Production & Operation Management

Q1.
Explain how material flow information helps in work centre decision. Consider
the example of a shopping centre to illustrate your answer.

Ans:
Work centers is a producing or processing facility comprising of one or more
machineries and workmen with a defined process on the input material with a
desired output. The work center as a unit may have single and multiple operations
which are to be conducted on the input material. The input material can either be
from an external vendor or from other work center as an input a particular work
center to do a value addition. The work center decision is arrived at based on the
design parameters and the information that flows in with the input materials. The
information that accompanies the material flow enables the work center to freeze the
process requirements for desired output. The information by way of a rout sheet that
accompany the input could be the drawing, specification and process requirement,
quantity, Quality Assurance Plan (QAP) etc. These are vital to the stage process and
upon completion of the desired process or value addition in the work center the
material moves into next stage with similar rout sheet. In this manner, the material
and desired information arrives simultaneously to each work center enabling smooth
material transformation in line with the objective. The material information thus helps
the work center decision without the need for referring back to preceding work
center.

Consider a shopping center like Big Bazzar, where different goods arrive at the
warehouse. The materials arrive along with the relevant details like vendor, source
location, shelf life, quality, input price, total ordered quantity, so far supplied and
balance to be supplied etc. Based on this information, the items undergo packing
and branding and storage. During this process the bar codes are assigned to the
pack. The barcode provides material information, source vendor details, MRP,
reordering levels, shelf location in the mall etc. This information that flows with the
material helps the store manager to keep track of the performance of the
commodities and their movement. A faster moving commodity can be ordered and
the vendor can be alerted for more supplies as the information is available at every

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stage of the work center. The decision making at each stage is made easier. Eg: The
rice received in bulk comes with the vendor, input cost, type, concerned sourcing
officer’s name etc. In the event of any quality problems, the matter is immediately
referred back to the concerned as information is readily available. Similarly if a
particular brand of rice is selling well, the store manager will be able to alert the
supply chain using the information contained in the barcode making the
replenishment in time easier.

At the time of selling, the goods accompany a bill which carries the item code the
name and price of the commodity. In the event of a sales return or customer
complaint, the material source can be traced and issued sorted out with ease as the
information trial is available throughout the supply chain along with the process
undertaken in each work center. In case of a defective packing the matter need to
be taken up with only packing unit which is a work center and not the entire supply
chain. The management will be able to focus on the right issue at the right work
center in view of the easy availability of information at every stage and as it
accompanies the material.

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Q2.
What are the reasons for failure of a project? Give suitable examples.

Ans:
A project may fail because of one or more of the following reasons.

1. Incidence of Project Failure.

Project being initiated at random at all levels.
Project objective not in line with the business objective
Project management not observed.
Project Manager with no prior experience in related project.
Non dedicated team.
Lack of complete support from the client.
2. Factors contributing to project success not emphasized.
Project objective in alignment with business objective.
Working within the frame work of the project management methodology.
Effective scoping, planning, estimation, execution, controls and review, closure
intertwined with quality.
Proactive approach towards project bottleneck.
Communicating and managing expectations effectively with clients, team
members and stake holders.
Prior experience of the project manager in similar projects.
3. Overview of Information and communication Technologies for project.
Involve information and communication technologies such as world wide web, e
mail, fiber optics and satellites.
Enable societies to produce, access, adapt and apply information in greater
amounts, more rapidly and at reduced costs.
Offer enormous opportunities for enhancing business and economic viability.
4. Common Problems encountered during the projects.
No prioritization of project activity from an organizational position.
One or more of the project mis-handled.
Less qualified or non dedicated man power.
Absence of smooth flow of communication between the involved parties.

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Example of major project failure :

Major refinery project was planned by M/s E- group at Jamnagar in Gujrat beside the
refinery project of M/s R- Group. While the R-group project was completed well in
time the E-Group Project failed to be completed in time due to following planning
flaws.

The petroleum refinery was not aligned to the core business of E- group. E- had no
core competence in project management. The project management team of E-group
was not effective when compared to R-Group team with respect to prior experience.
Further E- group had no team commitment as during the cyclone at the project site,
the E group deserted the site and did not return even after situation turned normal,
where as the R group supplemented the project team with additional supports and
rescue helicopters and the top R group management landed in the cyclone hit site
and encouraged the project team in rescue and reviving efforts.

R Group has set up multilayer communication set up with video conferencing through
communication satellite links between project site and core management group. This
has enable de-bottlenecking of project issues in time and contributed to large extent
to the project success. The E group depended on conventional channels and
resulted in delay in resolution of project issues.

The technology used by R group was such that they could refine the worst crude
available but E group refinery could refine in certain sweet crude blends. The
technology adopted by E group was therefore not versatile.

Above factors resulted in delayed completion of E- group refinery which resulted in

budget over run and starving of downstream function like retailing networks which
was commissioned prior to the commissioning of refinery. This is a case of wrong
prioritization of activities.

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Q3.
Explain the various phases in project management life cycle?

Ans:
The project management life cycle consists of the following phases.
1. Analysis and Evaluation phase.
2. Marketing phase
3. Design phase
4. Execution phase
5. Control phase
6. Closure & knowledge leverage phase

1. Analysis and Evaluation phase.

This is the initial stage of any project. The information is collected from the customer
pertaining to the project and the requirements are analyzed. The project concept is
studied in detailed and its feasibility is thoroughly studied. After the required
investigation, the project manager submits a details report to the top management for
their appraisal and eventual approval. This report is also known as project charter
and contains project justification, details of the project objective and the method to
achieve the objectives. The budget for the project and its success rate are included
in this report. The project feasibility and risk analysis also from part of the project
charter. The important task to be undertaken during this stage are :

• Specification Requirement Analysis: The essential requirement and the

standards to follow are framed in order to set the target for achievement.
• Feasibility study: This study is aimed at establishing the technical,
economical and practical feasibility of undertaking the project.
• Trade-off analysis: This is carried out to examine and evaluate various
alternatives that could be considered.
• Estimation: It is carried out to arrive at the project cost, efforts required,
project duration and functionality of various process in the project.

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• System Design: A suitable general design is chosen than can fulfill the
project requirement.
• Project Evaluation: Expected profit, cost and risks are evaluated.

2. Marketing phase: A project is prepared by a team including the project

manager. The project has to, apart from the implementation strategy, adopt an
evaluated strategy to market the project deliverable ( a product or service) to
customer.

3. Design Phase: This phase involves the study of inputs and outputs of various
project stages. Stage outputs are inputs to the next stage Eg: Project concept
is an input to the design stage where in a composite design and project plan are
prepared for implementation. The project design and implementation plan is an
input to the implementation stage.

4. Execution stage: The execution stage is characterized by action and

involvement of physical work. The project manager and his team embark on
working towards the achievement of project objective in line with the project plan
approved by the apex project management.

5. Control Phase: Control phase establishes the method for ensuring that the
project work is carried out as per the project plan and specification standards.
This is carried out by inspection, testing and delivery checks. The project is
tracked and monitored through its cost, manpower and schedules. The project
manager has to exercise quality, cost and other control measures to complete
the project as per the need of the stake holders and within the approved project
plan so as to ensure successful delivery and future business prospects.

6. Closure & Knowledge leverage phase: On completion of the project the

project deliverables are handed over to the end user (Customer) and the
performance of the project team is evaluated. The team is them disbanded. The
lessons learned during the project execution and the problems encountered are
documented and handed over to the stake holders for future reference and use.

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Q4.
What are the seven principles of SCM?

Ans:
Seven principles of Supply Chain Management (SCM) are:

1. Group Customers by need: In an effective SCM, the customers are grouped

by their distinct service needs, regardless of the industry, and then tailor make
the service to satisfy needs of that particular segment. This way the specific
need of the customer is understood in depth and thereby the service provider is
able to give due attention to the customer needs. It brings in better customer
bonds which translate into business gains / advantages for the organization.

2. Customize the logistics network: In designing their logistics network,

companies need to focus on service requirement and profit potential of the
customer segments identified. 20% of the total segments which generally
generates 80% of the income are provided with the major share of logistic
resources. Such prioritized resource allocation ensures better profit realization.

3. Listen to signal of market demands and plan accordingly: Sales and

operation planners must monitor the entire supply chain to detect early warning
signals of changing customer demands and needs. This demand driven
approach leads to more consistent forecast and optimal resource allocation. The
planner must be able to feel the pulse of customers and swiftly respond
accordingly. The timely course correction in tune with the changing customer
needs is the initial stepping stone for organizational success.

4. Differentiate the product closer to the customer: Companies today no longer

can afford to stock pile inventory to compensate for possible forecasting errors.
Instead they need to postpone product differentiation in the manufacturing
process closer to the customer demand. This strategy allows the supply chain to
respond quickly and cost effectively to changes in customer needs.

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5. Strategically manage the source of supply: It is essential that the

organizations work closely with the key suppliers to reduce the overall cost of
owning the material or service. SCM maximize profit margins both themselves
and suppliers. In view of the mutually beneficial association the supplier and
purchaser leads a cordial coexistence benefitting from enhanced end customer
satisfaction.

6. Develop a supply chain wide technology strategy: As one of the

cornerstones of successful SCM, information technology must be able to support
multiple level of decision making. It also should afford a clear view and ability to
measure the flow of products, service and information. The instant accessibility
and accuracy of the information and feedback makes the decision making and
initiating corrective action more appropriate and timely.

7. Adopt channel spanning performance measure: Excellent supply chain

performance measurement system do more than just monitor internal function.
They apply performance criteria to every link in the supply chain. This enable the
evaluation and localization of bottlenecks which leads to problem resolution
easier to manage. This leads to each segment of the chain being profitable and
leading to the supply chain being profitable as a cumulative effect.

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Q5.
Explain what is meant by bullwhip effect and how it could be prevented?

Ans:
A schematic representation of bullwhip effect is given below.

Bullwhip effect is magnification of demand variation as the information of demand

fluctuation moves upstream on the supply chain. Eg: from the retailer to the
producer. The exaggerated estimate of demand fluctuation leads to inappropriate
production and warehousing which eats away precious resources due to unrealistic
forecast. This leads to crippling of organizational profitability due to mounting
inventory along the supply chain thereby adversely affecting the functioning of the
organization. The changing market conditions, therefore needs to be studied and
analyzed in details before suitable supply intents are pushed upstream. The
amplification of demand as a result of the poor or ill-information is termed as Bullwhip
effect.

A bullwhip effect may arise because of:

• Increase in the lead time of a project due to increase in variability of demand.
• Increase in the stock to accommodate the increasing demand arising out of
complicated demand models and forecasting techniques.

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• Reduced service levels in the organizations.

• Inefficient allocation of resources.
• Increased transportation cost

Bullwhip effect can be prevented by adopting one or more of the following measures.

1. Avoid multiple demand forecasting.

2. Breaking single orders in to number of batch orders.
3. Stabilize the price and avoid risk involved in over stocking by maintaining
proper and optimum stock.
4. Reduce the variability and uncertainty in the point of sales and sharing the
information.
5. Reduce lead time in stages of projects.
6. Always keep analyzing the past figures and track current and future levels of
requirement.
7. Enhance operational efficiency and outsourcing logistics to a capable and
efficient agency.

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Q6.
What do you understand by Line Balancing? What is the importance of order
picking in material handling? Give suitable examples.

Ans:
Production lines have number of work centers in a particular sequence so that the
material that gets processed has to move further without encountering any
bottlenecks. The quantities produced, the rate of production at each center, the
number of operations and operation duration has to be set in such a way that line is
balanced in such a way that no shortage occurs between work centers and minimum
inventory gets created. Assembly lines are best suited for study and analysis of line
balancing problem called Assembly Line Balancing. (ALB). ALBs are categorized in
to four categories as under.

SMD – Single Model Deterministic: This model assumes that one product that
passes through dedicated line has all tasks times known. This model is useful when
automatic machines or where operations has their times predictable with certainty.

SMS- Single Model Stochastic: This model allows the task times to be variable.
This is applicable when a single product goes through machines where manual
content is more and the operations do not have any definite periods. Determining
locations and sizes of buffer require to keep the throughput is the purpose of this
algorithm.

MMD- Multi Model Deterministic: In this case task times are known, but have many
products that go through the lines. The products are assembled in batches.

MMS- Multi Model Stochastic: The task times are variable and we have many
products that go through the lines. The problem of balancing such lines is more.
Decomposition of the assembly into sub assemblies and having advanced handling
equipment may help to make inventories small and keeping the flow line smooth.

Generally the criteria for all the above cases are technical and economical ones. The
technical criterion seeks to maximize the line efficiency. Increasing the throughput,

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minimizing the work stations, number of operations and reducing the quantum of
buffers are economic criteria. It is for the operation manager to balance between two
competing requirements.

Order picking: It is a process by which the items or products for which supply is to
be made have to be retrieved from a specific storage location. This activity found to
take 60% of labor activities in the warehouse. Since this is critical to the business to
meet customer’s demand expeditiously and accurately, lot of attention is being given
to this aspect of operation. In the manufacturing arena, we desire to move towards
small lot sizes, point of use delivery and cycle time reduction. These are essential to
achieve for targets of JIT, which have economical implications. Efficient order picking
is necessary for being competitive. In a supply chain, Storage, Retrieval and Delivery
do not add value to the product, but are essential to ensure customer satisfaction
and profitability of the organizations involved in supply chain.

Order picking therefore calls for efficient and orderly storage warehousing which
enables the operator to identify, locate and pick an articles easily and quickly. It also
calls for vertical and horizontal storage system and retrieval equipments to bring
about operational efficiency.

Some of the systems adopted in order picking in Electro Mechanical Workshop of

Indian Railways located in Hubli is explained below:

The storage of spares and consumable required for maintenance of locomotives are
stored in a warehouse which adjacent to workshop, is arranged in parallel racks with
aisles for free movements of picker. Spares are arranged in a volume based
category. The larger and heavier spares are stored in racks along the entrance of the
warehouses. The smaller parts are stored in the interior racks. Similarly the heavier
spares are stored in lower racks and lighter ones are stored in higher racks. The
part numbering with bin location is stored and managed in a inventory management
software package which is online with the workshop, store, purchase finance and
office of the Chief Mechanical Engineer’s office.

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When an online intent is placed by loco workshop for any spares, the stores
department gets an alert with the requirement with the part number ( The numbering
is designed in such a way that it revels the type of loco, category in volume class,
coat class, movement class, bin location etc.). When an alert is received the system
generates and order picking slip, which provides the picker with the spare code no.
location and qty and delivery schedule for the items. The picker picks the spare and
leads the same to delivery area in time when the intending department comes for
taking delivery and leading the same to maintenance rakes where the locomotives
engines are being repaired.

The horizontal travel: It is facilitated by electric vehicles which have fork lift
mechanism attached to it. The picker drives the vehicle to appropriate bin and picks
the spare articles as per the intent are picked and place them on the platform trolley
along with the intent slip and Goods Issue Note No. (Bar coded sticker on the
articles is recorded at the exit points and necessary goods issues is accounted).

Person Aboard: In order to contain the warehouse area the store is designed in
vertical racks which are up to 6m in height. This calls for considerable vertical
movement. This is achieved by hydraulically operated platform on which the picker
can stand and lead the required spared. Electrically operated over head rail
mounted chain pulley lifting and leading mechanisms are also available for move and
store major sub assemblies.

Parts to picker: There are mechanized systems like rotary trays which are brought to
the picker by way of motorized operation which helps the picker to pick the required
spared and off load them into the delivery tray which least manual efforts.

There are other specialized storage systems for dispensing lubricating oils. These
are stored in vertical tanks and required quantity as per the intent is dispensed
through computer controlled flow meters. The stock balance and receipts are
accounted using automated tank gauging system.
These systems help railways to timely repair of locos and ensure timely re ordering
and provision of spares with least inventory cost.

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