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Management
14
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Table of Contents
Production may be defined as the convertion Inputs (Men, Machines, Materials, Money and management) into an output through a
transformation process.
Output may be Goods produced or Services rendered.
Goods produced is by the manufacturing concerns and services rendered is by the service/operations unit such as Banking, Hospitals,
Hotels/Restaurants etc.
In this sense, production management is sometimes viewed as Operations Management.
Feedback from the output stage is used to adjust the changes required to the Inputs or the Transformation Process i.e. Production Control is
done to take care on the deficiency of resources if any.
Decision Management in production management determines the firm's mission and strategy and how the firm's resources can be utilized
most effectively. A production manager who understands his company's goals can maximize his contribution to developing an effective
operational strategy.
POM {Productions Operations Management) involves all the three both Strategies plan and decision:
Strategic plans and decisions: Long-range plans and decisions involving product lines, facilities and equipments, conducted at the highest
levels of an organisation.
Tactical plans and decisions: Intermediate-range plans and decisions involving resources allocation and utilization, conducted at the
middle levels of an organisation.
Operational plans and decisions: Shot-range plans and decisions involving resource allocation and :utilization, conducted at the middle
levels of an organisation.
Product Design: To lead in research and engineering competitions in all areas of out primary business, designing and producing products
and services with outstanding quality and inherent customer value.
Process Designing & Equipment Selection: To determine and design the production process and equipment than will be compatible with
the cost product and high quality.
Layout: To achieve effectiveness and efficiency in production through skills imagination, resourcefulness in plans layout and for methods.
Location & Facility Engineering: To locate design, built efficiency, economic facilities that will yield high value to the company.
Human Resource Management: To provide a good quality of word life with well designed safe rewarding jobs stable employment and
equitable pay in exchange for outstanding individual contribution from employees at all levels.
Production Control: To achieve high utilization of manufacturing facilities through effective scheduling
Quality Assurance Control: To attain the exceptional quality that is consistent with company's policy & marketing objective.
Materials Management: To cooperate with supplies and subcontracts to develop stable effective and efficiency sources of supply for those
components that are to be processed from outside sources.
Organizing work
Selecting Process / Processes
Locating Facilities
Designing Jobs
Assigning Jobs & Allocation of Duties
Achieving Higher Productivity
Controlling Quality
Planning and Scheduling Production including Inventory Control etc.
A successful Production Manager is one who is able to manage all the above mentioned functions well.
Production Management is today more than 200 years old and in its present form is the result of contribution by a number of
CONTRIBUTORS. Evolution of Production Operations Management can be studied by dividing the total period into six ERAS.
Concept of Modern Factories: During the 18th century the concept of Large Scale Production came through in which small shops
were converted into large manufacturing concerns employing mass production techniques .Notable among them being the Textiles.
Metal Fabrication and Machine Tool Industries .The major contributors were by Spinning Jenny and Carteright's Powerloom in
Textiles, James Watt's Steam Engine and Maudslay's Screw Cutting Lathe for mechanization in industries).
Division of Labour: Adam Smith (1776) advocated Division of Labour. He gave three distinct advantages i.e.
Charle's Babbage (1883) gave the fourth advantage of 'Division of Labour called Specialisation giving rise to cutting cost of production
through better managerial and organisational structures, human relations, product development and Management accountability through
profit/volume (P/V) relationship.
Concept of Inter-changeability: Along with the Division of Labour the concept of inter-changeability grew. The major contributor
being Ele Whitne (1790) whose this concept of inter-changeability revolutionised the modem manufacturing methods.
(2) THE ERA OF SCIENTIFIC MANAGEMENT:
The era of scientific management began in the United States during the early 20th century.
Contribution by F. W. Taylor:
He gave a number of contributions notable among them being:
Due to his various contributions which came largely through his own experience (he rose from a workers level to chief Engineer's level) as a
result he is often called ‘ father of scientific management.
(b) Contributions by Frank B. Gilbrethand his wife Lilian Gilbreth (a psychologist) in 1917 they developed ‘ Motion Study' classifying basic
motions in 17 divisions called ‘ Therbligs' which helped in Methods Improvement.
(c) Contribution by Henry Gantt (1913) He developed the technique of scheduling and monitoring work popularly called Gantt Chart.
Scientific Management approach emphasised the physical and Technical aspects of work whereas the ‘ How thorn Studies' (conducted in
1931 at Western Electric} suggested that the Behaviour Considerations are also vitally important to ‘ Productivity'. Major contributions being
by Elton Mayo for ‘ Howthorn Studies'(1930), Motivational theories by A. Maslow (1940) F.Herzberg (1950) and Douglas McGregos (1960).
During the world-war II and thereafter the use of Quantitative Techniques in Decision Making (popularly knownas O.R. techniques )has
further revolutionised the production (Operations) Management not only for performing the operations better but also aiding the Decision-
Making through the use of Statistical Techniques Probability and Sampling Distributions and Mathematical Modeling (PERI/CPM, Linear
Programming, Inventory Control, Simulations and Dynamic Programming etc.)
The development of COMPUTERS further aided in the development of these techniques of Management Decision Making through it speed
and capability of handling Voluminous work that can be undertaken by it.
With the advent of Computer and its use in the design of layouts (CRAFT -Computerized Relative Allocation of Facilities Techniques,
Production Design (CAD/CAM) and Manufacturing System). CIM -Computerized Integrated Manufacturing System. All these have given rise
to the Advanced Technology. Hi-Technological Developments being ROBOTS and MICROCOMPUTERS.
(6) ERA OF QUALITY REVOLUTION:
Since 1980's there has been strategic emphasis on Manufacturing --the in-built quality.
TQM System converted ‘ Q C—Q A' and this gave the customs not only customer satisfaction but also the customer delightness.
ISO 9000 series is called ‘ Quality Friendly' and ISO 14000 is called ‘ Environmental Friendly'.The major thrust has been an adoption of the
Japanese Management Technology, Quality circle and the J I T concept.
The change in Technology has brought in various improvements in Production Function and as a result of this our industrialists today are well
informed of the most modern techniques. The new name ‘ Operations Management' has broadened our fields to service sector which has
become more prominent.
Previously there was a big emphasis on integration of operations activities through emphasis on Marketing and Finance, however, today the
operations function is experiencing a renewal role as a vital strategic element.
There has been a tremendous growth of most modern techniques and today's Manager is required to have knowledge of commerce and
economics also in addition to Information Technology.
A number of training centers for workers and Management Institutes for Managers are there to impart training as per requirement of the
Manufacturing and Service Systems.
Management of the conversion process which converts land labour capital and management materials inputs into “ Desires Outputs of
Goods and Services” .
Schools of Thought
There are basically three schools of thought
(i) Classical
(ii) Behavioral
(iii) Modeling.
(a) Human Relationship: Behavioral Scientists recognise that people are complete and have multiple needs and that the subordinate-
supervisor relationship directly affect productivity.
(b) Behavioral Science: The science which explored how human behavior is affected by leadership, motivation, Communication Inter-
personnel relationships and Attitude change.
Effectiveness of production management is measured by the efficiency with which the inputs are converted into outputs i.e. Effectiveness
Outputs and Inputs. This efficiency is called Productivity of the system.
The higher the Productivity the more efficiency is the Production system.
Conceptually Productivity is defined as an attitude of mine and prevent on of all kinds of waste.
When both output and input are expressed in the same units productivity reduces to a number. Quite often it is expressed as Output per Man
shift (OMS) such as
Tonnes of coal produced per man per day for better understanding in an industry.
National Productivity is given as per capita income, in Agriculture sector output per hectare etc.
WASTIVITY:
Another way of looking as the concept of productivity is to look at the amount of wastage generated in the system. The wastage could be an
unnecessary input; a defective output of idling of the resources etc. If we could measure these wastages and reduce them then a measure of
the wastage (i.e. ‘ wastivity') becomes a tool for measuring the efficiency of the inputs.
Idling of resources ego materials waiting in the fort of inventory in the stores machine waiting to be loaded job orders waiting to be
processed patients in a hospitals waiting to be attended customers waiting in a band to be serves etc.
Production of defective goods and services (e.g. components of parts nos conforming to specifications);
Higher conversion costs resulting from inefficient methods of working poor methods being used but conditions of machines poorly
trained workmen and ineffective supervision and
Less productivity time available for production (minimizing delays)
If the efficient production function wastage of all kinds must be eliminated of at least minimised.
Checklist for above can be prepared for the parameters responsible for wastage generation and fixing standards from time to time.
REVIEW OUESTIONS :
Q.1 Define Production/operations Management and describe briefly the scope of Production/Operation Management.
Q.2 What do you understand by the term Production Management?
Q.3 What arc the three schools of thought in Production Operations Approaches? Describe the silent features of each?
Q6 Summarise the contributions of various contributors in “ Evolution of Production/Operations Management” in a tabular form.
Q.1 A fast-food restaurant has a drive-through window and during peak lunch times can handle a maximum of 80 cars per hour with one
person taking orders, assembling them, and acting as a cashier. The average sale per order is Rs 100/-. A proposal has been made to add
two additional workers and divide the tasks among them. One will take orders, the second will assemble them, and the third will act as
cashier. With this system it is estimated that 120 cars per hour can be serviced. All workers earn the minimum wage. Use productivity
arguments to recommend whether or not to change the current system.
Q.2 The following data are available for the first two quarters of the current year:
Using selling Rupees measures of input and output, compare the total profit and productivity achieved for the two quarters. How does the
productivity during the second quarter compare to the productivity during the first quarter? Use partial-factor productivity to identify what
might be done to improve productivity and profitability during the third quarter.
Q.3 In a scooter factory, 800 workmen are working for the production of scooters. The output fixed per month is 800 number of scooters. If
the workers are paid incentive bonus production proportionate to the output increase, then find the incentive earned by each employee if the
output for the month is 1000 scooters and men employed are as under:
** CASE STUDY
2.1 FACTORY:
land
labour
capital and
enterprise
The formulation of a complete plan for the creation of goods or services. The term embraces the determination of:
location
production process
equipment
physical arrangement
provisions for personnel
offices and
all functions that are necessary for completion of the goods.
The first step is largely dependent on the organisation's long term strategies such as:
technological
marketing
resource mobilization and
financial strategies
However, the choice of site (second step) is best determined by comparing the relative availability and costs of the needed resources such
as:
transport
power
water
land
labour law &
materials in alternate sites.
labour relations
climate
community support
recreational facility and
quality schools availability etc.
The layout of facilities is also a crucial problem. One of the main considerations in layout work-areas is the ease in the flow of work. The flow
of work may take place through the movement of
(b) People e.g. in a hospital where patients, nurses, doctors and others come from one
department or to another; and
(c) Information e.g. the movement of papers and people as in an administrative office.
For any type of problem for optimal location the criteria is to achieve the maximum Rate of Return (ROI) of investments over the long run.
SR = Sale Revenue
As SR depends upon the Market and not on location, Hence, ROI is directly proportional to TC/ TA.
Thus to maximise the Rate of Return, the location must be so chosen so as to minimise the
In any single plant location problem, the total cost of production of a product includes:
Land
Buildings
Equipments
Materials and
Cash
Another addition to the total as et factor is providing of the security, protection and other civil amenities such as schools, hospitals,
recreation facilities etc.
The best location is one that will enable the company to produce and distribute its products with the greatest profit.
1) Raw material:
Length of haul age of raw material from the source to region of supply.
3) Marketing:
4) Factory Services:
Adequacy of supply of power, water, fuel etc. for present and prospective plant size.
Availability of external plant services--sewerage disposal system, repair and replacement parts fire protection
Public transportation for personnel etc.
Available supply of trained management personnel
Attractions of region; cultural, climatic, etc. for professional management personnel.
5) Climatic Conditions:
Cost of construction to with stand forces of nature such as earthquakes. winds. snow, etc.
Heating or air-conditioning costs for either personnel comfort or process control.
Probability of absenteeism caused by weather;
Probabilityof work stoppages or interruption of supply of raw materials by weather:
Necessity for premium wages because of weather conditions and
Cost of maintenance
7) Community facilities
8) Community attitudes
9) Industrial relations
"When the same market areas have to be supplied from more than one manufacturing unit the problem of adding new plans is said to be a
Multiplant Location Problem."
The first step in solving the Multi plant Location Problem is solving the regional product distribution strategy into which the new unit has to be
fitted in .
If no such strategy is involved then the second step in solving Multi plant Location problem is allocation of output from each plant to various
destinations. The technique which helps in allocation of output$ from origins to destinations is called Transportation Problem.
Transportation is a special technique of finding Optimum Cost of Transportation which has been discussed in detail.
PROB. Four locations are under the consideration of a management. The fixed costs and variable costs pet unit are given against each
location in a table given below:
Find out which location is best for the following demand ranges:
(a) 4000, 6000, 8000, 10000, 112000, 14000 units per annum.
(b) For detemination of best location for 11500 units, we can detem1ine mathematically as done above, because it could be either C or D
location
OR
we can detemine best location for each production range and for 11,500 units directly from graph between Total Cost Vs Capacity.
( DO IT YOURSELF)
CASE STUDY ON PLANT LOCATION
A small scale industrial unit intends to select one of the three sites. The data based on both Tangible & Intangible factors collected by the
analyst is given below:
It involves a continuous or almost continuous physical flow of material. It makes use of Special Purpose Machines (SPMs) and produced
standard items in large quantities.
1. Standard products are manufactured, which have large demand throughout the year and production is done for stocks.
2. Standardized inputs and standardized sequence of operations standardized machines tools and equipments are used.
3. Division of labour is made mo e efficiently.
4. Material Handling is minimised.
5. Balance flow of work is ensured.
6. Small work in progress
7. Less supervision
8. Use of productivity technique being feasible, it raises. The possibility of achieving minimisation of cost of production per unit i.e.
securing all advantages of a Mass Production System.
9. Possibility of Rigid Quality Control.
10. Preventive Maintenance System (PMS) can be easily operatable.
Mass Production,
Process Production
Mass Production:
Here preferably one type of standard product or maximum 2 to 3 types of products are manufactured in large quantities and much emphasis
is not given to consumer orders. Standardization of products, processes, materials, machined and uninterrupted flows of materials are the
main characteristics of this system.
Examples:
Petrochemical Industries
Cement Industries
Steel
Sugar
Cigarette
Fertilizer Industries etc.
Process Production:
This system is used for manufacturing of those items whose demand is continuous or high. Here. single raw material can be transformed into
different kinds of products at different stages of the production process.
Examples:
Wire Drawing
Alloy Steel Manufacturing (ASP, Durgapur )
Rolled Products
Crude oil refinery -One gets kerosene, gasoline etc. at different stages of production.
Disadvantages
In this system, the goods are manufactured specifically to fulfill orders by customers rather than producing against stock. Here the flow of
materials is intermittent.
Intermittent systems are those where the production facilities are flexible enough to handle a wise variety of products and size (e.g.
Switchgear Industry).
Considerable storage between operations is required so that individual operations can be carried out independently for further utilization of
men and machines.
Job Production is production of single complete unit by one operator or a group of operators, e.g. bridge building, dam construction, ship
building etc. Here whole project is considered as one operation and work is completed on each project before passing on to the next. Each
product is a class by itself and required a distinct and separate job for production process. The system required versatile and highly skilled
labour with high capital investment.
Here, items are processed in lot. or batches and new batch is undertaken for production only when the production on all items of a batch is
complete. In fact, batch type production can be considered as an extension of Job type system.
The best example of Batch type system is of Chemical Industry, where different medicines are manufactured in batches.
Advantages
Disadvantages
Capacity may be defined as the maximum or limiting capability of a production unit to produce in a specific period. This is expressed in terms
of output per unit of time. If stated period of time is one month, the capacity is said to be the limiting capability of the producing unit in one
month, say, eg. 10000 units a month.
This capacity is the capability of producing unit under given (or specified) conditions, For eg. one shift working/ two shifts working - three
shifts working or one shift + 4 hours O.T. working - two shift + 4 hour O.T. working and so on.
Measures of Capacity
Different types of organisations used different measures of capacity. e.g. Steel Plant uses tonnes of steel produced per month. Beer Plant
uses cases of beer produced and Auto Plant uses number of Autos produced.
TYPES OF CAPACITY:
Designed Capacity: Designed capacity is the theoretical maximum capacity that a producing unit can produce under ideal conditions. This is
based on the designed parameters by R & D.
Effective Capacity: Effective capacity is Percent utilisation of the designed capacity.
Rated Capacity: Rated capacity is the actual capacity achievable under stated conditions.
Example: The Steel Melting Shop Arc Furnace is designed for a production of 50 t Capacity/heat. The average efficiency is found to be 90%
and the utilization of the furnace in a week is 168 hours, i.e. 7 days working. If the average heat time is four hours/heat, find the rated
capacity of the Steel Melting Shop.
Whenever the existing demand changes or additions of new product(s) has to be made, then re-assessment of capacity at various stages of
production, depending upon the processed details, is called for and then steps are taken care to take of the desired capacity demands.
The demand of a certain product indicated that it will increase @ 2000 Units per year uniformly for four (4) years. Two machines P and Q are
available with production capacities of 4000 and 8000 Units per year respectively. Work out investment and capacity of the unit.
The investment costs and operating costs for the next four (4) years are given below:
MACHINE ‘ P'
MACHINE ‘ Q'
PLAN I
Capacity added in increments of 4000 Units, taking outside help, if needed, during first and third years.
PLAN II
Capacity added in increments of 4000 units, taking outside help in first year.
The outside help is available @ Rs 80 per unit. Take average rate of interest @15 %
PLAN I
Capacity added in increments of 4000Units, taking outside help, if needed, during first and third years.
= (A) + (B)
= 3,48,000 + 11,25,000
= Rs 14,73,000
RESULT: Out of Plan I & Plan II; Plan II is better than Plan I.
4.1
Planning of the layout of machines and equipment has always been given priority in the operations. A successful plant layout depends to a
large extent upon the layout of physical facilities in an organisation.
A layout is the physical Configuration of work stations, Departments and equipments in an organisation for conversion process.
Thus, in short, we can say that a good plant layout helps in smooth production, reduction idle time, helps maintaining the quality of the
product and improve delivery rate of the system.
1. The layout should be able to produce the forecasted amount of finished goods or services.
2. The layout planner should take all the departments and work stations into consideration.
3. While planning the layout, the activities interconnected with each other should be closely placed.
4. Layout planner should see that there is enough space to move around and breath after allocating spaced to the machines, work
stations and the equipment.
5. The layout planner should into consider alone the possibility of future modernisation and expansion plan.
6. The production layout should also take various maintenance factors into account.
7. The layout should be diversification designed to help in the maximization of profits and reduced so as in a production costs.
8. The layout should also take various steps keeping emergency handling into consideration.
9. Finally, in a production layout, all the elements necessary for the production should be taken care of and each factor discussed
above given due weightage. As a layout designing is a long term strategic decision, involving heavy investment on the system, a
layout should be designed with utmost care. Care and perfection is also necessary for layout planning because most of the times it
might not be possible to reverse the decision once taken.
The types of layouts can be divised into three (3) major classes:
Each of these methods of layouts had certain advantage and disadvantages. The decision to choose depends upon the requirements and
conditions that must be met.
(1) Line or product layout
In the line layout, all the equipment required for one part or product is grouped together in one department in the sequence of the operations
performed, so that the part is completed there and does not have to be moved from one department to another for processing. The line is
“ balanced” , in that the output capacity of each different type of equipment (or process) is the same or as nearly so as practicable.
Ordinarily, only one product is processed by one line department. However, it is frequently possible to change the tooling on the machines
and thereby use the same sequence of machines for production of some similar part.
A line layout is not usually a straight line. In fact, a straight line usually indicated inefficient use of floor space and greater intra-departmental
handling costs. The ideal line is one in which the product of one machine gets automatically fed into the next, and so on. If each machine
must be attended by workmen, it is desirable to arrange the machines in such a way that each operator can pick up the part from the place
where it was deposited by the previous operator.
Conveyer belts, chutes and roller conveyer are used when size and shape of the machines make the direct arrangement inconvenient. In
practice movement of parts is more likely to be similar to the shape of letters like S, U, L, M, N or O rather than a straight line.
It depends upon:
1. No variety is possible;
2. No flexibility with regard to design changes;
3. Very high stoppage costs as lines are highly integrated and if one part of the line stops, the entire line is affected;
4. High maintenance cost.
5. High capital cost and capital investment;
6. Less Job satisfaction for labour;
7. High line reliability is required resulting in duplication of critical machines and
8. More coordination required between materials, production and Job shop floor manager.
In the process or functional method of layout, the department is made up of machines, equipments or process that fall into one category,
according to the functions performed. The product is fabricated by moving it from department to department according to the sequence of
operations to be performed on it. The operations performed in each department are assigned to a particular machine within the department
according to :
Possible Disadvantages:
1. Higher flow time of the product due to zig-zag flow through the system.
2. Larger number of machine setups;
3. High in-process inventory;
4. Low machine utilization;
5. More material handling and
6. Complex production planning;
Many companies employ combination method (i.e. the combination of product or line and Process or functional).
Examples:
The combination method of layout is feasible when a number of products require about the same sequence of functional operations but none
enjoys sufficient volume justify individual production line. The principle of this method lies in the arrangement of functional departments
across the building at right angles to the flow of product and in the required sequence of operations. Particular sections of each department
are assigned the different lines of products, but the sections can be adjusted as volumes change to accommodate larger or smaller orders.
An Assembly Line is the most common type of line layout in which the jobs are transported between the work stations. Each work-station
carried out one or more tasks of the work. When tasks are over as per the technological sequence, the Job is said to be completed.
The ideal time is developed when the number of machines and operations is balanced perfectly, so that each one is taking the same amount
of time and there is no idle time at anyone of the stations.
How to do it?
FIG.15.1
4. Effective Writing time in a shift of 8 hrs. = 450 minutes
5. Output/shift = 45 units.
# The next step is to combine various tasks in such a way that no work station tasks more than 10 minutes and at the same time the
precedence and succeedence relationship is maintained.
Step 2
Take C + D + F = 3 + 4 + 3 = 10 minutes
Step 3
E + H = 2 + 8 = 10
Step 4
G + I + J = 7 minutes
n = 4, c = 10, E ti = 35
We have reached an optimal solution easily as number of tasks and stations is comparatively very low. However, under practical Assembly
line Balancing, the problems we have large number of tasks up to 1000, and workstations up to 200 and complex precedence and
succeedence relationships among tasks.
To solve such complex assembly line problems, there are a number of techniques. One such technique is given by Moodie & Young which is
given briefly as follows:
(2) The preceding and succeeding relationship is shown in the diagram given below:
PROCEDURE:
A precedence matrix and succeedence matrix are constructed, say P matrix and Q matrix.
Step 2
Step 3
1. Identify those tasks which have all zeroes in their row, i.e. those tasks which have no precedence.
2. Assign the task with the largest time to work station 1 of those tasks which have all zeroes.
Assign Task ‘ A' to work station 1 (as A had duration greater than B)
Step 4
Step 5
Step 6
Repeat steps III, IV, V and then open next work station.
Step 8
NB : The constraint is that total time for each work station should be equal to or less than the cycle time.
Advantages:
1. From layout point of view, line balancing gives the sequence in which the equipments have to be laid and the number of work
stations to be provided.
2. Line Balancing optimized the product line concept of division of labour and specialization.
3. Meaningful job design and job satisfaction are related to the line balancing ---the factors which have to be given due weightage for
designing an assembly line.
In response to the changes to consumer preferences in the modem society, characterized by shorter product life cycles, the shorter cycle
means more products phasing out, and resulting in lower order quantities. In this sense, the age of mass production is gone and era of
Flexible production is being started.
The requirement for Flexible Production System dictates the specifications of the factory of the future:
A Flexible Manufacturing System (FMS) is a logical extension of CAM . An FMS consist of two or more computer-controlled machines linked
by handling devices such as robots and transport systems. Computers direct the overall sequence of operations and route the workpiece to
the appropriate machine, select and load the proper tools, and control the operations performed by the machine. More than one different
workpiece may be machined simultaneously and many different parts can be processed in random order.
1. Increased productivity
2. Shorter preparation time for net products
3. Reduction of inventory parts in the plant
4. Saving of labour cost
5. Improved product quality
6. Attracting skilled people to manufacturing, and
7. Improved operator safety.
By making the use of FMS technology it should be possible to reduce the cost of producing parts in small and medium quantities.
General Electric modernized its locomotive plant in Erie , Pennsylvania , using an FMS.
The machining time for engine-frame parts was reduced from 16 days to 16 hours; overall productivity was increased by 240 percent;
capacity was increased by 38 percent; and design flexibility was increased.
FMS provide the ability economically to manufacture small volumes of many different parts. This reduce work-in-process inventory, provides
increased capacity due to reductions in setup times, better predictability and control of operations and scheduling, reduction in material-
handling cost and greater sensitivity to market requirements. All these advantages can only help increase profitability and competitive
position.
4.9 FACTORS FOR SELECTION OF MATERIAL HANDLING SYSTEM AND MATERIAL HANDLING EQUIPMENT :
Plant Layout & Material Handling go side by side. While working out details of Plant Layout details of Material Handling for movement of men
& materials have to be worked out simultaneously. Knowing the details of materials & personnel required to be moved, we have to know the
type of equipments required for the same.
1. The amount of material to be handled from one work station to another (Load Summary).
2. To know the capacity of equipment required for handling the quantum of material in (1) we have to have the rate of handling & the
frequency.
3. The flow of materials. Normally it is kept Unidirectional.
4. Then nature of material required to be handled with respect to its shape, size, chemical, physical properties etc.
5. The dimensions such as length, width, height (normally ceiling height), column spacing, door openings & floor load capacity etc
6. The existing material handling system & its similarity for the system under consideration.
7. Proposed Extension - Expansion programmes etc.
Major classification of Material Handling can be done into the following three groups:
(1) Conveyors
(2) Trucks, Trailors, Forklifts etc.
(3) Crane and Hoists
Group I
Conveyors:
A conveyor is a device to move material from one place to another, between two fixed points, in a horizontal or vertical direction.
Conveyors are normally used to handle bulk chemicals, bulk materials, fragile materiald such ad T. V. Picture tubes. The conveyors are
normally installed where the frequency of handling is high - almost continuous. Ad they occupy a large space continuously.
Group II
As the trucks, Trailors & Fork lifts can move from one Location to another, hence the handling of materiald can be done almost in any
direction. However, a path must be marked for the travelling of these equipments for the safety of men, machined & materials. Handling of
materials by fork lift can be done in horizontal ad well ad vertical direction. They are generally used in Proceed Oriented Layout such ad Job
ship, maintenance shops, airputs, hospitals etc.
Group 3
Cranes & hoists type of handling equipment are of intermediate type. They can move material to laterally or vertically locations over a limited
radius. These are commonly used in Heavy Engineering Workshops, Construction Projects, Ports etc. for large volumes & heavy lifting.
REVIEW QUESTIONS:
Q.3 Describe briefly the Optimal Criteria for selecting a plant location
OR
Show that the Optimal Criterion or a Plant Location is minimum of total cost and total assets.
Q.4 What are the factors affecting the selection of a Regional Plant Site?
Q.6 What are the advantages of a good plant layout? State the various guidelines which help in achieving a good plant layout.
As consumer we buy different kinds of products so as to satisfy our various needs. We buy food-grains, textiles pens, books etc. in our daily
life. However, our decision to buy a product is based not only on tangible attributes but also on a variety of non-tangible and psychological
attributes such as services, brand, package, warranty, image etc.
According to ALDERSON, Product is a bundle of utilities consisting of various product features and accompanying services. The bundle of
utilities is composed of those physical and physiological attributes that the buyer receives when he buys the product and which the seller pro
ides by selling a particular combination of product features and associated services.
According to SCHWARTZ, “ a product is something a firm markets that will satisfy a personal want or fill a business or community need,
“ and includes” , all the peripheral factors that may contribute to consumer's satisfaction.”
These factors may include reputation of the manufacturer, the warranty, credit and delivery term, the brand name and the courtesy shown by
the sales and service personnel.
From these definitions it is clear that a product is something which offers not only the tangible but also the non-tangible services and
psychological attributes such as prestige Image etc. e.g.
Nirlon Synthetic Fibres and Chemicals Ltd., Bombay , offers a 3 tier after sales service called NASA 4, along with its tangible
product - conveyor belts. These services include
i. A highly qualified Technical Survey Group which studies the customer's needs in depth and suggest the most suitable
conveyor belts for the most stringent individual requirements.
ii. Then the Maintenance Consultancy Cell for the Customer's Technical Personal where the conveyor's technical experts and
engineers arrange courses and services on the maintenance and proper usage of conveyor belting.
iii. The third service is the on-site Belt Splicing and repair Services by the company's skilled supervisors.
Like wise Hindustan Level Ltd., Bombay, offers a Pear's soap, it docs not merely offer a bathing soap--> a tangible attribute -but
also 'mother's love' for a child --> a psychological attribute. These essentially made Levitt to that “ Management must think of itself
not as producing product but as providing a customer with bunch of value satisfaction. The organisation must learn to think of itself
not as producing goods or services but as buying customers” .
Consumer product are those products which are destined for use by ultimate customers or households and in such form that they can be
used without further commercial processing. Whereas industrial product are those which are destined to be used by buyers (customers) as
inputs in producing other products and for further commercial processing.
In other words, consumer products are meant for personal and non-business use whereas industrial products are meant for non-personal
and business use. e.g. Soap, Toothpaste, Wristwatch, Cigarette etc. are meant for personal use and hence are called CONSUMER GOODS.
While Machine Tools, Computers, Trucks, Machinery etc. are meant for Non-personal and business use of providing other products and
hence are called Industrial Products.
However, no product may be exclusively classified as Customer or Industrial Product. It depends upon the specific purchase situation. e.g.
COCONUT OIL when purchased by a housewife is a consumer product but when purchased by a hair-oil or soap manufacturer who buys it
as an input, process it and then sells it to ultimate consumers as a different product is called an Industrial Product.
Durable Products are those tangible products which normally survive many uses like e.g. Machinery, Cars, Scooters, Furniture, Cooler,
Refrigerator etc.
Whereas Non-Durable products are those tangible products which normally survive a few uses or consumed in one use itself, e.g. Lubricating
oils, Soap, toffees and cornflakes etc.
Services are those intangible products like activities, benefits or satisfaction which are offered for sale e.g. hairdressing, banking. insurance
etc.
a. Convenience Products: Convenience Products are those consumer products which a customer usually purchases
frequently, immediately and within the minimum of effort e.g. soap, toothpaste, bread, chewingum, biscuits etc.
b. Shopping Products: Shopping Products are those consumer products which the customer, in the process of selection and
purchase characteristically compares on such bars as suitability, quality, price and style etc. e.g. refrigerator, fans, cooler,
mopeds, suiting etc.
c. Speciality Products: Speciality products are those consumer products with unique characteristics and/or brand identification
for which a significant group of people (buyers) are habitual willing to make a special purchasing effort. e.g. Ice-cream,
special eating items, fancy goods etc.
Design of a product may be defined as determining its shape, specifications and pattern of the product. According to the feature or shape,
configuration, pattern or ornament, applied to any article by any industrial process, whether manual, mechanical or chemical, which in the
furnished article appeal to and are judged solely by the eye, but does not include any mode or principle of construction or anything which is a
mere mechanical device and does not include any trade mark".
Types of Design
a. Functional
b. Aesthetic
c. Production
d. Packaging
Developing an idea: Making a rough sketch of the proposed product which gives an idea of its overall shape and the parts
necessary to accomplish the task.
Drafting Specifications: The next step is to draft the correct dimensions of the product.
Experimental Model: Then experimental models are proposed and tasted thoroughly starting actual production.
Now, it is not sufficient that the functional design of the product is good and economical, but it must appeal to the customers' eyes and induce
them to buy the product. Thus its better if before commencing “ Commercial Product” , the feedback from a few potential customers is
obtained.
The functional design has to be translated to Production Design without sacrificing the functional efficiency, the product design must conform
to the fact that the production can be carried out in an economic manner and also the design of gig-sand fixtures needed in production should
be done simultaneously.
(d) Packaging Design:
The design of labels and packaging must be aesthetical as well as give complete information (minimum required information in the
Mandatory one) and must be strong and sturdy so that the product does not get damaged during transit or handling. The aesthetic look of the
packaging acts as a silent salesman particularly for the consumer products sold through bog departmental stores or superbazars where there
is no salesman on the spot.
Moreover, especially for EXPORT Products, the strength and toughness of the Packaging must be good enough to withstand long journey
and rough handling at various stages. It is said that if our Packaging and Packing for Export Products are accepted by Importers, we can
have increase in our Exports gains by 33%.
It means devising a product to meet the requirement of the market or the customer. It involves two main aspects:
The steps of the product development procedure can be best explained by a diagram (fig.4.3of your text at page 83)
( Fig. 4.3)
Needs of Product Development: The need of product development is to get its objectives. There are two main aspects:
Monopolisation of market;
Making possible its manufacture on quality basis;
Pursuasion of the person to only branded product;
Reduction in the cost of production by creating demand and producing on large scale basis;
Supply the goods to the customer at a lower price due to reduction in cost of production.
A well organised and coordinated plan of production of development, if it successfully implemented will benefit the producers, consumers and
whole of the society.
The question or factors are:
1. Does the product satisfy the customers' preference; size; color; shape etc.?
2. Has the product been designed or economy in the factory production to ensure a reasonable price?
3. What is the possibility of product protection?
4. What will be the probable effect of product development on their products line?
5. What are the manufacturing and distribution facilities available for the product.
6. Is the stock and display of the product convenient?
7. To what extent will the by-product or waste be utilized?
8. Can the product be sold/distributed through existing distributing channels?
9. Is the product within the buy in capacity of the consumer?
10. Will the product afford stable supply?
11. Is the product convenient to handle, carry out of stores to use?
12. Whether the product is durable and can prevent the spoilage during the course of its transfer to the customer?
13. Is the quantity of the product a pealing to the people which may help increasing the demand continuously?
14. What relationships stand between development research and manufacturing costs and return expected due to development plan
which is going to be embarked upon?
15. Is the product pleasing to the eyes?
It means fixation of Standard dimensions for the product with a view to having large production of only limited number of varieties.
The object is to measure; to identify; to compare; to describe product process; activities and performance in an organization. It helps in
controlling function of management.
Advantages:
Disadvantages
(2) SIMPLIFICATION
“ It refers to the elimination of superfluous varieties; sizes; dimensions etc." -W.R.SPRIEGEL and R.H. LAUSBURG.
Advantages:
(A) To Producer:
(B) To Consumer:
Disadvantages:
(3) AUTOMATION
It means replacment of manual and human workby machines which are capable of doing physical and mental work.
Stages:
Advantages:
i. Reduction in production costs due to reduce in direct labour cost. variable cost, wastages.
ii. Improved quality because possibility of human errors does not exist.
iii. Higher standard of living due to improved quality and lower cost/unit.
iv. Better working condition tor workers.
v. Benefit to firm-higher profit and goodwill.
Disadvantages:
i. Displacement of personnel.
ii. Involvement of high cost -initial cost; replacement cost; maintenance cost.
iii. Increased working cost -hish fixed cost and Break even point.
iv. Non-stop work.
v. High skilled operations.
vi. Difficulties in designing; procuring and building processes.
Feasibility:
The demand for a product generally tends to follow a predictable pattern called the Product Life Cycle (PLC). Product Life Cycle has been
defined as “ an attempt to recognise different distinct stages in the sales history of the product;” and “ a generalised model of sales and
profit trends for a product class or category over a period of time.”
The various stages through which a product passes are shown in the graph given below:
Fig. 5.6
Introduction
Growth
Maturity
Saturation
Decline
Brief description:
The ‘ INTRODUCTION ' is the first stage which begins with the launching of a new product. The product entry into the market requires a
large investment which gradually comes down as sales price up.
The sales at this stage are fairly low and the competitors arc already there in the field.
The next stage is ‘ GROWTH ' stage. Both sales and profit begin to rise (as shown in the graph) At the end of this stage, the arrangement of
distribution is likely to get completed.
The third stage is called ‘ MATURITY ' stage. During this stage the manufacturers introduce new models or adopt new techniques for
production of product with a view to retaining their position in the market. This stage is marked by stiff competition. Though the number of
buyers continues to increase but the rate of growth is quite low.
The fourth stage is called ‘ SATURATION ' stage. This stage is marked by a point of stagnation. The products sale goes up sluggishly but
the profit decline.
The last stage is ‘ DECLINE (DECAY) '. The sales decline and the profit reduce down as the new competitors appear in the market with
newer and better products and the customers start using them. It is here, the story of a product ends.
REVIEW QUESTIONS :-
Q.1 What do understand by product Development? Discuss its needs and explain the factors which would be taken into consideration while
developing a new product.
(1) Standardization
(2) Simplication
(3) Automation.
Q.3 What do you understand by PLC (Product Life Cycle)? Explain various issues involved.
Q.4 (a) Define the Meaning and role of Product.
MATERIAL MANAGEMENT is defined as the integrated function of Purchasing and allied activities so as to achieve the maximum
coordination and optimum expenditure in the area of MATERIALS.
MATERIAL Planning
Purchasing
Receiving
Stores
Inventory Control
Scrap and surplus disposal
Keeping above functions in mind, MM is the function responsible for the coordination of planning, sourcing, purchasing, moving, stocking and
controlling MATERIAL in a optimum manner so as to provide a pre-decided service to the organisation at a minimum cost.
Based on the Sales forecast and Production Plans, the MATERIAL planning and control is done:
This involves estimation of individual requirements of parts, preparing MATERIAL budgets, forecasts the levels of inventories, scheduling the
orders a d monitoring the performance in relation to production and sales.
Purchasing
This includes:
This involves:
Stores are also responsible for physical handling and verification of stocks and reconciling for the book figures. Also stocks are responsible
for -classification, codification, ABC Analysis, fixing EOQs, setting safety stock levels, lead time analysis and reporting i.e. all aspects of
inventory control. Also functions of storekeeping such as Perceiving, Storing, issuing as well as MATERIAL handling within the stores.
The modern concepts of Material Management are the keys to the cost reduction and profitability.
Supply management is a process responsible for the development and management of a firm's total supply system -both the internal and the
external components. At an operational level, it includes and expands the activities of the purchasing function and the procurement process.
Its major focus; however is strategic. This is reflected in the activities added to the scope of its responsibilities all of which have two
characteristics:-
1. They deal with activities that have great potential for impacting the success of the firm.
2. They tend to be interdisciplinary in nature and integrate supply actions with those of other key players in the firm :-
1. Early purchasing involvement (EPI) and early supplier involvement (ESI) in product design and subsequent specification
development for important items, typically through the use of cross-functional teams.
2. Conduct of all purchasing function and procurement process activities.
3. Heavy use of cross -functional teams in supplier qualification and selection.
4. Heavy use of purchasing partnering arrangements and strategic alliances with supplier -to develop close and mutually beneficial
linkage with key suppliers in the value chain and to control quality and costs.
5. Continuous identification of treats and opportunities in a firm's supply environment.
6. Development of strategic, long- term acquisition plans for all major materials.
7. The monitoring of continuous improvement in the supply chains.
8. Active participation in the corporate strategic planning process.
Logistic management is managing the things keeping in mind all the scenarios and thinking logistically regarding each and every step which
is involved.
The practical problems should be highlighted first and the solutions should be given to them. Also the effect of one process over the other
and their causes and effects should be studied. e.g. in case of processing through transportation: all the routes should be studied well from
where the transport will pass. The mode of transportation should be decided keeping in mind the most cost and time effective manner. For
taking these kinds of decisions manager should be aware of all the different alternatives which could be used and then take out the most cost
effective decision.
The importance of materials management lies in its capacity to reduce the material cost. It has scope and the material manager can devise
ways and means to administer saving in material cost. To meet this aspect, the management is functionally divided into three broad
segments of management. These are:-
1. Arranging for finance: Making provisions for the operation of the enterprise for which the management has to make all efforts to
arrange for adequate finance so that the organisation may run smoothly without any interruption.
2. Assembly, acquisition, storage land production of material : It is the function of actual operation of the enterprise. For an efficient
and purposeful operation of the enterprise materials are to be assembled, acquired, stored and produced so that the organisation
may move ahead uninterrupted with speed and goodwill.
3. Distribution: The organisation operates for the ultimate consumer. It is the basic function of any management to arrange the
distribution so as to get the goods and services reach the ultimate consumer .Material management integrates and coordinates the
functions of management to ensure success of an enterprise. Every manufacturing concern is engaged in budgeting, purchasing
and procuring, receiving, production scheduling, producing, maintaining, controlling the inventory, controlling the quality,
standardising and also storing and warehousing, distributing and transporting. Materials management is required to plan, organise,
staff, direct, control and coordinate its own efforts in the light of the predetermined objectives of the entire organisation.
1. Better Accountability
2. Better coordination
3. Better Performance
4. Adaptability to EDP
5. Miscellaneous Advantages
Miscellaneous Advantages:
Under a central MM, a team spirit is inculcated. This results in better morale and cooperation. The opportunity for growth and development
arc better and an individual is not confined to one function alone but gets exposed to broader aspects of MATERIAL function.
Right Quality
Right Quantity
Right Price
Right Sources
at Right Time (Timed supply)
Integrated Approach
All Departments must work for the one corporate goal --> growth of the company.
a true, correct and timely exchange of information between the various departments will lead to integrated approach and aimed
inter-departmental conflicts.
The user Department's responsibility is to requisite right Quality/Specifications of the MATERIALS needed by it is not the
final/ultimate authority to decide which MATERIAL is adequate or not.
Inventory is the stock of items or resources required in an organisation for running production smoothly. Inventory is necessary because of
the following reasons:
There are two basic questions required to be answered in any Inventory Control System. They are
1. When to Order?
2. How much to Order?
Major Inventory related costs can be classified into the following four categories;
Thus cost is measured in terms of Per unit/per year or as a % of the inventory value.
Every time an order is placed for replenishment, certain costs are involved.
The ordering cost involves paper work expenses, follow-up cost, cost of transporting the MATERIAL and its receipt and inspection every time
the MATERIAL is procured. The average ordering cost is Rs.100 in India .
This cost Ku, is the cost incurred when an item is out of stock. It includes the cost of lost production during the period of stock out and the
extra cost per unit, which might have to be paid for an Emergency Purchase.
This cost Ko, is the inventory carrying cost (which is calculated per year) for a specific period of time.
Based on above costs several scientific inventory models have been developed.
X Cost of Ordering
Depending on quantity to be ordered for purchase, the inventory carrying cost increases with increase in purchase quantity whereas the
ordering cost decreases as the number of orders to be placed decreases. Thus Ordering costs and inventory carrying costs oppose each
other. This indicates that there exists a point at which the total inventory carrying cost is Minimum.
6 SOLVED PROBLEMS ON INVENTORY CONTROL :
PROB (I) for an item costing Rs 50 per unit, there is a constant demand of 15,000 units per annum. The estimated cost of placing an order is
Rs 150 and the inventory carrying cost is 24 %. Find the Economic Order Quantity (E O Q).
PROB 1(b): For the above given data, the supplier offers 5% discount if the order quantity is made double of the E O Q. Should he accept the
discount offer or not?
The demand during lead time is Poisson distribution. Find the number of stock outs per year.
=60/15=4
=0.12
Q. Find E O Q and how often the Production run should be made for the following data:
Q. A contractor has to supply 10,000 bearings per day to an authorized manufacturer. He finds that, when he starts a production run, he can
produce 25,000 bearings per day. The cost of holding a bearing per day is @ Rs 0.0020 per bearing per day and the set up cost of a
production run is @ Rs 720.
TRY YOURSELF :
Q. A manufacturer receives an order for 6890 items to be delivered over a period of one year, as follows:
and so on.
The cost of carrying inventory is Rs 2.60 per item per year and the cost of a set up is Rs 450 per production run.
ANSWERS:
i. Rs 1200
ii. Rs 8000
iii. Rs 9000
iv. Rs 27000
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
MATERIALS MANAGEMENT is an interactive MATERIALS requirement planning and control system. The object of the system is to make it
easier to deal with the complexities of operating a manufacturing company by taking into account various aspects of information flow and
MANAGEMENT. It is primarily designed for manufacturers who build standard product to stock in discrete manufacturing steps (Fabricators
and Assemblers). These companies have a significant investment in inventory, and the system can help them balance their inventory levels
with customer demands for timely shipments.
MATERIALs MANAGEMENT System consist of ten major modules:
This is a MANAGEMENT planning and production scheduling tool. It is used by the master scheduler to generate a production
schedule for the plant's marketable products. Input to the module includes current customer orders, forecast customer orders, the
current production schedule, and the current level of product inventory. The output of the MPS calculations is called the master
production schedule. This schedule contains suggested manufacturing orders including quantities and starting dates. The schedule
is then input to the MATERIALs requirement planning (MRP) module the plan to manufacture and purchase of the required
component parts.
2. Rough-cut resource planning (RRP):
This is a MANAGEMENT tool used by a master scheduler to help produce a realistic master schedule by comparing the resources
needed to implement the master schedule with the available critical resources. The example of critical resources are labour hours,
floor space, investment in work- in-process inventory, and MATERIALS supply. The (RRP) reports highlight the capacity constraints
and help the user resolve competing demands for critical resources.
3. MATERIALS requirements planning (MRP):
MRP simulates the complex now of MATERIALS required to manufacture products and generates a MATERIAL plan. MRP planning
starts with up-to-date information about current inventory levels and the planned production requirement. Using part and bill-of-
MATERIAL information the MATERIAL requirements for each part are calculated. The plan starts with the highest - level assemblies
and proceeds through the lowest-level parts.
4. Parts and bills of MATERIAL:
This module provides maintenance f engineering, accounting, and planning information about each part and product, and
information on how the parts inter-relate to one another to form the product structure (bill-of- MATERIAL).
5. Routings and work centers:
The bill-of-MATERIAL defines the parts and subassemblies that go into a product but does not document how the various
components are assembled. The routing and work centers module maintains information that describes the locations where the
products are made (work centers) and the proper sequence of manufacturing steps (routings). This information is used to generate
cost information the standard product cost module and to help develop detailed production schedules.
6. Standard product cost (SPC):
SPC provides manufacturers with the capability of accurately calculating the standard cost associated with manufacture of each
product. The standard cost of a product is determined by accumulating all relevant MATERIAL, labour and overhead costs for the
components of the product as well as the costs associated with the construction of e finished product. These standards can be used
to determine product pricing and profitability.
7. MATERIAL issues and receipts:
This module helps control stock room inventory by maintaining timely and accurate records of all actions that affect Inventory
balances. The data includes receipts of work orders and purchase orders. MATERIAL issues from stock to a particular work order,
filling of a back order, or an unplanned issue.
The inventory balance MANAGEMENT module maintains information about inventory balances and warehouse locations where the
inventory is stored.
A work order is an internal factory organisation to build a specified quantity of a sub assembly by a specified date. All work orders
require the issue of on-hand inventory for their completion. Prior reservation of on-hand inventory is the best method of preventing
shortages at the time of issue. The actual issuing of parts and work orders, and the actual receipt of finished product is
accomplished using the MATERIAL issues and receipts module.
A purchase order represents a scheduled receipt for purchase items. Entering a purchase order requires the entry of more
information than that required on a work order for example, Vendor information, Shipping information, and price information.
All the above modules can be diagrammatically shown as below
REVIEW QUESTIONS :-
(b) State the basic two questions involved in any Inventory Control System.
d -Demand Rate
MATERIAL MANAGEMENT is defined as the integrated function of Purchasing and allied activities so as to achieve the maximum
coordination and optimum expenditure in the area of MATERIALS.
MATERIAL Planning
Purchasing
Receiving
Stores
Inventory Control
Scrap and surplus disposal
Keeping above functions in mind, MM is the function responsible for the coordination of planning, sourcing, purchasing, moving, stocking and
controlling MATERIAL in a optimum manner so as to provide a pre-decided service to the organisation at a minimum cost.
Based on the Sales forecast and Production Plans, the MATERIAL planning and control is done:
This involves estimation of individual requirements of parts, preparing MATERIAL budgets, forecasts the levels of inventories, scheduling the
orders a d monitoring the performance in relation to production and sales.
Purchasing
This includes:
This involves:
Stores are also responsible for physical handling and verification of stocks and reconciling for the book figures. Also stocks are responsible
for -classification, codification, ABC Analysis, fixing EOQs, setting safety stock levels, lead time analysis and reporting i.e. all aspects of
inventory control. Also functions of storekeeping such as Perceiving, Storing, issuing as well as MATERIAL handling within the stores.
The modern concepts of Material Management are the keys to the cost reduction and profitability.
Supply management is a process responsible for the development and management of a firm's total supply system -both the internal and the
external components. At an operational level, it includes and expands the activities of the purchasing function and the procurement process.
Its major focus; however is strategic. This is reflected in the activities added to the scope of its responsibilities all of which have two
characteristics:-
3. They deal with activities that have great potential for impacting the success of the firm.
4. They tend to be interdisciplinary in nature and integrate supply actions with those of other key players in the firm :-
9. Early purchasing involvement (EPI) and early supplier involvement (ESI) in product design and subsequent specification
development for important items, typically through the use of cross-functional teams.
10. Conduct of all purchasing function and procurement process activities.
11. Heavy use of cross -functional teams in supplier qualification and selection.
12. Heavy use of purchasing partnering arrangements and strategic alliances with supplier -to develop close and mutually beneficial
linkage with key suppliers in the value chain and to control quality and costs.
13. Continuous identification of treats and opportunities in a firm's supply environment.
14. Development of strategic, long- term acquisition plans for all major materials.
15. The monitoring of continuous improvement in the supply chains.
16. Active participation in the corporate strategic planning process.
Logistic management is managing the things keeping in mind all the scenarios and thinking logistically regarding each and every step which
is involved.
The practical problems should be highlighted first and the solutions should be given to them. Also the effect of one process over the other
and their causes and effects should be studied. e.g. in case of processing through transportation: all the routes should be studied well from
where the transport will pass. The mode of transportation should be decided keeping in mind the most cost and time effective manner. For
taking these kinds of decisions manager should be aware of all the different alternatives which could be used and then take out the most cost
effective decision.
The importance of materials management lies in its capacity to reduce the material cost. It has scope and the material manager can devise
ways and means to administer saving in material cost. To meet this aspect, the management is functionally divided into three broad
segments of management. These are:-
4. Arranging for finance: Making provisions for the operation of the enterprise for which the management has to make all efforts to
arrange for adequate finance so that the organisation may run smoothly without any interruption.
5. Assembly, acquisition, storage land production of material : It is the function of actual operation of the enterprise. For an efficient
and purposeful operation of the enterprise materials are to be assembled, acquired, stored and produced so that the organisation
may move ahead uninterrupted with speed and goodwill.
6. Distribution: The organisation operates for the ultimate consumer. It is the basic function of any management to arrange the
distribution so as to get the goods and services reach the ultimate consumer .Material management integrates and coordinates the
functions of management to ensure success of an enterprise. Every manufacturing concern is engaged in budgeting, purchasing
and procuring, receiving, production scheduling, producing, maintaining, controlling the inventory, controlling the quality,
standardising and also storing and warehousing, distributing and transporting. Materials management is required to plan, organise,
staff, direct, control and coordinate its own efforts in the light of the predetermined objectives of the entire organisation.
6. Better Accountability
7. Better coordination
8. Better Performance
9. Adaptability to EDP
10. Miscellaneous Advantages
Miscellaneous Advantages:
Under a central MM, a team spirit is inculcated. This results in better morale and cooperation. The opportunity for growth and development
arc better and an individual is not confined to one function alone but gets exposed to broader aspects of MATERIAL function.
Right Quality
Right Quantity
Right Price
Right Sources
at Right Time (Timed supply)
Integrated Approach
All Departments must work for the one corporate goal --> growth of the company.
a true, correct and timely exchange of information between the various departments will lead to integrated approach and aimed
inter-departmental conflicts.
The user Department's responsibility is to requisite right Quality/Specifications of the MATERIALS needed by it is not the
final/ultimate authority to decide which MATERIAL is adequate or not.
Inventory is the stock of items or resources required in an organisation for running production smoothly. Inventory is necessary because of
the following reasons:
There are two basic questions required to be answered in any Inventory Control System. They are
3. When to Order?
4. How much to Order?
Major Inventory related costs can be classified into the following four categories;
vi. Blocking working capital- such as Interest on Capital and Depreciation etc.
vii. Occupying Space, thereby incurring Warehouse rent and cost of facilities like bins, racks etc.
viii. Increasing risks of spoilage, obsolescence, theft, leakage etc.
ix. Salary of stores staff etc.
x. Insurance premium.
Thus cost is measured in terms of Per unit/per year or as a % of the inventory value.
Every time an order is placed for replenishment, certain costs are involved.
The ordering cost involves paper work expenses, follow-up cost, cost of transporting the MATERIAL and its receipt and inspection every time
the MATERIAL is procured. The average ordering cost is Rs.100 in India .
This cost Ku, is the cost incurred when an item is out of stock. It includes the cost of lost production during the period of stock out and the
extra cost per unit, which might have to be paid for an Emergency Purchase.
This cost Ko, is the inventory carrying cost (which is calculated per year) for a specific period of time.
Based on above costs several scientific inventory models have been developed.
X Cost of Ordering
Depending on quantity to be ordered for purchase, the inventory carrying cost increases with increase in purchase quantity whereas the
ordering cost decreases as the number of orders to be placed decreases. Thus Ordering costs and inventory carrying costs oppose each
other. This indicates that there exists a point at which the total inventory carrying cost is Minimum.
6 SOLVED PROBLEMS ON INVENTORY CONTROL :
PROB (I) for an item costing Rs 50 per unit, there is a constant demand of 15,000 units per annum. The estimated cost of placing an order is
Rs 150 and the inventory carrying cost is 24 %. Find the Economic Order Quantity (E O Q).
PROB 1(b): For the above given data, the supplier offers 5% discount if the order quantity is made double of the E O Q. Should he accept the
discount offer or not?
The demand during lead time is Poisson distribution. Find the number of stock outs per year.
=60/15=4
=0.12
Q. Find E O Q and how often the Production run should be made for the following data:
Q. A contractor has to supply 10,000 bearings per day to an authorized manufacturer. He finds that, when he starts a production run, he can
produce 25,000 bearings per day. The cost of holding a bearing per day is @ Rs 0.0020 per bearing per day and the set up cost of a
production run is @ Rs 720.
TRY YOURSELF :
Q. A manufacturer receives an order for 6890 items to be delivered over a period of one year, as follows:
and so on.
The cost of carrying inventory is Rs 2.60 per item per year and the cost of a set up is Rs 450 per production run.
ANSWERS:
v. Rs 1200
vi. Rs 8000
vii. Rs 9000
viii. Rs 27000
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
MATERIALS MANAGEMENT is an interactive MATERIALS requirement planning and control system. The object of the system is to make it
easier to deal with the complexities of operating a manufacturing company by taking into account various aspects of information flow and
MANAGEMENT. It is primarily designed for manufacturers who build standard product to stock in discrete manufacturing steps (Fabricators
and Assemblers). These companies have a significant investment in inventory, and the system can help them balance their inventory levels
with customer demands for timely shipments.
MATERIALs MANAGEMENT System consist of ten major modules:
This is a MANAGEMENT planning and production scheduling tool. It is used by the master scheduler to generate a production
schedule for the plant's marketable products. Input to the module includes current customer orders, forecast customer orders, the
current production schedule, and the current level of product inventory. The output of the MPS calculations is called the master
production schedule. This schedule contains suggested manufacturing orders including quantities and starting dates. The schedule
is then input to the MATERIALs requirement planning (MRP) module the plan to manufacture and purchase of the required
component parts.
12. Rough-cut resource planning (RRP):
This is a MANAGEMENT tool used by a master scheduler to help produce a realistic master schedule by comparing the resources
needed to implement the master schedule with the available critical resources. The example of critical resources are labour hours,
floor space, investment in work- in-process inventory, and MATERIALS supply. The (RRP) reports highlight the capacity constraints
and help the user resolve competing demands for critical resources.
13. MATERIALS requirements planning (MRP):
MRP simulates the complex now of MATERIALS required to manufacture products and generates a MATERIAL plan. MRP planning
starts with up-to-date information about current inventory levels and the planned production requirement. Using part and bill-of-
MATERIAL information the MATERIAL requirements for each part are calculated. The plan starts with the highest - level assemblies
and proceeds through the lowest-level parts.
14. Parts and bills of MATERIAL:
This module provides maintenance f engineering, accounting, and planning information about each part and product, and
information on how the parts inter-relate to one another to form the product structure (bill-of- MATERIAL).
15. Routings and work centers:
The bill-of-MATERIAL defines the parts and subassemblies that go into a product but does not document how the various
components are assembled. The routing and work centers module maintains information that describes the locations where the
products are made (work centers) and the proper sequence of manufacturing steps (routings). This information is used to generate
cost information the standard product cost module and to help develop detailed production schedules.
16. Standard product cost (SPC):
SPC provides manufacturers with the capability of accurately calculating the standard cost associated with manufacture of each
product. The standard cost of a product is determined by accumulating all relevant MATERIAL, labour and overhead costs for the
components of the product as well as the costs associated with the construction of e finished product. These standards can be used
to determine product pricing and profitability.
17. MATERIAL issues and receipts:
This module helps control stock room inventory by maintaining timely and accurate records of all actions that affect Inventory
balances. The data includes receipts of work orders and purchase orders. MATERIAL issues from stock to a particular work order,
filling of a back order, or an unplanned issue.
The inventory balance MANAGEMENT module maintains information about inventory balances and warehouse locations where the
inventory is stored.
A work order is an internal factory organisation to build a specified quantity of a sub assembly by a specified date. All work orders
require the issue of on-hand inventory for their completion. Prior reservation of on-hand inventory is the best method of preventing
shortages at the time of issue. The actual issuing of parts and work orders, and the actual receipt of finished product is
accomplished using the MATERIAL issues and receipts module.
A purchase order represents a scheduled receipt for purchase items. Entering a purchase order requires the entry of more
information than that required on a work order for example, Vendor information, Shipping information, and price information.
All the above modules can be diagrammatically shown as below
REVIEW QUESTIONS :-
(b) State the basic two questions involved in any Inventory Control System.
d -Demand Rate
Industrial Engineering field has continued to expand since the end of the 11th century when the development of scientific management
concept started: Originally concerned mainly with Time Study, Method Improvement, Motion Study, Design and Administration of Payment
System, today Industrial Engineering activities have progressed in many ways: Development of new statistical and management tools,
electronic computers and increased application of industrial engineering to areas outside the engineering activities together with the changes
that have taken place in size of organisation and production technology has completely modified the past concepts: Mathematical and
statistical programming, inventory models, computer applications, simulation, forecasting, system designs, PERT and applications of various
other new techniques are now becoming routine area of working of Industrial Engineers: Today Industrial Engineering is concerned with the
design, improvement and installation of integrated system of men, materials and equipment: It draws upon the specialised knowledge and
skill in the mathematical, Physical and Social Science, together with the principles and methods of Engineering Analysis and Design to
specify, predict and evaluate the results to be obtained from such systems: Work Study is considered as synonymous to Industrial
Engineering.
Industrial engineering started in India about the year 1136 when a consulting firm named Eastern Bedaux was established as a branch of
Bedaux International, USA : In the early days the industrial engineering job was generally entrusted to consulting firms and its application
was limited mainly to manufacturing spheres: Since then the functional applications have been largely diversified and expanded covering
industries, Govt: organisations, Railways, Airlines, Shipping, Defence organisations and it is now, in fact, difficult to identify any major activity
to which Industrial Engineering is not applied to some degree.
The concept of productivity is of fundamental importance in understanding the objective functions of Industrial Engineering: It must be
understood that productivity is not the same as production: To be able to produce something or to provide any service, some resources in the
form of men, materials, machinery, energy, land and capital are always necessary: Productivity is the relationship between the output, which
is the products and services created, and the input that is the resources of power, men ,equipment, materials etc: utilised for the same
output: The cumulative productivity for all sectors of economy -Agriculture, Industry, Transport. Communications, Administration -constitutes
the national productivity:
Production can be increased without the consideration of the cost» whereas, for increasing productivity the production is no doubt required to
be maximised but at the same time the cost aspect optimisation of production has to take place at minimum cost:
8.2 WORK MEASUREMENT: It is the application of techniques designed to establish the work content of a specified task, by determining the
time required for carrying it out at a defined standard of performance by a qualified worker:
Stated in simple words “ Work Measurement” is a technique to find out the time required by a normal worker to do a job at a normal
efficiency".
Others being: Production study, Analytical Estimating & Predetermined Motion Time Standard (PMTS)
ACTIVITY SAMPLING:
This consists of a series of instantaneous random observations of defined activities and delays: The major advantage f this technique is that
it can be applied simultaneously to a number of equipments: The percentage of observations s recorded for a particular activity or delay is a
measure 0 the percentage of time during which that activity or delay occurs.
TIME STUDY:
Time Study is a technique for determining as accurately as possible, from a limited number of observations the time necessary to carry out a
given activity at defined standard of performance.
Slide rule and Measuring instruments for distances and speed etc.
Stop Watch time study is the basic technique for determining accurate time standards: They are economical for repetive types of work but
can be used for long cycles & non- repetitive work also: Continuous Method or snap back method of stop watch can be employed for time
measurement.
In continuous timing: The stop watch is started at the beginning of the cycle and stopped at the end of the cycle, observing the readings of
stop watch at the start of each new element: The time of individual element can be found by subtracting two successive elements.
The basic steps taken in carrying out time study are as under:
Record - All the relevant data, regarding the job, method of work (breaking the job in identifiable elements, Layout working conditions etc.
Measure - each element in terms of time over a sufficient number of the cycles of the activity to ensure a representative element time.
Examine -The recorded data &the element times critically to ensure that unproductive or random elements are separated out from productive
elements.
RATING
The operator's effective speed of work relative to the observer's concept of 'normal' pace or speed is called RATING and it is denoted by a
numerical value.
Normal Rating corresponds to the average rate at which qualified workers will naturally work at a job provided they know and adhere to the
specified methods and work under capable supervision but without the stimulus of any financial incentive.
Rating Norm:
The normal pace of a person is said to be "100" when he walks at a rate of 3 Miles (approx: 5 km.) per hour.
Or
When a person deals a pack of 52 cards in 0.5 minute, at the four corners of a square of one foot side: Left hand holds the pack and helps to
pick up one card at a time and the right hand deals.
Variations on actual times of a specific element may be due to certain factors beyond or within the control of the workers.
1. Variations in the quality of materials used within the prescribed tolerance limits.
2. Changes in the operating efficiency of the tools and equipment within their usual life.
3. Minor changes in the method or conditions of operating performance of certain of the elements.
4. Changes in the surrounding conditions of light, temperature, humidity etc.
Factors within the control of the worker:
If a worker works less effectively than the idea of the 'normal' as in the mind of the work study man, he will get a factor less than 100 say 85
or so: If he is adjudged to be working more effectively, he gets a rating factor greater than 100 say 115 or so. These factors are usually
rounded off to nearest multiple of 5. For example rating factor of 83 is rounded of to 85: The index used to express the assessment should be
such that for repetitions of the same way,
= Normal time
ALLOWANCES
A person is not supposed to be working all the day without some interruptions: He may need some time for personal need ret etc: Normal
time for a operation docs not contain any allowances: It is just time needed by a qualified worker to do a job at a normal tempo: The
allowances are made for the needs of the operator and added the normal time to obtain the standard time: The allowances can be broadly
classified into four classes:
Personal Allowance:
This is the allowance given to an operator for his personal needs and is generally less than 5 %: This depends upon the type of work - light or
heavy, particularly in hot humid atmosphere: (This is normally the constant allowance in Relaxation allowances)
Policy Allowances:
Sometimes certain policy allowances are also given in certain companies to meet certain contingencies outside the work place etc.
The time standards developed from the various techniques of Work Measurement can be for the following:
1. Production Scheduling
2. Estimates for tenders, selling prices, and delivery promises.
3. Balance Work Load at different stage.
4. Reveals unproductive operations and idle time of equipment
5. Basis for a sound INCENTIVE SCHEME.
6. Comparison of the efficiency of alternate methods.
Method study, according to British standards Institutions (Bs 3138) is defined as:
"Method study is the systematic recording & critical examination of existing ways of doing work and proposing new ways as a means of
developing and applying easier and more effective methods thereby reducing costs.
BASIC PROCEDURE:
Method study is an organised approach: The basic technique rests on the following six(6) steps:
1. SELECTION:
Select the work to be analysed: The kinds of priorities could be: Economic Consideration, Technical consideration & Human
consideration.
2. RECORD:
Record the existing method using the charting symbols: The symbols used are:
...Operation
...Inspection
...Transport
...Delay
...Storage
3. CRITICAL EXAMINATION:
Examine the facts of existing process critically but impartially so as to have easier & effective ways of doing work:
The step includes "My Six Servants: - What, Why, How, When, Where & Who.
Develop the alterations, though critical examination and choose the most effective, efficient & economical method as the proposed
method: All aspects like change of technology, elimination of operations, change of layout or any other suggestions should be
developed fully before Installation of the new method.
5. INSTALLA TION:
Installation (or implementation) of the proposed method involve preparation of recommendations, making oral preparation to top
management & securing approval of the decision maker, assisting the line management (production deptt.) during implementation &
training of workmen getting new standards /target set for the proposed way of doing the job/ operations.
6. MAINTENANCE (To maintain):
'Maintenance' phase is the follow up phase after implementation and could be termed as Monitoring & Controlling' mechanism after
the Planning Phase: It helps in checking up proposed ways of working and carrying out changes/ modifications, if any, so that the
proposed way of working is really easier & more effective & economical than the existing one.
Q: Draw the Man -Machine Chart for the following activities on a product in a Manufacturing unit & find percentage utilization of Man and
Machine.
Cycle Time = 30.00 minutes
Idle time of Machine = Nil
Idle time of Man = 20 minutes
% utilization of man = (30 -20) /30 x 100 = 33.33 %
% utilization of machine = 30/ 30 x 100 = 100 %
Q2: If a man works on two identical machines and the activities on the machine are given below.
Sol.
Q3: In an electrical industry, a group of 15 girls working 8 hours a day on an assembly line produce 600 MCBs per day: During a sampling
study for the work shift it was found that 10% of the time the girls were found to be 'Working':
However, the average rate of performance was 80% for the whole group: Calculate Standard time for producing one MCB.
Sol:
= 12 minutes
= 10.80 minutes
Q4: In a steel plant for three days the work sampling study was carried on Slab Grinders (10 numbers): It was observed that 25% of the time
the workers were found to be Not-working: The average time per round was found to be 10 minutes: How long the study should be carried
out to ensure accuracy of > n~ 5% with 15% confidence limit?
Chapter 9. USE OF QUANTITATIVE TECHNIQUES IN SOLVING PRODUCTION PROBLEMS
9.1 INTRODUCTION:
Problems of Decision Making are in Vogue since the inception of human civilization and they cover all spheres of life.
Decision problems in business and Industry are more difficult since there arc too many factors involved in it and the effect of a ‘ WRONG
DECISION' is far reaching.
Moreover, the pace of Modem Business is such that decisions are required more rapidly than ever before the mere postponement of action
can give a decided advantage to a competitor.
Increase in difficulty of decision making has been followed by efforts to put this activity on a mere objective and routine basis and to develop
QUANTITATIVE METHODS to solve problems in DECISION MAKING. Such methods were first developed by BRITISH and US scientists
during the second world war to facilitate the DECISION MAKING in War-Operations and hence the "Body of Techniques for Decision Making"
is popularly known as Operations Research (O.R.).
9.1.1 O. R. DEFINED:
"O.R. is a scientific way of tackling complex problems in the Management of large systems of Men, Machines, Money, Materials, Methods
and Management (6 M's).
The purpose is to help management in scientific decision making. The hallmark of O.R. is the Quantitative Approach to problem solving,
incorporating measurements of factors such as Risks, Uncertainty etc. So that production and comparison of "alternative decisions,
strategies, and controls are possible."
1. Definition of the "Objectives" in specific terms understood and accepted by the Decision-Makers.
2. Complete description of problem in a Quantitative Model Apply the appropriate technique to find the various alternatives.
3. To analyse the behavior of the various factors influencing the objectives.
4. To choose the best alternative as the decision arrived at.
5. Implement the decision.
1. Allocation Models
a. TRANSPORTATION MODEL
b. ASSIGNMENT MODEL
c. LINEAR PROGRAMMING MODEL
2. Sequencing
3. Inventory
4. Replacement
5. Waiting Lines (or Queuing Theory)
6. Competitive Strategies
7. Dynamic Programming
8. Simulation Model
9. Net-work Analysis ( PERT/ CPM)
9.2 SEQUENCING:
In sequencing, we are concerned with finding a sequence in which a series of tasks are performed.
Important problems that can be solved by sequencing models are :
(1) This sequencing problem for which a solution is available, is more completely described as:
An on machine 'A', and exact or expected processing machine time B1, B2_ _ _ _ Bn; on machine ‘ B' are given.
(2) The Problem (or objective) is to Minimize ‘ T' the elapsed time from the start of the first job to the completion of the last job.
9.2.2 METHODOLOGY:
i. Select the smallest processing time occurring in the list A1, A2 _ _ _ _ An; B1, B2 Bn.
(if there is a tie, select either smallest processing time)
ii. lf the minimum processing time is Ar (i.e. in 'A' Write the number of job on left side extreme i.e. to do this job as the first job and if
the minimum time is found to be on machine b (say Br) then write the number of job on right hand extreme i.e. do this job as the last
job.
The decision arrived in (ii) will apply to machines a and B.
iii. There are now (n -1) jobs left to be ordered or sequenced.
iv. Repeat (ii) above till no job is left.
v. The resulting ordering will give minimum 'T' -the time elapsed.
Example
We have five jobs, each of which must go through the two machines and b in the order AB. Processing Times are given in the table:
Determine a sequence for the five jobs that will minimise the time T.
Solution
Applying the routine of the text, we see that the smallest time is 1 hour for job 2 on machine A. Thus we keep job 2 in first cell
The smallest processing time is 2 for job 1 at machine b, so we schedule job1 and keep it in the last cell:
Continuing we have
We may calculate the elapsed time corresponding to the optimal, using the individual processing times given in the problem. The details are
given in the following table:
Thus the minimum elapsed time is 30 hours. Idle time is 3 hours machine B, and 2 hours for the machine A.
No solution is available at the present for the general sequencing problem of n jobs through machines A,B,C; prescribed order ABC for each
job and no passing.
However the method of previous section i.e. “ 2 Machine method” can be applied for special cases where either or both of the following
conditions hold:
a. The smallest processing time for machine ‘ A' is at least as great as the largest processing time for machine ‘ B'
Min. time of machine ‘ A'> = Max. time of machine ‘ B'
b. The smallest processing time for machine ‘ C' is at least as great as the largest processing time for machine B
i.e. Min. time of machine ‘ C' > = Max. time of machine
9.2.4 METHODOLOGY:
where G1 = A1 + B1
H1 = B1 + C1
Example : Given 5 jobs, which must follow the order a b c i.e. first each job should go on machine A, then on machine B and then on machine
C
Determine a sequence for the five jobs that will minimise the time T.
Solution :
Here min Ai-= 4, maX Bi- = 6, min Ci- = 6. Since max bi, _< min Ci- we are justified in applying the method of this subsection. The equivalent
problem becomes
Determine Sequence that will minimize the Total Elapsed Time ‘ T'.
Network analysis is one of the techniques of Scientific used in planning a project with Minimum Possible Time and with Minimum Possible
Use of Resources (i.e. OPTIMUM TIME and COST Control Technique)
In case of uncertainties, it provides a set of principles and to assist the Project Manager. Network pin points 'CRITICAL AREAS' where the
completion of a job on time is threatened and thus helps the manager to take Timely Action. It also helps the manager to determine how the
resources can be transferred from one job to another, thus providing alternate course of action to accomplish the desired goal.
In a Network, the various activities are connected through necessary of a system in a sequence, which culminates the completion of the
project i.e. the Network is flow plan consisting of the activities and the events that must be completed to reach the goal.
Thus it shows orderly step-by-step series of activities carried out in a logical sequence to reach the goal.
An event in a Network is defined as a NODE, Clear Step or Milestone or Control Point in the Plan.
9.3.5 ACITIVITY:
“ Activities are the channels of flow of the network and the Manager can control this flow of material, investments, expenses, human efforts,
time spent etc. utilized to achieve the final project goal.
A dummy activity is defined as an activity which does not consume time or resource but it is a useful and necessary constraint, completion of
which depends on other activities.
Event 1 and Event 2 represent DELHI & AMBALA but we have two different routes 1 to 2 and 1 to 3 which is the only way to indicate. Thus
using a dummy event, we have completed the logic, without consuming any resource.
1. PERT stands for Program Evaluation and Review technique and CPM stands for CRITICAL PATH METHOD.
2. PERT is Event Oriented and CPM technique is Activity Oriented.
3. In PERT, there are 3 times estimates, whereas in CPM there is only 1 time estimate called the Average Time.
In PERT, the activity or time duration associated with each activity has three time estimates -
Optimistic (to or a)
Most likely (tm or m)
Pessimistic (tp or b)
Optimistic Time (to or a):
The time estimate, which is based on the assumption that every thing will go on exceptionally well and hence has a very low chance of being
realized in actual practice.
The time estimate, which would be correct most often if it could be repeated under identical conditions in normal.
The time estimate based on the assumption that everything short catastrophic goes wrong and hence having a very low chance of realized.
The Pessimistic Time is the longest time that would require under most adverse conditions.
The formula gives approximate results but its use in analysis of distribution and work very satisfactory in practical situations.
= 5 units
a. Take L4 = E4 = 4 and put this in a triangle and write at the bottom of the event.
b. Activities Merging with 4 are 3 and 2 (Reverse of Previous Pass)
c. Event 3 has only one arrow out of it whereas 2 has two arrows out of it.
(a) Events which have TS and LF same are called Critical events (i.e. Events of critical path) and activities connecting them are called Critical
Activities.
(d) If we draw this on scale, it will be seen that we get a Network as shown in Fig. given below:
This dotted line shows that there is SLACK (or Float) available for this activity.
9.3.10 CRITICAL and NON-CRITICAL ACTIVITIES:
(2) These Activities which have zero float (slack) form the Critical Path and activities which do not lie on Critical Path are called Non Critical
Activities.
(1) Critical Activities are those, which have no Slack or Float available i.e. if these activities are delayed, the entire project gets delayed.
9.3.11 CONSTRUCTION OF A NETWORK, PROJECT COMPLETION TIME, NETWORK TABLE, DETERMINATION OF CRITICAL
ACTIVITIES, THE CRITICAL PATH AND SQUARED NETWORK:
(Draw yourself)
# 5 CRITICAL PATH
1->2->3->4->5->7->8
# 6 SQUARED NETWORK
N.B. Study Table and fig. 17.1 at page 550 & 551 of your text and example at page 554 of your text.
In large projects, it is desirable to have a number of Networks describing the preferences of different or individual portions of the project. The
end events such different networks are integrated and shown in a Master which gives the total project view.
Events common to more than one network are known as Interface Events and such Interface Events must be identified before the Networks
are completed.
The status of the project is maintained through "Critical" through Periodical Reputes.
From the Earliest Start and the Latest Allowable Time, it is possible to estimate the manpower needs for each activity and possible to have a
balanced manpower throughout the duration of the project.
Though the project duration is governed by Critical Activities on the Critical Path. Use of Direct Cost and overhead costs associated with
activities helps in finding out the overall cost associated with Project Completion. It also helps in understanding that if the project duration has
been reduced, which activities should be crashed and what shall be Additional Cost increased. Thus the network helps in "CRASh -".
Let us take the help of the following Network and explain how we can proceed in predicting the probability of meeting the schedule of any
interim event. How much is the probability of completing the project in 42 days?
The probability of completing the whole project in 42 days means to find the probability of event 6 occurring within 42 days i.e. the shaded
area of the curve need be found.
From the table of normal distribution, we find that the area between Ts and Te = 22.6%
= 27.4%
i.e. the probability of meeting the project schedule within 42 days = 27.4% ANS