PRODUCTION

AND
OPERATIONS MANAGEMENT

POM-KGR-34

Course Co-ordinator:
Mr. K. Gururaj

Prescribed Textbook:
OPERATIONS MANAGEMENT FOR COMPETITIVE ADVANTAGE
by R B Chase, F R Jacobs & N J Aquilano, Tata Mcgraw Hill (765 pages)

This document was the hand out for a course conducted at a Bangalore MBA institute over
thirteen weeks with two classes of 90 minutes each week. The class had about 50 students and
was interactive and the coordinator brought up examples from his own work experience. This
also serves as an illustration for process selection services (14) –production line- war, self
service suicide and personal approach murder!!!

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 1

Course Outline

DEFINITION OF OM 3
PRODUCTS AND SERVICES - BROAD DIFFERENCES 3
OPERATIONS COMPETITIVE DIMENSIONS 3
PRODUCTIVITY INDEX 4
LEARNING CURVE 5
PROJECT MANAGEMENT- PERT/CPM 6
PROCESS ANALYSIS 8
JOB DESIGN 10
WORK MEASUREMENT 11
FACILITY LAYOUT 11
PROCESS SELECTION-SERVICES 13
QUEUING THEORY - WAITING LINE MANAGEMENT 13
QUALITY MANAGEMENT 14
JAPANESE METHODS IN OPERATIONS MANAGEMENT 16
BPR-BUSINESS PROCESS REENGINEERING 16
FACILITY LOCATION 17
JIT-JUST IN TIME- LEAN SYSTEMS 18
ERP - ENTERPRISE RESOUCE PLANNING 18
FORECASTING 19
AGGREGATE SALES & OPERATION PLANNING 20
SCM-SUPPLY CHAIN MANAGEMENT-INVENTORY 21
MRP- MATERIAL REQUIREMENT PLANNING 22
OPERATIONS SCHEDULING 22
PERSONAL EFFECTIVENESS 25
BRIEF BIODATA 26
CASE STUDY: DOCTOR’S FEES 27
CASE STUDY: CAR REPAIR FIRM 28

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 2

DEFINITION OF OM
Operations Management is defined as the design, operation and improvement of the systems that create and
deliver the firm’s products and services. Like Marketing and Finance, OM is a functional field of business with
clear line management responsibilities.

Within the operations function, management decisions can be divided into three broad categories:-
Strategic (long term) decisions
Tactical (intermediate, short term) decisions
Operational planning and control (short term) decisions

The strategic issues are usually broad addressing such questions as: How will we make the product? Where do
we locate and how do we layout the factory? How much capacity do we need? When should we add more
capacity or reduce capacity? The time frame is normally long extending over several months or years.

Tactical planning typically deals with issues of how to efficiently schedule material and labour within the
constraints of the previously made strategic decisions such as: How many workers do we need? Should we
work overtime? Should we add another shift? When should we have material delivered? Should we
outsource/subcontract? Should we have finished products inventory?

Operational Planning and control decisions are within the constraints of the tactical plan and typically deal with
issues such as: What jobs do we start or continue to work on today? Whom do we assign to these jobs? What
jobs have priority?

PRODUCTS AND SERVICES - BROAD DIFFERENCES

The essential difference is that service is an intangible process whereas a goods is the physical output of a
production process. In services the location of the facility and direct customer involvement in creating the
output are essential factors.
Some of the characteristics of a service system are:
1.No inventory is accumulated 2.Interaction with customer is extensive 3.Output is intangible and often
customised 4. Demand pattern is variable 5. Labour content is usually very high 6. Output quality is often
variable and difficult to measure

MAJOR WAYS FIRMS ARE MEETING GLOBAL COMPETITION

1.By utilising higher-technology equipment (often in a foreign location)
2.By employing part-time or lower paid workers (often in a foreign location)
3.By improving operations (TQM etc) to world class levels

OPERATIONS COMPETITIVE DIMENSIONS

Different customers are attracted by different attributes. The operations strategy of a firm has to be positioned
taking into account the trade offs in one or more of the following dimensions. The essence of strategy is in the
activities –choosing to perform activities differently or to perform different activities from competitors.

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 3

COST- “make it cheap” . To compete in this segment a firm must be a low cost producer. The products in this
group are commoditylike –ie customers cannot distinguish one firm’s products from another. The volumes are
typically and comparatively very large and this attracts many firms into this segment but since the lowest cost
producer sets the selling price –the chances of failure are high.

PRODUCT QUALITY & RELIABILITY- “make it good”. The product will have some features including
better performance for which the customer may be willing to pay a higher price. The quality of the process of
production/service is designed & controlled so that expectations, specifications and tolerances are consistently
met or exceeded, and the product earns a justified reputation as good and reliable in comparison with
competitors.

DELIVERY SPEED- “make it fast”. In some markets a firm’s ability to deliver more quickly than its
competitors may be critical and important.

DELIVERY RELIABILITY-“deliver when promised”. This dimension is the ability of a firm to deliver a
product or service on or before the promised date. This dimension is assuming greater importance in view of the
changes that are taking place like JIT,MRP etc.

COPING WITH CHANGES IN DEMAND-“change volume” While coping with increasing demand
successfully was an important dimension in the past the present need is the ability to cope with fluctuating or
decreasing demand in an efficient and effective manner is proving to be more important.

INNOVATION & NEW PRODUCT-“change it” Flexibility to offer a wide variety of products ie
customisation as per customer requirements.

It is just not possible for a firm to excel simultaneously in all the dimensions of competitive strategy . You
cannot “make it fast” and “cheap” at the same time- so there is a choice (strategic decision) to be made. While
focussing on and excelling in one or two dimensions to give it a competitive edge the minimum requirements
in other dimensions will have to be maintained. It is not a simple question of this or that, but a complex answer
of more of this and less of the other.

PRODUCTIVITY INDEX
Productivity is a common measure of how well a firm is using its resources or factors of production. Since
operations management focuses on making the best use of resources productivity measurement is very
necessary to understand operations related performance.

Productivity is defined as Output/Input, and to increase productivity this ratio of output to input must be made
as large as practicable. Productivity is a relative measure in that it has to be compared with something else.
There are two ways of doing this comparison, the productivity of a firm can be compared with some other firms
in the same industry for the same factors of output & intput if such information is available. Eg.1 Assembly
manhours per car by GM and Ford. 2. Sales per square foot of stores space in different stores of the same
company.

The second way of comparison which is more usually done is to compare the productivity for different periods
of time in the same firm for the same factors of output and input.
Eg 1. Output in units per 1000 manhours in the month of May 2004 compared with the output in units per
1000 manhours in the previous month of April 2004. If productivity has improved what are the known reasons

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for this and will this be sustained and can further improvement be made. Similarly if there has been a decline
what corrective action or decisions are required or possible.

Many industries have evolved over the years accepted and simple measures of productivity and some common
examples are given below;

Restaurant: Customers per labour hour

Retail Store: Sales per square foot
Chicken Farm: Kg of meat per Kg of feed
Thermal Power Station: Units produced per tonne of coal
Paper Mill: Kgs of paper per cubic metre of wood
Transport Company: Kilometres per litre of fuel

The above indices are known as “partial measures” since only one factor of input has been considered.
If all input factors that is men, capital and material are considered then the productivity index is known as total
productivity index. For this to be done all the three input factors must be available in the same unit namely
monetary terms (rupees) so that they can be added together to form the denominator.

LEARNING CURVE
Learning (or experience ) theory has a wide range of applications in the business world. In manufacturing it can
be used to estimate the time for product design and production as well as costs. Strategic corporate decisions
regarding pricing, capital investment and operating costs can be based on the learning curve.

Learning curve theory is based on three assumptions which have been found to be true in a large number of
industries over many years of experience.
1. The amount of time taken for a given task or unit of product will be less each time the task is repeated.
2. The unit time will decrease at a decreasing rate
3. The reduction in time per unit will follow a predictable pattern.
The degree of improvement depends on the type of task , but is normally expressed in terms of the percentage
of time it takes to complete the unit that represents a doubling of the cumulative output. For example if
an activity follows an “80 percent learning curve” and required 100 hrs for the first unit, the second unit will
take 80 hrs, the fourth- 64 hrs and the eighth- 51.2 hrs.

In the absence of proper past records, care must be taken in estimating learning rates which typically range
from 70% to 95%, but the following can be used as guidelines
75 percent hand assembly & 25percent machining - 80% learning
50 percent hand assembly & 50 percent machining - 85% learning
25 percent hand assembly & 75 percent machining - 90% learning

Another set of guidelines for the learning rates based on type of industry is as below;

Aerospace-85%, Shipbuilding –85%, Complex machinetools-80%

Electronic manufacturing-90% Repetitive machining operation-95%
Repetitive welding operations-90% Raw material manufacturing-95%

Many areas have shown continous improvement over many decades after allowing for inflation like
automobiles, radios,computers,washing machines,aircraft, shipbuilding,and most other manufactured goods. On

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 5

the other hand highly automated systems may have a near zero learning curve because after installation they
quickly reach a constant volume.

The learning curve can be improved for individuals or groups by proper selection, training, motivation,
providing tools & equipment and involvement in the design of their tasks.
Not only individuals but organisations also learn as a whole entity and this can be critical for their survival and
success. An organisation learns through its knowledge of technology, its structure, documents, standard
operating procedures and transfer of good operating practices from group to group over the years.

PROJECT MANAGEMENT- PERT/CPM

Project Management concerns the management of relatively large scale work activities done on a one time basis
to accomplish a well defined goal requiring a significant period of time typically running into several months or
years.

There are three basic ways of structuring a project team (1) PURE (2) FUNCTIONAL & (3) MATRIX, but in
all cases it is essential a Project leader or co-ordinator be clearly identified.
In the Pure project a self contained team works full time on the project.

In the Functional project all the members belong to one functional activity like R&D, Engineering or
Manufacturing and some may work part time on the project.

The Matrix type is a combination of both structures with members from various functional areas working
generally part time on the project.

The first step in the project planning process is a statement of work which describes the objectives to be
achieved ,specifies the start and finish dates and contains performance measures in terms of budget (costs) and
major completion steps or events(milestones).

Activities are defined within the project and are pieces of work which take time and are the responsibility of a
particular person or agency. Each activity commences from an event and ends at an event . For example the
entire project commences from the event “start” and ends with the event “finish”. The project must be
completed when all the activities are completed. For each activity there is an estimate of the time period
required (generally in weeks or months) and a specification of which activities must be completed (preceding)
before a particular activity can commence.

GANTT CHART is also known as a bar chart and is used to visually depict and monitor a project . The list of
activities are always on the vertical axis and the time period on the horizontal axis. There is a horizontal bar for
each activity from its start date to its completion date. While drawing the horizontal bar for any activity the
necessary precedent activity completion is taken into account.
During the project the progress and degree of completion of each activity is monitored and shown against each
activity by means of another bar or symbols etc. so that it is clear visually which activities are on schedule and
which are falling behind so that corrective action can be taken in a systematic manner..
The Gantt chart can be used for fairly simple projects involving around ten to fifteen activities.

ERT/CPM – Programme Evaluation and Review Technique also known as Critical Path Method is the
more widely used method to plan, depict and monitor projects.

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After all the activities in the project have been listed along with their time requirement and preceding activities
a network diagram is constructed. In this network diagram small circles known as nodes are connected together
by arrows also known as arcs or branches starting from left to right. There are two conventions for constructing
the network (1) AON-activity on node (2) AOA –activity on arrow.

In the AON convention the activities are normally represented by alphabets in the circles (nodes) and the
arrows from one node to the other nodes indicate the sequence of the activities ie which activities must be
completed before the other activities can commence. In the node the time required for the activity is also
indicated. After the network is completed for all the activities in the entire project from “start” to “finish” a
visual picture of the project becomes available. In most large projects there are a large number of activities
which can occur in parallel at various stages and the network diagram highlights this aspect very well.

After the network is constructed it will be noticed that there are a number of paths from the “start” to the
“finish” and the time taken by all the activities in each of these alternative paths is found out by adding up the
times in each of the nodes in the path. The path with the largest time period will determine the total time for the
project and this path is known as the “Critical Path”. The length of the critical path from the start date will
determine the finish date of the project . For example if the length of the critical path is 52 weeks and the start
date is 1st Jan 2004 the project finish date will be 30th Dec 2004. All the activities on the critical path require
more attention and monitoring as any delay in anyone of them will affect the project finish date.

In addition to providing a date for the finish date it is possible to obtain from the network the dates for
commencement and completion of each of the activities and this is extremely useful in the coordination and
management of the various people, agencies, resources and money involved in the project. For all the activities
on the critical path there is only one commencement date and one completion date. For the activities which are
non-critical i.e. on other paths there is an early start date(ES) and a second late start date(LS) depending on
whether the date is computed forwards from left to right from the project start node or backwards from right to
left from the project finish node. The difference between the early start date and the late start date is known as
the “slack” in this activity.

A PLAN IS A PLAN AND NOTHING WORKS TO PLAN. After the project has started the progress is
monitored and recorded regularly on the network- some activities will be completed earlier & some later than
the plan. Depending on the current status the critical path to the finish of the project may change and some
activities which were non-critical may come onto the current critical path and require a different degree of
management attention.

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 7

PROCESS ANALYSIS
Understanding how processes work is essential to ensuring the competitiveness of a company. A process is any
part of an organisation that takes inputs and transforms them into outputs which are of greater value. By
analysing a process it is possible to answer many questions that might come up like - How many customers can
be handled per hour? What is the process cost? What should be done to expand capacity? What is the impact of
changes in the future.

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“Cycle time”- in a repetitive process is the time between completion of successive units. If a firm is assembling
eight cars in a shift of eight hours the cycle time is one hour.

“Utilisation”- is the ratio of the time that a resource ( man or machine) is actually active compared to the time it
is available for use and is normally expressed as a percentage.

“Stages of a process”- Normally a group of activities is combined together to form a stage for purposes of
analysis and a process will then have multiple stages. Eg engine assembly stage, final assembly stage etc in an
automobile factory.

“Buffer”- refers to a storage area between stages where the output of one stage is placed prior to being used in
the next stage.

“Blocking”-If there is no buffer and one stage feeds directly into the next stage and there is no place to place the
output of a stage it comes to a halt and this is known as blocking.

“Starving”-This occurs when a stage must stop because there is no input from the previous stage.

“Bottleneck”-In a multistage process the stage with the longest cycle time determines the rate of output of the
process and is known as the bottleneck, which could be at any part of the process either in the earlier stages or
in the final stages.

“Types of processes”- There are two types of processes “make to order” or “make to stock”. In the make to
order, the process is activated only in response to an actual order and inventories are kept to a minimum, and
therefore the time to deliver is likely to be greater since all the activities need to be completed.

Make to stock process does not wait for actual orders but is planned as per a forecast or expectation and some
finished product stock is planned for quick delivery to customer.

“Process Flow Charts”- using standardised symbols are very useful in analysing and improving processes.

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JOB DESIGN
Job designs typically specify “what” task is to be performed, “how” to do it, “when” & “where” to do it. The
work goals themselves should be clear and specific, moderately difficult and well accepted.

Specialisation & Automation – As a worker’s efforts become more focussed he tends to benefit from
experience, becomes more proficient and do a better job. However as the scope of the job narrows and
specialisation occurs the work can become monotonous and dissatisfying. Automation is the substitution of
mechanical equipment for human effort. Many repetitive and less desirable tasks have been shifted to machines
where the rate of output is generally higher and level of quality more consistent. Automation involves a high
capital investment in specialised equipment which reduces a firm’s flexibility and requires a higher volume to
maintain profitability.

Trends in job design -

(1) Quality control as part of the worker’s job.
(2) Cross training workers to perform multiskilled jobs.
(3) Employee involvement and team approaches to designing and organising work.
(4) Extensive use of temporary workers
(5) Automation of heavy manual work.

Method study & improvement –Jobs that have a high labour content and done frequently, that are tiring or
unsafe offer the most potential for study and improvement. Analysis of the present job can make use of flow
process and worker-machine charts plus a questioning technique (a)”what” is its purpose and (b)”why” is it
necessary.

The following are the typical steps in a methods improvement study-SREDIM

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1.S- select the job to be studied - eg a bottleneck, costly, difficult, inconsistent etc.
2.R- record and document the present method using flow process charts etc.
3.E- examine and analyse the present method-get other opinions etc.
4.D- develop an improved method and convince other people.
5.I- install the new improved method.
6.M-maintain and follow up on the new method.

WORK MEASUREMENT
The purpose of work measurement is to set time standards for a job and this is necessary for three reasons
1. To schedule work and allocate capacity
2. To provide a basis for motivating and measuring workers performance
3. To provide benchmarks for future improvements.
There are four methods of work measurement to set time standards (1) Historical from past experience and
records (2)Time study (3) PDMTS-Pre-determined time standards by using published data for very small
elements of work (4) Work sampling.

Time Study The task is observed for some cycles and broken into basic elemental motions and each element is
timed with a stopwatch. Then the average elemental time over several cycles is computed and adjusted for the
speed and skill i.e. performance rating (PR) of the worker studied. Then an allowance factor (AF) ranging from
about 8% to 20% is applied for personal needs, unavoidable delays and fatigue to arrive at the standard time for
the task.
The number of cycles to be time studied depends on the cycle time and will range from say 60 cycles for a task
of ten seconds to five cycles for a task of twelve minutes. In the case of long tasks of more than sixty minutes at
least one or two full cycles must be time studied.
For a standard time set by time study to be valid and acceptable it is necessary that the worker selected for the
study should be reasonably experienced and skilled in his task and also that the time study is conducted after
informing him. Time studies conducted secretly or covertly have no validity. The time study observer should
have been trained in this technique especially with regard to performance rating of elements.

Work sampling is a work measurement technique that consists of taking “random” observations of workers to
determine the proportion of time they spend doing various activities, and also the proportion of time they are
idle due to any reason. This method is not suitable for highly repetitive short cycle tasks but is useful for
analysing group and long cycle activities.

Data is recorded in the form of “counts of times” idle or working on some activity and not as stopwatch times.
However the data once collected can be used to set time standards, cost analysis or methods improvement.

Work sampling can be done by an observer on a part-time basis who will make rounds at times picked out from
a random number table. The observer will not disturb the workmen and can identify by a quick glance the
activity of the worker at that instant of observation. The number of rounds to be made depends on the initial
data but the work sampling should be continued until the results from batches of rounds show a reasonably
consistent pattern.

FACILITY LAYOUT
At the most basic levels there are four types of processes
1. Conversion: e.g. iron ore into steel
POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 11
 2. Fabrication: e.g. cloth into clothes
3. Assembly: e.g. components into a car
4. Testing: e.g. for quality of product

Process flow structures can be categorized as below

1. Job shop- Production of single items or customised small batches in an intermittent manner. Eg- Xerox
shop
2. Batch shop- production of larger batches of items following a similar flow pattern in an intermittent
manner. e.g. printing press
3. Assembly line-Production of items moving in a specified sequence from workstation to workstation at a
controlled rate in a continuous manner. e.g. automobile assembly .
4. Continuous flow- Production of a single item or commodities in large volumes following a sequence
of processes in a continuous manner e.g. refinery
5. Flexible Manufacturing Systems (FMS)- are unattended automated manufacturing systems that consist
of computer controlled machining centres with automated loading and unloading of items with
movement by automated guided vehicles (AGV) along with a comprehensive computer control to run
the entire system to produce in small batches.

The general pattern of workflow determines the format by which departments and sections in a facility are
arranged and there are three basic types process layout, product layout and fixed position layout and a
hybrid the group technology or cellular layout.

Process Layout also known as job shop or functional layout is a format in which similar equipment or
functions are grouped together such as all lathes in one area and all drilling machines in another.

Product layout also known as flow-shop layout is a format in which equipment or functions are arranged
according to the progressive steps by which the product is made and the path for each item is in effect one
straight line.

Group Technology (GT) also known as cellular layout is a format in which dissimilar equipment or
functions are arranged together to work on groups of items which have similar shapes and processing
requirements. It is similar to the product layout except that it deals with a smaller proportion of all the items
involved in a facility.

Fixed Position Layout is a format in which the product because of its size or weight remains in one
position and processing equipment ,workmen etc.are moved to the product. e.g. construction sites, farming,
mining, shipbuilding.

Many manufacturing facilities present a combination of layout types. Different types of layout may be used
in different areas with a process layout used in fabrication and machining, group technology in sub-
assembly, and product layout in final assembly.

Systematic Layout Planning (SLP) is a generalised approach to layout that utilises a grid matrix to
display ratings of relative importance of the distance between departments. The importance ratings are
indicated by code letters a,e,i,o,u & x in the matrix and range from (a) absolutely necessary (e)essential
(i)important (o)ordinary (u)unimportant to (x) undesirable.

Several computerised approaches are available for developing and analysing layouts. The analytical
(software) packages are primarily heuristic, step by step (iterative) methods. The ALDEP (automated layout
design program) and CORELAP (computerised relationship layout planning) programs attempt to maximise
a nearness rating within facility dimension constraints. The CRAFT (computerised relative allocation of
POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 12
 facilities technique) program attempts to minimise material movement costs by calculating costs,
exchanging two departments and recalculating costs until a good solution is found. None of the programs
can guarantee an optimal solution.

PROCESS SELECTION-SERVICES
There are three contrasting approaches to delivering on site service (1) the Production line approach (2) The
Self service approach & (3) the Personal attention approach.

The Production line approach . In this approach the focus is not on personal attention to the customer but on
equipment selection ,facilities layout and standard operation methods so that the customer is served within a
reasonable range of requirements in a consistent and repetitive manner. Eg. Fast food restaurants

The Self service approach- In this the equipment selection, and layout is such that the customer himself is
involved in the production of the service. Eg.automatic teller machines(ATM), self service coffee machines,
buffet salad bars, internet online banking.

The Personal attention approach- There is one to one contact between the employee and the customer and in
many cases backed up by a system thro which the employee is aware of the customers personal preferences etc.
Eg five star hotels, fine dining restaurants, personal banking branches for high networth individuals (HNI),
jewellery stores.

QUEUING THEORY - WAITING LINE MANAGEMENT

It is to avoid queues and minimise waiting time that medical specialists, lawyers, accountants, senior managers
make appointments to meet their customers and in some services like trains, airlines, buses, fine dining
restaurants there is a system of prior reservations to fulfil customer demand. In effect a system is put in place to
control, regulate, plan or schedule the incoming load within the available capacity.

Understanding queues or waiting lines and how to manage them is one of the important areas in operations
management. It is basic to creating schedules, job designs, inventory levels etc. In our service economy we wait
in line everyday from driving on the roads, checking out at stores and jobs wait in line before machines and
machines themselves wait to be repaired or serviced. In short waiting lines are there everywhere.

Suggestions for managing queues-

1. Determine an acceptable waiting time for customers
2. Try to divert customers while waiting- music, videos etc.
3. Inform customers of what to expect-reason for any long delays etc.
4. Keep employees not serving customers out of sight.
5. Segment customers- Eg short service times in a separate line.
6. Train your servers to be friendly- greet with smile etc.
7. Encourage customers to come during slack periods- special prices etc.
8. Take long term action to reduce waiting time.

Queuing theory: is a quantitative(mathematical) approach to analysis of waiting lines.

The objective of the analysis is to evaluate the service and the costs of a facility so as to maximise its
usefulness. Waiting lines form even though the facility(system) has “on the average” enough capacity to
POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 13
handle the demand. This is because arrival times and service times for the customers (jobs) are random and
variable. Calculations are done typically to evaluate (1) System utilisation(U) as a %age. (2) Mean number of
customers in the system (3) Mean time customers spend in the system (4)Related idle facility and waiting time
costs.

If it is attempted to increase utilisation close to 100% by reducing the capacity then the waiting line will become
very very long (close to infinity) because of the random & variable nature of the arrivals and the service times.

A simple formula for the queuing theory is

N = A / (S-A)
Where
N- is number of customers in system –waiting plus being served.
A- “average” arrival rate per hour in a random and variable manner
S- “average” service rate per hour in a random and variable manner

U- utilisation is a ratio of A/S and is a fraction generally indicated as a %age.

Example- If the “average” arrival rate (A) at a bank counter is 8 customers per hour and the “average” service
rate (S) is 10 customers per hour then the following can be expected as per queuing theory.

Utilisation (U) = A/S= 8/10= 0.80 ie 80%

No. of customers in system (N) = A/(S-A)= 8/10-8 = 8/2= 4 customers in system

3 waiting and 1 being served.

Average time for customer in system =N/S=4/10=0.4 hr. ie 24 minutes.

It will be noted from the above example that if the utilisation is 80% then the number in the queue plus being
served is four.

In the above example if the arrival rate goes upto 9.5 customers per hour for the same service rate of 10 per
hour the utilisation will become 95% but the number of customers in the system will go up substantially to 19
customers and the time for customer in the system will increase from the previous 24 minutes to 114 minutes or
nearly two hours.

From the above it will be clear that if one of the strategies of the firm is to provide a reasonably quick service to
customers then the utilisation ratio must be kept around 60% to 80% and the costs inherent in the idle time of
the facility must be taken into account as part of the costs of the business in adopting this strategy.

QUALITY MANAGEMENT
Quality management may be defined as “managing the entire organisation so that it excels on all dimensions of
products and services that are important to the customer”. It has two fundamental goals namely:
1. Careful design of the product or service
2. Ensuring that the organisation’s systems can consistently produce the design.

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Design quality –refers to the inherent value of the product or service in the marketplace and is thus a strategic
decision for the firm. The common dimensions of this are performance, features, reliability, durability,
serviceability, aesthetics, reputation etc.

Conformance quality -refers to the degree to which the product or service design specifications are met. The
activities involved are of a tactical day to day nature.

Quality control is the use of(statistical or other) control activities to ensure that a goods or service meets its
specified standards, which may relate to materials, performance, reliability, or any other quantifiable (objective
or measurable) characteristic. QC involves measurement of characteristic, feedback, comparison with
specification and then correction.
Two major approaches to controlling quality are “process control” of the actual transformation activities and
“acceptance sampling” of incoming or outgoing products.

The quality characteristics being observed are classified either as “attributes” or “variables”. Attributes are
either present or not such as defective or non- defective, or passing a test or failing it. Variables are present in
varying degrees and are measurable such as weights, dimensions etc. Attributes are countable, variables can be
measured.
When you look at yourself daily in a mirror you are observing and evaluating an attribute, but when you take
your weight on a weighing machine you are measuring a variable.
Quality “cannot” be inspected or evaluated “into” a product or service it has to be designed and then built into
it.

Tolerances- are the upper and lower limits within which measurements are required to be so as to be
acceptable and are specified by design engineering.
Process Capability is the ability of a process to function within its design parameters with respect both its
central tendency (or target value) and its inherent variability. For a process to be within control the target value
set and the inherent variability must be within the tolerance limits of the product.
Sampling –Due to variations in processes or set ups some items might be outside the tolerance limits. 100%
inspection is neither feasible (destructive testing),may be too costly, is unreliable and therefore checking of
random samples is normally done as per a
statistically valid plan regarding sample size and acceptable number of defectives in the sample to achieve an
acceptable level of quality.
POM-KGR-18
Six Sigma Quality- is a philosophy and methods adopted by some very large companies like GE and Motorola
to eliminate defects in their products and processes. Normal manufacturing organisation policy is to ensure that
process variations are within three sigma with respect to the specified tolerances and this statistically means that
99.7% will be acceptable and 0.3% ie 3 per thousand will be defective ie outside the tolerances. In six sigma
philosophy the organisation puts in place procedures, equipment, training etc such that the process capability is
improved in a continous manner to achieve a defect rate which is expected to be less than two defects per billion
units produced.

ISO 9000 certification – is a series of five standards agreed upon by the International Organisation for
Standardisation and adopted in 1987. More than 100 countries including India recognise this for domestic and
international trade and about 50,000 companies have been certified as complying with these standards. These
standards pertain largely to documentation of a firm’s quality process. ISO 9000 and 9004 only provide
guidelines.
ISO 9003- covers quality assurance in final inspection test
ISO 9002- covers quality assurance in procurement, production & installation
ISO 9001- covers q.a. in design, procurement, production,installation & servicing.

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 15

A firm interprets the requirements as they relate to its business. ISO 9000 certification after audit is done
through a third party which is “qualified” for the audit other than the firm and its customers.

JAPANESE METHODS IN OPERATIONS MANAGEMENT

Beginning in 1950 it took ten years to train management and another ten years to train supervisors and workmen
in this philosophy which has the following characteristics.
• Every workstation is a control point and workers not inspectors are responsible for doing the inspection.
• Quality records are expressed in easy to understand charts etc and displayed on chalkboards and signs
throughout the factory
• Both production managers and purchasing officers insist that quality goods be produced/procured with a
minimum quality level.
• Workers have the authority to stop a production line when a problem is noticed. Except in food and drug
plants this is not the case in other countries.
• Rework is the responsibility of those who made the bad items and workers may have to work late in
their own time for this rectification.
• One hundred percent checking for quality especially in finished products is emphasised.
• Small production lots help identify defects and their causes quickly .
• Scheduling and planning is always for less than full capacity to allow production to slow or stop for
quality problems but still make up to meet targets.
• Workers check out and clean their own machines everyday and many perform their own preventive
maintenance and service for the equipment that they use.
• When 100% inspection is not done the first and last piece of a batch are checked as per logic that if first
and last are good the batch is also good.

BPR-BUSINESS PROCESS REENGINEERING

BPR is described as the fundamental rethinking and radical redesign of business processes to achieve dramatic
improvements in critical contemporary measures of performance, such as cost, quality, service and speed.
Reengineering can be compared to TQM-(total quality management) since many of the techniques used are
similar but the basic difference is that while TQM emphasises continuous and incremental improvement of
processes that are in control, reengineering is about radical discontinuous change through process innovation.
The following rules or principles form part of BPR.

1. Organise around outcomes ,not tasks- Several specialised tasks done by different people should be
combined and performed by a single individual to reduce the need for coordination.

2. Have those who use the output perform the task- work should be done where it make the most sense .
For example employees can make some purchases on their own without going through purchasing, make
minor repair etc themselves, suppliers manage parts inventory.

3. Merge information processing work into real work that produces the information- People who
collect the information should also be responsible for processing it as this reduces errors and the need
for reconciling between different information sources.

4 Treat geographically dispersed resources as though they were centralised- Information technology
now available makes this possible and hybrid centralised/decentralised operations are a reality.
POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 16
 2. Link parallel activities instead of integrating their results –Parallel activities should be linked
continuously and coordinated during the process itself.
3. Put decision making where the work is performed and build controls into the process so that the
organisation is flatter and more responsive.
4. Capture information once at source - Information should be collected and available on the firm’s
online system from the source . This avoids erroneous data entries, costly re-entries and delays.

Normally BPR is implemented in a firm by using consultants who have successful experience of this activity in
other businesses and is based on a common platform of innovative use of information technology.

FACILITY LOCATION
Where should a factory or service facility be located? This is a top question in the strategic agenda of all firms
particularly in this age of global markets and global production. Dramatic changes in international trade
agreements have made the world truly a global factory. In practice the question of location is linked to two
competitive factors-
1. The need to produce close to the customer due to time based consumption, trade agreements and costs.
2. The need to locate near the appropriate labour pool to take advantage of low labour costs and/or high
technical skills.
Steps in a facility location decision-
1. Define location objectives, decision criteria and basic requirements.
2. Use political, social, economic (market) data to narrow the potential locations to a few that satisfy
objectives.
3. Evaluate alternatives against basic or dominant requirements and eliminate unacceptable locations.
4. Compare remaining alternatives on quantitative and economic basis using cost-volume, linear
programming, centre of gravity, load/distance and/or other models.
5. Compare alternatives on qualitative basis using factor rating or other subjective means to take less
tangible factors into account.
6. Select the location that best satisfies the quantitative and qualitative criteria by using weighted score or a
group decision process.

Goods can be produced in locations away from the market. Some goods (minerals etc.) are strongly influenced
by raw material availability, whereas others (light engineering) are more flexible. But in all cases value is added
and stored in the product which can then be transported to customers for use at a later time.

Services are typically produced and consumed simultaneously often in the presence of the customer. Because
services normally cannot be stored many service locations (medical, police, beauty salons, fast food restaurants)
are dictated largely by the location of customers. However the ease and speed of electronic telecommunications
has given significant flexibility in the location of information services. This enables firms serving customers in
one country to process work in another country (call centres, software development and support, back office
work, research and engineering).

Because of the variety of service firms and relative low cost of establishing a service facility, compared to one
for manufacturing, new service facilities are far more common than new factories especially in areas of rapid
population growth.

Whereas manufacturing locations decisions are often made by minimising costs, many service location decision
techniques maximise the profit potential of various sites.
POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 17
JIT-JUST IN TIME- LEAN SYSTEMS

In the never ending drive to improve productivity and competitiveness, few concepts have had such a
widespread impact as the Just-In-Time (JIT) philosophy. Beginning with Japan JIT thinking has influenced not
only the inventory process but the entire culture of business firms worldwide.

JIT is a managerial philosophy that fosters continuous improvement by reducing inventories and developing
supplier and system capabilities to produce quality goods in relatively small lots when needed i.e. just in time.

An illustration of JIT is that of a boat crossing a body of water that has dangerous rocks below the surface.
Lowering the water (inventory) reveals the large rocks (problems) that, once removed (solved) allow the boat
(system) to function more effectively. Profits increase not only from the lower inventory costs but also from the
other numerous benefits to the organisation.

With JIT work is “pulled” through the system in response to control from the following downstream work
centre. It is in turn responding to a pull from the next work centre and ultimately to the master schedule and
customer demand. This means that lot sizes are smaller, variety is greater and more set ups are required. The
work force has to more highly trained (flexible) to function in co-operative way as a team taking more
responsibility for the quality of their own work, production methods, preventive maintenance of equipment etc.
Defect free supplies must arrive exactly when required in the correct quantities. Any production problems must
be solved as they occur-not hidden under the protection of buffers and inventory.

Key elements of JIT systems

1. Close ties with a few reliable suppliers.
2. Low inventories of raw materials, work in progress, and finished goods.
3. Pull-type movement of work through the system.
4. Small lot sizes with shorter lead times.
5. Short low cost set up times
6. Product layout generally in smaller, more focussed facilities.
7. Smoothed (mixed-model) master schedule (customer)
8. Multi skilled flexible responsive work force
9. Supportive team oriented problem solving environment
10. Preventive maintenance to minimise breakdowns
11. Strong commitment of everyone to continuous improvement.

ERP - ENTERPRISE RESOUCE PLANNING

ERP is a business software system that integrates application programmes in accounting, sales, manufacturing,
and the other functions in firm. This integration is accomplished through a common database shared by all the
applications.

ERP has the following segments

1. Financial accounting –that includes financials, controlling, and asset management functionality needed
to run the financial accounts for a business. Financials include accounts payable, accounts receivable,
general ledger, capital investments, and the procedures to close the books of account for the month and
year.
POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 18
 2. Human resources- capability to manage, schedule, pay and hire people who work for the firm. This
includes payroll, benefits administration, applicant data, personnel development planning, workforce
planning, schedule and shift planning, time management, and travel expense accounting.
3. Manufacturing and logistics- includes material management, plant maintenance, quality management,
production planning and control, and project management.
4. Sales and distribution- includes customer sales order and configuration management, distribution
export controls, shipping and management, billing, order and rebate processing.

The business software is available from SAP which is a German software firm but there are competitors like
Peoplesoft, i2 Technologies, Oracle etc. It is quite expensive to purchase and implement but there are more than
50,000 sites worldwide using this system.

Like many new technologies ERP systems have near magical effects when they work as promised. Managers at
companies which have implemented ERP successfully list dozens of productivity enhancements including
ability to calculate new prices instantly when a single component in a product is changed, more accurate
manufacturing cost comparisons among different locations, better exchange of electronic data with suppliers
and vendors, more detailed forecasting, rapid delivery of quotations for special customer orders, and elimination
of bottlenecks and duplicate procedures.

Many of the procedures and techniques used in finance, marketing, human resources and production and
operations management are included in the ERP software package and therefore there might be a feeling that
there is no need to learn about them. However this is not the case since the ERP package provides many
different variations of these techniques and a basic understanding of the scope and limitations of these
conventional techniques is necessary so that the ones most appropriate for a particular firm and its business can
be chosen at the time of implementation of ERP.

FORECASTING
Forecasts are estimates of occurrence, timing and/or magnitude of uncertain future events.
Operations managers are primarily concerned with forecasts of demand-which are often made by or in
conjunction with marketing. However managers also use forecasts to plan for levels of personnel, decide how
much inventory to carry and a host of other activities. This results in better use of capacity, more responsive
service to customers, and improved profitability.

Qualitative methods of forecasting- opinion and judgmental

1. Sales force composites –Estimates from field sales people are added up together.
2. Delphi method- A selected group of experts answer a series of questions anonymously and then
receive a summarised feedback and then revise their estimates which is once again summarised. This is
done to minimise bias due to boss-subordinate relationships of people within the organisation.

Quantitative methods of forecasting- Time series

There are a large number of methods to forecast based on past data to take into account trends, business cycles,
seasonal variations (Christmas, summer), macro economic trends etc. The following three quantitative methods
are relatively simple, easy to understand & calculate and reasonably adequate for most businesses.
1. Simple moving average- The average of a recent number of previous time periods is assumed as
the forecast for the future, sometimes corrected with a percentage increase/decrease based on
managerial judgement.
2. Weighted moving average- This is an average of the past periods with different weights for the
past periods with the sum of all weights being equal to 1..
POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 19
 3. Exponential smoothing- The above two methods require a lot of past data to be continually carried.
In exponential smoothing method only three pieces of data are required, the actual and forecast for
the previous period and a smoothing constant alpha decided by the forecaster. The forecast for the
new period is equal to old forecast for the previous period plus a portion(alpha) of the difference
between the actual and the old forecast for that period. Alpha is specified between 0.1 to 0.9, and
the higher the value the greater is the weightage to the recent periods and when it is 1.0 the
forecast equals the actual of previous period.
If it is desired to use exponential smoothing but at the same time keep it close to the simple moving average the
value of alpha should be 2 / n+1 where n is the number of periods. In case n is the previous twelve months then
alpha should be 0.154 since 2/13=0.154 so that both these methods provide similar forecasts.

If the forecast and actual for April were 500 and 450 and the alpha assumed is 0.30, then the forecast for May
would be 485 since 500+0.30(450-500)=485 as per the exponential smoothing method of forecasting which is
considered reasonably accurate for most short term and medium term purposes.

AGGREGATE SALES & OPERATION PLANNING

Production planning is a complex problem! The capacity of most firms is relatively stable whereas the demand
for goods and services is often quite variable. Demand cannot always be met and at other times there are
additional costs due to idle capacity. The objective of aggregate planning is to respond to irregular market
demands by utilising the firm’s equipment, personnel and other resources in the most effective manner, by
planning the quantity and timing of output over the intermediate range (often 3 to 18 months) by adjusting the
production rate, employment, inventory and other controllable variables.
Some decision variables and their associated costs in aggregate planning-
1. Varying size of workforce- costs of hiring, training and layoffs
2. Using overtime- cost of wage premium
3. Allowing idle time- cost of non-productive time
4. Varying inventory levels of finished goods- costs of carrying and storage
5. Subcontracting work to others- extra cost of labour and material

There are in the main three focussed strategies used to meet non-uniform demand involving trade-offs between
workforce size, working hours, inventory and backlog:
1. Chase strategy- Match the production rate to the demand (customer order) rate by hiring and laying-off
employees, use of overtime or subcontracting . To be effective this requires a pool of easily trained
applicants to draw upon. It has obvious non-motivational impacts and workers might slow down to
avoid being laid off when demand rate is low or declining. FINISHED PRODUCT INVENTORY IS
NOT BUILT UP
2. Stable workforce strategy-variable work hours- Vary the output by varying the number of hours
worked through overtime, flexible work schedules (part time) and accepting idle time, some amount of
subcontracting and changes in inventory but NO LAY-OFFS .
3. Level production strategy- produce at a constant rate with stable workforce. Inventory can be
accumulated to meet peaks in demand. Sub-contracting is allowed and promotional programmes to shift
demand (yield management tactics). USE CHANGE IN INVENTORY

Master production schedule (MPS)- After the aggregate sales and operation plan has been decided using one or
a mixture of the above planning strategies a Master production planning schedule is drawn up detailing the
various finished products to be produced over the short to intermediate time horizon. The time horizon in weeks
or months must be sufficient to take into account the lead times required for all purchased and assembled
components.
POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 20
The finished product items in the MPS are then exploded into specific material and capacity requirements by
MRP (materials requirement planning ) and MRP-II (manufacturing resources planning) or CRP (capacity
resources planning). It is to be noted that planning implies not only quantities but also dates and time periods
relevant to these quantities.

SCM-SUPPLY CHAIN MANAGEMENT-INVENTORY

An inventory is a stock of an item or idle resource held for future use. Manufacturing inventories are normally
classified as (1)raw materials (2) work-in-process(3)finished goods or(4) supplies. Inventories represent
investments designed to assist in production activities and/or serve customers. The problem of inventory
management is to hold adequate but not excessive levels since poor inventory management leads to liquidity
problems that has resulted in the failure of many firms.

Major reasons for carrying inventories

1. Service customers with variable demands (immediate or seasonal).
2. Protect against supply errors, shortages and stock outs
3. Help level production activities, stabilise employment
4. Decouple successive stages in operations so that breakdowns don’t stop entire system.
5. Facilitate production of different products on the same facilities
6. Provide a means of purchasing materials in economical lot sizes and obtaining quantity discounts
7. Provide a hedge against future price rises, delivery uncertainties and inflation.

ABC classification or Pareto Analysis;

The ABC classification system is widely used for categorising inventories according to quantity of items and
consumption value.

Group “A”- These high consumption value items though constituting only 10-20% of the total number of items
will account for 70-80% of the total value of consumption of all items and the inventory control is to be “tight”
with “careful, accurate and frequent reviews” with low safety stocks

Group “B” typically constitute 30-40% by number and 15-20% of the total value and merit “normal” control
with “normal ordering and review” with moderate safety stocks.

Group”C” typically constitute 40-50% by number and 5-10% by value and merit only “simple” control with
infrequent reviews and large safety stocks.

Inventory counting- records of inventory must be accurate to facilitate control systems and there are two
methods of auditing inventory records (1) periodical physical counting of all items e.g. once a year or (2)
cyclical counting also known as perpetual inventory counting in which system there is continuous physical
counting and reconciliation with records so that all items are checked at least once in a “cycle” which may be 12
months or less.

Inventory control systems are the ordering and monitoring techniques used to control the ordering and timing
of inventory transactions and the following variables are associated with this system
1. Q-order quantity is the replenishment amount ordered
2. LT- Lead time is the time period between ordering and receipt
3. SS-safety stock is the extra inventory needed to cope with demands stronger than average and/or
delayed receipts.

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 21

 4. ROP-Reorder point is inventory level at which a replenishment order is to be placed and this is equal to
the safety stock (SS) plus expected consumption during the lead time in a fixed quantity order system.
5. AI-Average inventory planned to be held is equal to the safety stock (SS) plus half of order quantity(Q)
in a fixed quantity order system.
6. LTC- Lead time consumption quantity is the quantity expected to be consumed during the lead time.

In the Fixed Order Quantity system (Q system)-a fixed quantity is ordered as soon as the inventory level
drops to the reorder point which is equal to the safety stock plus the lead time consumption quantity. The order
quantity and safety stock quantity are “decided” depending on the A,B,C classification of a particular item and
also taking into account the known fluctuations in demand or reliability of lead times. In this system orders are
triggered as per stock levels and not as per any time period intervals.

A second system is the Fixed Time Periodic System(P system)- the inventory levels are reviewed at fixed
periods e.g. once a month or once a week or daily and orders are placed to replenish the stocks up to a
maximum level which is decided taking into account the safety stocks thought to be necessary and the
consumption during the lead time. In this system orders are only placed as per the Fixed Time period interval.

TWO BIN SYSTEM-this is a simplified version of the Fixed Order System where the both the order quantity
and reorder point are equal to the safety stock plus lead time consumption. This can be used mainly for “B” &
“C” value items with two equal storage facilities (two bins) capable of holding just the order quantity. As soon
as items are drawn from the first bin a replenishment quantity is ordered which will fill up the second bin when
it is received.
Bin qty.= Order qty = Safety stock plus Lead Time consumption
If the weekly consumption is estimated at 20 . and the safety stock is “decided” as 4 weeks and lead time is
expected to be 12 weeks then the Bin Qty and Order Qty will both be 320 ie 4 x 20 plus 12 x 20.

MRP- MATERIAL REQUIREMENT PLANNING

MRP is a software system being widely used in many firms large and small to determine from the Master
Production Schedule(MPS) for the various finished products of a firm the requirement of quantities and
priorities (dates) of all the raw materials , components, sub-assemblies both in house and from outside vendors,
suppliers, contractors etc so that the MPS can be implemented in a smooth and efficient manner with optimum
levels of inventory and work in process.

MRP II or CRP is an extension of the above MRP and in addition to material requirement planning the
Manufacturing Resources Planning or Capacity Resource planning is also available to provide a schedule of
priorities and dates for the various stages and processes involved in the manufacture of the various finished
products as per the MPS-Master Production Schedule.

OPERATIONS SCHEDULING
Operations scheduling is concerned with implementing the plans prepared as per aggregate planning, master
production schedule and MRP etc. by assigning of workloads to equipment, machines, people and monitoring
the actual flow of work through the system.

The major functions of operation scheduling are

1. Release orders to the system in accordance with the plan (MPS)
2. Assign jobs to specific work centres or stages
POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 22
 3. Provide sequencing priorities to decide the order in which jobs are to be processed
4. Control the processing lead time by tracking and expediting (chasing) jobs
5. Monitor the capacity status of facilities and their utilisation

The objectives of scheduling are to optimise the goals of (1) providing the best possible customer service ( due
dates delivery, inventory) while at the same time (2)make the best use of people, equipment and facilities
available in the firm.

In high volume (flow or continuous) and intermediate (flow or large batch) systems the facilities are laid out in
such a way that work flow is streamlined and all products follow the same path or sequence with minor
variations and therefore scheduling focuses on exercising care to avoid breakdowns, material shortages, and
reducing change-over times etc which might reduce the output rate and decrease utilisation.

Low volume (job and small batch) systems are normally laid out in a functional process layout format utilising
general purpose equipment grouped together. The variable work-flow paths and variable processing times
generate queues, excessive work-in-process inventories, capacity utilisation concerns that require more day-to-
day attention.

Job shops typically have many jobs waiting to be processed. Priority decision rules are simplified guidelines
(heuristic) or thumb rules for determining the sequence of jobs. Some of these rules are first come first served
(FCFS), earliest due date (EDD),least slack or due date less processing time (LS), shortest processing
time(SPT), longest processing time(LPT) and preferred customer order (PCO).

One cardinal rule that is followed throughout operations scheduling is that jobs once started are not
interrupted for any scheduling or priority reasons.

JOHNSON’S RULE-yields a minimum processing time and maximum utilisation for sequencing “n” jobs
through two work centres where the same sequence must be followed by all the “n” jobs. Jobs with the shorter
processing time in the second work centre are placed at the end of the sequence queue and jobs with the
shorter processing time in the first work centre are placed at the head of the sequence queue.

Scheduling in a service system is sometimes more of a problem since services cannot be stored (inventoried)
and the demand fluctuations can be quite high. Some of the methods used to adapt customer demand to limited
capacity of service systems are
1. Appointment systems- to control customer arrival times and the number of customers in the system at
one time (medical specialists, auto-repair shops etc.)
2. Reservation systems-when customers occupy some facility (hotel rooms, airline seat, rental car). They
provide lead time and some assurance of demand so that the firm can get higher utilisation of the
facility.
3. Pricing incentives and backlogs-are ways of shifting or adjusting demands e.g. price discounts are used
to smooth out airline demands and backlogs are used in appliance repair and installation.

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 23

The essentials of operations management in production of
goods or services are:

1. Make it better
2. Make it cheaper
3. Make it faster

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 24

PERSONAL EFFECTIVENESS
• Confident without being aggressive or rude
• Push the envelope without breaking it
• Must not become too dependent on the present job –must retain a degree of the feeling of freedom
• Politically plugged in – listen to colleagues and friends
• Stay focussed on work while away from home
• Boss- professional loyalty-think about his aims and how you can assist
• Don’t overprice yourself on the present job- this will restrict mobility
• Work smartly- think through your tasks
• Must feel positive and look forward to going to work every morning-especially on Monday mornings-
• Punctuality of attendance
• Meeting deadlines- prior information to bosses of any delays and reasons. No surprises either pleasant or
unpleasant- must establish and maintain credibility as a reliable person who will do his best without
much supervision.
• Don’t merely pass problems on to bosses- suggest some solutions.
• Read Economic times daily-politics, sports, business- Indian & International Listen to news regularly.
• Faced with a problem or task collect information on it from internet, books, experts, friends, colleagues,
superiors, and competitors. There is very little that is unique in this world
• As long as you are working in an organisation and even after leaving don’t disparage it or your boss-
this is totally counterproductive. If you are not happy or comfortable make plans to leave the
organisation- in the meantime keep your cool and also avoid the temptations to be wilfully critical even
after you have left.
• Continuous education & training – must keep up to date– professional institutions- membership-
interaction- and reading specialised journals.
• Plan your work-Work your plan
• The impossible will not happen the inevitable will
• Hope for the best –plan for the worst.
• Don’t keep mum- communicate
• MANAGE-make best use of available resources
• Sense of humour- you must be able laugh about yourself and your tasks- don’t get into the mood or
feeling that the whole worlds weight has fallen on your shoulders.
• When you are at work concentrate – don’t brood on domestic or personal problems this will reduce your
effectiveness. In any case there is nothing you can do about these matters while at work- so worry about
them when at home.

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 25

BRIEF BIODATA

K.GURURAJ
BE (Honors), C.Eng., AMP (Harvard)
Email: K_Gururaj@hotmail.com
Education & Training

B E (hons) ,mechanical engineering, College of Engineering Guindy with Cartwright Gold Medal
English Electric Overseas Fellowship- two year practical shop floor training in three factories in UK
Industrial Engineers Course conducted by MPC/USAID
General Management Programme –Dunchurch College of Management, Rugby,UK
Advanced Management Program- Harvard Business School, Boston USA

Working Experience

English Electric Co of India Ltd, Chennai –(10 yrs)

Manufacture of various electrical engineering products like switches, fuses, relays and control panels.
(1)Special Trainee (2) Industrial Engineer (3) Chief Industrial Engineer (4) Purchase & Technical
Services Manager.

American Universal Electric I Ltd., Faridabad (2 yrs)

Manufacture of fractional horsepower motors, ceiling fans and coolers etc on flow line basis with
American collaboration (1) Works Manager.

G E C of I Ltd., Calcutta (11 yrs)

Manufacture of transformers, motors, switchgear, ceiling fans etc.
(1)Group Manager-Engineering Services responsible for quality control and improvement in all four
factories in India. (2) General Manager, AEI works –Calcutta

English Electric Co of India Ltd, Chennai (3 yrs)

Executive Director – Manufacturing

Bhoruka Gases Ltd. Bangalore (12 yrs)

Manufacture of Oxygen, Nitrogen, Argon by a continuous process (1) Managing Director.

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 26

CASE STUDY: DOCTOR’S FEES
Business Plan-Queuing Theory
Dr Balaji who has qualified as a general physician has been working in a large hospital in Bangalore for five
years and now has plans to set up a private practice of his own in his house which is located in the IV th block
of Koramangala. He has surveyed the neighbourhood and found that there are no other private doctors within a
two km radius where in addition to high and middle income households there are also three low income
colonies and is therefore confident that he will have a reasonably good practice provided his fees are reasonable.

He wishes to earn by way of consultation fees a total around Rs 36000 per month while working for 24 days in
a month . He will put up a notice board outside that he will be available for consultations from 9.30 am to
12.30 pm and from 5 pm to 8 pm excluding Sundays and holidays.

From his own experience, from data gathered from professional publications and the internet he has come to the
conclusion that though the time for consultations with individual patients will vary considerably the average
time per patient will be six minutes.

He plans to see patients without any system of prior appointments and also feels that for him to be successful
the total time (waiting plus consultation) that patients spend on his premises should be limited to 30 minutes.

As part of his business plan please advise Dr Balaji the consultation fee to the nearest rupee that he should
plan on charging using the simplified Queuing theory formula
N= A / (S-A)
N- is total number in the system- waiting plus being served
A- arrival rate per hour
S- service rate per hour

Note for general information -If the arrival rate is in a random manner and comes very close to the service
rate the queue(N) will get close to infinity
===============================================================
Tick or circle the most appropriate amount for the consultation fee from the choices given below

(A) Rs 10 (B) Rs 30 (C) Rs 50 (D) Rs 20

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 27

CASE STUDY: CAR REPAIR FIRM
Weekly Schedule
Johnson’s Rule
Ms Sharmila is the Manager of a very successful car repair firm located on the ring road in Koramangala ,
Bangalore. The firm has built up an excellent reputation for quality work and reliability of delivery dates at
reasonable prices. It specializes in repair and painting of damaged car bodies. ( Better, Cheaper & Faster)

One of the reasons for the success of this firm is that Sharmila follows an excellent weekly system for
scheduling of jobs which results in good utilization of the facilities and also provides a reliable delivery date for
each vehicle. The firm deals with all sizes and makes of cars and repair of all types of damage to the body of
the car. Though the types of jobs vary all follow the same sequence “body repair” followed by “painting” and
Sharmila follows the Johnson’s Rule for her weekly schedule. The firm works for 8 hours in a day from 9 am to
5 pm and for six days in a week from Monday to Saturday.

On the Saturday of a particular week Sharmila has the following five cars A to E to schedule in the next week
starting from Monday 9 am for which the estimated times for “body repair” and “ painting” are as below

I II
Body repair Painting

Car-“A” -Blue Santro 10 hrs 3 hrs

Car “B” Green Esteem 4 hrs 9 hrs
Car “C” Red Maruti 2 hrs 7 hrs
Car “D” Grey Lancer 8 hrs 11 hrs
Car “E” White Accent 6 hrs 5 hrs
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( I ) Which one of the following four sequences will she follow (tick one)
(1) ABCDE (2) DECAB (3) CEBAD (4) CBDEA

(II) On which day and what time will the last car be ready for delivery (tick one)
(1) Wednesday-5 pm (2) Friday-2 pm (3) Saturday-10am (4) Thursday-3 pm

POM-KGR-001 - PRODUCTION AND OPERATIONS MANAGEMENT 28