Mba III Operations Management [10mba33] Notes

8/11/2019 Mba III Operations Management [10mba33] Notes

1/99

OPERATIONS MANAGEMENT 10MBA33

OPERATIONS MANAGEMENT

10MBA33

Syllabus

MODULE -1Introdut!on and Br"a# "$"n analys!s

Br"a# "$"n analys!s- Br"a# "$"n analys!s !n t"r%s o& '(ys!al

un!ts Sal"s $alu" and '"r"nta)" o& &ull a'a!ty

Br"a# "$"n &or Mult! Produt s!tuat!ons

*a'a!ty "+'ans!on d"!s!ons

Produt!on 'ro"ss Ma#" or Buy

d"!s!ons E,u!'%"nt S"l"t!on d"!s!ons

Produt!on 'ro"ss s"l"t!on d"!s!ons

Mana)"r!al us"s o& br"a# "$"n analys!s

L!%!tat!ons o& Br"a#"$"n analys!s

MODULE .II

/ORE*ASTING

/or"ast!n) as a 'lann!n) tool

/or"ast!n) t!%" (or!on

S(ort and lon) ran)" &or"ast!n)

Sour"s o& data

Ty'"s o& &or"ast!n) ,ual!tat!$" &or"ast!n) t"(n!,u"s

uant!tat!$" &or"ast!n) %od"ls-

L!n"ar r")r"ss!on

Mo$!n) a$"ra)"

2"!)(t"d %o$!n) a$"ra)"

E+'on"nt!al s%oot(!n)

Page1


2/99


E+'on"nt!al s%oot(!n) !t( tr"nds4

M"asur"%"nt o& "rrors

Mon!tor!n) and ontroll!n) &or"ast!n) %od"ls

MODULE . III

/a!l!ty 'lann!n)

/a!l!t!"s loat!on d"!s!ons4

/ators a&&"t!n) &a!l!ty loat!on d"!s!ons

R"lat!$" !%'ortan" &or d!&&"r"nt ty'"s o& &a!l!t!"s

/a!l!ty loat!on %od"ls

MODULE-I5

E%'loy"" 'rodut!$!ty

E%'loy"" Produt!$!ty6 - Produt!$!ty and or# study

Produt!$!ty and t(" standard o& l!$!n)4 Produt!$!ty and t(" or)an!at!on

'rodut!$!ty4 $ar!abl"s a&&"t!n) lab our 'rodut!$!ty4 or# ont"nt and t!%"4 or#

study and r"lat"d or#!n) ond!t!ons and (u%an &ators

M"t(od Study

Introdut!on 7to M"t(od study4 Data oll"t!on4 r"ord!n)4 "+a%!n!n)4 and

!%'ro$!n) or#4 Mat"r!al &lo and %at"r!al (andl!n) study4 2or#"r &lo study4

or#"r ar"a study

2or# %"asur"%"nt6-

Introdut!on to 2or# M"asur"%"nt4 2or# sa%'l!n) study4 T!%" study and

s"tt!n) standards Nu%"r!al 'robl"%s on 'rodut!$!ty %"asur"%"nts4 t!%" study

and or# standards

Page2


3/99


MODULE 5

*a'a!ty 'lann!n)

*on"'t and o$"r$!" o& a))r")at!on4 d"%and and a'a!ty o't!ons and strat")!"s

!n 'rodut!on and s"r$!"s4 a'a!ty and $alu"4 &!nan!al !%'at o& a'a!ty

d"!s!ons4 a))r")at" 'lann!n) ty'"s and 'ro"dur"4 a'a!ty r",u!r"%"nt 'lann!n)4

on"'ts o& y!"lds 8'rodut!$!ty9 and !ts !%'at on a'a!ty *a'a!ty r",u!r"%"nt

'lann!n)4 Mat"r!als r",u!r"%"nt 'lann!n)

Plann!n) (!"rar(!"s !n o'"rat!ons4 a))r")at" 'lann!n)4 'ur'os"4 n""ss!ty and

!%'ortan" o& a))r")at" 'lann!n)4 Mana)"r!al !%'ortan" o& a))r")at" 'lants4

alt"rnat!$"s &or %ana)!n) d"%and d and su''ly4 a'a!ty au)%"ntat!on strat")!"s4Mat(!n) d"%and and a'a!ty4 d"%and (as" a))r")at" 'lann!n)4 l"$"l

'rodut!on a))r")at" 'lann!n)4 a'a!ty 'lann!n) and st"'s

R"sour" r",u!r"%"nts 'lann!n) syst"%4 %at"r!als r",u!r"%"nt 'lann!n)4

ob:"t!$"s o& MRP4 BOM4 b"n"&!ts o& MRP

MODULE .5I

MATERIALS MANAGEMENT

Rol" o& Mat"r!als- Mana)"%"nt .%at"r!als and 'ro&!tab!l!ty4 'ur(as" &unt!ons4

'rour"%"nt 'ro"dur"s !nlud!n) b!d syst"%s

5"ndor s"l"t!on and d"$"lo'%"nt4 $"ndor rat!n)4 "t(!s !n 'ur(as!n) Rol"s and

r"s'ons!b!l!t!"s o& 'ur(as" 'ro&"ss!onals4 on"'ts o& l"ad t!%"4 'ur(as"

r",u!s!t!on4 'ur(as" ord"r4 a%"nd%"nts4 and &or%s us"d and r"ords %a!nta!n"d

In$"ntory %ana)"%"nt4 AB* 5ED4 and /SN analys!s4 In$"ntory osts4 In$"ntory

%od"ls .EO4 sa&"ty sto#s4 R" ord"r 'o!nt4 uant!ty d!sounts

Stor"s-ty'"s4 &unt!ons4 rol"s r"s'ons!b!l!t!"s4 In$"ntory r"ords4

Nu%"r!al Probl"%s on $"ndor rat!n)4 AB* analys!s4 In$"ntory %od"ls4 d!sounts

Page3


4/99


MODULE-5II

ual!ty %ana)"%"nt -1

Bas! on"'ts o& ,ual!ty o& 'roduts and s"r$!"s4 d!%"ns!ons o& ,ual!ty4

R"lat!ons(!'s b"t""n ,ual!ty4 'rodut!$!ty4 osts4 yl" t!%" and $alu" ;uan


5/99


CONTENTS

Module Chapter Name PAGE NOS.

1 Introducton and Brea! e"en anal#$$ %&11

' (oreca$tn) 1'&'*

3 (aclt# plannn) '+&3%

, Emplo#ee product"t# 3-&,,

. Capact# plannn) ,&*

% Materal$ mana)ement +&-1

- /ualt# mana)ement 0I -'&+0

* /ualt# mana)ement 0II +1&+*

Page5


6/99


MO2E I

Introducton and Brea! e"en anal#$$

INTRO2CTION TO BREA4 E5EN ANA6SIS7&

The term Operations refers to a function or system that transforms Inputs into outputs of

a )r"at"r $alu" O'"rat!ons ar" o&t"n d"&!n"d as a Trans&or%at!on or on$"rs!on 'ro"ss ("r"!n

In'uts su( as Mat"r!als4 Ma(!n"s4 Labour and a'!tal ar" trans&or%"d !nto out'uts

Operaton$ mana)ement7 & It !s d"&!n"d as t(" d"s!)n4 o'"rat!on4 and I%'ro$"%"nt o& t("

systems that create and deliver the firms primary products and services.

(ACTORS A((ECTING PRO2CTION AN OPERATIONS7&

a) R"al!ty o& Global o%'"t!t!on

b) ual!ty4 *usto%"r s"r$!" and ost (all"n)"s

c) Ra'!d E+'ans!on o& ad$an"d 'rodut!on T"(nolo)y

d) *ont!nu"d )rot( o& s"r$!" s"tor

e) Sar!ty o& 'rodut!on r"sour"s

f) So!al r"s'ons!b!l!ty Issu"s

PRO2CTI5IT67&

T(" t"r% 'rodut!$!ty d"sr!b"s (o "ll a 'rodut!on %ana)"r a(!"$"s 'rodut!$!ty us" o& t("

r"sour"s o& t(" &!r% Produt!$!ty !s an !nd"+ or %"asur" o& t(" "&&"t!$" us" o& r"sour" It !s

"+'r"ss"s as out 'ut

In'ut

Product"t# mea$ure$ nclude$7&

a) Labour 'rodut!$!ty

b) Ma(!n" Produt!$!ty

c) *a'!tal Produt!$!ty

d) En"r)y Produt!$!ty

Page


7/99

6OPERATIONS MANAGEMENT 10MBA33

Compett"ene$$7 - *o%'"t!t!$"n"ss !s a ru!al &ator !n d"t"r%!n!n) t(" sur$!$al and )rot( o&

a &!r% *o%'"t!t!$"n"ss !s (o "&&"t!$"ly an or)an!at!on %""ts t(" n""ds o& usto%"rs r"lat!$"

to ot("r &!r% (!( o&&"r s!%!lar )oods or s"r$!"s T(" d!%"ns!ons o& o%'"t!t!$"n"ss t(at

M"asur" t(" "&&"t!$"n"ss o& t(" 'rodut!on &unt!on ar" .

a) *ost or 'r!"

b) uant!ty

c) Produt s"r$!" d!&&"r"nt!at!on

d) D"'"ndab!l!ty as a su''l!"r

e) /l"+!b!l!ty

f) T!%" to '"r&or% "rta!n at!$!t!"sBrea!&E"en anal#$$7&

Br"a# "$"n- analys!s4 also all"d 'ro&!t analys!s or ost-$olu%"-'ro&!t 8*5P9 analys!s !s

us"d to d"t"r%!n" t(" nu%b"r o& un!ts o& a 'rodut 8$olu%"9 to s"ll or 'rodu" t(at !ll ",uat"

total sal"s r"$"nu" !t( total 'rodut!on ost

T(" t(r"" o%'on"nts o& a br"a#-"$"n-analys!s ar" $olu%"4 ost and 'ro&!t

Pro&!t

R"$"nu" ost

O& 'ro&!t TR 8Total R"$"nu"9

T* 8Total *ost9

Loss *58Total $ar!abl" ost9

*18/!+"d *ost9

uant!ty . 8B E 5olu%"9

Page


8/99


A''l!at!on o& Br"a#- E$"n analys!s

a9 E"aluatn) product$ or Ser"ce$

Br"a# .E$"n analys!s an b" us"d to "$aluat" t(" 'ro&!t 'ot"nt!al o& a n" or "+!st!n)'rodut or s"r$!" T(!s t"(n!,u" 'ro$!d"s ans"rs to &ollo!n) u"st!ons6-

a) Is t(" 'ro:"t"d sal"s $olu%" o& t(" 'rodut s"r$!" su&&!!"nt to br"a#-"$"n

b) Co lo t(" $ar!abl" ost %ust b" '"r un!t to br"a#-"$"n

c) Co lo %ust t(" &!+"d ost b" to br"a#-"$"n

d) Co do 'r!" l"$"ls a&&"t t(" Br"a#-"$"n $olu%"

/

P - *

2("r" Br"a# .E$"n 5olu%"

/ /!+"d *ost

P Un!t S"ll!n) Pr!"* 5ar!abl" *ost Un!t

b) E"aluatn) alternat"e Proce$$e$

8Ma#" .or . buy9

O'"rat!ons %ana)"rs ar" &a"d !t( 'robl"% o& (oos!n) b"t""n to or %or" 'ro"ss"s or

b"t""n an Int"rnal Pro"ss 8Ma#"9 and buy!n) 'roduts o%'on"nts &ro% outs!d" $"ndors

8buy9 t(!s !s usually r"&"rr"d as Ma#" .or-buy d"!s!on

T(" assu%'t!on !s t(at "!t("r d"!s!on do"s not a&&"t r"$"nu"s T(" o'"rat!on %ana)"r %ust

study all t(" osts and ad$anta)" o& "a( a''roa( and &!nd ,uant!ty at (!( total *osts ",ual toTotal r"$"nu"s

/%-/b

*b- *%

Page


9/99


/% /!+"d ost &or %a#" o't!on

/b /!+"d ost &or buy o't!on

*b 5ar!abl" ost &or buy o't!on

*% 5ar!abl" ost &or %a#" o't!on

B-E-'o!nt Total ost 8buy9

*ost

Total ost 8%a#"9/!+"d ost 8%a#"9

/!+"d ost 8buy9

ty 8BE$olu%"9

Brea!&E"en anal#$$ 8or Mult product ca$e$

Most Manu&atur"rs or s"ll"rs (a$" a $ar!"ty o& o&&"r!n)s 8)oods or s"r$!"s9 Ea( o&&"r!n)

%ay (a$" d!&&"r"nt s"ll!n) 'r!" and $ar!abl" ost BE analys!s an b" us"d to r"&l"t t("

proportion of sales for each product. The formula uses the Weighting factorindicating each

'roduts ontr!but!on by !ts 'ro'ort!on o& sal"s

/ /!+"d ost

5! 5ar!abl" ost un!t

P ! Un!t s"ll!n) 'r!"


10/99

Page9OPERATIONS MANAGEMENT 10MBA33

2! P"r"nta)" o& sal"s o& 1t( 'rodut o& Total Sal"s

Ma9or Proce$$ ec$on$7

1. Proce$$ Choce& D"t"r%!n"s ("t("r r"sour"s ar" or)an!"d around 'roduts or 'ro"ss"s

!n ord"r to !%'l"%"nt t(" &lo strat")y It d"'"nds on t(" $olu%"s and d")r"" o& usto%!at!on

to b" 'ro$!d"d

2. 5ertcal Inte)raton7 & Is t(" d")r"" to (!( a &!r%


11/99


IMITATIONS O( BREA4&E5EN ANA6SIS7&

1. T(" analys!s assu%"s a l!n"ar r"$"nu" &unt!on and a l!n"ar ost &unt!on

2. T(" analys!s assu%"s t(at (at"$"r !s 'rodu"d !ll b" sold

3. T(" analys!s assu%"s t(at &!+"d and $ar!abl"s ost an b" aurat"ly Id"nt!&!"d

4. /or %ult!'l" 'rodut analys!s4 t(" sal"s %!+ !s assu%"d to b" #non and onstant

5. T(" s"ll!n) 'r!" and osts ar" assu%"d to b" #non !t( "rta!nty


12/99


MO2E II

(ORECASTING

A Forecast is an Estimate about the future.

(oreca$tn)7 & It is defined as estimating the future demand for products and servicesand the

r"sour"s n""ssary to 'rodu" and s"r$!"s and t(" r"sour"s n""ssary to 'rodu" t("s"

out'uts /or"ast!n) !s t(" art and s!"n" o& 'r"d!t!n) &utur" E$"nts It !s not a %"r" )u"ss or

'r"d!t!on about t(" &utur" !t(out any rat!onal bas!s It !n$ol$"s Data 'ro"ss!n) and Data

%!n!n) T"(n!,u"s to o%" out !t( onlus!ons (!( ar" %or" aurat" and r"l!abl"

(oreca$tn) a$ a plannn) Tool7&

Mana)"r!al D"!s!on %a#!n) !s o&t"n o%'l!at"d du" to an "l"%"nt o& un"rta!nty !n

$ar!abl"s a&&"t!n) t(" D"!s!on-%a#!n) 'ro"ss It !s $"ry !%'ortant to d"$!" a M"(an!s%

(!( "nabl"s t(" 'lann!n) 'ro"ss to (a''"n %or" o%'r"("ns!$" by su!tabl" T"(n!,u"s

/or"ast!n) !s t(at bran( o& o'"rat!ons Mana)"%"nt (!( addr"ss"s su( !ssu"s

'ro$!d"s t(" Mana)"r !t( a s"t o& Tools and T"(n!,u"s &or t(" Est!%at!on Pro"ss

/or"asts ar" Est!%at"s o& T!%!n) and Ma)n!tud" o& t(" ourr"n" o& &utur" "$"nts

4e# 8uncton$ o8 (oreca$tn)7&

It !s an Est!%at!on Tool

A ay o& addr"ss!n) t(" o%'l"+ and un"rta!n "n$!ron%"nt surround!n) bus!n"ss

d"!s!on-%a#!n)

A Tool &or 'r"d!t!n) "$"nts r"lat"d to o'"rat!ons 'lann!n) and ontrol

A $!tal 'r"r",u!s!t" &or t(" 'lann!n) 'ro"ss !n or)an!at!on


13/99

Page12


2(y do " &or"ast

1. 2" ar" o'"rat!n) !n a Dyna%! and o%'l"+ En$!ron%"nt

2. S(ort t"r% &lutuat!ons ar" s""n !s 'rodut!on syst"%s

3. To "nsur" B"tt"r Mat"r!als Mana)"%"nt

4. To Inor'orat" Rat!onal!"d Man'o"r d"!s!ons

5. To "stabl!s( a bas!s &or 'lann!n) s("dul!n) &or strat")! D"!s!on %a#!n)

(oreca$t Tme


14/99

'lan4 r"s("dul!n) su''l!"s a'a!ty au)%"ntat!on4 Introdut!on4

o& Ra Mat"r!al N" Bus!n"ss /a!l!t!"s Loat!on

D"$"lo'%"nt D"!s!ons

Page 13OPERATIONS MANAGEMENT 10MBA33

Source$ o8 ata

/or"ast!n) !s o&t"n only as )ood as t(" ,uant!ty and ,ual!ty o& Data a$a!labl"

1 Sale$ 8orce E$tmate$6 - T(" sal"s &or" onst!tut"s sal"s r"'r"s"ntat!$" and ot("r &!"ld

o'"rat!ons sta&& T(" !n&or%at!on !nlud"s -

- Atual onsu%'t!on

- *(an)!n) 'att"rns !n onsu%'t!on

- P"r&or%an" o& o%'"t!tor brands

- O$"r all 'att"rns !n t(" Mar#"t s(ar" and Mar#"t )rot(

Or)an!at!ons an %a#" "nd-us" analys!s T(!s data !s $"ry us"&ul !n s(ort t"r% &or"ast!n) and

%!d- ours" orr"t!ons !n 'rodut!on and sal"s 'lann!n)

@ Pont o8 $ale$ >POS? ata S#$tem$7&

T(!s syst"% a'tur"s data at t(" 'o!nt o& sal" us!n) POS syst"% 2!t( t(!s T"(nolo)y4 as

a usto%"r buys a un!t o& an or)an!at!on


15/99

R"s"ar( &!r%s su( as ORG- MARG and Mana)"%"nt onsultany &!r%s also 'ro$!d" lass!&!"d

In&or%at!on


. B'B portal$ Mar!et place$7&

B@B 8Bus!n"ss @ Bus!n"ss9 'ortals 'ro$!d" n""ssary !n&or%at!on about o%'any


16/99


17/99

Ad"anta)e$7&

1. Us"s "+'"r!"n" and #nol"d)" o& "+'"rts

2. *an b" us"d &or T"(nolo)!al &or"ast!n)

3. *an b" us"d &or &or"ast!n) d"%and &or n" 'rodut

Page


4. *an b" us"d to %od!&y "+!st!n) &or"ast to aount &or unusual

!ru%stan"s

$ad"anta)e$7&

1. It !s ostly 'ro"ss

2. It so%"t!%"s )"ts out o& ontrol or )"ts d"lay"d

3. D!&&!ult to obta!n ons"nsus o'!n!on o& s"$"ral "+'"rts

b) Sale$ Compo$te Method7 -This is also knon as pooled sales force estimate. Eachsales

'"rson "st!%at"s (at sal"s !ll b" !n (!s ("r t"rr!tory T("s" "st!%at"s ar" t("n r"$!""d to

"nsur" t(at t("y ar" r"al!st!

Ad"anta)e$7&

- T(!s !s %or" 'rat!al4 r"al!st! and u'dat"d !n&or%at!on

- It ("l's !n In$"ntory Mana)"%"nt4 d!str!but!on and sal"s &or" sta&&!n)

$ad"anta)e$7&

- It %ay a&&"t t(" sal"s &or"ast

- Sal"s '"o'l" %ay b" unabl" to d!st!n)u!s( b"t""n (at usto%"rs ould l!#"

to do and (at t("y atually !ll do

- Sal"s '"o'l" %ay b" o$"rly !n&lu"n"d by t("!r r""nt "+'"r!"n"s

Mar!et Re$earch Method$ >Con$umer Sur"e# Method?

T(!s !s a syst"%at! a''roa( to d"t"r%!n" onsu%"r !nt"r"st !n a 'rodut or s"r$!" by

ondut!n) a onsu%"r sur$"y and sa%'l" onsu%"r o'!n!ons T(!s %"t(od %ay b" us"d to

&or"ast D"%and &or (" s(ort4 M"d!u% and lon) t"r%

Ad"anta)e$7&

T(!s !s b"tt"r o%'ar"d to sal"s &or" o%'os!t" %"t(od as t(" usto%"rs d!r"tly )!$"s t("!r

o'!n!on

T(!s !n&or%at!on !s %or" 'r!%ary !n natur" and annot b" obta!n"d !n ot("r %"t(ods


18/99

$ad"anta)e$7&

1. It !s t!%" onsu%!n)

2. It !s $"ry ostly a&&a!r E+'"ns!$"


3. T(" r"s'ons" rat" &or Ma!l"d u"st!onna!r" !s $"ry 'oor

4. T(" sur$"y r"sult %ay not r"&l"t t(" o'!n!ons o& t(" %ar#"t

1. elph Method7 & In t(!s %"t(od o'!n!ons ar" sol!!t"d &ro% a nu%b"r o& ot("r %ana)"rs and

sta&& '"rsonn"l T(" d"!s!on %a#"rs ons!st o& )rou' o& to 10 "+'"rts (o !ll b" %a#!n)

atual &or"ast T(" sta&& '"rsonn"l ass!st d"!s!on %a#"rs by 'r"'ar!n)4 d!str!but!n)4 oll"t!n)

and su%%ar!!n) a s"r!"s o& ,u"st!onna!r"s and sur$"y r"sults

T(" %ana)"rs (os" :ud)%"nts ar" $al!d ar" t(" r"s'ond"nts T(!s )rou' 'ro$!d"s !n'ut

to t(" d"!s!on %a#"rs b"&or" &or"ast !s %ad" R"s'ons" o& "a( r"s'ond"nt ar" #"'t anony%ous

(!( t"nds to "noura)" (on"st r"s'ons"s Ea( n" ,u"st!onna!r" d"$"lo'"d us!n) t("

!n&or%at!on "+trat"d &ro% t(" 'r"$!ous on"s T(us "nlar)!n) t(" so'" o& !n&or%at!on on (!(

'art!!'ants an bas" t("!r :ud)%"nt T(" )oal !s to a(!"$" ons"nsus &or"ast

Ad"anta)e$7&

- T(!s %"t(od an b" us"d &or lon)-ran)" &or"ast 'rodut d"%and

- A 'an"l o& "+'"rts %ay b" us"d as 'art!!'ants

$ad"anta)e$7&

- Pro"ss an ta#" a lon) t!%"

- R"s'ons"s %ay b" l"ss M"an!n)&ul

- C!)( auray %ay not b" 'oss!bl"

- Poorly d"s!)n"d u"st!onna!r" !ll r"sult !n a%b!)uous or &als" onlus!ons

/uanttat"e Approach7&

NaD"e Approach7 & T(" s!%'l"st ay to &or"ast !s to assu%" t(at &or"ast o& D"%and !n t("

n"+t '"r!od !s ",ual to t(" atual D"%and !n t(" %ost r""nt '"r!od

E) I& t(" d"%and &or a 'rodut !n ;an @00? !s 10 T("n d"%and &or t(" 'rodut !n /"b-@00?

!s also 10


19/99

Mo"n) a"era)e$ Method6-

(i) S!%'l" Mo$!n) a$"ra)"

(ii) 2"!)(t"d Mo$!n) a$"ra)"


D"%and !n 'r"$!ous n '"r!ods

Mo$!n) a$"ra)"

n

!!9 E+'on"nt!al s%oot(!n) M"t(od

It !s a so'(!st!at"d "!)(t"d %o$!n) a$"ra)" %"t(od t(at !s st!ll r"lat!$"ly "asy to

und"rstand and us" It r",u!r"s t(r"" !t"%s o& data

- T(!s '"r!od


20/99

/t 8At-19 K 81- 9 8/ t-1K T t-19

Tt 8/t . /t-19 K 81- 9 8Tt-19

/or"ast Error 8/E9

/E Atual D"%and . /or"ast D"%and


M"an Absolut" D"$!at!on 8MAD9

MAD 8&or"ast "rrors9

MONITORING AN CONTROING (ORCASTS

On" a &or"ast (as b""n o%'l"t"d4 !ts n""d to b" %on!tor"d and orr"t"d '"r!od!ally by

d"t"r%!n!n) (y atual d"%and d!&&"r"d s!)n!&!antly &ro% t(at 'ro:"t"d T(!s an b" don" by

s"tt!n) u''"r and lo"r l!%!ts on (o %u( t(" '"r&or%an" (arat"r!st! o& a &or"ast!n)

%od"l an d"t"r!at" b"&or" " (an)" t(" 'ara%"t"rs o& t(" %od"l

TRAC4ING SIGNA

A %"asur"%"nt o& (o "ll t(" &or"ast !s 'r"d!t!n) atual $alu"s

Runn!n) su% o& &or"ast "rrorsTra#!n) s!)nal M"an absolut" d"$!at!on

/our 'oss!bl" o%'on"nts6

Tr"nd 8s"ular tr"nd9 -- Lon) t"r% 'att"rn or d!r"t!on o& t(" t!%" s"r!"s

*yl" 8 yl!al "&&"t9 -- 2a$"l!#" 'att"rn t(at $ar!"s about t(" lon)-t"r% tr"nd4 a''"ars o$"r a

nu%b"r o& y"ars ") bus!n"ss yl"s o& "ono%! boo% ("n t(" yl" l!"s abo$" t(" tr"nd l!n"

and "ono%! r""ss!on ("n t(" yl" l!"s b"lo t(" s"ular tr"nd


21/99

S"asonal $ar!at!on -- *yl"s t(at our o$"r s(ort '"r!ods o& t!%"4 nor%ally 1

y"ar ") %ont(ly4 ""#ly4 da!ly

Rando% $ar!at!on 8r"s!dual "&&"t9 --Rando% or !rr")ular $ar!at!on t(at a t!%" s"r!"s s(os

*ould b" add!t!$"6 H! T! K *! K S! K I!


Or

Mult!'l!at!$"6 H! T! + *! + S! +I

/or"ast!n) us!n) s%oot(!n) t"(n!,u"s

T(" to o%%only us"d s%oot(!n) t"(n!,u"s &or r"%o$!n) rando% $ar!at!on &ro% a t!%"

s"r!"s ar" %o$!n) a$"ra)"s and "+'on"nt!al s%oot(!n)

Mo$!n) a$"ra)"6 8MA9

Mo$!n) a$"ra)"s !n$ol$" a$"ra)!n) t(" t!%" s"r!"s o$"r a s'"!&!"d nu%b"r o& '"r!ods 2"

usually (oos" odd nu%b"r o& '"r!ods so " an "nt"r t(" a$"ra)"s at 'art!ular '"r!ods &or

)ra'(!n) 'ur'os"s I& " us" an "$"n '"r!od4 " %ay "nt"r t(" a$"ra)"s by &!nd!n) to-'"r!od

%o$!n) a$"ra)"s o& t(" %o$!n) a$"ra)"s Mo$!n) a$"ra)"s a!d !n !d"nt!&y!n) t(" s"ular tr"nd o&

a t!%" s"r!"s b"aus" t(" a$"ra)!n) %od!&!"s t(" "&&"t o& yl!al or s"asonal $ar!at!on !" a

plot of the moving averages yields a smoothtime series curve that clearly shos the longterm

tr"nd and l"arly s(os t(" "&&"t o& a$"ra)!n) out t(" rando% $ar!at!ons to r"$"al t(" tr"nd

Mo$!n) a$"ra)"s ar" not r"str!t"d to any '"r!ods or 'o!nts /or "+a%'l"4 you %ay !s( to

alulat" a >-'o!nt %o$!n) a$"ra)" &or da!ly data4 a 1@-'o!nt %o$!n) a$"ra)" &or %ont(ly data4

or a -'o!nt %o$!n) a$"ra)" &or y"arly data Alt(ou)( t(" (o!" o& t(" nu%b"r o& 'o!nts !s

arb!trary4 you s(ould s"ar( &or t(" nu%b"r N t(at y!"lds a s%oot( s"r!"s4 but !s not so lar)" t(at

%any 'o!nts at t(" "nd o& t(" s"r!"s ar" lost T(" %"t(od o& &or"ast!n) !t( a )"n"ral L-'o!nt

%o$!n) a$"ra)" !s outl!n"d b"lo ("r" L !s t(" l"n)t( o& t(" '"r!od

/or"ast!n) Us!n) an L-Po!nt Mo$!n) A$"ra)"


22/99

1 S"l"t L4 t(" nu%b"r o& ons"ut!$" t!%" s"r!"s $alu"s H14 Y2. . .HL

t(at !ll b" a$"ra)"d 8T(" t!%" s"r!"s $alu"s %ust b" ",ually s'a"d9


2. *alulat" t(" L-'o!nt %o$!n) total4 by su%%!n) t(" t!%" s"r!"s $alu"s o$"r L ad:a"nt t!%"

'"r!ods

3. *o%'ut" t(" L-'o!nt %o$!n) a$"ra)"4 MA4 by d!$!d!n) t(" orr"s'ond!n) %o$!n) total by L

4. Gra'( t(" %o$!n) a$"ra)" MA on t(" $"rt!al a+!s !t( t!%" ! on t(" (or!ontal a+!s 8T(!s

'lot s(ould r"$"al a s%oot( ur$" t(at !d"nt!&!"s t(" lon)-t"r% tr"nd o& t(" t!%" s"r!"s9

E+t"nd t(" )ra'( to a &utur" t!%" '"r!od to obta!n t(" &or"ast"d $alu" o& MA

E+'on"nt!al s%oot(!n)6

On" 'robl"% !t( us!n) a %o$!n) a$"ra)" to &or"ast &utur" $alu"s o& a t!%" s"r!"s !s t(at $alu"s

at t(" "nds o& t(" s"r!"s ar" lost4 t("r"by r",u!r!n) t(at " sub:"t!$"ly "+t"nd t(" )ra'( o& t("

%o$!n) a$"ra)" !nto t(" &utur" No "+at alulat!on o& a &or"ast !s a$a!labl" s!n" t(" %o$!n)

a$"ra)" at a &utur" t!%" '"r!od t r",u!r"s t(at " #no on" or %or" &utur" $alu"s o& t(" s"r!"s

E+'on"nt!al s%oot(!n) !s a t"(n!,u" t(at l"ads to &or"asts t(at an b" "+'l!!tly alulat"d

L!#" t(" %o$!n) a$"ra)" %"t(od4 "+'on"nt!al s%oot(!n) d"-"%'(as!"s 8or s%oot("s9 %ost o&

t(" r"s!dual "&&"ts

To obta!n an "+'on"nt!ally s%oot("d t!%" s"r!"s4 " &!rst n""d to (oos" a "!)(t 24 b"t""n

0 and 14 all"d t(" "+'on"nt!al s%oot(!n) onstant T(" "+'on"nt!ally s%oot("d s"r!"s4 d"not"d

E!4 !s t("n alulat"d as &ollos6

E! 2 H!K81- 29E!-1 8&or !@9

("r" E! "+'on"nt!ally s%oot("d t!%" s"r!"s


23/99

H! obs"r$"d $alu" o& t(" t!%" s"r!"s at t!%" !

E!-1 "+'on"nt!ally s%oot("d t!%" s"r!"s at t!%" !-1

2 s%oot(!n) onstant4 ("r" 0 2 1

B")!n by s"tt!n) E1H1


E@ 2 H@K81- 29E1

E3 2 H3K81- 29E

E! 2 H!K81- 29E!-1

Hou an s"" t(at t(" "+'on"nt!ally s%oot("d $alu" at t!%" ! !s s!%'ly a "!)(t"d a$"ra)" o& t("

urr"nt t!%" s"r!"s $alu"4 H!4 and t(" "+'on"nt!ally s%oot("d $alu" at t(" 'r"$!ous t!%" '"r!od4

E!-1 S%all"r $alu"s o& 2 )!$" l"ss "!)(t to t(" urr"nt $alu"4 H! 2("r"as lar)"r $alu"s )!$"

%or" "!)(t to H!

T(" &or%ula !nd!at"s t(at t(" s%oot("d t!%" s"r!"s !n '"r!od ! d"'"nds on all t("

'r"$!ous obs"r$at!ons o& t(" t!%" s"r!"s

T(" s%oot(!n) onstant 2 !s (os"n on t(" bas!s o& (o %u( s%oot(!n) !s r",u!r"d A

s%all $alu" o& 2 'rodu"s a )r"at d"al o& s%oot(!n) A lar)" $alu" o& 2 r"sults !n $"ry l!ttl"

s%oot(!n)

E+'on"nt!al s%oot(!n) ("l's to r"%o$" rando% $ar!at!on !n a t!%" s"r!"s B"aus" !t us"s t("

'ast and urr"nt $alu"s o& t(" s"r!"s4 !t !s us"&ul &or &or"ast!n) t!%" s"r!"s T(" ob:"t!$" o& t("

t!%" s"r!"s analys!s !s to &or"ast t(" n"+t $alu" o& t(" s"r!"s4 /!K1 T(" "+'on"nt!ally s%oot("d

&or"ast &or /!K1 E!

("r" E! 2 H!K81- 29E!-1

!s t(" &or"ast o& H!K1 s!n" t(" "+'on"nt!al s%oot(!n) %od"l assu%"d t(at t(" t!%" s"r!"s (as

l!ttl" or no tr"nd or s"asonal o%'on"nt T(" &or"ast /! !s us"d to &or"ast not only H!K1 but

also all &utur" $alu" o& H!


24/99

!" /! 2 H!K81- 29E!-14 ! n K 14 n K @4

/or"ast!n)6 T(" R")r"ss!on A''roa(

Many &!r%s us" 'ast sal"s to &or"ast &utur" sal"s Su''os" a (ol"sal" d!str!butor o&

s'ort!n) )oods !s !nt"r"st"d !n &or"ast!n) !ts sal"s r"$"nu" &or "a( o& t(" n"+t

Page 23OPERATIONS MANAGEMENT 10MBA33

y"ars S!n" an !naurat" &or"ast %ay (a$" d!r" ons",u"n"s to t(" d!str!butor4 so%"

%"asur" o& t(" &or"ast

3 GG 1G IGI @> 10F@

= 1GI 1I >1= @F 11GG

G @31 1> F3= @? 11?@

I @33 1F ?3I 30 1@G@

> 31= 1? ?=@ 31 13I3

F =I0 @0 FG= 3@ 1=IF

? =I1 @1 FI@ 33 1=I1

10 =1? @@ F?? 3= 1G1=

11 =GG @3 F?@ 3G 1G0?

1@ G3 G @= ??1

To !llustrat" t(" t"(n!,u" o& &or"ast!n) !t( r")r"ss!on4 ons!d"r t(" data !n t(" Tabl" abo$"

T(" data ar" annual sal"s 8!n t(ousands o& dollars9 &or a &!r% 8say4 t(" s'ort!n) )oods d!str!butor9

!n "a( o& !ts 3 y"ars o& o'"rat!on


25/99

A satt"r 'lot o& t(" data !s s(on b"lo and r"$"als a l!n"arly !nr"as!n) tr"nd4


ANNUAL SALES

160140

Sales 120100

80 SALES y6040200

0 20 40

YEARS

So t(" &!rst ord"r 8stra!)(t-l!n"9 %od"l

E8H!9 o K 1!

S""%s 'laus!bl" &or d"sr!b!n) t(" s"ular tr"nd T(" r")r"ss!on analys!s 'r!ntout &or t(" %od"l

)!$"s R@ ?F4 / 141>@= 8'-$alu" 000194 and s 3F@= T(" l"ast s,uar"s 'r"d!t!on

",uat!on !s

Yi = Bo + B1i = .=0113 K =@?30!

T(" 'r"d!t!on !nt"r$als &or ! 34 3> =0 !d"n as " att"%'t to &or"ast &art("r !nto t("

&utur" Intu!t!$"ly4 " #no t(at t(" &art("r !nto t(" &utur" " &or"ast4 t(" l"ss "rta!n " ar" o&

t(" auray o& t(" &or"ast s!n" so%" un"+'"t"d (an)" !n bus!n"ss and "ono%! ond!t!ons

%ay %a#" t(" %od"l !na''ro'r!at" S!n" " (a$" l"ss on&!d"n" !n t(" &or"ast &or4 say4 ! =0


26/99

t(an &or t -34 !t &ollos t(at t(" 'r"d!t!on !nt"r$al &or ! =0 %ust b" !d"r to atta!n a ?

l"$"l o& on&!d"n" /or t(!s r"ason4 t!%" s"r!"s &or"ast!n) 8r")ardl"ss o& t(" &or"ast!n)

%"t(od9 !s )"n"rally on&!n"d to t(" s(ort t"r%

Mult!'l" r")r"ss!on %od"ls an also b" us"d to &or"ast &utur" $alu"s o& a t!%" s"r!"s !t(

s"asonal $ar!at!on 2" !llustrat" !t( an "+a%'l"


E Q A M P L E

R"&"r to t(" 1??1-1??= ,uart"rly 'o"r loads l!st"d !n t(" atta("d Tabl"

a. Pro'os" a %od"l &or ,uart"rly 'o"r load4 y4 t(at !ll aount &or bot( t(" s"ular tr"nd

and s"asonal $ar!at!on 'r"s"nt !n t(" s"r!"s

b. /!t t(" %od"l to t(" data4 and us" t(" l"ast s,uar"s 'r"d!t!on ",uat!on to &or"ast t("

ut!l!ty o%'anys ,uart"rly 'o"r loads !n 1?? *onstrut ? on&!d"n" !nt"r$als &or

t(" &or"asts

Solut!on

a A o%%on ay to d"sr!b" s"asonal d!&&"r"n"s !n a t!%" s"r!"s !s !t( du%%y $ar!abl"s /or

,uart"rly data4 a %od"l t(at !nlud"s bot( tr"nd and s"asonal o%'on"nts !s

E8H!9 Bo K Bl! K B@Q1K B3Q@K B=Q3

Tr"nd S"asonal o%'on"nt

("r"

! T!%" '"r!od4 ran)!n) &ro% ! 1 &or ,uart"r I o& 1??1 to ! 1 &or ,uart"r I5 o& 1??=

H! Po"r load 8%")aatts9 !n t!%" !Q1 1 !& ,uart"r I Q@ 1 !& ,uart"r II

O !& not O !& not

Q3 1 !& ,uart"r III Bas" l"$"l ,uart"r I5

O !& not

T(" o"&&!!"nts asso!at"d !t( t(" s"asonal du%%y $ar!abl"s d"t"r%!n" t(" %"an !nr"as" 8or


27/99

d"r"as"9 !n 'o"r load &or "a( ,uart"r4 r"lat!$" to t(" bas" l"$"l ,uart"r4 ,uart"r I5

b T(" %od"l !s &!tt"d to t(" data us!n) t(" SAS %ult!'l" r")r"ss!on rout!n" T(" r"sult!n) SAS

'r!ntout !s s(on b"lo Not" t(at t(" %od"l a''"ars to &!t t(" data ,u!t" "ll6 R@ ??>@4

!nd!at!n) t(at t(" %od"l aounts &or ??> o& t(" sa%'l" $ar!at!on !n 'o"r loads o$"r t(" =-

y"ar '"r!od7 / ?F?@ stron)ly su''orts t(" (y'ot("s!s t(at t(" %od"l (as 'r"d!t!$" ut!l!ty 8'-

$alu" 000197 and t(" standard d"$!at!on4 Root MSE 13@=@4 !%'l!"s t(at t(" %od"l'r"d!t!ons !ll usually b" aurat" to !t(!n a''ro+!%at"ly K@81394 or about K30 %")aatts


/or"asts and orr"s'ond!n) ? 'r"d!t!on !nt"r$als &or t(" 1?? 'o"r loads ar" r"'ort"d !n

t(" botto% 'ort!on o& t(" 'r!ntout /or "+a%'l"4 t(" &or"ast &or 'o"r load !n ,uart"r I o& 1??

!s 1F=> %")aatts !t( t(" ? 'r"d!t!on !nt"r$al 81F04 1FF?9 T("r"&or"4 us!n) a ? 'r"-

d!t!on !nt"r$al4 " "+'"t t(" 'o"r load !n ,uart"r I o& 1?? to &all b"t""n 1F0 and 1FF?

%")aatts R"all &ro% t(" Tabl" t(at t(" atual 1?? ,uart"rly 'o"r loads ar" 1F14 1>@4

1?0 and1F?34 r"s'"t!$"ly Not" t(at "a( o& t("s" &alls !t(!n !ts r"s'"t!$" ? 'r"d!t!on

!nt"r$al s(on

Many d"sr!'t!$" &or"ast!n) t"(n!,u"s (a$" 'ro$"d t("!r %"r!t by 'ro$!d!n) )ood &or"asts

&or 'art!ular a''l!at!ons N"$"rt("l"ss4 t(" ad$anta)" o& &or"ast!n) us!n) t(" r")r"ss!on

a''roa( !s l"ar6 R")r"ss!on analys!s 'ro$!d"s us !t( a %"asur" o& r"l!ab!l!ty &or "a( &or"ast

t(rou)( 'r"d!t!on !nt"r$als Co"$"r4 t("r" ar" to 'robl"%s asso!at"d !t( &or"ast!n) t!%"

s"r!"s us!n) a %ult!'l" r")r"ss!on %od"l

PROBLEM 1 2" ar" us!n) t(" l"ast s,uar"s 'r"d!t!on ",uat!on to &or"ast $alu"s outs!d" t("

r")!on o& obs"r$at!on o& t(" !nd"'"nd"nt $ar!abl"4 t /or "+a%'l"4 su''os" " ar" &or"ast!n) &or

$alu"s o& t b"t""n 1> and @0 8t(" &our ,uart"rs o& 1??94 "$"n t(ou)( t(" obs"r$"d 'o"r loads

ar" &or t $alu"s b"t""n 1 and 1 As not"d "arl!"r4 !t !s r!s#y to us" a l"ast s,uar"s r")r"ss!on

%od"l &or 'r"d!t!on outs!d" t(" ran)" o& t(" obs"r$"d data b"aus" so%" unusual (an)"

"ono%!4 'ol!t!al4 "t%ay %a#" t(" %od"l !na''ro'r!at" &or 'r"d!t!n) &utur" "$"nts

B"aus" &or"ast!n) alays !n$ol$"s 'r"d!t!ons about &utur" $alu"s o& a t!%" s"r!"s4 t(!s

'robl"% ob$!ously annot b" a$o!d"d Co"$"r4 !t !s !%'ortant t(at t(" &or"ast"r r"o)n!" t("

dan)"rs o& t(!s ty'" o& 'r"d!t!on


28/99

PROBLEM @ R"all t(" standard assu%'t!ons %ad" about t(" rando% "rror o%'on"nt o& a

%ult!'l" r")r"ss!on %od"l 2" assu%" t(at t(" "rrors (a$" %"an 04 onstant $ar!an"4 nor%al

'robab!l!ty d!str!but!ons4 and ar" !nd"'"nd"nt T(" latt"r assu%'t!on !s o&t"n $!olat"d !n t!%"

s"r!"s t(at "+(!b!t s(ort t"r% tr"nds As an !llustrat!on4 r"&"r to t(" 'lot o& t(" sal"s r"$"nu" data

Not!" t(at t(" obs"r$"d sal"s t"nd to d"$!at" about t(" l"ast s,uar"s l!n" !n 'os!t!$" and n")at!$"

runs T(at !s4 !& t(" d!&&"r"n" b"t""n t(" obs"r$"d sal"s and 'r"d!t"d sal"s !n y"ar t !s 'os!t!$"

8or n")at!$"94 t(" d!&&"r"n" !n y"ar t K 1 t"nds to b" 'os!t!$" 8or n")at!$"9 S!n" t(" $ar!at!on !n


t(" y"arly sal"s !s syst"%at!4 t(" !%'l!at!on !s t(at t(" "rrors ar" orr"lat"d 5!olat!on o& t(!s

standard r")r"ss!on assu%'t!on ould l"ad to unr"l!abl" &or"asts

M"asur!n) &or"ast auray 8MAD9

/or"ast "rror !s d"&!n"d as t(" atual $alu" o& t(" s"r!"s at t!%" ! %!nus t(" &or"ast

$alu"4

!" H! -#$i. This can be used to evaluate the accuracy of the forecast. To of

the'ro"dur"s &or t(" "$aluat!on ar" to &!nd t(" %"an absolut" d"$!at!on

MADV H! -#$i % &' and ()* +,-E! 8 H! -#$i*) &'


29/99


MO2E 3

(aclt# plannn)

(ACTORS A((ECTING OCATION ECISIONS

DE*IDING ON DOMESTI* INTERNATIONAL LO*ATION6

-Pol!t!al stab!l!ty-E+'ort or I%'ort ,uotas-E+(an)" rat"s

-*ultural and "ono%! ons!d"rat!ons

-a$a!lab!l!ty o& natural r"sour"s-ost o& labour

REGIONAL LO*ATION DE*ISION7

- A$a!lab!l!ty o& ra %at"r!als- N"arn"ss to sour" o& ra %at"r!als- N"arn"ss to %ar#"t- Pro+!%!ty to su''l!"rs- A$a!lab!l!ty o& 'o"r- Trans'ort &a!l!t!"s

- Su!tab!l!ty o& l!%at"- Go$t Pol!y- *o%'"t!t!on b"t""n stat"s

SELE*TION O/ *OMMUNITH

- A$a!lab!l!ty o& labour- *!$! a%"n!t!"s &or "%'loy""s- E+!st"n" o& o%'l"%"ntary4 an!llary and o%'"t!n) !ndustr!"s- /!nan" R"s"ar( &a!l!t!"s- A$a!lab!l!ty o& at"r


30/99

- A$a!lab!l!ty o& &!r" &!)(t!n) s"r$!"s- Loal Ta+"s R"str!t!ons

SELE*TION O/ EQA*T SITE

- Ar"a o& land a$a!labl"- To'o)ra'(y- *ost o& land

- D!s'osal o& ast"- *o%%un!ty att!tud"

Page29


REATI5E IMPORTANCE O( OCATION (ACTORS

Loat!on &ators n""d to b" 'r!or!t!"d to "nsur" b"tt"r s"l"t!on 'ro"ss T(" &ollo!n)

stat!st!s 'ro$!d"s !n&or%at!on r"lat!$" !%'ortan" o& "a( &ator !n d"!d!n) an !d"al loat!on

2nmporta Neutral Important

(actor$ nt >F? >F?

>F?

P"rsonal bus!n"ss ontats !n 'art!ular r")!on @= 11 IG

Good o%%un!at!on Trans'ort &a!l!t!"s G3 @1 @I

A$a!lab!l!ty o& su&&!!"nt In&rastrutur" => @0 33

Mar#"t R"s"ar( Ind!at!n) s!" or ot("r b"n"&!ts o& GF 1I @Iloal %ar#"t

A$a!lab!l!ty o& s#!ll"d labour >0 1G 1G

R")!on


31/99

- It &a!l!tat"s o%%un!at!on about (y on" loat!on s!t" !s b"tt"r t(an anot("r

- Enabl"s br!n)!n) d!$"rs" loat!onal ons!d"rat!ons !nto t(" "$aluat!on 'ro"ss

- /ost"r ons!st"ny o& ;ud)%"nt about loat!on alt"rnat!$"s


;? Pont Ratn) Method7&

In t(!s %"t(od4 t(" r"lat!$" "!)(t a o%'any ass!)ns to "a( ob:"t!$" or to "a( o&

'o!nts a '"r&"t s!t" ould r""!$" !n "a( at")ory Ea( 'ot"nt!al s!t" !s t("n "$aluat"d !t(

r"s'"t to "$"ry &ator a o%'any !s loo#!n) &or and 'o!nts ar" ass!)n"d &or "a( &ator T(" s!t"

!t( t(" (!)("st total No o& 'o!nts !s ons!d"r"d su'"r!or to ot("r s!t"s

T(" dra ba# o& t(!s %"t(od !s t(at (!)( sor" !n any &ator an o$"ro%" a lo sor" !s

any ot("r &ator

Brea!&E"en anal#$$7&

Loat!onal Br"a#- E$"n analys!s !s t(" us" o& ost-'ro&!t-analys!s to %a#" an "ono%!

o%'ar!son o& loat!on alt"rnat!$"s By !d"nt!&y!n) &!+"d and $ar!abl" osts and dra!n) t("

)ra'(s o& ,uant!ty 5s Total osts &or "a( loat!on7 " an d"t"r%!n" t(" loat!on (!( (as t("

lo"st ost o$"r a ran)" o& $olu%" 'rodu"d Loat!onal Br"a#-"$"n-analys!s an b" don"

%at("%at!ally or )ra'(!ally

/ualtat"e (actor Method7&

I& "ono%! r!t"r!a 8ost4 r"$"nu" or 'ro&!ts9 alon" ar" not su&&!!"ntly !n&lu"nt!al to

d"t"r%!n" t(" loat!on alt"rnat!$"4 a syst"% o& ass!)n!n) "!)(ts to ,ual!tat!$" &ators s"'arat"ly

and o%b!n!n) t("% to arr!$" at a total sor" !s us"&ul !n %a#!n) t(" loat!on d"!s!on T(!s

a''roa( !n #non as ,ual!tat!$" &ator analys!s %"t(od

(aclt# a#out Plannn)7&

/a!l!t!"s Layout r"&"rs to t(" on&!)urat!on o& D"'art%"nts4 or# "nt"rs and ",u!'%"nt


32/99

and Ma(!n"ry !t( &ous on t(" &lo o& Mat"r!als or or# t(rou)( t(" 'rodut!on syst"%

/a!l!ty layout- M"ans 'lann!n) &or loat!on o& all %a(!n"s4 ",u!'%"nts4 ut!l!t!"s4 or#s

to usto%"r s"r$!" ar"as4 Mat"r!al stora)" ar"as4 tool s"r$!n) ar"as "t4 and also 'lann!n) &or

t(" 'att"rns o& &lo o& Mat"r!als and '"o'l" around !nto and !t(!n t(" bu!ld!n)s


O;9ect"e$ o8 a Good plant la#out7&

1. C!)("r ut!l!at!on o& s'a"4 ",u!'%"nt and '"o'l"

2. I%'ro$"d &lo o& Mat"r!als4 In&or%at!on and 'la"

3. I%'ro$"d "%'loy"" %oral" and sa&" or#!n) ond!t!on

4. C!)("r &l"+!b!l!ty

5. I%'ro$"d 'rodut!on a'a!ty

6. R"du!n) %at"r!al (andl!n) osts

7. R"du"d on)"st!on or r"du"d bottl"n"# "nt"rs

8. R"du"d C"alt( Caard and a!d"nts

9. To 'ro$!d" "as" o& su'"r$!s!on

10. To !%'ro$" 'rodut!$!ty

11. To allo "as" o& %a!nt"nan"

12. To &a!l!tat" b"tt"r su'"r$!s!on

13. To ut!l!" a$a!labl" s'a" "&&!!"ny and "&&"ts

(actor$ In8luencn) a#out chan)e$7&

Pr!%ar!ly t(" layout o& a 'lant !s !n&lu"n"d by t(" r"lat!ons(!' a%on) %at"r!als4

%a(!n"ry and %"n Ot("r &ators as &ollos7&

1. Materal$7 & Plant layout !nlud"s 'ro$!s!on &or stora)" and (andl!n) o& ra %at"r!als4

su''l!"s and o%'on"nts us"d !n 'rodut!on


33/99

2. Product7 & T(" ty'" o& 'rodut ("t("r 'rodut !s l!)(t or C"a$y4 b!) or s%all4 sol!d or l!,u!d

E) S(!' bu!ld!n)4 A!rra&t ass"%bly4 Loo%ot!$" ass"%bly "t4

3. or!er$7 & T(" G"nd"r o& "%'loy""s 8M"n 2o%"n9 t(" 'os!t!on o& "%'loy""s (!l"

or#!n) 8stand!n) s!tt!n)9 "%'loy"" &a!l!t!"s "t4


Machner# and Eupment$7 & Ty'" o& 'rodut4 $olu%" o& 'rodut!on4 Ty'" o& 'ro"ss"s

d"t"r%!n"s ty'" o& Ma(!n"s and ",u!'%"nts to b" !nstall"d ")4 *N* Ma(!n"s4 lat("Ma(!n"s4 Auto%at!on T"(n!,u"s4 Robot!s "t4

5. T#pe o8 Indu$tr#7 & Industr!"s an b" lass!&!"d as - Synt("t! Industry

- Analyt!al !ndustry

- *ond!t!on!n) Industry

- E+trat!on Industr!"s

6. ocaton7 & T(" s!" and t"rra!n o& t(" s!t" s"l"t"d &or t(" 'lant !n&lu"n"s t(" ty'" o&

bu!ld!n)s (!( !n turn !n&lu"n"s t(" layout d"s!)n

7. Mana)eral polce$7 - R")ard!n) $olu%" o& 'rodut!on4 'ro$!s!on &or &utur" "+'ans!on4

"+t"nt o& auto%at!on4 Ma#"-or-buy d"!s!ons S'""d o& d"l!$"ry o& )oods to usto%"rs4

'ur(as!n) and In$"ntory 'ol!!"s and '"rsonn"l 'ol!!"s !n&lu"n" 'lant layout d"s!)n

T#pe$ o8 plant la#out7&

1. Pro"ss layout

2. Produt layout

3. /!+"d 'os!t!on layout

4. *"llular %anu&atur!n) layout

5. Cybr!d Layout


34/99

1. Proce$$ la#out7 & It !s also all"d as :ob s(o' or /unt!onal Layout T(" Ma(!n"s and

",u!'%"nts o& s!%!lar ty'" ar" )rou'"d to)"t("r and 'la"d !n on" loat!on !n t(" 'ro"ss layout

All %"tal utt!n) ",u!'%"nt l!#" ba# sa4 !rular s"!n) %a(!n"s4 Lat(" turn!n)

%a(!n"s4 M!ll!n) Ma(!n"s4 )as utt!n) Ma(!n"s4 "ld!n) Ma(!n"s !ll b" lust"r"d !n )rou'

and (ous"d !n s"'arat" Loat!on T("s" ar" usually all"d Turn!n) s(o'4 %!ll!n) s(o' G"ar s(o'

and Lubr!at!on s(o' Et4 s",u"n!n) o& s(o's !s )"n"rally as '"r a ty'!al 'rodut


T(" 'rodut !s )!$"n s"ondary ons!d"rat!on and t(" 'ro"ss !s %or" !%'ortant T(!s

on&!)urat!on !s )ood &or :ob ord"rs

E+a%'l"6 - Cos'!tals

Ad"anta)e$7&

Br"a# don o& Ma(!n"s do"s not sto' t(" "nt!r" 'rodut!on

T(" "+!st!n) %a(!n"s an b" &ully ut!l!"d 'rodut!on &l"+!b!l!ty !s 'oss!bl" !t(out any (an)"s

!n Ma(!n"s

S'"!al s#!lls an b" d"$"lo'"d !n or#"rs :ob !ns"ns!t!$" s("%"s an b" d"$"lo'"d

$ad"anta)e$7&

- Lar)" In$"ntor!"s and ons",u"nt ost !nr"as" l!n" balan!n) !s not 'oss!bl"

- Pro"ss!n) t!%" Inr"as"s du" to l!n) tra$"ls

- Produt!on 'lann!n) and ontrol !s d!&&!ult

- It !s d!&&!ult !n"nt!$" s("%"s

Product la#out7&

A 'rodut layout or stra!)(t l!n" layout !s a s!n)l" 'rodut or!"nt"d layout

a''ro'r!at" &or a standard!"d 'rodut and &or lar)" $olu%" 'rodut!on t(" &a!l!t!"s ar" la!d out

su( t(at "a( ",u!'%"nt )!$"s a s'"!al!"d s"r$!" o& s",u"n" o& tas# In t(!s syst"% t("

'rodut 'ass"s t(rou)( all t(" Ma(!n"s !n a s",u"n"

E+a%'l"6 - P(ar%a tab l"tt!n)4 bottl!n) o& b"$"ra)"s4 ar Manu&atur"4 soot"r b!#"


35/99

Manu&atur"4 ar as("rs4 a&"t"r!as "t4

Ad"anta)e$7&

- L"ss %at"r!al (andl!n) du" to stra!)(t L!n" %o$"%"nt o& Mat"r!als

- Idl"n"ss and Idl" a'a!ty !s r"%o$"d by

Ma+!%u% s'a" ut!l!at!on

- Easy to ontrol 'rodut!on $olu%"s and ,ual!ty- Do"s not r",u!r" &r",u"nt Ma(!n" s"t u'

- S("dul!n)4 rout!n) and Mana)!n) !n 'ro"ss In$"ntor!"s ar" s!%'l"


$ad"anta)e$7&

- Br"a#don o& on" %a(!n" !n L!n" sto's "nt!r" 'ro"ss

- B"n"&!ts o& s#!lls o& )ood su'"r$!sor annot b" us"d

- *(an)" o& 'rodut or $olu%" (an)" br!n)s 'robl"%s o& ut!l!at!on o& lar)" r"sour"s

- T(" syst"% !s In&l"+!bl"

(:ed po$ton la#out7&

As t(" t"r% !ts"l& !%'l!"s4 t(" &!+"d 'os!t!on layout !n$ol$"s t(" %o$"%"nt o& %"n4 and

%a(!n"s to t(" 'rodut (!( r"%a!ns stat!onary In t(!s ty'" o& layout4 t(" %at"r!al or %a:oro%'on"nt r"%a!ns !n a &!+"d loat!on and tools4 %a(!n"ry and %"n as "ll as ot("r '!""s o&

%at"r!al ar" brou)(t to t(!s loat!on It !s also all"d as stat! layout7 t(!s ty'" !s nor%ally us"d !n

t(" %anu&atur" o& bul#y and ("a$y 'roduts

E+6 loo%ot!$"s4 s(!'s4 a!rra&t4 sub%ar!n"s4 s'a"ra&ts4 bo!l"rs "t

Ad"anta)e$

- M"n and %a(!n"s an b" us"d &or a !d" $ar!"ty o& o'"rat!ons

- In !n$"st%"nt on layout !s $"ry s%all

- *ost o& Trans'ort!n) bul#y !t"%s an b" a$o!d"d

4) Cellular manu8acturn) la#out >CM?

In "llular %anu&atur!n) 8*M9 %a(!n"s ar" )rou'"d !nto "lls4 and t(" "lls &unt!on

so%"(at l!#" a 'rodut layout !t(!n a lar)"r s(o' or 'ro"ss layout Ea( "ll !n *M layout !s

&or%"d to 'rodu" a s!n)l" 'arts &a%!ly- a &" 'arts4 all !t( o%%on (arat"r!st!s4 (!(


36/99

usually %"ans t(at t("y r",u!r" sa%" %a(!n"s and (a$" s!%!lar Ma(!n"s s"tt!n)s

E+6 - G"ar s(o'4 at( out"r as!n) s(o'

Ad"anta)e$7

- Lo"r or#-!n 'ro)r"ss In$"ntory

- R"du"d %at"r!al (andl!n) ost


- S(ort"r &lo t!%"s !n 'rodut!on

- S!%'l!&!"d 'rodut!on 'lann!n)

- I%'ro$"d $!sual ontrol

- ual!ty t"nds to !%'ro$"

-

$ad"anta)e$

- R"du"d %anu&atur!n) &l"+!b!l!ty

- Pot"nt!ally !nr"as"d %a(!n" don t!%"

- Du'l!at" '!""s o& ",u!'%"nt %ay b" n""d"d so t(at 'arts n""d not b" trans'ort"d

b"t""n "lls

5)


37/99


MO2E&,

Emplo#ee product"t#

Product"t#7& Produt!$!ty !s t(" r"lat!ons(!' b"t""n t(" out'ut o& an or)an!at!on and !n'uts

r",u!r"d to 'rodu" t("s" out'uts Produt!$!ty !s "+'r"ss"d as t(" rat!o o& out'ut to su% or all o&

t(" r"sour"s us"d to 'rodu" t(" out'ut

Produt!$!ty Out'ut !n'ut

Labor 'rodut!$!ty Un!ts 'rodu"d Cours or#"d

*a'!tal 'rodut!$!ty out'uta'!tal !n'ut

Mat"r!al 'rodut!$!ty out'ut%at"r!al !n'ut

Ma(!n"s 'rodut!$!ty out'ut%a(!n" (ours !n'ut

Total 'rodut!$!ty out'utlabourK%at"r!alK"n"r)yKa'!tal

/ators a&&"t!n) 'rodut!$!ty


38/99

1. T"(nolo)y

2. *a'!tal !n$"st%"nt

3. ual!ty o& 'roduts and s"r$!"s

4. Pro"ss or %"t(ods

5. Mana)"%"nt

6. Standard!at!on o& 'ro"ss


7. ual!ty d!&&"r"n"s

8. E%'loy"" att!tud"9. Un!on at!$!ty

10. Po"r s(orta)"

11. Labor turno$"r

12. Go$t 'ol!!"s and r")ulat!ons

13. 2or# 'la" d"s!)n

14. Plant layout and 'ro"ss

15. Plant %a!nt"nan"

Product"t# mpro"ement Technue$

1) E%'loy"" bas"d t"(n!,u"6 (!( !nlud"s &!nan!al !n"nt!$"s /r!n)" b"n"&!ts4 'ro%ot!on4

'ol!!"s4 :ob "nr!(%"nt4 "%'loy"" 'art!!'at!on !n %ana)"%"nt "%'loy"" tra!n!n) and

"duat!on

2) Mat"r!al bas"d t"(n!,u"s6 su( as !n$"ntory 'lann!n) and ontrol Mat"r!al r",u!r"%"nt

'lann!n) %at"r!al (andl!n) syst"%4 ,ual!ty ontrol "t

3) Tas# bas"d T"(n!,u"s6 su( as "n)!n""r!n)4 or# %"asur"%"nt4 :ob d"s!)n4 :ob "$aluat!on

and (u%an &ator "n)!n""r!n)

4) Produts bas"d t"(n!,u"s6 su( as 'rodut standard!at!on4 s!%'l!&!at!on and


39/99

d!$"rs!&!at!on4 'rodut r"l!ab!l!ty4 ad$"rt!s!n) and 'ro%ot!on4 $alu" analys!s4 r"s"ar( and

d"$"lo'%"nt

5) T"(nolo)y bas"d T"(n!,u"s6 8bas"d on o%'ut"r "n)!n""r!n)9 su( as Robot!s4 *AD4

*AM4 "l"tron! data 'ro"ss!n)4 )rou' t"(nolo)y /l"+!bl" %anu&atur!n)4 total 'rodut

%a!nt"nan"4 %a(!n" r"ond!t!on!n) "t


or! Stud#

2or# study !s d"&!n"d as t(at body o& #nol"d)" on"rn"d !t( t(" analys!s o& t(" or#

%"t(ods and t(" ",u!'%"nt us"d !n '"r&or%!n) a :ob T(" d"s!)n o& an o't!%u% or# %"t(od

and t(" standard!at!on o& 'ro'os"d or# %"t(ods

O;9ect"e$ o8 or! $tud#7

1) To !%'ro$" 'rodut!$!ty o& urr"nt :obs and %a+!%!" 'rodut!$!ty

2) To r"du" ast" t(rou)( standard!at!on o& or# "l"%"nts o& :ob

3) To !nr"as" !ndustr!al 'rodut!$!ty t(rou)( :ob sat!s&at!on

4) To !%'ro$" labour "&&!!"ny

5) To "nabl" o't!%al ut!l!at!on o& 'lant

6) To "nsur" %ost "&&"t!$" ut!l!at!on o& (u%an "&&ort

7) To d"t"r%!n" "&&!!"nt or# %"t(ods

8) To "$aluat" (u%an "&&ort

9) To "stabl!s( standards o& '"r&or%an" &or "%'loy"rs

2or# study 'ro"dur"

1) S"l"t t(" or# to b" %"asur"d


40/99

2) R"ord all t(" r"l"$ant &ats about t(" :ob or 'ro"ss

3) E+a%!n" r!t!ally all r"ord"d &ats4 ,u"st!on!n) t(" 'ur'os"4 'la" to "l!%!nat" !n"&&"t!$"

t!%"

4) D"$"lo' a n" %"t(od &or :ob'ro"ss


5) M"asur" t(" or# ont"nt and "stabl!s( t(" standard t!%" us!n) an a''ro'r!at" or#

%"asur"%"nt t"(n!,u"

6) D"&!n" t(" n" %"t(od &or t(" :ob

7) Ma!nta!n t(" n" %"t(od &or :ob'ro"sso'"rat!on

B"n"&!ts O& or# study

- Inr"as"d 'rodut!$!ty and o'"rat!onal "&&!!"ny

- R"du"d %anu&atur!n) osts

- I%'ro$"d or# 'la" layout

- /a!r a)"s to "%'loy""s

- I%'ro$"d or# &lo

- R"du"d %at"r!al (andl!n) ost

- B"tt"r %an 'o"r 'lann!n)

- B"tt"r or#!n) ond!t!ons to "%'loy""s

M"t(od study

- M"t(od study !s a s!"nt!&! t"(n!,u" o& obs"r$!n)4 r"ord!n) and r!t!ally "+a%!n!n)

t(" 'r"s"nt %"t(od o& '"r&or%!n) a tas# or :ob or o'"rat!on !t( t(" a!% o& !%'ro$!n) t("


41/99

'r"s"nt %"t(od and d"$"lo'!n) a n" and ("a'"r %"t(od

Ob:"t!$"s o& M"t(od study

- To study t(" "+!st!n) 'ro'os"d %"t(od o& do!n) any :ob o'"rat!on or at!$!ty

- To d"$"lo' on !%'ro$"d %"t(od

- To !%'ro$" ut!l!at!on o& r"sour"s


- To "l!%!nat" ast"&ul and !n"&&!!"nt %ot!ons

- To standard!" or# n"tor# 'ro"ss"s

Ad"anta)e$ o8 Method Stud#7&

2or# s!%'l!&!at!on

I%'ro$"d 2or#!n) M"t(od

B"tt"r Produt ,ual!ty

I%'ro$"d or#'la" layout

I%'ro$"d ",u!'%"nt d"s!)n

I%'ro$"d or# &lo

C!)("r sa&"ty to or#%"n

S(ort"r Produt!on yl" t!%"

R"du"d %at"r!al onsu%'t!on asta)"s

R"du"d %anu&atur!n) osts

Method $tud# procedure7


42/99


43/99

E+'"t"d sa$!n)s

/"as!b!l!ty

Produt!$!ty


5. In$tall7 & T(" !%'ro$"d %"t(od !n t(r"" '(as"s- 'lann!n)4 arran)!n) and !%'l"%"nt!n)

'(as"s

6. Mantan7 & N" %"t(od by "nsur!n) t(at t(" !nstall"d %"t(od !s &unt!on!n) "ll T(!s !s

don" by '"r!od! ("#s and $"r!&!at!on at r")ular !nt"r$als Pro'"r ontrol 'ro"dur"s ar" us"d

to "nsur" t(at t(" n" %"t(od !s 'r"a("d to a(!"$" t(" b"n"&!t

or! Mea$urement7&

2or# %"asur"%"nt !s d"&!n"d as a''l!at!on o& T"(n!,u"s d"s!)nat"d to "stabl!s( t("

or# ont"nt o& a s'"!&!"d tas# by d"t"r%!n!n) t(" t!%" r",u!r"d &or arry!n) out t(" tas# at a

d"&!n"d standard o& '"r&or%an" by a ,ual!&!"d or#"r

O;9ect"e$ o8 Hor! mea$urement

I%'ro$"d 'lann!n) and ontrol o& at!$!t!"s

Mor" "&&!!"nt %ann!n) o& 'lant

R"l!abl" !nd!"s &or labor '"r&or%an"

R"l!abl" bas!s &or labour ost ontrol

Bas!s &or sound !n"nt!$" s("%"s


44/99

Step$ n Hor! mea$urement

Br"a# t(" :ob !nto "l"%"nts

R"ord t(" obs"r$"d t!%" &or "a( "l"%"nt by t!%" study

Establ!s( "l"%"ntal $alu"s by "+t"nd!n) obs"r$"d t!%" !nto nor%al t!%"

Ass"ss r"la+at!on alloan" &or '"rsonal n""ds and '(ys!al and %"ntal &at!)u"


Add t(" r"la+at!on alloan" t!%" to nor%al t!%"

D"t"r%!n" t(" &r",u"ny o& ourr"n" o& "a( "l"%"nt !n t(" :ob

Obs"r$"d t!%"

Nor%al t!%"

2or# ont"nt

Standard t!%"

Tme $tud#

T!%" study !s a or# %"asur"%"nt t"(n!,u" &or r" ord!n) t(" t!%"s and rat"s o& or#!n) &or

t(" "l"%"nts o& a s'"!&!"d :ob arr!"d out und"r s'"!&!"d ond!t!ons and &or analy!n) t(" data

so as to obta!n t(" t!%" n""ssary &or arry!n) out t(" :ob at a d"&!n"d l"$"l o& '"r&or%an"

O;9ect"e$ o8 Tme Stud#

- To &urn!s( a bas!s o& o%'ar!son &or d"t"r%!n!n) o'"rat!n) "&&"t!$"n"ss

- To s"t labor standard &or sat!s&atory '"r&or%an"

- To d"t"r%!n" standard osts


45/99

- To o%'ar" alt"rnat!$" %"t(ods !n %"t(od study

- To d"t"r%!n" bas!nor%al t!%"s

- To d"t"r%!n" t(" no o& %a(!n"s

- To balan" t(" or# o& o'"rators

- To 'ro$!d" a bas!s &or s"tt!n) '!"" rat"!n"nt!$" a)"s


MO2E

Capact# plannn)

*a'a!ty Plann!n)6

*a'a!ty r"&"rs to t(" %a+!%u% load an o'"rat!n) un!t an (andl" T(" o'"rat!n) un!t %!)(t b" a

'lant4 a d"'art%"nt4 a %a(!n"4 a stor" or a or#"r

Produt!on a'a!ty6

T(" 'rodut!on a'a!ty o& a &a!l!ty or a &!r% !s t(" %a+!%u% rat" o& 'rodut!on t(" &a!l!ty or

t(" &!r% !s a'abl" o& 'rodu!n) It !s usually "+'r"ss"d as $olu%" o& out'ut P"r '"r!od o& t!%"

Ty'"s o& a'a!ty

(i) /!+"d a'a!ty6 T(!s r"&"rs to t(" a'!tal ass"ts 8bu!ld!n)s and ",u!'%"nts9 a &!r% 'oss"ss"s at

a 'art!ular t!%" It annot b" "as!ly (an)"d !n a s(ort '"r!od o& t!%"

(ii) 5ar!abl" a'a!ty6 T(!s r"&"rs to t(" s!" o& t(" or# &or" T(" no o& (rs '"r day or '"r

""# t(" ",u!'%"nt and labour or# and t(" "+t"nt o& o$"rt!%" and subontrat!n) o& or#


46/99

8!!!9 I%%"d!at" a'a!ty6 !s t(at (!( an b" %ad" a$a!labl" !t(!n t(" urr"nt bud)"t"d '"r!od

(iv) Pot"nt!al a'a!ty6 !s t(at (!( an b" a$a!labl" !t(!n t(" d"!s!on Cor!on o& t("

%ana)"%"nt

(v) D"s!)n a'a!ty6 It !s t(" 'lann"d rat" o& out'ut o& )oods or s"r$!"s und"r nor%al or#!n)ond!t!ons It s"ts t(" u''"r l!%!t to a'a!ty assu%!n) t(at t("r" !s no a'a!ty loss du" to

abs"nt""!s%4 'oor 'lann!n) Non-a$a!lab!l!ty o& %at"r!als "t


(vi) O'"rat!n) a'a!ty6 It !s t(" a'a!ty (!( an b" ut!l!"d a&t"r ta#!n) !nto aount t("a'a!ty loss"s du" to !n"&&"t!$"n"ss4 bad 'lann!n)4 r":"t!ons and s ra' rat" "t

(vii) Syst"% a'a!ty6 !s t(" %a+!%u% out'ut o& a s'"!&! 'rodut or 'rodut %!+4 a 'rodut!on

syst"% an 'rodu" It !s l"ss t(an d"s!)n or !nstall"d a'a!ty b"aus" o& l!%!tat!on on t("

syst"% du" to

(i) *(an)"s !n 'rodut %!+ 8!!9 ual!ty s'"!&!at!ons 8!!!9 Balan" o& ",u!'%"nt and labour

(viii)Nor%al or Rat"d a'a!ty6 It !s t(" "st!%at"d ,uant!ty o& out'ut or 'rodut!on t(at s(ould

b" nor%ally a(!"$"d ta#!n) !nto ons!d"rat!on t(" o$"rall "&&!!"ny o& ",u!'%"nt and labour

T(" atual a'a!ty (!( !s a$a!labl" &or ut!l!at!on !s l"ss t(an t(" rat"d a'a!ty and !s

"+'r"ss"d as a '"r"nta)" o& rat"d a'a!ty

!+9 Ut!l!"d a'a!ty6 T(!s !s t(" atual out'ut a(!"$"d dur!n) a 'art!ular t!%" '"r!od

Ut!l!at!on Atual out'ut

D"s!)n a'a!ty

Atual out'ut

Syst"% "&&!!"ny Syst"% a'a!ty


47/99

Q9 P"a# a'a!ty6 It !s t(" %a+!%u% out'ut t(at a 'ro"ss or &a!l!ty an a(!"$" und"r !d"al

ond!t!ons4 '"a# a'a!ty an b" r"a("d by us!n) "+"ss!$" o$"rt!%"4 "+tra s(!&ts4 o$"r sta&&!n)

and subontrat!n)

Q!9 Sur'lus a'a!ty6 It !s t(" "+"ss or unut!l!"d a'a!ty (!( !s a$a!labl" as sur'lus to b"

ut!l!"d &or any n" usto%"rs ord"r or any !nr"as"d !n &or"ast"d d"%and &or a

/utur" t!%" '"r!od


+!!9 Bottl" n"# a'a!ty6 Most &a!l!t!"s (a$" %ult!'l" o'"rat!ons and o&t"n t("!r "&&"t!$"

a'a!t!"s ar" not !d"nt!al A bottl" n"# !s an o'"rat!on (!( (as t(" lo"st "&&"t!$" a'a!ty

o& any o'"rat!on !n t(" &a!l!ty and t(us l!%!ts t(" syst"%


48/99

e) S"l"t!n) a a'a!ty alt"rnat!$" %ost su!t"d to a(!"$" strat")! %!ss!on o& t(" &!r%

Ty'"s o& a'a!ty 'lann!n)

A) On t(" bas!s o& t!%" (or!on4

a) Lon) ran)" 8t"r%9 a'a!ty 'lann!n)

b) S(ort ran)" 8t"r%9 a'a!ty 'lann!n)


B9 Bas"d on t(" a%ount o& r"sour"s "%'loy"d4

a) /!n!t" a'a!ty 'lann!n)

b) In&!n!t" a'a!ty 'lann!n)

(i) Lon) t"r% a'a!ty 'lann!n)6 lon) t"r% a'a!ty 'lann!n) !s don" to !nlud" %a:or (an)"s

t(at a&&"t t(" o$"rall l"$"l o& out'ut !n t(" lon) run t(" %a:or (an)" ould b" d"!s!ons to

d"$"lo' n" 'rodut l!n"s4 "+'and!n) "+!st!n) &a!l!t!"s and onstrut n" or '(as" out "+!st!n)'rodut!on 'lants

(ii) S(ort t"r% a'a!ty 'lann!n)6 !s on"rn"d !t( %""t!n) t(" r"lat!$"ly !nt"r%"d!at" $ar!at!on

!n d"%and du" to s"asonal or "ono%! &ators S(ort t"r% a'a!ty 'lann!n) !n$ol$"s ad:ust!n)

t(" a'a!ty to %at( t(" $ary!n) d"%and !n s(ort run by

a9 Us" o& o$"rt!%" or !dl" t!%"

b9 Inr"as!n) t(" No o& s(!&ts

9 Subontrat!n) to ot("r &!r%s

/!n!t" a'a!ty 'lann!n)6 ("n t(" usto%"r do"sn


49/99

In&!n!t" a'a!ty 'lann!n)6 I& t(" d"l!$"ry s("dul" !s &!+"d by t(" usto%"r4 t("n t(" ba#ard

s("dul!n) !s don" to ao%%odat" t(!s d"l!$"ry s("dul" by 'lann!n) &or !n&!n!t" a'a!ty

8a'a!ty r",u!r"d to "+"ut" t(" usto%"r ord"r !n t(" s(ort"st '"r!od 'oss!bl"9

/ators a&&"t!n) a'a!ty 'lann!n)6

a) *ontrollabl" &ators

b) L"ss ontrollabl" &ators


*ontrollabl" &ators !nlud" a%ount o& labour "%'loy"d4 &a!l!t!"s !nstall"d Ma(!n"s4 tool!n)

s(!&ts o& or# '"r day4 days or#"d '"r ""#4 o$"rt!%" or#4 subontrat!n)4 'r"$"nt!$"

%a!nt"nan"4 and no o& 'rodut!on s"t u's

L"ss ontrollabl" &ators !nlud" abs"nt""!s% Labour '"r&or%an"4 %a(!n" br"a#-dons4

%at"r!al s(orta)"s4 sra' and r"or#s4 str!#"4 lo#-out &!r" a!d"nts "t

e"elopn) capact# alternat"e$6To "n(an" a'a!ty Mana)"%"nt4 t(" &ollo!n) a''roa("s

to a'a!ty alt"rnat!$"s ould b" d"$"lo'"d

!9 D"s!)n!n) &l"+!b!l!ty !nto t(" syst"%6

D"s!)n!n) &l"+!bl" 'rodut!on syst"%s an o&&"r 'ot"nt!al b"n"&!ts !n lon) ran)" a'a!ty

'lann!n) b"aus" o& t(" r!s#s !n("r"nt !n lon) t"r% &or"asts

E+6 It ould b" l"ss "+'"ns!$" to 'ro$!d" &or &utur" "+'ans!on !n t(" or!)!nat"d d"s!)n o& a

strutur" rat("r t(an r"%od"l!n) an "+!st!n) strutur" to ao%%odat" (!)("r 'rodut!on

a'a!ty

ii) D!&&"r"nt!at!n) b"t""n n" and %atur" 'rodut and s"r$!"s6 *a'a!ty r",u!r"%"nts o&

%atur" 'roduts an b" 'r"d!t"d %or" 'r"!s"ly and %atur" 'roduts %ay (a$" l!%!t"d l!&"

s'ans T(" 'oss!bl" l!%!t"d l!&" s'an o& %atur"d 'roduts or s"r$!" %ay n""ss!at" &!nd!n) an


50/99

alt"rnat!$" us" &or t(" r"sult!n) "+"ss a'a!ty at t(" "nd o& l!&" s'an On t(" ot("r (and4 n"

'roduts t"nd to arry (!)("r r!s# b"aus" t(" ,uant!ty d"%and"d and durat!on o& t(" d"%and

annot b" 'r"d!t"d aurat"ly

iii) Ta#!n) a b!)- '!t("r a''roa( to a'a!ty (an)"s7- 2("n d"$"lo'!n) a'a!ty alt"rnat!$"s

a &!r% %ust ons!d"r (o d!&&"r"nt 'arts o& t(" syst"% !nt"rr"lat" E+4 ("n t(" %ana)"%"nt o&a &!$" star Cot"l %a#"s a d"!s!on to Inr"as" t(" No o& roo%s4 !t %ust also ons!d"r 'robabl"

!nr"as"d d"%and &or 'ar#!n) lots r"staurant s"at!n) a'a!ty4 b!))"r d!n!n) (all and #!t("n

a'a!ty


!$9 Pr"'ar!n) to d"al !t( W*(un#s o& a'a!ty7 &Usually4 a'a!ty !nr"as"s ar" o&t"n a,u!r"d

!n t(" &or% o& &a!rly lar)" (un#s o& a'a!ty rat("r t(an s%all !nr"%"nts !s a'a!ty

E+6 !n a st""l 'ant4 t(" "+!st!n) a'a!ty o& a &urna" %ay not b" "nou)( to %""t t("

D"%and4 but !nstall!n) an add!t!onal &urna" ould r"sult !n (a$!n) l"ss a'a!ty b"aus"

add!t!onal &urna"s annot b" !nstall"d !n s%all a'a!ty (un#s

$9 Att"%'t!n) to s%oot( out a'a!ty r",u!r"%"nts7 & Ca$!n) un"$"nn"ss !n a'a!tyr",u!r"%"nt %ay b" 'robl"%at! /or ") Dur!n) s"asons o& bad or "+tr"%" "at("rs4 %or" and

%or" '"o'l" %ay t"nd to us" 'ubl! trans'ort $"(!l"s &or t("!r tra$"l rat("r t(an us!n) t("!r on

$"(!l"s *ons",u"ntly t(" 'ubl! trans'ortat!on syst"% %ay t"nd to alt"rnat" b"t""n und"r

ut!l!at!on and o$"r ut!l!at!on

"? Id"nt!&y!n) t(" o't!%al o'"rat!n) l"$"l7&

T(" o't!%al o'"rat!n) l"$"l !s t(" Id"al l"$"l o& o'"rat!on at (!( t(" ost '"r un!t !s t("

lo"st &or t(" 'rodut!on un!t Lar)"r or s%all"r $olu%"s o& out'ut ould r"sult !n (!)("r un!t

ost

A))re)ate producton plannn)7&

It !s t(" 'ro"ss o& d"t"r%!n!n) out'ut l"$"ls 8un!ts9 o& 'rodut )rou's o$"r t(" n"+t to


51/99

1F %ont(s '"r!od on a ""#ly or %ont(ly bas!s T(" 'lan !nd!at"s t(" o$"rall l"$"l o& out'uts

su''ort!n) t(" bus!n"ss 'lan T(" a))r")at" 'lan !s a stat"%"nt o& a &!r%


52/99

a'a!ty 'lans %ay (a$" b" to r"$!s"d u'ard and donard to a$o!d "!t("r o$"r load"d or

und"r load"d &a!l!t!"s

Need 8or a))re)ate capact# plannn)7&

1. It &a!l!tat"s &ully load"d &a!l!t!"s and %!n!%!"s o$"rload!n) and und"r load!n) and#""'s t(" 'rodut!on osts lo

2. Ad",uat" 'rodut!on a'a!ty !s 'ro$!d"d to %""t "+'"t"d a))r")at" d"%and


3. Ord"rly and syst"%at! trans!t!on o& 'rodut!on a'a!ty to %""t t(" '"a#s and $all"ys o&"+'"t"d usto%"r d"%and !s &a!l!tat"d

4. In t!%"s o& sar" 'rodut!on r"sour"s4 )"t t(" %a+!%u% out'ut &or t(" a%ount o&

r"sour"s "n(an"d

5. To %ana)" (an)" !n 'rodut!on o'"rat!ons %ana)"%"nt by 'lann!n) &or 'rodut!on

r"sour"s t(at ada't to t(" (an)"s !s usto%"r d"%and

Step$ n A))re)ate Capact# plannn)7&

Pr"'ar" t(" sal"s &or"ast &or "a( 'rodut t(at !nd!at"s t(" ,uant!t!"s to b" sold !n "a(

t!%" '"r!od o$"r t(" 'lann!n) (or!on

Su% u' t(" !nd!$!dual 'rodut or s"r$!" &or"ast !nto on" a))r")at" d"%and &or t("

&atory

Trans&or% t(" a))r")at" d"%and &or "a( t!%" '"r!od !nto labour4 %at"r!als4 %a(!n"s

and ot("r "l"%"nts o& 'rodut!on a'a!ty r",u!r"d to sat!s&y a))r")at" d"%and

D"$"lo' alt"rnat!$" r"sour" s("%"s &or su''ly!n) t(" n""ssary 'rodut!on a'a!ty to

su''ort t(" u%ulat!$" a))r")at" d"%and

S"l"t t(" a'a!ty 'lan &ro% a%on) t(" alt"rnat!$"s ons!d"r"d t(at sat!s&!"s a))r")at"

d"%and and b"st %""ts t(" ob:"t!$"s o& t(" or)an!at!on

Approache$ to A))re)ate plannn)7&


53/99

1. Top oHn approach7 & In$ol$"s d"$"lo'%"nt o& t(" "nt!r" 'lan by or#!n) only at t("

(!)("st l"$"l o& onsol!dat!on o& 'roduts It onsol!dat"s t(" 'roduts !nto an a$"ra)" 'rodut

and t("n d"$"lo's on" o$"rall 'lan T(!s 'lan !s d!s!nt")rat"d to alloat" a'a!ty to 'rodut

&a%!l!"s and !nd!$!dual 'roduts

2. Bottom&up Approach7 & In$ol$"s d"$"lo'%"nt o& 'lans &or %a:or 'roduts or 'rodut

&a%!l!"s at so%" lo"r l"$"l !t(!n 'rodut l!n" T("s" sub 'lans ar" t("n onsol!dat"d to arr!$"

at t(" a))r")at" 'lan (!( )!$"s t(" o$"rall out'ut and t(" a'a!ty r",u!r"d to 'rodu" !t


3 Capact# Reurement Plannn)7&

*a'a!ty r",u!r"%"nt 'lann!n) !s a t"(n!,u" &or d"t"r%!n!n) (at labour '"rsonn"l and

",u!'%"nt a'a!t!"s ar" n""d"d to %""t t(" 'rodut!on ob:"t!$"s sy%bol!"d !n t(" Mast"r

Produt!on s("dul" 8MPS9 and t(" Mat"r!al r",u!r"%"nt 'lann!n) 8MRP-I9

A))re)ate capact# plannn) $trate)e$7&

A))r")at" a'a!ty 'lann!n) !n$ol$"s t(" b"st ,uant!ty to 'rodu" dur!n) t!%" '"r!ods !n

t(" Int"r%"d!at"-ran)" Cor!on and 'lann!n) t(" lo"st "ost M"t(od o& 'ro$!d!n) t("

ad:ustabl" a'a!ty to ao%%odat" 'rodut!on r",u!r"%"nts

THo t#pe$ o8 a))re)ate plan$ that are commonl# u$ed are-

a. L"$"l a'a!ty 'lan

b. Mat(!n) a'a!ty !t( a))r")at" D"%and 'lan

a9 L"$"l a'a!ty 'lan6 L"$"l a'a!ty 'lans (a$" un!&or% a'a!t!"s '"r day &ro% t!%" '"r!od to

time period. The underlying principle of evel /apacity 0lanis produce to stockand sell

firms is operate production systems at uniform production levelsand l"t &!n!s("d

)oods !n$"ntor!"s r!s" and &all as t("y !ll to bu&&"r t(" d!&&"r"n"s b"t""n a))r")at" d"%and

and


54/99

production levels from time period to time period.

Ad"anta)e$6ost o& (!r!n) and lay!n) o&& or#"rs and us!n) o$"rt!%" !s 'rat!ally "l!%!nat"d

T(" ost o& loat!n) and d"$"lo'!n) n" sour"s o& %at"r!al su''l!"s !s %!n!%!"d

ii) Labour and %at"r!al ostun!t o& out'ut !s lo

iii) S!%'l!&!"d su'"r$!s!on and lo sra' rat"s s!n" or#"rs ar" "+'"r!"n"d !n t("!r :obs

iv) Lo o'"rat!n) ost

v) D"'"ndabl" 'rodut!on rat"s


D!sad$anta)"s6

a) R"sults !n (!)("r &!n!s("d )oods

b) C!)("r In$"ntory l"$"ls

c) Inr"as"d In$"ntory arry!n) osts

B9 Mat(!n) a'a!ty !t( A))r")at" d"%and 'lan6 In t(!s 'lan4 t(" 'rodut!on a'a!ty !s

%at("d !t( t(" a))r")at" d"%and !n "a( t!%" '"r!od T(" or# &or" !s &lutuat"d to su''ort

t(" a))r")at" 'lan Mat"r!al &los and %a(!n"ry a'a!ty ould b" allo"d to (an)" &ro%

,uart"r to ,uart"r to %at( t(" a))r")at" d"%and

T(" %a!n ad$anta)" o& t(!s 'lan !s t(" lo"r l"$"ls o& &!n!s("d )oods In$"ntory r"sult!n) !n

l"ss"r arry!n) osts ("n o%'ar"d to l"$"l a'a!ty 'lan Co"$"r labour and %at"r!als ost

t"nd to b" (!)("r b"aus" o& &r",u"nt (an)"s !n or# &or"4 %at"r!al su''l!"s and !nr"as!n) or

d"r"as!n) %a(!n" a'a!t!"s

Strat")!"s &or a))r")at" a'a!ty 'lann!n)6

1) At!$" strat")!"s6 T(" ob:"t!$" !s to s%oot( out t(" '"a#s and $all"ys o& d"%and dur!n) t("

'lann!n) (or!on to obta!n a s%oot("r load on 'rodut!on &a!l!t!"s Dur!n) '"r!ods o& lo

d"%and4 !nr"as"d sal"s an b" "noura)"d t(rou)( 'r!" uts Dur!n) '"r!ods o& (!)( d"%and4


55/99

%ana)"%"nt an (oos" not to %""t all t(" d"%and r",u!r"%"nt but t(!s a''roa( !)nor"s

o''ortun!t!"s o& !nr"as"d r"$"nu"

2) Pass!$" strat")!"s6 T(" ob:"t!$" !s not to (an)" d"%and but to absorb so%"(o t("

&lutuat!ons !n d"%and T(" alt"rnat!$"s !nlud" $ary!n) any on" o& t(" or# &or" s!"4

'rodut!on rat"4 and !n$"ntory4 sub ontrat!n) and a'a!ty ut!l!at!on

Page54


R"sour" R",u!r"%"nt 'lann!n)6 R"sour" r",u!r"%"nt 'lann!n) !s d!r"t"d at d"t"r%!nat!on o&

t(" a%ount and t!%!n) o& 'rodut!on r"sour"s su( as '"rsonn"l4 %at"r!als4 as( and

'rodut!on a'a!ty n""d"d to 'rodu" t(" &!n!s("d 'roduts or "nd It"%s as '"r t(" %ast"r

'rodut!on s("dul"

It !s an a))r")at" 'lann!n) tool t(at !s us"d to su% u' and "$aluat"s t(" or# load t(at a

'rodut!on 'lan 8MPS9 !%'os"s "!t("r on all or# "nt"rs or on only s"l"t"d #"y or# "ntr"

("r" r"sour"s ar" l!%!t"d4 "+'"ns!$" or d!&&!ult to obta!n &ro% outs!d" sour"s

Rou)( ut a'a!ty 'lann!n) !s usually a''l!"d to t(" r!t!al or# "nt"rs (!( ar" %ost l!#"ly

to b" bottl"n"#s

R"sour" R",u!r"%"nt Plann!n) Syst"% 8D!a)ra%9

(unctonal Input$ R"sour" r",u!r"%"nt Out'uts

'lann!n)

Mar#"t!n) s(ort ran)" Mar#"t!n) "nd !t"%

d"%and &or"ast 'rodut!on s("dul"

/!nan" as( a$a!lab!l!ty /!nan"aount!n) .

!n$"ntory nor%s In$"ntory l"$"l s("dul"


56/99


Produt!on a'a!ty Produt!on -MPS4 load 'ro&!l"

onstra!nts4 d"$"lo'%"nt o& Mast"r 'rodut!on s("dul" a'a!ty ut!l!at!on data4

MPS4 *RP and MRP 8MPS9

En)!n""r!n) (an)"!n Plann"d %at"r!als ord"r4 s(o'

'rodut d"s!)n and 'rodut &loor 'lans

strutur"

P"rsonal . "%'loy"" En)!n""r!n) n" d"s!)n

a$a!lab!l!ty !nor'orat!on data

Pur(as!n) . %at"r!al Mat"r!al r",u!r"%"nt

su''ly a$a!lab!l!ty 'lann!n)8MRP9 P"rsonn"l . "%'loy""

MIS Data bas" syst"% . r",u!r"%"nt s("dul"

B!ll o& %at"r!al &!l"

Pur(as!n) 'lann"d ord"r and

ord"r r"l"as"s

*a'a!ty r",u!r"%"nt

'lann!n)8*RP9 MIS data bas" syst"% u'dat"d

!n$"ntory status &!l"

Mat"r!al R",u!r"%"nt 'lann!n)6 Mat"r!al r",u!r"%"nt 'lann!n) !s o%'ut"r bas"d syst"% !n


57/99

(!( t(" )!$"n MPS !s "+'lod"d !nto t(" r",u!r"d a%ounts o& ra %at"r!als4 'arts and sub

ass"%bl!"s4 n""d"d to 'rodu" t(" "nd !t"%s !n "a( t!%" '"r!od o& t(" 'lann!n) (or!on T("

)ross r",u!r"%"nt o& t("s" %at"r!als !s r"du"d to n"t r",u!r"%"nts by ta#!n) !nto aount t(at

%at"r!al t(at ar" !n !n$"ntory or on ord"r

Ob:"t!$"s o& MRP

19 to !%'ro$" usto%"r s"r$!" by %""t!n) d"l!$"ry s("dul"s 'ro%!s"d and s(ort"n!n)

d"l!$"ry s("dul"s 'ro%!s"d and s(ort"n!n) d"l!$"ry l"ad t!%"s


2) To r"du" !n$"ntory osts by r"du!n) !n$"ntory l"$"ls4

3) To !%'ro$" 'lant o'"rat!n) "&&!!"ny by b"tt"r us" o& 'rodut!$" r"sour"s

B"n"&!ts o& MRP6

a) In$"ntory6 t(" !n&o 'ro$!d"d by t(" MRP syst"% !s us"&ul to b"tt"r o ord!nat" ord"rs &or

o%'on"nts !t( 'rodut!on 'lans &or 'ar"nt !t"%s T(!s r"sults !n r"du"d l"$"ls o& a$"ra)"

!n$"ntory &or d"'"nd"nt d"%and !t"%s

b) Produt!on6 In&o &ro% MRP &a!l!tat"s b"t""n ut!l!at!on o& (u%an and a'!tal r"sour"s

c) Sal"s6 MRP ("l's to ("# !n ad$an" ("t("r t(" d"s!r"d d"l!$"ry dat"s ar" a(!"$abl" It

!%'ro$"s t(" o%'any


58/99

(an)"s !n du" dat"s &or ord"rs so t(at t(" 'ur(as" sta&& %ay "+'"d!t" or d"lay t(" ord"rs 'la"d

on $"ndors

g) S("dul!n)6 b"tt"r s("dul!n) an r"sult &ro% MRP t(rou)( b"tt"r #nol"d)" o& 'r!or!t!"s

h) /!nan"6 MRP an ("l' b"tt"r 'lann!n) o& as( &lo r",u!r"%"nts It an !d"nt!&y t!%"a'a!ty onstra!nts or bottl"n"# or# "nt"rs t("r"by ("l'!n) o'"rat!ons %ana)"rs to %a#"

b"tt"r a'!tal !n$"st%"nt d"!s!ons


Element$ o8 MRP

Mast"r 'rodut!on s("dul" 8MPS9

T(" MPS s'"!&!"s (at "nd 'roduts ar" to b" 'rodu"d and ("n t(" 'lann!n) Cor!on s(ould

b" lon) "nou)( to o$"r t(" u%ulat!$" l"ad t!%"s o& all o%'on"nts t(at %ust b" 'ur(as"d or

%anu&atur"d to %""t t(" "nd 'rodut r",u!r"%"nts

b9 B!ll o& Mat"r!als 8BOM9 &!l"6

T(!s &!l" 'ro$!d"s t("r" !n&o r")ard!n) all t(" %at"r!als 'arts and sub ass"%bl!"s t(at )o !nto t("

"nd 'rodut T(" b!ll o& %at"r!als an b" $!""d as (a$!n) a s"r!"s o& l"$"ls4 "a( o& (!( (

r"'r"s"nts a sta)" !n t(" %anu&atur" o& t(" "nd 'rodut T(" (!)("st l"$"l o& BOM r"'r"s"nts

t(" &!nal ass"%bly or "nd 'rodut T(" BOM &!l" !d"nt!&!"s "a( o%'on"nt by a un!,u" 'art

nu%b"r and &a!l!tat"s 'ro"ss!n) by "+'lod!n) t(" "nd 'rodut r",u!r"%"nts !nto o%'on"nt

r",u!r"%"nts

9 In$"ntory status &!l"6 T(" !n$"ntory status &!l" )!$"s o%'l"t" and u' to dat" !n&o on (and

,uant!t!"s Gross r",u!r"%"nts s("dul"d r""!'ts and 'lann"d ord"r r"l"as"s &or t(" !t"% It also

!nlud"s ot("r !nto su( as lot s!"s4 l"ad t!%"s4 sa&"ty sto# l"$"ls and s ra' alloan"s T("

)ross r",u!r"%"nts ar" total n""ds &ro% all r"sour"s ("r"as t(" n"t r",u!r"%"nts ar" Xn"t< a&t"r


59/99


60/99

S!n" %at"r!al !s tr"at"d as a %a:or 'art o& urr"nt ass"ts4 !%'ro$!n) r"turn on !n$"st%"nt

d"'"nds on "&&"t!$" ut!l!at!on o& %at"r!als

Mat"r!als add $alu" to t(" 'rodut

ual!ty o& &!n!s("d 'rodut d"'"nds on t(" ,ual!ty o& %at"r!als us"d to 'rodu" t("%

Mat"r!als %ana)"%"nt "no%'ass"s ar"as su( as 'ur(as!n)4 stor!n)4 In$"ntory ontrol4

Trans'ortat!on and s(!''!n)

Mat"r!als ar" l!&" blood o& d"$"lo'%"nt o& Cu%an!ty

O;9ect"e$ o8 Materal$ Mana)ement7&

1. Lo"r 'r!"s &or %at"r!als and ",u!'%"nts 'ur(as"d

2. C!)("r !n$"ntory turno$"r rat!o

3. *ont!nu!ty o& su''ly o& %at"r!als


4. R"du"d 'rour"%"nt l"ad t!%"

5. R"du"d Trans'ortat!on ost

6. L"ss du'l!at!on o& "&&orts

7. R"du"d obsol"s"n" o& Mat"r!als

8. I%'ro$"d $"ndor r"lat!ons(!'

9. B"tt"r !nt"r-d"'art%"ntal o-o'"rat!on

10. I%'ro$"%"nt o& o$"rall 'rodut!$!ty o& &!r%

(uncton$ o8 materal$ Mana)ement7&

1. Mat"r!als 'lann!n) and bud)"t!n)

2. Prour"%"nt o& Mat"r!als

3. Stora)" o& Mat"r!als

4. Issu" o& Mat"r!als

5. In$"ntory ontrol

6. 5"ndor d"$"lo'%"nt

7. 5"ndor "$aluat!on and $"ndor rat!n)

8. Mat"r!al aount!n)

9. Mat"r!als (andl!n) and trans'ortat!on

10. D!s'osal o& sra'

11. Tra&&! %ana)"%"nt


61/99

Purcha$n)7&

It r"&"rs to t(" &unt!on o& 'rour!n) o& %at"r!als4 su''l!"s4 Ma(!n"s4 ",u!'%"nts4 tools4 s'ar"

'arts and s"r$!"s r",u!r"d &or %""t!n) t(" n""ds o& 'rodut!on d"'art%"nt and %a!nt"nan"

d"'art%"nt

(uncton$ o8 purcha$n)7&

1. Mat"r!als r",u!r"%"nt r"$!"

2. S'"!&!at!ons d"$"lo'%"nt &or %at"r!als

3. Ma#"-or-buy analys!s

4. Mat"r!als standard!at!on

5. D"t"r%!nat!on o& In$"ntory l"$"ls


6. D"t"r%!nat!on o& ,ual!ty r",u!r"%"nts

7. N")ot!at!on o& 'r!" t"r%s o& su''ly

8. Su''l!"r s"l"t!on

9. ;o!nt 'robl"% sol$!n) !t( su''l!"rs

10. Produt!$!ty ost !%'ro$"%"nt

11. 5"ndor analys!s rat!n)

12. Mar#"t analys!s

13. Pr!" &or"ast!n)

14. 5alu" analys!s

15. D"t"r%!nat!on o& 'ur(as!n) 'ol!y

Purcha$n) polce$7&

It d"&!n"s t(" bas! d"!s!ons o& To' %ana)"%"nt as t("y r"lat" to buy!n) at!ons In %osto%'an!"s4 t(" &ollo!n) ar"as o$"r"d by 'ol!y stat"%"nts

A d"&!n!t!on o& Aut(or!ty and r"s'ons!b!l!ty &or 'ur(as!n)

R"lat!ons(!' !t( $"ndors su''l!"rs

Tr"at%"nt o& sal"s r"'r"s"ntat!$"s o& $"ndor

Pro'"r (andl!n) o& o%'"t!t!$" b!dd!n)

R"!'ro!ty


62/99

E%'loy"" 'ur(as"s

Et(!al 'rat!"s !n 'ur(as"s

Purcha$n) Manual$7 & Pur(as!n) %anuals ar" d"s!)n"d to a$o!d on&l!ts b"t""n

d"'art%"nts4 to lass!&y r"s'ons!b!l!ty4 and to 'ro$!d" ons!st"nt !nstrut!ons o$"r!n) t(" r")ular

at!$!t!"s o& t(" 'ur(as!n) d"'art%"nt T("r" ar" to ty'"s o& 'ur(as!n) %anuals

a. Pol!y %anual

b. Pro"dur"s %anual

a Polc# manual7 &!s a r!tt"n stat"%"nt o& o%'any


63/99

;. Purcha$n) 8or a $pec8ed 8uture perod7

T(!s !s a standard 'rat!" &or )oods r")ularly us"d4 but not !n lar)" ,uant!t!"s and

&or (!( 'r!" $ar!at!ons ar" n")l!)!bl" Most su''l!"rs ar" bou)(t by t(!s %"t(od

* Purcha$n) Accordn) to Mar!et7&

T(!s %"t(od !s d"s!)n"d to ta#" ad$anta)" o& 'r!" &lutuat!on T(" ,uant!t!"s 'ur(as"d

on&or% to t(" 'rodut!on s("dul" and !ts 'oss!bl" (an)"s or to t(" d"%ands o& t(" 'lant or

bus!n"ss In as"s ("r" t(" &!r%s (a$" d"&!n!t" %anu&atur!n) or onsu%'t!on 'ro)ra%s T("


'ur(as" d"'art%"nt stud!"s t(" Mar#"t stat!st!s and &ators t(at a&&"t 'r!"s and &or"ast t("

tr"nd o& %ar#"t 'r!"s and buy to b"st ad$anta)"s

. Speculat"e purcha$n)7

T(!s r"&"rs to buy!n) ("n %ar#"t !s lo 8lo 'r!"94 %or" t(an an 'oss!bly b" us"d !n

%anu&atur!n)4 !t( t(" !d"a o& r"s"ll!n) %u( o& t(" %at"r!al at a (!)("r 'r!" to us"rs (o %ay

o%" to t(" %ar#"t ("n t(" 'r!" !s (!)(

e. (orHard Bu#n)7&

It !s not(!n) but o%%!tt!n) an or)an!at!on !nto t(" &utur" 8usually on" y"ar9 T(" buy"r

o%%!ts to buy a &utur" dat" a ontrat"d ,uant!ty at ontrat"d 'r!"4 (at"$"r %ay b" t("

rul!n) %ar#"t 'r!" !n t(" ontrat"d '"r!od T(" &utur" o%%!t%"nt !s d"!d"d d"'"nd!n) u'on

t(" a$a!lab!l!ty o& t(" !t"%4 &!nan!al 'ol!!"s4 EO4 ty D!sounts and sta))"r"d d"l!$"ry8.


64/99

*ontrat 'ur(as!n) o&&"rs ad$anta)"s o%'arabl" to t(os" o& s'"ulat!$" 'ur(as!n) By

a ontrat all!n) &or d"&"rr"d d"l!$"ry o$"r a '"r!od4 ad$anta)"s an b" (ad o& lo 'r!"s !n

"&&"t on %at"r!als at t(" t!%" o& 'la!n) t(" ontrat4 (!l" s'r"ad!n) d"l!$"ry o& %at"r!als o$"r

a s("dul" ons!st"nt !t( "st!%at"d &utur" r",u!r"%"nts

h. Group purcha$n)6-

A no o& s%all !t"%s an b" 'ur(as"d as )rou' (!( o&&"rs t(" 'oss!b!l!ty o& lar)" sa$!n)s

2("n t(" !t"%s ar" s%all and o& tr!$!al $alu"4 t(" ost o& 'la!n) an ord"r o&t"n "+""ds t("

$alu" o& !t"%s 'ur(as"d C"n" su( !t"%s ar" b"tt"r bou)(t und"r t(" %"t(od o& )rou'

'ur(as!n)

. Blan!et order7&

T("s" ar" 'ur(as" ord"rs 'la"d and a"'t"d &or lar)" ,uant!t!"s o& Mat"r!als to b"

d"l!$"r"d as lat"r s'"!&!"d By t(" a)r""%"nt4 t(" $"ndor a)r""s to su''ly and t(" buy"r t("


$"ndor a)r""s to su''ly and t(" buy"r a)r""s to a"'t a stat"d no o& un!ts4 nor%ally !t(!n a

)!$"n '"r!od

:. Tender Bu#n)7&

T(!s %"t(od 8also #non as t"nd"r syst"%9 !s ado't"d to 'rour" %at"r!als at t(" %ost

o%'"t!t!$" rat"s and to "l!%!nat" (an"s o& undu" &a$or to any su''l!"r T(" 'r!%" ob:"t!$" !s

to a$o!d n")ot!at!on and )!$" ",ual o''ortun!ty &or all $"ndors It !s usually ado't"d by Go$t

D"'art%"nts and 'ubl! s"tor und"rta#!n) to (oos" t(" b"st su''l!"r !t(out any b!as

There are three !nd$ o8 tender$ u$ed are7&

a. O'"n T"nd"r

b. L!%!t"d T"nd"r

c. S!n)l" T"nd"r

a. Open Tender7 & T"nd"rs ar" !n$!t"d by ad$"rt!s!n) !n at l"ast t(r"" or &our En)l!s(

N"s'a'"r and !n Ind!an Trad" ;ournal T(" su''l!"rs !ll usually (a$" to ,uot" !n t("

T"nd"r &or%s alon) !t( "arn"st Mon"y d"'os!t On" t(" ,uotat!ons ar" r""!$"d4 t("

t"nd"rs ar" o'"n"d 'ubl!!ty and a o%'arat!$" stat"%"nt !s %ad" and t(" t"nd"r !s

aard"d to t(" lo"st t"nd"r %""t!n) t(" t"(n!al s'"!&!at!ons

b. mted Tender7 - To a$o!d t(" ,uotat!on o& an !rr"s'ons!bl" b!dd"r 82(o ,uot"s a $"ry

lo 'r!" !n ord"r to )"t t(" ord"r4 but !ll not b" abl" to "+"ut" t(" ord"rs9 L!%!t"d


65/99

T"nd"r syst"% !s us"d In t(!s4 ,uotat!ons ar" sol!!t"d by s"nd!n) t"nd"r &or%s to )"t

,uotat!ons &ro% a &" s"l"t"d su''l!"rs (o ar" o%'"t"nt to "+"ut!$" t(" ord"r

c. Sn)le Tender7 & /or 'ro'r!"tary !t"%s or s!n)l" sour" !t"%s4 s!n)l" t"nd"r syst"% !s

ado't"d

5endor e"elopment Selecton7 & Usually a o%b!nat!on o& 'r!"4 ,uant!ty4 ,ual!ty4d"l!$"ry

t!%" and s"r$!" !s us"d to rat" t(" $"ndors4 )!$!n) r"l"$ant "!)(t a)"s to "a( o& t("s" &ators

a. Rela;lt#6-

- Is su''l!"r r"'ut"d4 stabl" and &!nan!ally stron)

- Ar" t(" su''l!"r


66/99

%at"r!als e. A8ter Sale$ $er"ce7&

- do"s t(" su''l!"r (a$" a s"r$!" or)an!at!on

- !s an "%"r)"ny s"r$!" a$a!labl"

- Ar" 'arts a$a!labl" ("n n""d"d

Sale$ a$$$tance7&

-*an t(" su''l!"r ("l' bu!ld!n) %utual %ar#"ts

- !ll (" s(" r"o%%"nd our 'roduts

- Do"s t(" us" o& su''l!"r


67/99

. Pa#!n) %at"r!als stor"s

(uncton$ o8 Store$ 4eepn)7&

1. To r""!$" ra %at"r!als4 o%'on"nts4 tools4 ",u!'%"nts and ot("r !t"%s and aount &or

t("%

2. To 'ro$!d" ad",uat" and 'ro'"r stora)" and 'r"s"r$at!on o& $ar!ous #!nds o& %at"r!als3. To %""t t(" d"%ands o& us"r d"'art%"nts by 'ro'"r !ssu"s and #""'!n) aounts o& !t"%s

us"d by us"r d"'art%"nt

4. To %!n!%!" obsol"s"n"4 sur'lus and sra' t(rou)( 'ro'"r od!&!at!on4 'r"s"r$at!on

and (andl!n)

5. To (!)(l!)(t au%ulat!on o& sto#s4 d!sr"'an!"s and abnor%al onsu%'t!on and

!%'l"%"nt 'ro'"r ontrol %"asur"s


6. To "nsur" )ood (ous"-#""'!n) to &a!l!tat" 'ro'"r %at"r!al (andl!n)4 %at"r!al

'r"s"r$at!on r""!'t4 sto#!n) and !ssu" o& %at"r!als

7. To ass!st %at"r!al aounts d"'art%"nt !n sto# $"r!&!at!on and 'ro$!d" su''ort!n)

!n&or%at!on &or "&&"t!$" 'ur(as!n)

8. To o-ord!nat" stor" #""'!n) !t( r"lat"d 'rodut!on &unt!ons

Role$ Re$pon$;lte$ o8 Store$ mana)ement7&

1. /a!l!tat" a balan"d and s%oot( &lo o& ra %at"r!als4 o%'on"nts4 tools and any ot("r

!t"%s n""ssary to %""t 'rodut!on r",u!r"%"nts

2. To %a!nta!n o't!%u% sto# o& %at"r!als to o%'"nsat" &or !rr")ular su''l!"s by

su''l!"rs

3. To a(!"$" "&&!!"nt ut!l!at!on o& stora)" s'a"4. To r"du" usa)" o& %at"r!als (andl!n) ",u!'%"nts

5. To 'ro$!d" od!&!at!on o& stor"d !t"%s &or "asy r"o)n!t!on

6. To "nabl" &l"+!b!l!ty !n 'rodut!on s("dul"s

7. To &a!l!tat" ,uant!ty 'ur(as"s at d!sount 'r!"s

8. To #""' t(" aount o& all )oods #"'t !n stor"s

9. To 'r"$"nt t("&t4 da%a)"4 asta)" and d"t"r!orat!on o& stor"d %at"r!als


68/99

10. To %a!nta!n r"ord o& all !no%!n) %at"r!als and !ssu" o& %at"r!als to us"r d"'art%"nt

In"entor# mana)ement7&

T(" t"r% In$"ntory r"&"rs to any r"sour" t(at (as a "rta!n $alu"4 (!( an b" us"d at a

future occasion hen the demand arises. 1lternatively inventory may be defined as-tock of

!t"%s #"'t on (and by an or)an!at!on to b" us"d to meet customer demand.

T#pe$ o8 In"entor#7&

!. Ba$ed on Nature o8 Materal$7&

1. Producton In"entore$7 & Ra %at"r!als4 'arts and o%'on"nt (!( b"o%"

part of the firms finished product in the production process.


2. MRO In"entore$7 Ma!nt"nan"4 r"'a!r and o'"rat!n) su''l!"s (!( ar"onsu%"d

!n t(" 'rodut!on 'ro"ss4 but (!( do"s not b"o%" 'art o& &!n!s("d 'rodut

E)4 Lubr!ants4 )r"as"4 otton ast"4 s'ar" 'arts

3. In&proce$$ In"entore$7 - Also #non as or#-!n-'ro)r"ss or s"%!-&!n!s("d )oods

In$"ntor!"s-t("s" ar" 'arts or sub-ass"%bl!"s &ound at $ar!ous sta)"s !n t(" 'rodut!on

'ro"ss

4. (n$hed Good$ In"entore$7 - *o%'l"t"d 'roduts #"'t !n stor"s r"ady &or

s(!'%"nt

II Cla$$8ed ;# hoH t $ created7

1. C#cle In"entor#7 T(" 'os!t!on o& total In$"ntory (!( $ar!"s d!r"tly !t( Lot s!"

8,uant!ty ord"r"d9 ")4 I& !s t(" ord"r ,uant!ty or t(" Lot s!" and t(" "+atly lot4

and t(" su''ly !s r""!$"d "+atly ("n t(" sto# !s NIL4 %a+!%u% !n$"ntory !s

and t(" a$"ra)" yl" !n$"ntory !s (al& o& ,uant!ty ord"r"d


69/99

2. Sa8et# Stoc! In"entor#7 & Sa&"ty In$"ntor!"s ar" ("ld to a$o!d sto# out ond!t!ons

(!( aus" 'rodut!on sto''a)"s and to 'rot"t a)a!nst un"rta!nt!"s !n d"%and4 l"ad

t!%"4 su''ly and onsu%'t!on rat"s

3. Antcpaton In"entor#7 & In$"ntory o& %at"r!als 'ur(as"d !n Bul# ,uant!t!"s !n

ant!!'at!on o& 'r!" r!s" and 'roduts (a$!n) s"asonal d"%ands 'rodu"d !n

,uant!t!"s %or" t(an t(" d"%and dur!n) o&&-s"asons and ("ld !n !n$"ntory to %""t

(!)("r d"%and rat" dur!n) s"asons o& C!)( d"%and

4. Ppe&ne In"entor#7 & In$"ntory %o$!n) &ro% 'o!nt to 'o!nt !n t(" %at"r!als &lo

syst"% Mat"r!als %o$" &ro% su''l!"r to a 'lant4 &ro% on" o'"rat!on to t(" n"+t !n t("

'lant and &ro% t(" 'lant to t(" usto%"r P!'"l!n" !n$"ntor!"s also !nlud" %at"r!als

t(at (a$" b""n ord"r"d but not r""!$"d


5. (luctuaton n"entor#7 & In$"ntory ("ld as r"s"r$" sto# to %""t t(" un"+'"t"d

&lutuat!n) d"%and o$"r a '"r!od (!( annot b" 'r"d!t"d aurat"ly

(uncton$ o8 In"entor#7&

1. To %""t ant!!'at"d D"%and4

2. To s%oot( 'rodut!on r",u!r"%"nts

3. To d"ou'l" o%'on"nts o& t(" 'rodut!on4 d!str!but!on syst"%

4. To 'rot"t a)a!nst sto# outs

5. To ta#" ad$anta)" o& ord"r yl"s

6. To ta#" ad$anta)" o& ,uant!ty d!sounts

7. To ("d)" a)a!nst 'r!" !nr"as"s

In"entor# co$t$7&

There are tHo t#pe$ o8 co$t$ a$$ocated Hth In"entor# namel#&

a. *osts asso!at"d !t( t(" 'ur(as" o& In$"ntory !t"%s 8ost o& %at"r!als 'ur(as"d9

b. *osts on %at"r!als ons!st!n) o& t(r"" bas! osts

- Ord"r!n) ost


70/99


71/99

3 5E Anal#$$7&

5-$!tal4 E-Ess"nt!al and D-D"s!rabl" T(!s lass!&!at!on !s usually a''l!"d &or s'ar" 'arts

to b" sto#"d &or %a!nt"nan" o& %a(!n"s and ",u!'%"nts bas"d on t(" r!t!al!ty o& s'ar" 'arts

T(" sto#!n) 'ol!y !s bas"d on t(" r!t!al!ty o& t(" !t"%s T(" $!tal s'ar" 'arts ar" t(os" (!(

an aus" sto''a)" o& t(" 'lant !& not a$a!labl" Usually su( s'ar" 'arts ar" #non as a'!tal or

!nsuran" s'ar"s T(" !n$"ntory 'ol!y !s to #""' at l"ast on" nu%b"r o& t(" $!tal s'ar"

!rr"s'"t!$" o& !ts $alu"

= (SN Anal#$$7&

It stands &or &ast %o$!n)4 slo-%o$!n) and non-%o$!n) !t"%s T(" lass!&!at!on !s bas"d

on 'ast onsu%'t!on 'att"rn It"%s (!( ar" usually dran &ro% stor"s &r",u"ntly ar" lass!&!"d

as /ast %o$!n) !t"%s7 !t"%s (!( ar" dran on" or t!" a y"ar ar" lass!&!"d as slo- %o$!n)

!t"%s and !t"%s not dran at all &or 'ast to y"ars ar" lass!&!"d as non-%o$!n)


!t"%s /SN analys!s !s us"&ul to ontrol obsol"s"n" o& ra %at"r!als4 o%'on"nts4 tools and

s'ar" 'arts


72/99

S- Stands &or s"asonal !t"%s and OS stands &or o&&-s"asonal !t"%s It %ay b"

ad$anta)"ous to buy s"asonal !t"%s at lo 'r!"s and #""' !n$"ntory or buy at (!)( 'r!" dur!n)

o&& s"asons

F G O ( Anal#$$7

T(!s stands &or Go$"rn%"nt4 o'"n %ar#"t4 loal &or"!)n sour" o& su''ly /or %any

!t"%s4 !%'orts an anal!"d t(rou)( Go$"rn%"nt a)"n!"s su( as

Documents

Mba III Operations Management [10mba33] Notes