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Operations Management
Sandeep Prabhu
MITSOB, Pune
Job of Operations Manager Getting the job done………. Provide the leadership that is needed to produce
the product or services demanded by customer 1980: Concept of factory focus brought higher
performance levels Timeliness, Quality concept, Competitive arenas
demands more from Operations Manager Operations managers can also be called as
Fleet Manager Administration manager Store Manager (Super market)
Major subject areas of Operations
Strategy: To support organisations mission
Output planning: Select and design services/ product
Capacity planning: Facility/ Equipment/ labour
Facility location: Production/ storage
Transformation system: Facility layout: Material flow/ Equipment layout
Aggregate planning: Yearly/ monthly needs of lobour/ material/ facilities
Inventory management: of row material/ Work In Process/ Finished goods
Project management: Specifications of performance, schedule and cost
Material requirement planning: Supply chain management: Speed/ Efficiency/ Quality
Quality control: Quality standards Reliability and maintenance:
Operations system Operations system (function) of an organisation is the part that produces the
organisation’s products (physical goods or service) Physical goods: Refrigerators/ Soaps Services: Insurance, health care facilities, Service providers, financial institutes
Inputs•Capital•Material•Equipment•Facilities•Suppliers•Labour•Knowledge•Time
Conversion process•Alternation•Transformation•Storage•Inspection
Outputs•Goods•Services
Comparison:Actual vs Desired
AdjustmentsNeeded?
Monitoroutput
Feedback
ENVIRNOMENT: Customers Competition SuppliersGovt Regulations Technology Economy
Operations system for Departmental store
Inputs•Land•Labour•Building Equipment•merchandise•Store Manager
Conversion process
Outputs•Serviced customer with desired merchandise
DEPARTMENT STORERandom fluctuations•Late deliveries•Recession•Labour turnover
Feedback•Inventory levels•Labour efficiency•Sales volume
•What if Labour does not turn up for work?•What if deliveries are not happening fast?•What if location is not correct?•What if goods are not available for sales?•What if sales volume is not satisfactory?
Operations system for Farm
Inputs•Land•Farmer Labour•Tractors, plows etc.•Stores•Market skills
Conversion process
Outputs•Grains•Milk•Meat
FARM
Random fluctuations•Weather•Price changes•Government control•Equipment breakdawn
Feedback•Observation of crop and soil conditions•Prices received
•What if correct price not received?•What if Weather is not good?•What if land is not good for cultivation?
Operations system
Exact form of conversion varies from Industry to Industry
This transformation of resources into goods and services is production function
Goal is to create “ Value addition” Random fluctuations: arise from external
sources (fire, floods or lightening) or from internal problems (imperfections in material and equipments, human errors)
Technology of conversion
The conversion of Inputs to Outputs varies with technology used.
Manufacturing operations Vs Service Operations Tangible/ intangible nature of output Consumption of Output Nature of work (jobs) Degree of customer contract Customer participation in conversion Measurement of performanceManufacturing :•Tangible outputs, outputs that customer consume over time•Jobs that use less labour and more equipments•Little customer contact•No customer participation in conversion process•And sophisticated measures for measuring production activities and resource consumption
Service :•Intangible outputs, outputs that customer consume immediately•Jobs that use more labour and less equipments•Direct customer contact•Frequent customer participation in conversion process•Elementory measures for measuring conversion activities and resource consumption•Some services are equipment based: Computer programming service, Railways, Telephone and some are people based: tax accounting, Saloon, Coach
Service operations:
Output: is a generated service Throughput: is an item going through the
processPediatric Clinic: Output: Medical service to the childThroughput: Child
Fast-food restaurant:Output: Hamburgers (Both goods & services)Throughput: Food Items and not customer
Automobile assembly, steel making
Home remodeling, retail sales
Automobile Repair, fast food
Computer repair, restaurant meal
Song writing, software development
Goods Service
Surgery, teaching
Goods-serviceGoods-service
Services: Domestic in nature, can not be importedProducts: Can be domestic or Imported or partly
Historical Evolution
Changing names: • Manufacturing Management• Production Management• Operations Management
Historical Evolution
Manufacturing Management: Traditional view of Manufacturing Management began in eighteenth century when Adam Smith recognised economic benefits of specialization of labour
He recommended breaking jobs in to subtasks and reassigning workers to specialised tasks in which they will become highly skilled and efficient.
In the early twentieth century Frederick W Taylor implemented Smiths theories and started scientific management.
From then untill 1930 the traditional view prevailed
Historical Evolution
Production Management: From 1930 till 1950’s production management become more widely accepted term.
As Frederick Taylor’s work became more widely known. Managers developed techniques that focussed on economic
efficiency in manafacturing. Workers were put under microscope and studied in great details
to eliminate wasteful efforts and achieve greater efficiency. Workers multiple needs were discovered, Psychologists,
sociologists and other social scientists began to study people and human behaviour in the work environment.
In addition economists, mathamaticians and computer scientists contributed newer, more sophisticated analytical approaches.
Historical Evolution Operations Management: With 1970’s two distinct
changes emerged in views The name ‘Operations management’ was a shift indicating the
service and manufacturing sectors. First: As service sector became more prominent the change from
‘production’ to ‘operation’ emphasized the broadening of our field to service organisations.
Second: The second change was beginning of of an emphasis on synthesis rather than just analysis in management practices.
Industry awakened to its ignorance of operations function as a vital weapon in the organisations overall competitive strategy.
Previously preoccupied with an intensive analytical orientation and an emphasis on marketing and finance, managers had failed to integrate operations.
Today ‘operations’ plays as a strategic element Organisations goals are more focussed to meet customers’ needs.
Historical Evolution1776 Specilisation of labour in manafacturing Adam Smith
1799 Interchangeable parts, cost accounting Eli Whitney and others
1832 Division of labour by skill; assignment of jobs by skill; basics of time study Charles Babbage
1900 Scientific mngt; time study and work study developed; dividing, planning and doing of work Frederick W Taylor
1900 Motion study of jobs Frank B Gilbreth
1901 Scheduling techniques for employees, machines, jobs in manafacturing Henry L Gantt
1915 Economic lot sizes for inventory control F W Harris
1927 Human relations: the Hawthorne studies Elton Mayo
1931 Statistical inference applied to product quality; quality control charts Walter A Shewhart
1935 Stastistical sampling applied to quality control; inspection sampling plans H F Dodge and H G Romig
1940 Operations research applications in World War II P M S Blacker and others
1946 Degital computer John Mauchly and J P Eckert
1947 Linear programming George B Dantzig, William Orchard Hays and others
1950 Mathematical programming, nonlinear and stochastic processes A Charnes, W W Cooper, H Raiffa and others
1951 Commercial digital computer; large-scale computations available Sperry Univac
1960 Organisational behaviour, continued study and stochastic processes L Cummings, L Porter and others
1970 Integrating operations into overall startegy and policy
Computer applications to manafacturing, scheduling and control, material requirements planning (MRP)
W Skinner
1980 Quality and productivity applications from Japan; robotics, computer-aided designs and manafacturing (CAD/CAM)
W E Deming and J JuranJ Orlicky and O Wright
Historical Evolution
Year Contribution Contributor
1776 Specilisation of labour in manufacturing Adam Smith
1799 Interchangeable parts, cost accounting Eli Whitney and others
1832 Division of labour by skill; assignment of jobs by skill; basics of time study
Charles Babbage
1900 Scientific mngt; time study and work study developed; dividing, planning and doing of work
Frederick W Taylor
1900 Motion study of jobs Frank B Gilbreth
….continued
Historical Evolution
1901 Scheduling techniques for employees, machines, jobs in manufacturing
Henry L Gantt
1915 Economic lot sizes for inventory control F W Harris
1927 Human relations: the Hawthorne studies Elton Mayo
1931 Statistical inference applied to product quality; quality control charts
Walter A Shewhart
1935 Statistical sampling applied to quality control; inspection sampling plans
H F Dodge and H G Romig
….continued
From earlier slide….
Historical Evolution
1940 Operations research applications in World War II
P M S Blacker and others
1946 Digital computer John Mauchly and J P Eckert
1947 Linear programming George B Dantzig, William Orchard Hays and others
1950 Mathematical programming, nonlinear and stochastic processes
A Charnes, W W Cooper, H Raiffa and others
1951 Commercial digital computer; large-scale computations available
Sperry Univac
From earlier slide….
Historical Evolution
1960 Organisational behaviour, continued study and stochastic processes
L Cummings, L Porter and others
1970 Integrating operations into overall startegy and policy
Computer applications to manafacturing, scheduling and control, material requirements planning (MRP)
W Skinner
1980 Quality and productivity applications from Japan; robotics, computer-aided designs and manafacturing (CAD/CAM)
W E Deming and J JuranJ Orlicky and O Wright
From earlier slide….
Case study: Olympics
Work spreads across thousands of people Work spreads across no of states Work spreads across no of days/ months/
years Issues of security, Traffic Deadlines
Case study: Wal Mart Vs Kmart
1987: K mart was dominating the discount store s
1991: Walmart sales overtook Kmart even with fewer no of stores (Kmart:2330, Walmart: 1721)
1997: Walmart becomes dominant discount store (3 times higher sales)
1997 to 1995: Market share changeKmart: Down from 34.5% to 22.7%Walmart: Up from 21.1% to 41.6%
Case study: Wal Mart Vs Kmart
Strategies:Kmart: Building on marketing and merchandising strengths.
Walmart: Invested in operations to lower costs Computer system: Company wise computer systems to link
cash register to headquarters facilitating inventory control Sophisticated distribution system: Integration of computer
system and the distribution system means customers would rarely encounter out of stock items
Use of scanners: Eliminating need of price checks
Case studies
Bank using new technologies like ATM’s or Internet or phone banking
Dark factories of future: Appliance store: May create value by
Storing merchandise Transporting (Delivery) Guaranteeing
Systems view of Operations
System is a collection of objects related by regular interaction and interdependence
Purchasi
ng
Acc
ount
ing
Personnel
Distribution
Engi
neer
ingFinance
Production/
Operations
Marketing
The business firm: A system s view
Operations management:
Management of the conversion process, which converts land, Labour, capital and management inputs into desired outputs of goods and services
The operations managers job is to manage the process of converting inputs into desired outputs.
Various approaches used by Operations Manager
Operations management elements from various school of management
School Some Important Assumptions Primary Focus General Contribution to Management
Classical
•Scientific Management •People motivated by economics alone •Managerial rationality•Organisation a closed system (certainty)
•Economic efficiency•Physical aspects of work environment•Scientific analysis of work tasks•Application of techniques to work tasks•Management processes
•Demonstration of benefits from specialisation of labour, division of labour, job analysis, separation pf planning and doing
•Process orientation •Management activities separable
•Management processes •Identification of principles and functions of management
Behavioral
•Human relations
Behavioral science
•People complex; possess multiple needs•Human beings social creatures
•Behavior of individual in work environment•Interpersonal and social aspects of work environment
•Awareness of individuals
•Identification of behavioral variables that relate to oragnisational behavior
•Social systems •Organisation an open system •Interactive relationships of organisation with its environment
•Development of theories relating organisational behaviour to human characteristics and organisational variables
Modeling
•Decision making •Decision-making processes are the primary managerial behaviors
•Information acquisition, utilisation and choice processes
•Development of guides for improving decisions making
•Systems theory •Organisation-an open system•Organisation-a complex of interrelated subcomponents
•Identification of organisation boundaries, interrelationships among subsystems and relationships between organisation and larger environment
•Development of approaches for predicting and explaining system behavior
•Mathematical modeling •Main elements of organisations can be abstracted, interrelated and expressed mathematically
•Quantification of decision problems and systems•Optimisation of small set of situations
•Development of explicit rules for management decisions•Development of methods for analysing organisation systems or subsystems
Framework for Managing operations: Management Themes in Operations
Planning Organising
Controlling
BehaviorModels
Defines objectivesCreates policies, programmes and procedures for achieving these ObjectivesAlso involves product planning, facilities designing and using conversion process
Establishes structure of roles and flow of InformationDetermine the activities required to goals and assign authority and responsibility
Measuring actual outputs to planned outputs. Controlling cost, quality and schedules
Problems of Operations Manager% Activity % Activity
90.6 Production planning, scheduling/ inventory control systems
44.4 Developing new processes for new products
76.9 Supervisor training 43.1 Vendor relations, procurement procedures
66.3 Capacity expansion 42.5 Focusing factories
63.1 Worker safety programmes 41.3 Narrowing product line, standardising
58.8 Defining a manufacturing strategy 39.4 Making existing systems work better
57.5 Motivating direct labour employees 35 Giving workers a broader range of tasks to perform
55 Value analysis-product redesign 33.1 CAD (Computer-aided design)
54.4 Improved maintenance practices 31.9 Giving workers more responsibility for planning and organising work
53.1 Changing the manufacturing organisation 29.4 CAM (Computer-aided manufacture)
53.1 Changing labour/ management relationships 26.9 Plant relocation
50 Developing integrated information systems 25 Group technology
48.1 Lead-time reduction 21.3 Office automation
47.5 Quality circles 20 Zero defects programmes
46.9 Developing new processes for old products 20.6 Reducing size of manufacturing units
46.3 Automating jobs
Strategic role of Operations
Easy to get pre occupied with detailed economic and engineering aspects of the conversion process and lose sight of its fundamental purpose. Economy and efficiency of conversion operations ar secondary goals, not promary goals. Primary goals are related to market opportunity
A strategic perspective
Industry
Market and competition
Organisational strategy
Profit or returnsSource of fundsProducts or service quality
Operations policy
Conversion characteristics: design•Product design flexibility•Delivery capability•Location of facilities•Processing technology•Control systems
Managing conversion operations
QualityEfficiencySchedule
Results
Information feedback
Priorities are established among following four characteristics:•Quality (Product performance)•Cost efficiency (low product price)•Dependability ( reliability, timely delivery of orders to customers)•Flexibility (responding rapidly with new products or changes in output volume)
TIME
Operations objectives
The overall objective of the operations subsystem is to provide conversion capabilities for meeeting the organisation’s goals and strategy. The subgoals of the operations subsystems, then specify the following,
Product/ service characteristics Process characteristics Product/ service quality Efficiency
Effective employees relations and cost control of labour Cost control of material Cost control in facility utilisation
Customer service (schedule) Producing quantities to meet expected demand Meeting the required delivery date for goods or services
Adaptability for future survival
Operations Strategies For Competitive Advantage
Strategic Planning
Strategic planning is the process of thinking through the current mission of the organisation and the current environmental conditions facing it, then setting forth a guide for tomorrow’s decisions and results.
Strategic planning is built on a fundamental concepts that current decisions are based on future conditions and results, that the strategic planning is a process, that it embodies a philosophy, and that it provides a linkage or structure within the organisation.
Strategic Planning for Production and Operations
Planning for operations:Establishing a programme of action for converting resources into goods or services
Planning the conversion system:Establishing a programme of action for acquiring the necessory physical facilities to be used in the conversion process.
Operational planning of facilities (design) Operational planning for the use of these facilities
Strategic planning approaches for Production/ Operations
1. A strategic planning forced choice modelEnvironmental Assessment Organisation’s position
Broad Economic Assumption
Key governmental/ Regulatory threats
Major technological forces
Significant marketing opportunities/ threats
Explicit competitive strategies for each major competitor
Statement of mission
Interrelation set of financial and non financial objectives
Statement of strength and weaknesses
Forecast of operations:Profit and cash flows
Major future programmes
STRATEGIC OPTION•Strategic options (at least two)•Requirements for implementing each strategy•Contingency plan
Strategic planning approaches for Production/ Operations
2. A strategic planning operations modelManufacturing strategy tries to link the policy decisions associated with operations to the marketplace, the environment and the company’s overall goals
Environment and Industry
Corporate strategy
Corporateresources
EfficiencyDependabilityQualityFlexibility
Facility mission
ProcessAutomationProduct/ service specialityInterconnectedness
CapacityLoadingLead/ lag
FacilitiesSizeLocation
Vertical integrationSupplier controlCustomer controlInterdependancies
InfrastructurePlanning and controlWork forceQuality control
Professor Chris A Voss
Market-based criteria for success
Any area which the company chooses to compete is a set of specific market-based criteria for successEFFICIENCY
EFFECTIVENESS
QUALITY
FLEXIBLITY
Low price Low costHigh productivity Labour
MaterialEnergy
Delivery ReliableRapid
Available from stockDesign competenceTechnical capability
HighConsistent
Fast introduction of new products and servicesWide product/ service range
How does a organisation fails?
Focusing on manufacturing performance criteria that do not match the market criteria for success
Trying to meet incompatible criteria for success within a single market
Trying to produce goods in a single factory for markets with very different criteria for success
Fundamental relationship between operations and markets: Either the operations strategy must be changed and adopted to maximise the market criteria for success, or the chosen markets should be changed to match more closely operations capability in terms of market criteria for success.
Competitive challenges to operations capablity
Productivity and quality Technology and mechanization International operations management
Productivity and quality
Efficiency Productivity Performance
OutputsProductivity (total factor) = ---------------------------------------------- Labour+Capital+Materials+Energy
Output 224 Customers servedLabour productivity= --------------------- = ------------------------------------------------- Labour inputs 3 employees X 8 hours/ employee
Quality: -The degree to which the design specifications for a product or service are appropriate to its function and use, - and the degree to which a product or service conforms to its design specification
QUALITY : PRODUCTIVITY ….. Because waste is eliminated.
Production Planning and Control
What is PPC?
Production is defined as the “manufacturing of goods and services”
Planning is defined as “the series of related and coordinated activities-materials control, process planning, scheduling etc.- designed to systematise in advance the manufacturing efforts”
Control is to review the work progress, make corrections wherever required thereby ensure that programmed production takes place.
What is PPC?
Production planning and control is the process of planning production in advance, setting rate of each item, fixing starting and finishing dates for each item, authorising shop activity by release of production orders, follow up the progress of products and expediting wherever required.
What is PPC?
Production planning is the determination, acquisition and arrangement of all facilities necessary for production of items. In other words production planning is essentially a pre-production activity, associated with the design of the production system. The production system is considered to incorporate an organisational element in addition to physical facilities and production planning is concerned with organising the production of an item prior to the commencement of production….
Production control is the corollary to short term production planning or scheduling and is quite simply concerned with the implementation of production schedules. Production control goes on during production and consists essentially of following steps,Initiating production
• Dispatching of items (i.e. establishing priorities between items competing for time on the same facility)
• Progressing• Reporting back to production planningPlanning is thus forward thinking while control is a mechanism for execution
Customer (BPCL, IOC, Reliance etc)
Sales department
Production planning & control departmentMaterial planProcess planScheduling
Production department
Industrial Dept
Quality Assurance Department
Assembly
Packaging and Dispatch
Purchase Order
System
Drawings
Jigs & fixtures
Stores DeptDesign Dept
Material Plan
Purchase dept
Requisitions
Spares and componentsOu
tso
urc
ed
pa
rts
Mother Depot
State level Depot/ C&F Agent
Finished goods
Fin
ish
ed
go
od
s
KIRLOSKAR BROTHERS LTDMnuf of Industrial pumps, Valves
KIRLOSKAR BROTHERS LTDMnuf of Industrial pumps, Valves
Challenges faced by PPC department at Kirloskar Brothers
1. Change in specifications by customers2. Sudden urgency desired by customer3. Insufficient information provided by sales department4. Technical challenges faced by Design department5. Delay in designing by design department6. Delay in designing jigs and fixtures by industrial dept7. Limitations of present machinery8. Labour related difficulties at production department9. Availability of machinery10. Unavailability of outsourced goods with purchase dept.11. Rejection of batch by quality assurance department12. Failure in depot logistics, transport strike, road blockage, heavy rains, depot damages13. System failures14. Delayed deliveries, hence delay of customer’s projects15. Penalty clause by customer16. Blacklisting by major customer for regular delays17. Order cancellation threat by customer18. Inefficient execution of plan by production department19. Frequent rush orders20. Lack of cooperation between different departments
KIRLOSKAR BROTHERS LTDMnuf of Industrial pumps, Valves
Challenges faced by PPC department at Kirloskar Brothers
a. Sales personnel try to insist on last minute changes in production plan. They bring rush orders
b. Production people insist on plenty of prior notice, longer production runs and sufficient inventory
c. Purchase department expects adequate notice of requirement of bought out components and materials
d. Finance department expects that stocks and WIP do not exceed budgeted values
e. R & D department insists on incorporating design changes or modifications without bothering about the disruption that changes may cause in production schedules.
Objectives of PPC
To plan systematically production related activities to meet targets of production with the available resources of the firm.
To provide for manufacturing requirements such as men, machines, material etc of right quality, in the right quantities and at the right time.
To schedule production facilities in the optimum manner. To coordinate the activities of different departments relating to
production to achieve regular, steady and balance flow of production.
To ensure conformance to delivery commitments and to inform sales department regarding difficulties (if any)
To inform management beforehand of the difficulties which may crop up later in achieving production targets.
Production planning versus Production controlPLANNING (planning the work) CONTROL (working the plan)
Planning involvesCollection and maintenance of data regarding time standardsmaterials and their specificationsmachines and their quantitiestools and their process capabilitiesDrawingsoperational layouts etc
Control involves dissemination of datapreparation of reports regarding outputs, machine and labour efficiency, percentage defectives etc.
Planning is seeing that requirements-tools, machines, men, instructions, authorizations and the like-will be available at the right time and in the right quantities and are of proper quality
Control is seeing that the requirements are actually made available at the right place and in the right quantities
Planning involves preparation of load charts and fitting various work orders into uncommitted time available on the company’s facilities (men or machines)
Control involves actual seeing that the jobs are started and completed as per schedule prepared by the scheduling cell of PPC
Planning involves preparation of all necessary forms and paper work
Control involves actual issue of forms and paper work
Planning involves designing suitable feed back as to what may happen
Control involves keeping track of what is happening and collecting information as to what has happened
Planning involves forward thinking as to the remedial action to be taken if the job fails behind the schedule
Control involves suggesting remedial action when the job is falling behind the schedule
Planning therefore is a centralised activity (in the office) and includes such functions as material control, tools controls, process planning and scheduling
Control is thus a diffused activity (in the shops) and includes functions such as dispatching, progressing and expediting
Functions of Production Planning and Control Material control Process planning or routing:
selection of path or route which raw material should follow to get transformed from raw materials into finished product
Determine manufacturing operations and sequence Decide required setup time and process time for each of the operations
Scheduling Prepare machine load charts to know workload of each machine Fix calendar dates of operations tube performed on a job Coordinate with sales to confirm delivery dates of new items
Dispatching Assign work to definite machines, work centers and men Issue required materials from stores to first operation and from operation to operation Issue jigs and fixtures and deliver them at the correct point of use. Release necessary work orders, time tickets, move orders etc. to authorise timely start of the operations Guide and control operations and material movement as embodied in the route sheets and schedule
charts. Record start and finish time of each job on each machine or by each man Coordinate with routing and scheduling for revisions in process or schedule wherever required.
Follow up Follow up of material Follow up of work in progress Follow up of assembly and erectionMajor activities in follow up Identify delays and interruptions which have crept into the production stream Devise cures from time ti time to keep rate of production in line with the schedule Communicate possible failures in delivery commitments to sales department
Information required for PPCInformation concerning
Details Source Department originating indicated information
1. Production Program
1. Quantity to be manufactured
2. Delivery date
Sales order or order acceptance Sales
2. Production Material
1. Kind and quality of materials
2. Quantity of material required
3. Stock on hand and reservations
4. Time required for procurement
Drawing/ bill of material
Stock cards
Lead time card
Drawing office
Stores
Purchase
3. Tooling 1. Standard and special tooling Tool card PPC
4. Quality standards
1. Dimensional sprcifications
2. Tolerances required
Experience
Drawings
Customer’s reaction
Drawing office
Sales Department
5. Operation Methods
1. Operations and their sequence
2. Machine tool for meeting the quality requirements
3. Jigs and fixtures needed
4. Speeds and feeds
Process sheets
Capacity charts
Experience
PPC
PPC
6. Path of Materials
1. List of operations and their sequence
2. Alternatives possible
Operational layouts
Plant layout
PPC
7. Operation Time
1. 1. Setup time and standard time for each operation
Work measurement data Industrial engineering
8. Scheduling 1. Starting and finishing dates Machine load & schedule charts PPC
9. Progress of wrk
1. Work completed as on date Daily Production Reports/ Time tickets/ Perforated Slips
Production
Organisation of PPC department
Status of PPC depends upon, Repetitiveness of work Sequence of operations Machine capacity- product variety less Functional layout of plant and machinery
Degree of decentralisation Centralised planning: Functions are controlled
centrally Decentralised planning: Planning carried out by line
staff
Internal structure of PPC
Functions of PPC Order Preparation Materials controls Tools control Process planning Scheduling Dispatching Progressing Expediting
Following may be added Cost Estimation Work measurement Sub-contracting Capacity planning
Relationship of PPC with other departments
Sales Department: Design Department Inspection & quality control department Purchase Department Stores Department Tool Room Maintenance Department Personnel Department Manufacturing Shops
Sales Department Quotation giving Order passing to PPC Tentative delivery period while order acceptance Information on status and progress Advanced information on change in delivery schedule Consultation with PPC before taking rush orders Buyers feedback should be passed on New schedules, amendments, cancellation and design
changes must be reported to PPC
Design Department
Design dept should know process capabilities Design changes must be intimated Tolerances may be reviewed and relaxed if required
Inspection & quality control department
Feedback on quality of goods produced, rejections and quantities.
Sample inspection reports Inspections and predefined important places should be
carried out with out fail. Delays because of inspections to be avoided
Speed of inspection and clearance for next job Errors to be communicated immediately Fox appropriate stages for inspection to be decided Defects at customers plant to be reported immeduately
Purchase Department
Advance information to Purchase on raw material and tools
Information to PPC on progress of purchase orders and delays.
Market situation of raw material should be informed to PPC
Immediate action on revised schedule from PPC Periodically information on lead time on items Immediate action on changes in designs and
specifications
Stores Department
Replenishment of raw material Maintaining stock records Inventory methods
Tool Room Making and maintenances of Tools and gauges in right
quantities Making jogs and fixtures
Maintenance Department
Prioritising maintenance by importance Information of inspection, replacement, servicing and
overhauling schedule
Personnel Department Statistics on absenteeism of different operators Information of holidays, dismissals, retrenchments, hiring Information on power situation
Manufacturing Shops
Preparing detailed work assignment Suggestions relating to overtime, job priority, job
splitting, shifting etc. Control on leaves, and alternatives Notifying information on damages to jigs and
fixures Economy and efficiency at manufacturing
through different methods Reporting of daily production reports
Production planning (Forecasting)
Need for Forecasting Main inputs like men, machine and material are
expensive Resources to be put to best use Maximising profit To meet customer’s orders at least costs
Changes in inventory of raw materials, Work-In –Progress, Finished goods must be made
Production planning (Forecasting)
Company ‘A’
Company ‘B’
Rs. Crore Rs. Crore
Raw material 10 5
Work In Process 6 4
Finished Goods 15 8
Investment in Inventory 31 17
Philips India Ltd. (Small Appliances Division)
Product Portfolio:Kitchen Appliances1. Mixer grinders (7
models)2. Juicer Mixer Gr (2
models)3. Hand Blenders (4
models)4. Juice Extractor (1
model)5. Citrus press (2 models)6. Food processor (1
model)7. Hand Mixer (1 model)8. Rice cooker (3 models)9. Coffee Maker (2
models)10. Kettle (4
models)11. Electric Ovens (4
models)12. Pop up Toasters (7
models)13. Snack Toasters (6
models)
Household Products1. Vacuum cleaners (3
models)2. Irons (16
models)
Personal Care1. Philishave (14 models)2. Ladyshave (1 model)3. Satinelle (3 models)4. Hair styler (1 model)5. Hair dryers (4 models)6. Infrared Lights (2
models)
Philips Irons
Production planning (Forecasting)Activities depends upon projection of future sales1. Smoothen imbalance between production and sales2. Schedule production activity with least cost and best utilization of plant
and machinery3. Plan for material schedule4. Access shop capacity5. Plan requirement of vendors for materials, tools bought out parts, sipplies6. Plan recruitment and training
Classification of forecast:1. Short term forecast: Less than 1 year2. Long term forecast: Over 1 year
Short term forecast: Made for Materials control, Loading, and scheduling and budgeting
Long term forecast: Made for product diversification, sales and advertising, budgeting, financial planning and investment planning
Forecasting methods
Synthetic forecasts Analytical estimates Economic indicators
Synthetic forecasts• Based on opinion surveys• Mostly used by manufacturers• Estimates from company salesmen are taken• Estimates are consolidated into total estimates
• It is simpler• Useful in launching new products• Quick• Active cooperation from sale force
May be biased due to:1. Salesmen temperaments (optimistic or pessimistic)2. Natural instinct to go to extremes3. Time limitation4. Understate low demand to get low targets5. Lack of knowledge of company’s strategy and economic conditions
Other factors should be included like1. Product improvement plans2. Changes in credit policy3. Changes in income levels4. Changes in advertising expenses, promotional activities5. Performance of competitors
Analytical estimates• Rely on actual demand data of last few years• Arranged in Time series• Determining trend and extrapolating the trend• Past as a guide for the future• Different statistical methods are used
Time series has four components:Secular trend: Overall growth or decline of business over the timeCyclical fluctuations: Oscillations-pattern around the tread cycle (greater than a year)Seasonal fluctuations: Oscillations around the trend with periodicity less than or equal to a
year. Fluctuations caused due to changes in season are attributed to a seasonal fluctuations.
Random fluctuations: unexplained chance variations when all above components are removed from original time series.
To make forecast from time series:1. Collect data of past sales (time series)2. Establish secular trends underlying3. Isolate seasonal and random fluctuations4. Extrapolate forecast from secular and seasonal fluctuations
Use of Economic indicators
Forecasting is done with the help of one of the indicators
Personal income: Agricultural income: Registrations: (Auto registrations, licenses) Contracts signed: Total Capacity of production: Population index
Statistical approach
Measurement of secular trend Curve fitting Moving Average Method Exponential smoothing Regression Analysis
Main concern is matching the resources to demand Capacity planning decisions are generally strategic in
nature. What is the expected growth of the industry and company’s
market share? How accurate is company’s market prediction? Capacity planning should be taken optimistically or
pessimistically? Capacity be created at FEW locations WITH large CAPACITY,
or at MANY locations with SMALL capacities. How many shifts? How many days plant to run in a week? What percentage to be through outsourcing, sub-contracting? Policy on temporary capacity shortfalls?
Production planning (Capacity Planning)
Measurement of capacity
When a single or homogeneous product in no of units per unit of time. Ex Automobiles, CTV, Steel, textile, power plant.
When multiple products are manufactured capacity can be measured in labour hours or machine hours.
Solving capacity problems
Working extra day a week (seven days working)
Overtime Strengthening the weakest link Sub contracting
Effective capacity is influenced by Demand forecast:
Effects of Life cycle of product, no of products. Longer the life easier is the forecasting.
Phase of product in its life cycle More the no of different products, lesser the demand fluctuation.
Labor efficiency: Person to person difference at machine
Plant efficiency: Multiplicity of shifts:
Single shift: Higher investments Multiple shifts: Higher labour costs, wage premium. Multiple shifts: Steel. Chemicals, oil refineries and other with large investment in
building, equipments Single or double shifts: Low capital investment firms.
Subcontracting Management policies
Sub contracting wherever possible Critical operations important for reputation Policy on no of shifts Specific machines for 3rd shifts only Buy new machine as soon as existing capacity reaches specific level. Not to use inefficient machines Extra inventory of spares for important machines
Quality Management
What is quality
Quality is the performance of the product as per the commitment made by the producer to the consumer
Commitment may be explicit- Written contract or implicit- expectations of average consumer of the product
The performance of the product: relates to ultimate functions and services which the final product must give to the final customer
WATCH: Shoe accurate time PEN: Write legible PAPER: Retain pen or pencil marks
Quality may be measured in terms of ‘PERFORMANCE TEST’ A product is called a quality product only when it satisfies various criteria for
its functioning for the consumer In addition to physical criteria there is also a service and time dimension to
the quality The same quality of performance should be available over the reasonable
period of time.
What is quality
Quality is either a written or non-written commitment to a known or unknown consumer in the market.
Since market is defined by company under strategic marketing, quality is is a strategic marketing decision taken by the company itself.
Hence it is not a domain of a single department
Statistical Methods
Process Finished goodsRaw materialAre raw material OK? Are finished goods okey to be sent to customers?
Are right processes operating on the raw materials?
•Acceptance sampling: The task of exercising control over raw material and outgoing finished goods is usually called as ‘Acceptance sampling”•Process control: The control over the processes operating on the raw material or the semi-finished goods is called Process Control•Mass production: Statistical methods are extensively used in mass-production and mass-purchase and mass-shipment.Statistical Process control
Statistical process control
If the processes (chemical reactions, mechanical working by men or machines) are operated with a tolerable range, the product produced will be of the desired quality.
Process control is monitoring of the various physical variables operating on the materials and the correction of the variables when they deviate from the previously established norms.
Variations: In process control is concerned with those causes which can be rectified.
Monitoring the process: We can control the process by Actually measuring the variables operating on the raw materials Measuring the characteristic of the output products
Specification Limits for the outputs: Quality of the particular product is described in the form of range (ex. Diameter of shaft: 3 plus/minus 0.002 cm)
Statistical process control
Control Limits: During exercising process control we should not exceed specification limits. Therefore the limits for our process control should be narrower than the specification limits. A danger signal should indicate if limits are crossed.
Cost Aspects: Should be understood while designing the control limits. Small variation in some no priority areas should be understood through cost point of view.
Statistical process control Central Tendency and Dispersion: Target Diameter: 150 mm
140 mm
151 mm
159 mm
139 mm
139.5 mm
140 mm
Machine 1 Machine 2
•Accurate machine•Central tendency does not show deviation•Has lot of dispersion
•Precise•Not accurate•Central tendency shows deviation•Dispersion is low
Quality planning To set quality objectives and targets and take into account customers
wants and the marketability of the products To carry out pre process capability or quality deliverability studies (to
find out whether the company is capable of producing and marketing the products of certain quality
To establish the relative importance of the quality characteristics and specification and communicate it to the production line people as well as to the vendors supplying the raw materials. Specifications and drawing per se can never communicate what that particular specification stands for and why.
To establish statistical control techniques, charts and sampling plans. To establish training programmes for various personnel in the company
so that quality consciousness gains a firm ground in the organisation.
Managing Quality
Managing Quality
Quality implementation Performing laboratory tests and analysis on the raw materials, finished
products, and the semi-finished products for acceptance/ rejection or for process control
Maintaining quality control equipment (Process, Laboratory and Inspection)
Advising and providing assistance for the clarification and solution of quality management problems in manufacture
Managing Quality
Quality monitoring and control Appraising the quality plan vis-à-vis the problems of production and the
problems of vendor quality, so that appropriate action is taken to correct the initial planning errors.
Appraising quality planning vis-à-vis the actual quality which has reached the customer and what the latter’s reaction is regarding the product quality, how such reactions can be set right by modifications to the original quality plan
In addition to performing quality audits, monitoring the costs of quality and providing such information to the quality-planners so that they take appropriate action for the future.
Costs of Quality
Cost of Appraisal: Cost of inspection, testing and such checking operations as are necessary to maintain the product quality.
Cost of Prevention: Cost of activities which are necessary to to prevent the production of bad quality output. Cost of activities such as Quality planning, bad quality of raw material entering into plant or improper methods and processes being followed
Cost of Failure: Cost of rejection, rework, spoilage. Cost of attending to customer complaints and providing product service
Analysis of cost of quality Category to category comparison: Time to time comparison:
Source: Economic Times 300507
Source: Economic Times 300507
Supply Chain Management
Supply chain, and weak link
Supplier’s Supplier
Supplier Company Customer Customer’s
Customer
Supplier’s Supplier’s Supplier
Customer’sCustomer’s Customer
Purchasing Purchasing is a window to the outside world Being sensitive to external supply market situation and
feeding back this information to other functions of organisation
Get Right quantity of material of Right quality at Right time at Right place from Right source and at Right cost
Increase profit by Increase sales or reduce purchase costs
Objectives of Purchase department
1. Ensure availability2. Procure material at low costs (not necessarily low price)3. Ensure supply of quality material4. Select proper source5. Information on substitute material6. Value analysis/ Value engineering7. Develop new vendors, maintain relations with vendors. Vendor
relations, vendor monitoring or vendor evaluation and development.8. Develop procedures and systems for purchase department9. Instututionalise purchasing and not let it personalise10. Coordinate with other departments to achieve continuity of information11. Price forecasting12. Make or Buy
Bayesian Analysis
Works on probability of incident happening
Value Analysis/ Value Engineering
Information stage Functional Analysis Brain Storming Evaluation Phase Implementation
Inventory Models and Safety Stocks
How much inventory to keep When Normal Consumption pattern Inventories between stages Decoupling function
Relevant costs
Cost of capital Space cost Material Handling costs Obsolescence, Spoilage or Deterioration Costs Insurance Costs Costs of General Administration Inventory procurement Costs
Space cost
Inventory Models
Optimal Order Quantity Economic Manufacturing Batch Size Inventory Models with purchasing
discounts Protection methods against usage rate
variations and supply lead time variations Fixed order period models
ABC and other classification of Materials
ABC Analysis: (Conventionally Annual consumption value)
Material price Criticality Non-availability Size Weight A B C
% OF ITEMS
100
0
Cumulative % annual turnover
VED Analysis: Nuisance value. V: VitalE: EssentialD: Desirable
Combination of ABC and VED
AV AE AD
BV BE BD
CV CE CD
Vital Essential Desirable
A
B
C
Material Requirement Planning Process
Firm orders
Manufacturing and
procurement lead
time
Inventory status Informatio
n on product design
structure
Forecasts
Capacity adequate?
Master schedule for production
Materials requirement plan
Final master production schedule and MRP
Evolution to ENTERPRISE RESOURCE PLANNING (ERP)
Benefits of EFP: It provides information that is
i. Up to dateii. Uniformiii. Comprehensive, across the entire organizationiv. Integrated, linking all the functional departments and
divisionsv. Embeds best practicesvi. Instantaneous information available with speed and qualityvii. Integrates the work flow in entire enterpriseviii. Every decision-maker, is put on chainix. Helps organization look inwards
Other aspects of Material Management Codification Standardization Material Handling
Hand Trucks Pulley blocks Chutes Roller conveyors Fork lift trucks Pallets Overhead electric cranes Belt conveyors Pneumatics of vacuum lift
Stores Management Receiving and inspection Issues and dispatch Stock-records Stores accounting Stock-taking and checking Stores preservations Stores arrangement
Supply chain management United we stand, divided we fall Globalization, global outsourcing Fast technological developments Large variety of competing products and services
Supply chain management
Building a supply chain: Alignment of organizations in the chain and Improving co-ordination between them.
Leader company in supply chain What keeps them together?
Mindset Coordination Sharing of Information Sharing of Risks and Rewards Joint problem solving
Pyramid of supply chain Management
Serviceto
the customer
CompetitivenessAnd Efficiency
Alignmentbetween partner
organisations
Coordination between partner
organisation
Bringing partnerorganisations to be
Together and to work together
Process orientation
Aligning their strategies and policies
Sharing of information, Sharing of risks and rewards
Orienting their organisation cultures and values
Provide leadership ensuring continuedcooperation, continued alignment
and build a culture of trust
Joint-problem solving
Within each partner organisation:Orienting the functional areas towards the supply chain objectives
of customer services, systems thinking,competitiveness and efficiency
The functional areas having immediate effect are, Production, materials including Purchasing,Inventory Control, Stores, Logistics, marketing, Human resources, Systems and Finance
Customer –Supplier relationshipTraditional org Partnership org
Purchase criteria Lowest price Competancy
Duration Short term as needed Long term
Number of suppliers Several One or few
Volume of Business for the supplier
Limited Large
Type of Agreement Contractual Working relationship
Type of Interaction Formal Formal and informal
Quality Variable, through inspection Right quality
Cost/ Price Price appears low initially Effectively low
Delivery Large consignment, infrequent causing large inventory
Small lot,