisor posts the form to share with and stimulate others and recognizes the accomplishment.
Tools used in KAIZEN Process:- 5 Why process
- Fishbone Diagrams
- PDCA – is TQM
- Pareto Analysis (80/20).
JUST-IN-TIME:The Philosophy of JIT is “Inventory is Waste”.
The hidden Wastes JIT highlight are – Junk, Inventory & TimeEx: Junk – Fuel wastage near traffic stopsInventory – Transit Inventory (pipeline of inventory)Time – Wasted in traffic jams. It is a Japanese philosophy applied in 1970. It assumes inventory as cost
incurring or waste, instead of value addition and storing value, contrary to traditional inventory practices.
GOALS/OBJECTIVES OF JIT:1. To minimize cost of production2. To integrate suppliers and manufacturer to optimize the material and time by
reducing unproductive operations and resources3. To improve continuously the process and systems4. To reduce cost of products and satisfy customer needs5. To increase degree of efficiency within the production process.6. To reduce waste in materials, time and effect involved in production process7. To obtain optimal quality cost relationshi[
PREREQUISTES for JIT:1. Reliable Vendors2. Minimal Setup time3. Multiskilled workers4. Elimination of bottlenecks5. Team work6. Commitment7. FlexibilityBENEFITS OF JIT:1. Improved flow of goods from warehouse to shelves2. Efficient utilization of multi-skilled employees3. Optimum use of working capital4. Reduced bottlenecks5. Reduced setup time6. Competitive edge7. Supplier relationships8. No storage or space cost9. Synchronization of production scheduling & performance with demand.
SUPPLY CHAIN MANAGEMENT:
Biggest challenge companies face in today’s world is the integration of
supply chain from vendor through manufacturers and distributors to satisfy the end customers and obtain value for these companies
SCM is all about aligning and coordinating the business processes and activities of different trading partners to improve the overall performance of the system.
FEATURES OF SCM:1. It is a system approach that considers the channel as a whole to
manage the flow of goods from supplier to customer2. A strategic orientation toward cooperative efforts to
synchronize and converge intra-firm and inter-firm operational and strategic capabilities into a united whole
3. A customer-focus to create unique and individualized sources of customer value, leading to customer satisfaction.
TASKS OF SCM:1. Physical Movement – flow between chain partners for perfect
physical flow2. Information Flow – procuring parts, manufacture and delivery
of finished3. Management Coordination – management of different chains4. Leadership of Chain – Leadership commitment for different
chains.
LIMITATIONS:1. High Cost
2. Investments are heavy
3. Operational Impact on reputation & future revenues
4. Customer Impact on future events.
POKA – YOKE:The starting point of conformity to standards is “to
anticipate errors”. While designing for conformance,
enforcement of discipline should be concerned more with anticipating human errors than relying upon the threat of punishment to prevent it.
Poka-yoke system focuses on the concept of “Mistake
Proofing” and believes in the principle of “nipping in the
bud”. The aim is to engineer production to eliminate the
possibility of error.
PRINCIPLES OF POKA-YOKE:1. Eliminate (or Control ) at Source
2. Maintain a sense of proportion
3. Simplicity & Effectiveness
4. Do the Obvious First
BUSINESS PROCESS ENGINEERING (BPR):It is the analysis and design of workflows and processes within an
organization.
It is basically fundamental rethinking and radical redesign made to an organization’s existing resources.
It is an approach for redesigning the way work is done to better support the org. mission and reduce costs. Reengineering starts with a high level assessment of org. mission, strategic goals and customer needs.
BPR derives its existence from different disciplines – six major areas under “acronym TOPICS” and some others divided BPR into four disciplines – Strategy, Technology, Organization and People.
TOPICS – Technology, Organization, People, Information, Communication and Strategy.
BPR TOPICS DESCRIPTION
TECHNOLOGYConcerned with mechanization, automation, process dynamics and computerization systems
ORGANIZATIONReflects the structural elements of the firm, such as hierarchical levels, the composition of organizational units, and the distribution of work between them
PEOPLE (HR) Deals with education, training, motivation and reward systems
INFORMATIONEnabler of new forms of organizing and collaborating, rather than supporting existing business functions
COMMUNICATIONActs like a connector of all areas and deals with the effective use of various forms of communication technology, such as audio, visual and signals.
STRATEGY
It is the primary driver of BPR initiatives, and the other dimensions are governed by strategy's encompassing role. It is concerned with evaluation of mission, vision, goals policies and strategies of the company.
TOTAL QUALITY MANAGEMENTTQM is a management approach that originated in the
1950s and has steadily become more popular since the early 1980s.
- To be successful implementing TQM, an organization must concentrate on the eight key elements:
Key Concepts in the TQM are:
• "Quality is defined by customers' requirements."• "Top management has direct responsibility for quality
improvement."• "Increased quality comes from systematic analysis and
improvement of work processes."• "Quality improvement is a continuous effort and
conducted throughout the organization."
TOTAL QUALITY MANAGEMENTPDCA ( Plan – Do – Check – Act) : - PDCA also known as Shewhart Cycle was made popular by Dr W. Edwards Deming, who is considered to be the father of modern quality control. -Deming changed PDCA to PDSA, Check was replaced by Study to fit Analysis instead of just inspection. - PDCA emphasis on iteration - once a hypothesis is confirmed (or negated), executing the cycle again will extend the knowledge further and moves us towards Goal of perfect operation and output.- In Six Sigma – it is called DMAIC.
PLAN: Establish the objectives and processes necessary to deliver results in accordance with the expected output DO: Implement the plan, execute the process, make the product. Collect data for charting and analysisCHECK: Study the actual results and compare against the expected results to ascertain any differencesACT: Implement the plan ascertained as it is or modified after checking it.
TQM Philosophy:- Failure and poor quality products/processes unacceptable.
- Target should be for ZERO defects.- The real costs of failure include both tangible and intangible items.
Tangible costs include Quality and Failure costs - Intangible include Time spent by management, loss of confidence in customer/different depts. due to faulty outputs.
- Though target is Zero defects – TQM doesn’t allow higher prevention costs
as innately the underlying principle is – Cost of Kaizen should not be high.
- An Optimal Quality level where total quality costs are minimum is finalized by management.
Implementing TQM :- Senior management support is must and give them necessary training
- Form a quality steering committee to oversee TQM implementation
- Communicate the change down through the org. hierarchy
- Record all actions and monitor progress Vs. expectations.
- If appropriate form quality circles (team of quality workers to meet regularly)
Failure of TQM Initiatives:- Lack of Management participation- TQM process and implementation is not a fad. Cannot be a faux pas.- Other recurring problems or initiatives takes precedence over TQM.- TQM is taken as a threat to current or incoming managers and rejected.- TQM cannot be implemented with cynicism about quality.
5 S’s:• Sort: Sort out & separate that which is needed & not needed in the area.
• Straighten: Arrange items that are needed so that they are ready & easy to use. Clearly identify locations for all items so that anyone can find them & return them once the task is completed.
• Shine: Clean the workplace & equipment on a regular basis in order to maintain standards & identify defects.
• Standardize: Revisit the first three of the 5S on a frequent basis and confirm the condition of the Gemba using standard procedures.
• Sustain: Keep to the rules to maintain the standard & continue to improve every
day.
5 S:
TOYOTA PRODUCTION SYSTEM (TPS)Applied in Lean Manufacturing / Production – Coined by Taiichi Ohno.
TPS Principle rests on - MURA MURI AND MUDAMUDA = WASTE; MURA = UNEVENNESS AND MURI = OVERBURDEN
(IMPOSSIBLE)
Lean Production/Manufacturing/Process: It is Simply “LEAN”.
- is a systematic method for the elimination of waste ("Muda") within a manufacturing system.
- Lean also takes into account waste created through overburden("Muri") and waste created through unevenness in work loads ("Mura").
- Essentially, lean is centered on making what “adds value” reducing everything else.
- Term was first coined by John Krafcik in his 1988 working as engineer in Toyota.
- Lean is built on eliminating waste -- anything that does not add value to the product. The metric in Lean is the value-added component: defining what the buyer actually pays for is key to identifying waste.
- Another area of waste elimination in Lean is reducing time spent in queue -- how much time a product “waits” along the production line for value to be added?
- Tightening a bolt adds value; - a pile of bolts waiting to be tightened is waste.
What are Lean Techniques? – Elimination of Seven Wastes (Muda)!!
Seven Wastes (Muda): “TIMWOOD”
The original seven muda (Waste - that which does not provide value) are:• Transport (moving products that are not actually required to perform the
processing)• Inventory (all components, work in process, and finished product not being
processed)• Motion (people or equipment moving or walking more than is required to
perform the processing)• Waiting (waiting for the next production step, interruptions of production
during shift change)• Overproduction (production ahead of demand)• Over Processing (resulting from poor tool or product design creating
activity)• Defects (the effort involved in inspecting for and fixing defects).
There can be more forms of waste in addition to the seven. The 8 most common forms of waste can be remembered using the mnemonic "DOWNTIME" (Defective Production, Overproduction, Waiting, Un-Tapped Employee Talent , Transportation, Inventory, Motion, and Excessive (Over) Processing)
ISO 9000 SERIES:
In today’s multinational manufacturing systems, the acceptability of
enterprises as suppliers will depend on whether they can conform to International Quality Standards. The best weapon for Suppliers is ISO 9000 certification.
Thus, it becomes dire need to enter and sustain in export markets, especially when suppliers wish to export to European and American Countries.
Although ISO 9000 quality standards were written to be used in voluntary two-party contractual situations it is the only way to do trade in foreign countries for market entry, product certification and laboratory accreditation.
ISO 9000 is being incorporated into buyer/seller agreements, government regulations and certification procedures. The principles of ISO 9000 are applicable whether a company employs 10 people or 10000 people.
ISO is acronym for International Organization for Standardization, which issued 6 standards in 1987 in order to bring standardization in terms of Quality across all nations – 1) quality system, (2) quality control, (3) quality management, (4) quality assurance, (5) quality surveillance, and(6) quality policy.
ISO 9000 series provides guidelines to manufacturers and suppliers about what is required for a quality-oriented system.
ISO 9000 series does not provide standards for one product or service and does not set out extra requirements which few firms only need to comply – but it is a practical standard for quality systems which can be used by all international organizations mandatorily if they wish to export to foreign countries.
ISOIS (INDIAN
STANDARDS)
EN (EUROPEAN
NORMS)TITLE
9000 14000 29000Quality management and quality assurance standards - selection and use
9001 14001 29001
Model for quality assurance in design/development, production, installation and servicing - all elements
9002 14002 29002Model for quality assurance in production and installation
9003 14003 29003Model for quality assurance in final inspection and tests
9004 14004 29004
Guidelines on development of quality management systems to minimize costs and maximize benefits
ISO 9000:2000 Revised Version:
In year 2000, ISO 9000 series underwent a change. The new quality systems are referred to as ISO 9001:2000 series. The major modifications in the revised version are as follows:
The old ISO 9002 and ISO 9003 series of standards are discontinued
ISO 9001:2000 replaced ISO 9001:1994, ISO 9002:1994 and ISO 9003:1994.
IF a company is currently ISO 9002 or ISO 9003 certified, it has to become ISO 9001:2000 certified.
If a company is ISO 9001certified, it has to update its quality system in order to meet the new ISO 9001:2000 requirements.
The ultimate objective of ISO 9000 series is to assure customer that any product or service coming out of this ISO 9000 certified company is bound to be of Good Quality!!
II) HML/XYZ Analysis:XYZ Analysis is based on the Value of Stocks on hand.
Items whose inventory values are high are called X items,
Those items whose values are Medium are M items.
Value of those items which is Low is termed under Z items.
H-High Price ItemsM-Medium Price ItemsL-Low Price Items
Usually XYZ analysis is used in conjunction with either ABC analysis or HML analysis.X- high inventory valueY-moderate inventory valueZ -low inventory value
XYZ analysis can be combined with FSN Analysis to classify Non-movingitems into XN, YN and ZN group thereby identify a handful of non-moving itemswhich account for bulk of non-moving stock.
III) FSN Analysis:
This analysis is based on the Consumption Figures of items. Items underthis are classified into :
F (Fast Moving); S (Slow moving) and N (non-moving) items.
• The last date of receipt of the items or the last date of the issue of items, whichever is later, is taken into account.
• The time period is usually calculated in terms of months or number of days and it pertains to the time elapsed seems the last movement was recorded.
FSN analysis helps a company in identification of the following
• The items considered to be “active” may be reviewed regularly on more
frequent basis.
• Items whose stocks at hand are higher as compared to their rates of consumption.
• Non-moving items whose consumption is “nil” or almost insignificant.
IV) VED ANALYSIS:
In this, the items are classified based on their criticality.The analysis of items are classified into 3 groups – Vital,Essential and Desirable.
Vital – encompasses those items without whichProduction comes to Halt.
Essential – includes items whose stockout costs are veryhigh
Desirable – items without which there is no immediateloss of production
OR their stockout costs entail nominal expenditure andcause minor disruptions for short duration.
V) SDE ANALYSIS:
This analysis is done based on the Lead Time required toprocure the items. S-”Scarce”; D-”Difficult” and E-”Easily Available”.
• Items which are imported and those items which havemore than 6 months lead time are – grouped under Scategory.
• Items which have more than a fortnight but less than 6months lead time are grouped under D category.
• Items which have less than a fortnight lead time areunder E category.
