Production and Operations Management- Handouts

7/25/2019 Production and Operations Management- Handouts

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INTRODUCTION TO PRODUCTIONS AND OPERATIONS MANAGEMENT

HANDOUTS

Instructor: Ms. Tanzeela Siddiui

Product:

Product is defined as a "thing produced by labor or effort"or the "result of an act or a process"

For a consumer: Combination of Utilities

For a product manager: Combination of Processes

For a Financial Manager: Mix of various cost elements,

For an H Manager: Mix of various s!ills

n general #e can define the product as a bundle of tangible and intangible attributes #hich along #ith theservice is meant to satisfy the customer #ants$

Production:

Production is %tep&by&step conversion of one form of material into another form through chemical ormechanical process to create or enhance the utility of the product to the user$ t's a value addition process$

E!a"#le:manufacturing custom&made products li!e a boiler #ith a specific capacity, and standardi(edproducts li!e, bi!es, radio, television etc$

Production Management is the process of planning, organi(ing, directing and controlling the activities ofa production function$ t combines and transforms various resources into value&added product in acontrolled manner as per policies of the organi(ation$


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O$%ecti&es o' Production Mana(e"ent:

)n ob*ective of production management is to produce products and services of right +uality and +uantityat right time and right manufacturing cost$

H- .U)/-0: is not necessarily best +uality$ t is determined by the cost of the product$

H- .U)1--0: products should be produced in right number$ f they are produced in excess ofdemand, capital #ill bloc!&up in the form of inventory$ )nd if the +uantity is produced in short ofdemand, leads to shortage of products$

H- -M2: timeliness of delivery is an important parameter to *udge the effectiveness of department$%o, the production department should ma!e the optimal utili(ation of its resources to achieve itsob*ectives$

H- C3%-: manufacturing cost is established before the product is actually manufactured$ %o productshould be produced at pre&established costs to minimi(e the variation b4# actual costs and pre&establishedcosts$

C)ASSI*ICATION O* PRODUCTION S+STEM:Production system can be classified as *ob&shop, batch, mass, and continuous production$

Classi'ication o' #roduction s,ste"

-O SHOP PRODUCTION

5ob shop production are characteri(ed by manufacturing of one or fe# +uantity of products designed andproduced as per the specification of customers #ithin prefixed time and cost$ ) *ob shop comprises ofgeneral purpose machines arranged into different departments$ 2ach *ob demands uni+ue technological

re+uirements, demands processing on machines in a certain se+uence

C/aracteristics:

High variety of products and lo# volume Use of general purpose machines and facilities Highly s!illed operators /arge inventory of materials


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6etailed planning is essential Higher cost due to fre+uent set up changes /arger space re+uirements

2xample: tailor, a construction company #ho build houses as per specifications, orange county chopper 7acustom&bi!e manufacturing company8

ATCH PRODUCTION9atch production is defined as a form of manufacturing in #hich the *ob passes through the functionaldepartments in lots or batches and each lot may have a different routing$; t is characteri(ed by themanufacture of limited number of products produced at regular intervals and stoc!ed a#aiting sales$

C/aracteristics:

shorter production runs


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OPERATING S+STEM:E&erett E. Ada" 0 Ronald -. E$ert define operating system as, )n operating system 7function8 of anorgani(ation is the part of an organi(ation that produces the organi(ation's physical goods and services$;n some of the organi(ation the product is a physical good 7hotels8 #hile in others it is a service7hospitals8$ 9us and taxi services, tailors, hospital and builders are the examples of an operating system$Production Management is a sub&system operations management$

CONCEPT O* OPERATIONS)n operation is defined in terms of

the mission it serves for the organi(ation technology it employs and the human and managerial processes it involves

3perations in an organi(ation can be categori(ed into=$ Manufacturing operations: conversion process that includes manufacturing yields a tangible

output: a product

>$ %ervice operations: conversion process that includes service yields an intangible output: a deed, aperformance, an effort$ %ome services are e+uipment based namely rail&road services, telephoneservices and some are people based namely tax consultant services, hair styling

Manufacturing 3perations %ervice 3perations tangible outputs 7products8 outputs that customers consume overtime *obs that use less labor and more

e+uipment little customer contact no customer participation in the conversion

process

intangible outputs outputs that customers consumes

immediately *obs that use more labour and less

e+uipment direct consumer contact fre+uent customer participation in the

conversion process

OPERATIONS MANAGEMENT3peration management is concerned #ith planning, organi(ing, and controlling the activities inproduction process #hich affect human behavior through models$3perations Management is the conversion of inputs into outputs, using physical resources, so as toprovide the desired utility4utilities of form, place, possession or state or a combination there&off to thecustomer #hile meeting the other organi(ational ob*ectives of effectiveness, efficiency and adaptability$

Plannin(:6efines the ob*ectives for the operations subsystem of the organi(ation, and the policies, andprocedures for achieving the ob*ectives$

Or(anizin(: )ctivities are determined, re+uired to achieve the goals and assign authority andresponsibility for carrying them out$

Controllin(: Measuring actual outputs and comparing them to planned operations management$Controlling costs, +uality, and schedules are the important functions here


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e/a&ior: ho# the behavior of subordinates can affect management's planning, organi(ing, andcontrolling actions$ -heir interest lies in decision&ma!ing behavior$

O-ECTI1ES O* OPERATIONS MANAGEMENT2. Custo"er Ser&ice-he first ob*ective of operating systems is the customer service to the satisfaction of customer #ants$-herefore, customer service is a !ey ob*ective of operations management$ -he operating system mustprovide something to a specification #hich can satisfy the customer in terms of cost and timing$ -hus,primary ob*ective can be satisfied by providing the ?right thing at a right price at the right time'$3. Resource Utilization)nother ma*or ob*ective of operating systems is to utili(e resources for the satisfaction of customer #antseffectively, i$e$, customer service must be provided #ith the achievement of effective operations throughefficient use of resources$ nefficient use of resources or inade+uate customer service leads to commercialfailure of an operating system$ 3perations management is concerned essentially #ith the utili(ation ofresources, i.e., obtaining maximum effect from resources or minimi(ing their loss, under utili(ation or#aste$

P)ANT )OCATION:2very entrepreneur is faced #ith the problem of deciding the best site for location of his plant or factory$Plant location refers to the choice of region and the selection of a particular site for setting up a businessor factory$ 9ut the choice is made only after considering cost and benefits of different alternative sites$ tis a strategic decision that cannot be changed once ta!en$)n ideal location is one #here the cost of the product is !ept to minimum, #ith a large mar!et share, theleast ris! and the maximum social gain$

)ocation Anal,sis/ocation analysis is a dynamic process #here entrepreneur analyses and compares the appropriateness orother#ise of alternative sites #ith the aim of selecting the best site for a given enterprise$ t consists thefollo#ing:


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2. De"o(ra#/ic Anal,sis:t involves study of population in the area in terms of total population 7in no$8, age composition, per capitaincome, educational level, occupational structure etc$

3. Co"#etiti&e Anal,sis:t helps to *udge the nature, location, si(e and +uality of competition in a given trade area$

4. Tra''ic anal,sis:-o have a rough idea about the number of potential customers passing by the proposed site during the#or!ing hours of the shop, the traffic analysis aims at *udging the alternative sites in terms of pedestrianand vehicular traffic passing a site$

5. Site econo"ics:)lternative sites are evaluated in terms of establishment costs and operational costs under this$ Costs ofestablishment is basically cost incurred for permanent physical facilities but operational costs are incurredfor running business on day to day basis, they are also called as running costs$

-#o sites ) and 9 are evaluated in terms of above mentioned t#o costs as follo#s:

-he above cost statement indicates that site 9 is preferable to site ) !eeping in mind economicconsiderations only although in some respects site ) has lo#er costs$ 9y applying the definition of ideallocation #hich is the place of maximum net advantage or #hich gives lo#est unit cost of production anddistribution, site9 #ould be preferred$Selection Criteria

1atural or climatic conditions )vailability and nearness to the sources of ra# material$ )ccess to mar!et: small businesses in retail or #holesale or services should be located #ithin the

vicinity of densely populated areas$

)vailability of nfrastructural facilities )vailability of s!illed and non&s!illed labour and technically +ualified and trained managers$ 9an!ing and financial institutions are located nearby %trategic considerations of safety and security should be given due importance esidence of small business entrepreneurs #ant to set up nearby their Homelands

P)ANT )A+OUT:


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Plant layout refers to the arrangement of physical facilities such as machinery, e+uipment, furniture etc$#ithin the factory building in such a manner so as to have +uic!est flo# of material at the lo#est cost and#ith the least amount of handling in processing the product from the receipt of material to the shipment ofthe finished product$t may be defined as a techni+ue of locating machines, processes and plant services #ithin the factory soas to achieve the right +uantity and +uality of output at the lo#est possible cost of manufacturing$

Essentials)n efficient plant layout is one that can be instrumental in achieving the follo#ing ob*ectives:

Proper and efficient utili(ation of available floor space -o ensure that #or! proceeds from one point to another point #ithout any 6elay educe material handling costs educe ha(ards to personnel Utili(e labour efficiently ncrease employee morale educe accidents )llo# ease of maintenance

T,#es o' )a,out

n case of "anu'acturin( unit, plant layout may be of four types:

Product or line la,out:Under this, machines and e+uipments are arranged in one line depending uponthe se+uence of operations re+uired for the product$ -he materials move from one #or!station to anotherse+uentially #ithout any bac!trac!ing or deviation$ Under this, machines are grouped in one se+uence$) line layout for t#o products is given belo#$

Manufacturing units involving continuous manufacturing process, producing fe# standardi(ed productscontinuously on the firm's o#n specifications and in anticipation of sales #ould prefer product layout e$g$chemicals, sugar, paper, rubber, refineries, cement, automobiles, food processing and electronics etc$Process or 'unctional la,out:n this type of layout machines of a similar type are arranged together at one place$ 2$g$ Machinesperforming drilling operations are arranged in the drilling department, machines performing castingoperations be grouped in the casting department$ -he #or! has to be allocated to each department in sucha #ay that no machines are chosen to do as many different *ob as possible i$e$ the emphasis is on generalpurpose machine$Process layout is sho#n in the follo#ing diagram$


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-hus, process layout or functional layout is suitable for *ob order production involving non&repetitiveprocesses and customer specifications and non&standardi(ed products, e$g$ tailoring, light and heavyengineering products, made to order furniture industries, *e#elry$

*i!ed #osition or location la,out:n this type of layout, the ma*or product being produced is fixed at one location$ 2+uipment labour and

components are moved to that location$ )ll facilities are brought and arranged around one #or! center$-his type of layout is not relevant for small scale entrepreneur$ -he follo#ing figure sho#s a fixedposition layout regarding shipbuilding$

n case of Trade unit, plant layout may be=$ Sel' ser&ice la,out:-he self&service layouts allo# customers to select merchandise for themselves$

Customers should be led through the store in a #ay that #ill expose them to as much display area as

possible, e$g$ rocery %tores or department stores$>$ *ull ser&ice la,out:Certain specialty enterprises sell to fe#er numbers of customers or higher priced

product, e$g$ )pparel, office machines, sporting goods, fashion items, hard#are, good +uality shoes,*e#elry, luggage and accessories, furniture and appliances are all examples of products that re+uiretime and personal attention to be sold$ -hese full service layouts provide area and e+uipmentnecessary in such cases$

@$ S#ecial la,outs:%ome layouts depend strictly on the type of special store to be set up, e$g$ -A repairshop, soft ice cream store, and drive&in soft drin! stores are all examples of business re+uiring specialdesign$ -hus, good retail layout should be the one, #hich saves rent, time and labour$

n case of Ser&ices centersand establishment plant layout may be:%ervices establishments such as motels, hotels, restaurants, must give due attention to client convenience,

+uality of service, efficiency in delivering services and pleasing office ambience$ n today's environment,the clients loo! for ease in approaching different departments of a service organi(ation and hence thelayout should be designed in a fashion, #hich allo#s clients +uic! and convenient access to the facilitiesoffered by a service establishment$


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MATERIA) HAND)ING S+STEMMaterials handling can be defined as the function dealing with the preparation, placing and positioningof materials to facilitate their movement or storage'$ Material handling is the art and science involvingthe movement, handling and storage of materials during different stages of manufacturing$ -hus thefunction includes every consideration of the product except the actual processing operation$

Material handling does not add any value to the product but adds to the cost of the product and hence it#ill cost the customer more$ %o the handling should be !ept at minimum$ Material handling in ndianindustries accounts for nearly BD of the cost of production$ 3ut of the total time spent for manufacturinga product, >D of the time is utili(ed for actual processing on them #hile the remaining ED of the timeis spent in moving from one place to another, #aiting for the processing$ Poor material handling mayresult in delays leading to idling of e+uipment$

O-ECTI1ES O* MATERIA) HAND)INGFollo#ing are the ob*ectives of material handling:=$ Minimi(e cost of material handling$>$ Minimi(e delays and interruptions by ma!ing available the materials at the point of use at right

+uantity and at right time$

@$ ncrease the productive capacity of the production facilities by effective utili(ation of capacity andenhancing productivity$

B$ %afety in material handling through improvement in #or!ing condition$$ Maximum utili(ation of material handling e+uipment$G$ Prevention of damages to materials$$ /o#er investment in process inventory$

SE)ECTION O* MATERIA) HAND)ING E6UIPMENTS%election of Material Handling e+uipment is an important decision as it affects both cost and efficiency ofhandling system$ -he follo#ing factors are to be ta!en into account #hile selecting material handlinge+uipment$

2. Pro#erties O' T/e Material


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cost to be considered$ 9y calculating and comparing the total cost for each of the items of e+uipmentunder consideration, a more rational decision can be reached on the most appropriate choice$

8. Nature O' O#erations%election of e+uipment also depends on nature of operations li!e #hether handling is temporary orpermanent, #hether the flo# is continuous or intermittent and material flo# pattern&vertical or hori(ontal$

9. Eui#"ent Relia$ilit,eliability of the e+uipment and supplier reputation and the after sale service also plays an important rolein selecting material handling e+uipments$

E1A)UATION O* MATERIA) HAND)ING S+STEM-he effectiveness of the material handling system can be measured in terms of the ratio of the time spentin the handling to the total time spent in production$ -his #ill cover the time element$ -he costeffectiveness can be measured by the expenses incurred per unit #eight handled$ t can be safely said thatvery fe# organi(ations try to collate the expenses and time in this manner so as to ob*ectively vie# theperformance and to ta!e remedial measures$ %ome of the other indices #hich can be used for evaluatingthe performance of handling systems are listed belo#:

Eui#"ent Utilization Ration order to !no# the total effort needed for moving materials, it may be necessary to compute MaterialsHandlin( )a$or MH); ratio$ -his ratio is calculated as under:

Personnel assigned

MHL=Material Handling Total Operating Work Force

n order to ascertain #hether is the handling system delivers materials #or! centres #ith maximumefficiency, it is desirable to compute direct labour handling loss ratio$ -he ratio is:

DLHL=Materials handlingtime lost of labour

Total direct labour time

MATERIA) HANDING E6UIPMENTSCon&e,orsConveyors are useful for moving material bet#een t#o fixed #or!stations, either continuously orintermittently$ -hey are mainly used for continuous or mass production operationsIindeed, they aresuitable for most operations #here the flo# is more or less steady$ Conveyors may be of various types,#ith rollers, #heels or belts to help move the material along: these may be po#er&driven or may rollfreely$ -he decision to provide conveyors must be ta!en #ith care, since they are usually costly to installJ

moreover, they are less flexible and, #here t#o or more converge, it is necessary to coordinate the speedsat #hich the t#o conveyors move$


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Industrial Truc


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Ro$otsMany types of robot exist$ -hey vary in si(e, and in function$ $ %e+uence the operations in logical manner so that handling is unidirectional and smooth$@$ Use gravity #herever possible as it results in conservation of po#er and fuel$B$


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Materials #lannin( and control:Material planning is a scientific techni+ue of determining in advance the re+uirements of ra# materials,ancillary parts and components, spares etc$ as directed by the production programme$ t is a sub&system inthe overall planning activity$ -here are many factors, #hich influence the activity of material planning$

-hese factors can be classified as macro and micro systems$

M)C3 F)C-3%:%ome of the macro factors #hich affect material planning are:

price trends, business cycles ovt$ import policy etc$

MC3 F)C-3%:%ome of the micro factors that affect material planning are:

plant capacity utili(ation, re*ection rates,

lead times, inventory levels, #or!ing capital, delegation of po#ers and communication$

PURCHASINGPurchasing is an important function of materials management$ n any industry purchase means buying ofe+uipments, materials, tools, parts etc$ re+uired for industry$ -he importance of the purchase functionvaries #ith nature and si(e of industry$ n small industry, this function is performed by #or!s managerand in large manufacturing concernJ this function is done by a separate department$

O$%ecti&es o' Purc/asin(-he basic ob*ective of the purchasing function is to ensure continuity of supply of ra# materials, sub&contracted items and spare parts and to reduce the ultimate cost of the finished goods$ n other #ords, theob*ective is not only to procure the ra# materials at the lo#est price but to reduce the cost of the finalproduct$ -he ob*ectives of the purchasing department can be outlined as under:

-o avail the materials, suppliers and e+uipments at the minimum possible costs -o ensure the continuous flo# of production -o develop an alternative source of supply


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-o establish and maintain the good relations #ith the suppliers -o achieve maximum integration #ith other department of the company -o train and develop the personnel 2fficient record !eeping and management reporting

PARAMETERS O* PURCHASING

Ri(/t Pricet is the primary concern of any manufacturing organi(ation to get an item at the right price$ 9ut rightprice need not be the lo#est price$ t is very difficult to determine the right priceJ general guidance can behad from the cost structure of the product$ -he ?tender system' of buying is normally used in public sectororgani(ations but the ob*ective should be to identify the lo#est ?responsible' bidder and not the lo#estbidder$

Ri(/t 6ualit,ight +uality implies that +uality should be available, measurable and understandable as far aspracticable$ -he right +uality is determined by the cost of materials and the technical characteristics assuited to the specific re+uirements$

Ri(/t Ti"e

For determining the right time, the purchase manager should have lead time information for all productsand analyse its components for reducing the same$ /ead time is the total time elapsed bet#een therecognition of the need of an item till the item arrives and is provided for use$


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2. Reco(nition O' T/e Need-he initiation of procedure starts #ith the recognition of the need by the needy section$ -he demand islodged #ith the purchase department in the prescribed Purchase e+uisition Form for#arded by theauthorised person either directly or through the %tores 6epartment$ -he purchase re+uisition clearlyspecifies the details, such as, specification of materials, +uality and +uantity, suggested supplier, etc$

3. T/e Selection O' T/e Su##lier-he process of selection of supplier involves t#o basic aspects: searching for all possible sources andshort listing out of the identified sources$ -he complete information about the supplier is available fromvarious sources, such as, trade directories, advertisement in trade *ournals, direct mailing by the suppliers,intervie# #ith suppliers, salesmen, suggestions from business associates, visit to trade fair, participationin industries convention, etc$ dentification of more and more sources helps in selecting better andeconomical supplier$ t should be noted that the lo# bidder is not al#ays the best bidder$ U# O' T/e OrderFollo#&up procedure should be employed #herever the costs and ris!s resulting from the delayeddeliveries of materials are greater than the cost of follo#&up procedure, the follo#&up procedure tries tosee that the purchase order is confirmed by the supplier and the delivery is promised$ t is also necessaryto revie# the outstanding orders at regular intervals and to communicate #ith the supplier in case of need$


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enerally, a routine urge is made to the supplier by sending a printed post card or a circular letter as!inghim to confirm that the delivery is on the #ay or #ill be made as per agreement$ n absence of any replyor unsatisfactory reply, the supplier may be contact through personal letter, phone, telegram and4or evenpersonal visit$

8. Recei&in( And Ins#ection O' T/e Materials-he receiving department receives the materials supplied by the vendor$ -he +uantity are verified and

tallied #ith the purchase order$ -he receipt of the materials is recorded on the specially designedreceiving slips or forms #hich also specify the name of the vendor and the purchase order number$ t alsorecords any discrepancy, damaged condition of the consignment or inferiority of the materials$ -hepurchase department is informed immediately about the receipt of the materials$ Usually a copy of thereceiving slip is sent to the purchase department$

9. Pa,"ent O' T/e In&oice$ -o provide ade+uate and proper storage and preservation to the various items$@$ -o meet the demands of the consuming departments by proper issues and account for the

consumption$B$ -o assist in verification and provide supporting information for effective purchase action$ Codi'icationt is one of the functions of stores management$ Codification is a process of representing each item by anumber, the digit of #hich indicates the group, the sub&group, the type and the dimension of the item$

each code should uni+uely represent one item t should be simple and capable of being understood by all Codification should be compact, concise, consistent and flexible enough to accommodate ne#

items$IN1ENTOR+nventory generally refers to the materials in stoc!$ t is also called the idle resource of an enterprise$nventories represent those items #hich are either stoc!ed for sale or they are in the process ofmanufacturing or they are in the form of materials, #hich are yet to be utilised$Reasons 'or ee#in( In&entories


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=$ To sta$ilise #roduction: -he demand for an item fluctuates because of the number of factors, e.g.,seasonality, production schedule etc$ -he inventories 7ra# materials and components8 should be madeavailable to the production as per the demand failing #hich results in stoc! out and the productionstoppage ta!es place for #ant of materials$

>$ To ta


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Deter"ination o' EO6 $, Ta$ulation Met/od-his method involves the follo#ing steps:=$ %elect the number of possible lot si(es to purchase$>$ 6etermine average inventory carrying cost for the lot purchased$@$ 6etermine the total ordering cost for the orders placed$B$ 6etermine the total cost for each lot si(e chosen #hich is the summation of inventory carrying cost and

ordering cost$$ %elect the ordering +uantity, #hich minimi(es the total cost$I))USTRATION: The XYZ Ltd. carries a wide assortment of items for its customers. One of its popularitems has annual demand of !!! units. Ordering cost per order is found to be "s. #$.%. The carr&ing

cost of average inventor& is $!' per &ear and the cost per unit is "e. #.!!. (etermine the optimal

economic )uantit& and ma*e &our recommendations.

-he table indicates that an order si(e of = units #ill gives the lo#est total cost among the differentalternatives$ t also sho#s that minimum total cost occurs #hen carrying cost is e+ual to ordering cost$

Deter"ination o' EO6 $, Anal,tical Met/od-he most economic point in terms of total inventory cost exists #here,

In&entor, carr,in( cost B Annual orderin( cost>>>>>>>> 2;

-otal annual ordering costs 1umber of orders per year N 3rdering cost per order64. N C=

N CN


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I))USTRATION: )n oil engine manufacturer purchases lubricants at the rate of s$ B> per piece froma vendor$ -he re+uirements of these lubricants are =E per year$ paise$

SO)UTION: iven data are:

1umber of lubricants to be purchased, 6 =E per year3rdering cost, C= s$ =G per ordernventory carrying cost, C s$ B> N e$ $> s$ E$B per year -hen,

3ptimal +uantity 723.8, .o

B>x$>

x=Ex=G>

.o E>$E or E@ lubricants 7approx8$

OTHER *UNCTIONS O* MATERIA) MANAGEMENT:Standardization:%tandardi(ation means producing maximum variety of products from the minimumvariety of materials, parts, tools and processes$Si"#li'ication:-he concept of simplification is closely related to standardi(ation$ %implification is theprocess of reducing the variety of products manufactured$ %implification is concerned #ith the reductionof product range, assemblies, parts, materials and design$1alue anal,sis is defined as an organi(ed creative approach #hich has its ob*ective, the efficientidentification of unnecessary cost&cost #hich provides neither +uality nor use nor life nor appearance norcustomer features$

6ualit, Control

6ifferent meaning could be attached to the #ord +uality under different circumstances$ -he #ord +ualitydoes not mean the +uality of manufactured product only$ t may refer to the +uality of the process 7 i.e$,men, material, and machines8 and even that of management$


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Men: the rapid gro#th in technical !no#ledge leads to development of human resource #ith differentspeciali(ation$Mac/ines and "ec/anization: in order to have +uality products #hich #ill lead to higher productivity ofany organi(ation, #e need to use advanced machines and mechani(e various operations$Modern in'or"ation "et/ods: the modern information methods help in storing and retrieving neededdata for manufacturing, mar!eting and servicing.

Moti&ation: if #e fix the responsibility of achieving +uality #ith each individual in the organi(ation #ithproper motivation techni+ues, there #ill not be any problem in producing the designed +uality products$Materials: selection of proper materials to meet the desired tolerance limit is also an importantconsideration$ .uality attributes li!e, surface finish, strength, diameter etc$, can be obtained by properselection of material

6ualit, control-he process through #hich the standards are established and met #ith standards is called control$-his process consists of observing our activity performance, comparing the performance #ith somestandard and then ta!ing action if the observed performance is significantly too different from thestandards$Ste#s in 6ualit, Control

Follo#ing are the steps in +uality control process:=$ Formulate +uality policy$>$ %et the standards or specifications on the basis of customer's preference, cost and profit$@$ %elect inspection plan and set up procedure for chec!ing$B$ 6etect deviations from set standards of specifications$$ -a!e corrective actions or necessary changes to achieve standards$G$ 6ecide on salvage method i$e$, to decide ho# the defective parts are disposed of, entire scrap or

re#or!$$ Coordination of +uality problems$E$ 6eveloping +uality consciousness both #ithin and outside the organi(ation$

Ins#ection

nspection is an important tool to achieve +uality concept$ t is necessary to assure confidence tomanufacturer and aims satisfaction to customer$ nspection is an indispensable tool of modernmanufacturing process$ t helps to control +uality, reduces manufacturing costs, eliminate scrap losses andassignable causes of defective #or!$-he inspection and test unit is responsible for appraising the +uality of incoming ra# materials andcomponents as #ell as the +uality of the manufactured product or service$ t chec!s the components atvarious stages #ith reference to certain predetermined factors and detecting and sorting out the faulty ordefective items$Pur#ose o' ins#ection=$ -o distinguish good lots from bad lots$>$ -o distinguish good pieces from bad pieces$@$ -o determine if the process is changing$

B$ -o determine if the process is approaching the specification limits$$ -o rate +uality of product$G$ -o rate accuracy of inspectors$$ -o measure the precision of the measuring instrument$E$ -o secure products&design information$O$ -o measure process capability

T,#es o' ins#ection2. *loor ins#ection


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n this system, the inspection is performed at the place of production$ t suggests the chec!ing of materialsin process at the machine or in the production time by patrolling inspectors$ -hese inspectors move frommachine to machine and from one to the other #or! centres$ nspectors have to be highly s!illed$ -hismethod of inspection minimi(e the material handling, does not disrupt the line layout of machinery and+uic!ly locate the defect and readily offers field and correction$Suita$ilit,

=$ Heavy products are produced$>$ 6ifferent #or! centers are integrated in continuous line layout

3. Centralized ins#ectionnspection is carried in a central place #ith all testing e+uipmentJ sensitive e+uipment is housed in air&conditioned area$ %amples are brought to the inspection floor for chec!ing$ Centrali(ed inspection maylocate in one or more places in the manufacturing industry$

4. *unctional ins#ection-his system only chec! for the main function, the product is expected to perform$ -hus an electricalmotor can be chec!ed for the specified speed and load characteristics$ t does not reveal the variation ofindividual parts but can assure combined satisfactory performance of all parts put together$ 9oth

manufacturers and purchasers can do this, if large number of articles are needed at regular intervals$ -hisis also called assembly inspection$5. *irst #iece or 'irst>o'' ins#ectionsFirst piece of the shift or lot is inspected$ -his is particularly used #here automatic machines areemployed$ )ny discrepancy from the operator as machine tool can be chec!ed to see that the product is#ithin in control limits$ 2xcepting for need for precautions for tool #e are chec! and disturbance inmachine set up, this yields good result if the operator is careful$8. Pilot #iece ins#ection-his is done immediately after ne# design or product is developed$ Manufacturer of product is doneeither on regular shop floor if production is not disturbed$ f production is affected to a large extent, theproduct is manufactured in a pilot plant$ -his is suitable for mass production and products involving largenumber of components such as automobiles airplanes etc$, and modification are design or manufacturingprocess is done until satisfactory performance is assured or established$9. *inal ins#ection-his is also similar to functional or assembly inspection$ -his inspection is done only after completion of#or!$ -his is #idely employed in process industries$ -his is done in con*unction #ith incoming materialinspection$

Met/ods o' Ins#ection2. 2F Ins#ection

-his type #ill involve careful inspection in detail of +uality at each strategic point or stage of manufacture#here the test is involved is non&destructive and every piece is separately inspected$t re+uires more number of inspectors and hence it is a costly method$ -here is no sampling error$ t issuitable only #hen a small number of pieces are there or a very high degree of +uality is re+uired$2xample: 5et engines, aircraft, medical and scientific e+uipment$

3. Sa"#lin( Ins#ectionn this method randomly selected samples are inspected$ %amples ta!en from different patches of productsare representatives$ f the sample proves defective, the entire concerned is to be re*ected or recovered$%ampling inspection is cheaper and +uic!er$ t re+uires less number of nspectors$-his type of inspection governs #ide currency due to the introduction of automatic machines ore+uipments #hich are less susceptible to chance variable and hence re+uire less inspection, suitable for


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inspection of products #hich have less precision importance and are less costly$ 2xample: 2lectricalbulbs, radio bulbs, #ashing machine etc$

aste Mana(e"ent-he industrial #aste and scrap consists of spoiled ra#&materials, re*ected components, defective parts,#aste from production departments etc$ involves some commercial values$ -hey should be disposed of

periodically and proper credit of the amount should be ta!en in the boo!s of accounts$Hence, #aste management places an important role in managing operations$


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Carrying cost >ED 4year of inventory value held$

a 6etermine the optimal number of units per order

b$ Find the optimal number of orders4year

c$ Find the annual total inventory cost i$e 3$CC$C

E!a"#le 3

Holding costs are @ s$4unit4year$ -he ordering cost is => s$4order and sales are relatively constant atB month$

a$


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9$ -he manager believes that /eyla places too many orders for scre#s 4year$ He believes that an ordershould be placed only t#ice4year$ f /eyla follo#s her managerSs policy, ho# much more #ould this cost

every year over the ordering policy that she developed, if only t#o orders #ere placed each yearL

E!a"#le 8

)hmet Uslu experiences an annual demand of >> units for pro +uality tennis balls at the T(mir-ennis %upply Company$ t cost )hmet @ %$ to place an order and his carrying cost is =ED$ Ho# manyorders per year should )hmet place for the ballsL

E!a"#le 9

)ye ValW!an,o#ner of Computer Aillage, needs to determine an optimal ordering policy for Porto&Procomputers,annual demand for the computers is >E units and carrying cost is >@ percent$ )ye hasestimated order costs to be BE %$ per order$ B units, ordering cost is B>%$4order, and holding cost B %$4unit4year$

a8 Ho# many should she order at one timeL

b8 Ho# many times per year #ill she replenish its inventory of this materialL

c8


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E!a"#le

)9C, a company that sells pump housings to other manufacturers, #ould li!e to reduce its inventory costby determining the optimal number of pump housings to obtain per order$ -he annual demand is = units, the ordering cost is = %$4order, and the average carrying cost per unit per year is $ %$$Calculate 23. $7i$e$the optimal number of units per order8$

E!a"#le 2

/emar %upermar!et sells about > !ilos of mil! annually$ -he mil! is purchased for B %$4!g$Holding costs are =$B %$4!g4yr$ 2ach order costs @ %$$ f the shelf life of the mil! is only days, ho#many !ilos should be ordered at a time$

E!a"#le 22

) building materials stoc!ist obtains its cement from a single supplier$ 6emand for cement is reasonablyconstant throughout the year$ /ast year the company sold > tonnes of cement$ t estimates the costsof placing an order at around > %$ each time an order is placed and charges inventory holding at >D ofpurchase cost$ -he company purchases cement at G %$ per tonne$

a8 Ho# Much cement should the company order at a timeL

b8 nstead of ordering 23., #hy not a order convenient = tonnesL

E!a"#le 23

R > pencils at the 2%$ boo!store are sold at a fairly steady rate of G per #ee!$ -he pencil cost theboo!store $> %$ each and sell for $= %$ each$ t costs the boo!store => %$ to initiate an orderand holding costs are based on an annual interet rate of >D$ 6etermine the optimal number of pencils forthe boo!store to purchase and the time bet#een placement of orders$


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Purchase price @ %$4unit

Holding cost > %$4= items4#ee!

3rder cost => %$4order

. L

E!a"#le 28

-- 9everage Co$ is a distributor of beer, #ine and soft drin!s product$ From a main #arehouse located inMagusa, -1C, -- supplies nearly = retail stores #ith beverage products$ -he beer inventory, #hichconstitutes about BD of the company's total inventory, averages approximately cases$ cases4#ee!$-he cost of holding for the -- beerinventory is >D of the value of the inventory$

71ote that definding the holding cost as a D of the value of the product is convenient, because it is easilytransferable to other products8

-- is paying @> %$4order regardless of the +uantity re+uested in the order$ %uppose -- is open dayseach #ee!, and the manufacturer of %ergio 9eer guarantees >&day delivery on any order placed$

a8 Find 2conomic 3rder .uantity$

b8 Find reorder point$

c8 Ho# fre+uently theorder #ill be placedL

d8 Find the cycle timeL

e8 Calculate minimum total inventory cost$

Documents

Production and Operations Management- Handouts