NOTES OF PRODUCTION AND OPERATIONS

MANAGEMENT

UNIT 1 :
What is relation of Operations Manager compared to other division

TOPIC 1 :
Q1 : WHAT IS DEFINITION OF PRODUCTION AND OPERATIONS MANAGEMENT ?

Production is defined as ‘the step-by-step conversion of one form of material into another
form through chemical or mechanical process to create or enhance the utility of the product to the
user’. Thus production is a value addition process. At each stage of processing, there will be value
addition.
Some examples of production are: manufacturing custom-made products like, boilers with a
specific capacity, constructing flats, some structural fabrication works for selected customers, etc.,
and manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.
Production function is ‘the part of an organisation, which is concerned with the transformation of
a range of inputs into the required outputs (products) having the requisite quality level’.

An effective planning and control on production parameters to achieve or create value to the
customer is called production management. OR
Whenever the management techniques are used in production process so as to achieve desired
output it is known as production management

Operation =Operation is that part of as organization, which is concerned with the transformation of
a range of inputs into the required output (services) having the requisite quality level.

OPERATION MANAGEMENT
Production management deals with manufacturing of goods whereas operation management
deals both with services and good
To deliver the value for customer in products and services it is essential to do following

Identify customer needs and convert that into a specific product or services in certain time
Based on input requirement establish backward linkage. Ensure safe supply chain for delivery.

Difference Between Production and Operation Management

Operations Management

The study of set of activities comprising supervision, planning and designing of business operations
in the field of manufacturing of goods and services is termed as operations management. The
purpose of operations management is to make certain that the operations of a business are efficient
and effective and result in minimum of wastage. Operations management tries to cut down
resources involved in operations while at the same time making operations more effective and
productive.

In fact operations management is more concerned on processes than people or products.

Operations management in a nutshell is using physical resources in an optimum manner, converting
input into output, so as to supply to the market the desired and finished product.

Whereas

Production Management

Production management on the other hand focuses specifically on the production of goods and
services and is concentrated upon churning output from input. It is a broad sum of activities that go
into turning raw material into final, finished product. One may feel that production management is a
subset of operations management,

‘Production management deals with decision-making related to production processes so that the
resulting goods or services are produced according to specifications, in the amount and by the
schedule demanded and out of minimum cost’.
Objectives of Production Management

The objective of the production management is ‘to produce goods and services of Right Quality and
Quantity at the Right time and Right manufacturing cost’.

1. Right Quality: The quality of product is established based upon the customers need. The
right quality is not necessarily being the best quality. It is determined by the cost of the product and
the technical characteristics as suited to the specific requirements.

2. Right Quantity: The manufacturing organisation should produce the products in right number. If
they are produced in excess of demand the capital will block up in the form of inventory and if the
quantity is produced in short of demand, leads to shortage of products.

3. Right Time: Timeliness of delivery is one of the important parameter to judge the
effectiveness of production department. So, the production department has to make the optimal
utilization of input resources to achieve its objective.

4. Right Manufacturing Cost: Manufacturing costs are established before the product is
actually manufactured. Hence, all attempts should be made to produce the products at pre-
established cost, so as to reduce the variation between actual and the standard (pre-established)
cost.

Objectives of Operations Management

These are the five basic ‘performance objectives’ and they apply to all types of operation. (Imagine
that you are an operations manager in any kind of business – a hospital administrator, for example,
or a production manager at a car plant. What kinds of things are you likely to want to do in order to
satisfy customers and contribute to competitiveness?)

1. Quality: There are many different approaches to defining this. We define it as consistent
conformance to customers’ expectations.

2. Speed: The elapsed time between customers requesting products or services and their
receiving them.

3. Dependability: Delivering, or making available, products or services when they were

promised to the customer. (You would want to do things on time, so as to keep the delivery
promises you have made to your customers. If the operation can do this, it is giving a
dependability advantage to its customers.)

4. Flexibility: The degree to which an operation’s process can change what it does, how it is
doing it, or when it is doing it. (You would want to be able to change what you do; that is,
being able to vary or adapt the operation’s activities to cope with unexpected circumstances
or to give customers individual treatment. Hence the range of goods and services which you
produce has to be wide enough to deal with all customer possibilities. Either way, being able
to change far enough and fast enough to meet customer requirements gives a flexibility
advantage to your customers.)

5. COST: You would want to do things cheaply; that is, produce goods and services at a cost
which enables them to be priced appropriately for the market while still allowing for a
 return to the organization; or, in a not-for-profit organization, give good value to the
taxpayers or whoever is funding the operation.

What are the roles and responsibility of Operations managers

1. Understanding the operation’s strategic objectives. The first responsibility of any

operations management team is to understand what it is trying to achieve. This means
developing a clear vision of how the operation should help the organization achieve its long-
term goals. It also means translating the organization’s goals into their implications for the
operation’s performance objectives, quality, speed, dependability, flexibility and cost.

2. Developing an operations strategy for the organization. Operations management

involves hundreds of minute-by-minute decisions, so it is vital that operations managers
have a set of general principles which can guide decision making towards the organization’s
longer-term goals. This is an operations strategy

3. Designing the operation’s products, services and processes. Design is the activity of
determining the physical form, shape and composition of products, services and
processes. Although direct responsibility for the design of products and services might
not be part of the operations function in some organizations, it is crucial to the operation’s
other activities.

4. Planning and controlling the operation. Planning and control is the activity of deciding what
the operations resources should be doing, then making sure that they really are doing it.

5. Improving the performance of the operation. The continuing responsibility of all operations
managers is to improve the performance of their operation

Why is operations management so important?

All the activities of operations management can very significantly contribute to the success
of any organization by using its resources effectively to produce goods and services in a way
that satisfies its customers. To do this it must be creative, innovative and energetic in
improving its processes, products and services. In fact, an effective operation can give four
types of advantage to the business.

1. _ it can reduce the costs of producing products and services and being efficient;
2. _ it can increase revenue by increasing customer satisfaction through good quality and
service;
 3. _ it can reduce the amount of investment (sometimes called capital employed) that is
necessary to produce the required type and quantity of products and services by increasing
the effective capacity of the operation and by being innovative in how it uses its physical
resources;
4. _ it can provide the basis for future innovation by building a solid base of operations skills
and knowledge within the business.

What is production system ?

The production system has the following characteristics:

1. Production is an organised activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organisation system.
4. There exists a feedback about the activities, which is essential to control and improve system
performance.
CLASSIFICATION OF PRODUCTION SYSTEM

Job-Shop Production:

Job-shop production are characterised by manufacturing one or few quantity of products designed
and produced as per the specification of customers within prefixed time and cost.

Job-shop Production is characterised by

1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product, capacities for
each work centre and order priorities.
Advantages
Following are the advantages of Job-shop Production:
1. Because of general purpose machines and facilities variety of products can be produced.
2. Operators will become more skilled and competent, as each job gives them learning
opportunities.
3. Full potential of operators can be utilised.
4. Opportunity exists for Creative methods and innovative ideas.

Limitations
Following are the limitations of Job-shop Production:
1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements

Batch Production
Manufacturers of anything from cakes to computer chips have many ways of organizing production.
One of these methods is called batch production. This is when, instead of manufacturing items singly
or by continuous production, items are manufactured in groups or batches. A specific process for
each item takes place at the same time on a batch of items, and that group does not move onto the
next stage of production or inspection until the whole batch is done.

For example, in small bakeries and many homes, as opposed to large food manufacturing
companies, cookies are baked in batches. A baker must first make the dough, then place it onto
baking sheets, and then bake it. People are limited as to how many cookies they can produce at one
time by the number of baking sheets and ovens they possess, and by the size of bowls available to
mix each batch.

This is batch production, since a large number of cookies is baked at the same time, and bakers can’t
skip from one step to the next until each process is complete.

Another example is found in thin film coating of materials, like lenses, computer screens and the
like. A coating machine can hold a finite number of the item being produced, and it can take several
hours to over a day to apply the coatings needed in order to produce one batch. After materials are
coated, they move on to the inspection process, while the coating machine must be readied for the
next batch.

Batch Production is characterised by

1. Shorter production runs.
2. Plant and machinery are flexible.
3. Plant and machinery set up is used for the production of item in a batch and change of set up
is required for processing the next batch.
4. Manufacturing lead-time and cost are lower as compared to job order production.
Advantages
Following are the advantages of Batch Production:
1. Better utilisation of plant and machinery.
2. Promotes functional specialisation.
3. Cost per unit is lower as compared to job order production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate and process number of products.
6. Job satisfaction exists for operators.
Limitations
Following are the limitations of Batch Production:
1. Material handling is complex because of irregular and longer flows.
2. Production planning and control is complex.
3. Work in process inventory is higher compared to continuous production.
4. Higher set up costs due to frequent changes in set up.

Mass Production

Mass production is the production of large amounts of standardized products, including and
especially on assembly lines. With job production and batch production it is one of the three main
production methods.[1]

An assembly line is a type of industrial production in which prefabricated, interchangeable parts are
used to assemble a finished product. The most basic assembly system consists of a simple conveyor
belt which carries the product, such as a toy, through a series of work stations until it is finished.
More complex lines include feeder belts to carry parts to work stations along the line, used for
building cars and other complex equipment. The development of the assembly line revolutionized
manufacturing, and contributed to the substantial fortunes of several major players in the Industrial
Revolution.

Mass Production is characterised by

1. Standardisation of product and process sequence.
2. Dedicated special purpose machines having higher production capacities and output rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.
Advantages
Following are the advantages of Mass Production:
1. Higher rate of production with reduced cycle time.
2. Higher capacity utilisation due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.
Limitations
Following are the limitations of Mass Production:
1. Breakdown of one machine will stop an entire production line.
2. Line layout needs major change with the changes in the product design.
3. High investment in production facilities.
4. The cycle time is determined by the slowest operation.

Continuous flow process

e.g. chemical plants or power plants steel plants

Manufacturers most often use this type of process in the manufacture of chemicals, drugs, and glass,
as well as in the refining process for crude oil. A continuous process plant is designed so that there is
a seamless flow of the product from one machine or robot station to another through the
production process. Software programs and complex equipment that collect feedback from different
stations regulate the rate of flow through the system, controlling the rate of production close.

Continuous Production is characterised by

1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.
Advantages
Following are the advantages of Continuous Production:
1. Standardisation of product and process sequence.
2. Higher rate of production with reduced cycle time.
3. Higher capacity utilisation due to line balancing.
4. Manpower is not required for material handling as it is completely automatic.
Operations Management Concepts 7
5. Person with limited skills can be used on the production line.
6. Unit cost is lower due to high volume of production.
Limitations
Following are the limitations of Continuous Production:
1. Flexibility to accommodate and process number of products does not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.

SCOPE OF OPERATIONS MANAGEMENT :

Following are the activities, which are listed under Production and Operations Management
functions:
1. Location of facilities.
2. Plant layouts and Material Handling.
3. Product Design.
4. Process Design.
5. Production and Planning Control.
6. Quality Control.
7. Materials Management.
8. Maintenance Management.

What is a PLANT OR FACILITY LOCATION ?

Facility location is the process of determining a geographic site for a firm’s operations. Managers
of both service and manufacturing organizations must weigh many factors when assessing the
desirability of a particular site, including proximity to customers and suppliers, labour costs, and
transportation costs.
‘
What are the controllable and uncontrollable factors to decide the location
of site or plant?

Following are the general factors required for location of plant in case of all types of organisations.

CONTROLLABLE FACTORS UNCONTROLLABLE FACTORS

1. Proximity to markets
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
6. External economies
7. Capital.
8. Government policy
9. Climate conditions
10. Supporting industries and services
11. Community and labour attitudes
12. Community Infrastructure.

1. Proximity to markets: Every company is expected to serve its customers by providing

goods and services at the time needed and at reasonable price organizations may choose to locate
facilities close to the market or away from the market depending upon the product. When the
buyers for the product are concentrated, it is advisable to locate the facilities close to the market.
Locating nearer to the market is preferred if
• The products are delicate and susceptible to spoilage.
• After sales services are promptly required very often.
• Transportation cost is high and increase the cost significantly.
• Shelf life of the product is low.
Nearness to the market ensures a consistent supply of goods to customers and reduces the
cost of transportation.

2. Supply of raw material: It is essential for the organization to get raw material in right
qualities and time in order to have an uninterrupted production. This factor becomes very important
if the materials are perishable and cost of transportation is very high.
General guidelines suggested by Yaseen regarding effects of raw materials on plant location
are:
• When a single raw material is used without loss of weight, locate the plant at the raw
material source, at the market or at any point in between.
• When weight loosing raw material is demanded, locate the plant at the raw material
source.
• When raw material is universally available, locate close to the market area.
• If the raw materials are processed from variety of locations, the plant may be situated
so as to minimize total transportation costs.
Nearness to raw material is important in case of industries such as sugar, cement, jute and
cotton textiles.
3. Transportation facilities: Speedy transport facilities ensure timely supply of raw materials
to the company and finished goods to the customers. The transport facility is a prerequisite for
Facility Location and Layout 69
the location of the plant. There are five basic modes of physical transportation, air, road, rail,
water and pipeline. Goods that are mainly intended for exports demand a location near to the port
or large airport. The choice of transport method and hence the location will depend on relative
costs, convenience, and suitability. Thus transportation cost to value added is one of the criteria
for plant location.
4. Infrastructure availability: The basic infrastructure facilities like power, water and
waste disposal, etc., become the prominent factors in deciding the location. Certain types of
industries are power hungry e.g., aluminum and steel and they should be located close to the
power station or location where uninterrupted power supply is assured throughout the year. The
non-availability of power may become a survival problem for such industries. Process industries
like paper, chemical, cement, etc., require continuous. Supply of water in large amount and good
quality, and mineral content of water becomes an important factor. A waste disposal facility for
process industries is an important factor, which influences the plant location.
5. Labour and wages: The problem of securing adequate number of labour and with skills
specific is a factor to be considered both at territorial as well as at community level during plant
location. Importing labour is usually costly and involve administrative problem. The history of
labour relations in a prospective community is to be studied. Prospective community is to be
studied. Productivity of labour is also an important factor to be considered. Prevailing wage
pattern, cost of living and industrial relation and bargaining power of the unions’ forms in
important considerations.
6. External economies of scale: External economies of scale can be described as
urbanization and locational economies of scale. It refers to advantages of a company by setting
up operations in a large city while the second one refers to the “settling down” among other
companies of related Industries. In the case of urbanization economies, firms derive from locating
in larger cities rather than in smaller ones in a search of having access to a large pool of labour,
transport facilities, and as well to increase their markets for selling their products and have
access to a much wider range of business services.
Location economies of scale in the manufacturing sector have evolved over time and have
mainly increased competition due to production facilities and lower production costs as a result
of lower transportation and logistical costs. This led to manufacturing districts where many
companies of related industries are located more or less in the same area. As large corporations
have realized that inventories and warehouses have become a major cost factor, they have tried
reducing inventory costs by launching “Just in Time” production system (the so called Kanban
System). This high efficient production system was one main factor in the Japanese car industry
for being so successful. Just in time ensures to get spare parts from suppliers within just a few
hours after ordering. To fulfill these criteria corporations have to be located in the same area
increasing their market and service for large corporations.
7. Capital: By looking at capital as a location condition, it is important to distinguish the
physiology of fixed capital in buildings and equipment from financial capital. Fixed capital costs
as building and construction costs vary from region to region. But on the other hand buildings can
also be rented and existing plants can be expanded. Financial capital is highly mobile and does
not very much influence decisions. For example, large Multinational Corporations such as Coca70
Operations Management operate in many different countries and can raise capital where interest
rates are lowest and conditions are most suitable.
Capital becomes a main factor when it comes to venture capital. In that case young, fast
growing (or not) high tech firms are concerned which usually have not many fixed assets. These
firms particularly need access to financial capital and also skilled educated employees.

UNCONTROLLABLE FACTORS
8. Government policy: The policies of the state governments and local bodies concerning
labour laws, building codes, safety, etc., are the factors that demand attention.
In order to have a balanced regional growth of industries, both central and state governments
in our country offer the package of incentives to entrepreneurs in particular locations. The
incentive package may be in the form of exemption from a safe tax and excise duties for a
specific period, soft loan from financial institutions, subsidy in electricity charges and investment
subsidy. Some of these incentives may tempt to locate the plant to avail these facilities offered.
9. Climatic conditions: The geology of the area needs to be considered together with
climatic conditions (humidity, temperature). Climates greatly influence human efficiency and
behaviour. Some industries require specific climatic conditions e.g., textile mill will require humidity.
10. Supporting industries and services: Now a day the manufacturing organisation will
not make all the components and parts by itself and it subcontracts the work to vendors. So,
the source of supply of component parts will be the one of the factors that influences the
location.
The various services like communications, banking services professional consultancy services
and other civil amenities services will play a vital role in selection of a location.
11. Community and labour attitudes: Community attitude towards their work and towards
the prospective industries can make or mar the industry. Community attitudes towards supporting
trade union activities are important criteria. Facility location in specific location is not desirable
even though all factors are favouring because of labour attitude towards management, which
brings very often the strikes and lockouts.
12. Community infrastructure and amenity: All manufacturing activities require access
to a community infrastructure, most notably economic overhead capital, such as roads, railways,
port facilities, power lines and service facilities and social overhead capital like schools, universities
and hospitals.
These factors are also needed to be considered by location decisions as infrastructure is
enormously expensive to build and for most manufacturing activities the existing stock of
infrastructure provides physical restrictions on location possibilities.

What are the different models or techniques used to decide ideal

site location?
LOCATION MODELS
Various models are available which help to identify the ideal location. Some of the popular models
are:
1. Factor rating method
2. Weighted factor rating method
3. Load-distance method
4. Centre of gravity method
5. Break-even analysis.

The process of selecting a new facility location involves a series of following steps:
1. Identify the important location factors.
2. Rate each factor according to its relative importance, i.e., higher the ratings is indicative
of prominent factor.
3. Assign each location according to the merits of the location for each factor.
4. Calculate the rating for each location by multiplying factor assigned to each location with
basic factors considered.
5. Find the sum of product calculated for each factor and select best location having highest
total score.
ILLUSTRATION 1: Let us assume that a new medical facility, Health-care, is to be
located in Delhi. The location factors, factor rating and scores for two potential sites are
shown in the following table. Which is the best location based on factor rating method?
Weighted Factor Rating Method

In this method to merge quantitative and qualitative factors, factors are assigned weights based
on relative importance and weightage score for each site using a preference matrix is calculated.
The site with the highest weighted score is selected as the best choice.
ILLUSTRATION 2: Let us assume that a new medical facility, Health-care, is to be
located in Delhi. The location factors, weights, and scores (1 = poor, 5 = excellent) for
two potential sites are shown in the following table. What is the weighted score for these
sites? Which is the best location?

Load-distance Method
The load-distance method is a mathematical model used to evaluate locations based on proximity
factors. The objective is to select a location that minimizes the total weighted loads moving into
and out of the facility. The distance between two points is expressed by assigning the points to
grid coordinates on a map. An alternative approach is to use time rather than distance.

DISTANCE MEASURES
Suppose that a new warehouse is to be located to serve Delhi. It will receive inbound shipments
from several suppliers, including one in Ghaziabad. If the new warehouse were located at
Gurgaon, what would be the distance between the two facilities? If shipments travel by truck,
the distance depends on the highway system and the specific route taken. Computer software
is available for calculating the actual mileage between any two locations in the same county.
However, for load-distance method, a rough calculation that is either Euclidean or rectilinear
distance measure may be used. Euclidean distance is the straight-line distance, or shortest
possible path, between two points.
Distance between point A and point B
The point A on the grid represents the supplier’s location in Ghaziabad, and the point B
represents the possible warehouse location at Gurgaon. The distance between points A and B
is the length of the hypotenuse of a right triangle, or
dAB = Sqrt ((XA – XB)2 + (YA – YB)2) where dAB = distance between points A and B
XA = x-coordinate of point A
YA = y-coordinate of point A
XB = x-coordinate of point B
YB = y-coordinate of point B

Centre of Gravity
The centre of gravity is defined to be the location that minimizes the weighted distance
between the warehouse and its supply and distribution points, where the distance is weighted
by the number of tones supplied or consumed.
Centre of gravity is based primarily on cost considerations. This method can be used to assist
managers in balancing cost and service objectives. The centre of gravity method takes into
account the locations of plants and markets, the volume of goods moved, and transportation costs
in arriving at the best location for a single intermediate warehouse

The new Health-care facility is targeted to serve seven census tracts

in Delhi. The table given below shows the coordinates for the centre of each census tract,
along with the projected populations, measured in thousands. Customers will travel from
the seven census tract centres to the new facility when they need health-care. Two
locations being considered for the new facility are at (5.5, 4.5) and (7, 2), which are
the centres of census tracts C and F. Details of seven census tract centres, coordinate
distances along with the population for each centre are given below. Find the target
area’s centre of gravity for the Health-care medical facility.

Break-even Analysis
Break even analysis implies that at some point in the operations, total revenue equals total cost.
Break even analysis is concerned with finding the point at which revenues and costs agree
exactly. It is called ‘Break-even Point’.
What is meaning of plant layout ? What are the different types of plant layout?

CLASSIFICATION OF LAYOUT
Layouts can be classified into the following five categories:
1. Process layout
2. Product layout
3. Combination layout
4. Fixed position layout
5. Group layout

Process Layout
Process layout is recommended for batch production. All machines performing similar type of
operations are grouped at one location in the process layout e.g., all lathes, milling machines, etc.
are grouped in the shop will be clustered in like groups.
Thus, in process layout the arrangement of facilities are grouped together according to their
functions. A typical process layout is shown in Fig. 4.5. The flow paths of material through the
facilities from one functional area to another vary from product to product. Usually the paths are
long and there will be possibility of backtracking.
Process layout is normally used when the production volume is not sufficient to justify a product
layout. Typically, job shops employ process layouts due to the variety of products manufactured and
their low production volumes.

Advantages
1. In process layout machines are better utilized and fewer machines are required.
2. Flexibility of equipment and personnel is possible in process layout.
3. Lower investment on account of comparatively less number of machines and lower cost
of general purpose machines.
4. Higher utilisation of production facilities.
5. A high degree of flexibility with regards to work distribution to machineries and workers.
6. The diversity of tasks and variety of job makes the job challenging and interesting.
7. Supervisors will become highly knowledgeable about the functions under their department.
Limitations
1. Backtracking and long movements may occur in the handling of materials thus, reducing
material handling efficiency.
2. Material handling cannot be mechanised which adds to cost.
3. Process time is prolonged which reduce the inventory turnover and increases the inprocess
inventory.
4. Lowered productivity due to number of set-ups.
5. Throughput (time gap between in and out in the process) time is longer.
6. Space and capital are tied up by work-in-process.

Product Layout
In this type of layout, machines and auxiliary services are located according to the processing
sequence of the product. If the volume of production of one or more products is large, the
facilities can be arranged to achieve efficient flow of materials and lower cost per unit. Special
purpose machines are used which perform the required function quickly and reliably.
The product layout is selected when the volume of production of a product is high such that
a separate production line to manufacture it can be justified. In a strict product layout, machines
are not shared by different products. Therefore, the production volume must be sufficient to
achieve satisfactory utilisation of the equipment. A typical product layout is shown in Fig. 4.6.

Advantages
1. The flow of product will be smooth and logical in flow lines.
2. In-process inventory is less.
3. Throughput time is less.
4. Minimum material handling cost.
5. Simplified production, planning and control systems are possible.
6. Less space is occupied by work transit and for temporary storage.
7. Reduced material handling cost due to mechanised handling systems and straight flow.
8. Perfect line balancing which eliminates bottlenecks and idle capacity.
9. Manufacturing cycle is short due to uninterrupted flow of materials.
10. Small amount of work-in-process inventory.
11. Unskilled workers can learn and manage the production.
Limitations
1. A breakdown of one machine in a product line may cause stoppages of machines in the
downstream of the line.
2. A change in product design may require major alterations in the layout.
3. The line output is decided by the bottleneck machine.
4. Comparatively high investment in equipments is required.
5. Lack of flexibility. A change in product may require the facility modification.

Combination Layout
A combination of process and product layouts combines the advantages of both types of layouts.
A combination layout is possible where an item is being made in different types and sizes. Here
machinery is arranged in a process layout but the process grouping is then arranged in a sequence
to manufacture various types and sizes of products. It is to be noted that the sequence of
operations remains same with the variety of products and sizes. Figure 4.7 shows a combination
type of layout for manufacturing different sized gears.
Fig. 4.7 Combination layout for making different types and sizes of gears
Fixed Position Layout
This is also called the project type of layout. In this type of layout, the material, or major
components remain in a fixed location and tools, machinery, men and other materials are brought
to this location. This type of layout is suitable when one or a few pieces of identical heavy
products are to be manufactured and when the assembly consists of large number of heavy parts,
the cost of transportation of these parts is very high.
Fixed position layout

Advantages
The major advantages of this type of layout are:
1. Helps in job enlargement and upgrades the skills of the operators.
2. The workers identify themselves with a product in which they take interest and pride in
doing the job.
3. Greater flexibility with this type of layout.
4. Layout capital investment is lower.

Group Layout (or Cellular Layout)

There is a trend now to bring an element of flexibility into manufacturing system as regards
to variation in batch sizes and sequence of operations. A grouping of equipment for performing
a sequence of operations on family of similar components or products has become all the
important.
Group Technology (GT) is the analysis and comparisons of items to group them into
families with similar characteristics. GT can be used to develop a hybrid between pure process
layout and pure flow line (product) layout. This technique is very useful for companies that
produce variety of parts in small batches to enable them to take advantage and economics of
flow line layout.
The application of group technology involves two basic steps; first step is to determine
component families or groups. The second step in applying group technology is to arrange the
plants equipment used to process a particular family of components. This represents small plants
within the plants. The group technology reduces production planning time for jobs. It reduces the
set-up time.
Thus group layout is a combination of the product layout and process layout. It combines
the advantages of both layout systems. If there are m-machines and n-components, in a group
layout (Group-Technology Layout), the m-machines and n-components will be divided into distinct
number of machine-component cells (group) such that all the components assigned to a cell are
almost processed within that cell itself. Here, the objective is to minimize the intercell movements.
The basic aim of a group technology layout is to identify families of components that require
similar of satisfying all the requirements of the machines are grouped into cells. Each cell is
capable of satisfying all the requirements of the component family assigned to it.
The layout design process considers mostly a single objective while designing layouts. In
process layout, the objective is to minimize the total cost of materials handling. Because of the
nature of the layout, the cost of equipments will be the minimum in this type of layout. In product
layout, the cost of materials handling will be at the absolute minimum. But the cost of equipments
would not be at the minimum if the equipments are not fully utilized.
In-group technology layout, the objective is to minimize the sum of the cost of transportation
and the cost of equipments. So, this is called as multi-objective layout. A typical process layout
is shown in Fig. 4.9.

Advantages of Group Technology Layout

Group Technology layout can increase—
1. Component standardization and rationalization.
2. Reliability of estimates.
3. Effective machine operation and productivity.
4. Customer service.
It can decrease the—
1. Paper work and overall production time.
2. Work-in-progress and work movement.
3. Overall cost.
Limitations of Group Technology Layout
This type of layout may not be feasible for all situations. If the product mix is completely
dissimilar, then we may not have meaningful cell formation
CLASSIFICATION OF LAYOUT
Layouts can be classified into the following five categories:
1. Process layout
2. Product layout
3. Combination layout
4. Fixed position layout
5. Group layout

Process Layout
Process layout is recommended for batch production. All machines performing similar type of
operations are grouped at one location in the process layout e.g., all lathes, milling machines, etc.
are grouped in the shop will be clustered in like groups.
Thus, in process layout the arrangement of facilities are grouped together according to their
functions. A typical process layout is shown in Fig. 4.5. The flow paths of material through the
facilities from one functional area to another vary from product to product. Usually the paths are
long and there will be possibility of backtracking.
Process layout is normally used when the production volume is not sufficient to justify a product
layout. Typically, job shops employ process layouts due to the variety of products manufactured and
their low production volumes.

Advantages
1. In process layout machines are better utilized and fewer machines are required.
2. Flexibility of equipment and personnel is possible in process layout.
3. Lower investment on account of comparatively less number of machines and lower cost
of general purpose machines.
4. Higher utilisation of production facilities.
5. A high degree of flexibility with regards to work distribution to machineries and workers.
6. The diversity of tasks and variety of job makes the job challenging and interesting.
7. Supervisors will become highly knowledgeable about the functions under their department.
Limitations
1. Backtracking and long movements may occur in the handling of materials thus, reducing
material handling efficiency.
2. Material handling cannot be mechanised which adds to cost.
3. Process time is prolonged which reduce the inventory turnover and increases the inprocess
inventory.
4. Lowered productivity due to number of set-ups.
5. Throughput (time gap between in and out in the process) time is longer.
6. Space and capital are tied up by work-in-process.

Product Layout
In this type of layout, machines and auxiliary services are located according to the processing
sequence of the product. If the volume of production of one or more products is large, the
facilities can be arranged to achieve efficient flow of materials and lower cost per unit. Special
purpose machines are used which perform the required function quickly and reliably.
The product layout is selected when the volume of production of a product is high such that
a separate production line to manufacture it can be justified. In a strict product layout, machines
are not shared by different products. Therefore, the production volume must be sufficient to
achieve satisfactory utilisation of the equipment. A typical product layout is shown in Fig. 4.6.

Advantages
1. The flow of product will be smooth and logical in flow lines.
2. In-process inventory is less.
3. Throughput time is less.
4. Minimum material handling cost.
5. Simplified production, planning and control systems are possible.
6. Less space is occupied by work transit and for temporary storage.
7. Reduced material handling cost due to mechanised handling systems and straight flow.
8. Perfect line balancing which eliminates bottlenecks and idle capacity.
9. Manufacturing cycle is short due to uninterrupted flow of materials.
10. Small amount of work-in-process inventory.
11. Unskilled workers can learn and manage the production.
Limitations
1. A breakdown of one machine in a product line may cause stoppages of machines in the
downstream of the line.
2. A change in product design may require major alterations in the layout.
3. The line output is decided by the bottleneck machine.
4. Comparatively high investment in equipments is required.
5. Lack of flexibility. A change in product may require the facility modification.

Combination Layout
A combination of process and product layouts combines the advantages of both types of layouts.
A combination layout is possible where an item is being made in different types and sizes. Here
machinery is arranged in a process layout but the process grouping is then arranged in a sequence
to manufacture various types and sizes of products. It is to be noted that the sequence of
operations remains same with the variety of products and sizes. Figure 4.7 shows a combination
type of layout for manufacturing different sized gears.
Fig. 4.7 Combination layout for making different types and sizes of gears
Fixed Position Layout
This is also called the project type of layout. In this type of layout, the material, or major
components remain in a fixed location and tools, machinery, men and other materials are brought
to this location. This type of layout is suitable when one or a few pieces of identical heavy
products are to be manufactured and when the assembly consists of large number of heavy parts,
the cost of transportation of these parts is very high.
Fixed position layout

Advantages
The major advantages of this type of layout are:
1. Helps in job enlargement and upgrades the skills of the operators.
2. The workers identify themselves with a product in which they take interest and pride in
doing the job.
3. Greater flexibility with this type of layout.
4. Layout capital investment is lower.

Group Layout (or Cellular Layout)

There is a trend now to bring an element of flexibility into manufacturing system as regards
to variation in batch sizes and sequence of operations. A grouping of equipment for performing
a sequence of operations on family of similar components or products has become all the
important.
Group Technology (GT) is the analysis and comparisons of items to group them into
families with similar characteristics. GT can be used to develop a hybrid between pure process
layout and pure flow line (product) layout. This technique is very useful for companies that
produce variety of parts in small batches to enable them to take advantage and economics of
flow line layout.
The application of group technology involves two basic steps; first step is to determine
component families or groups. The second step in applying group technology is to arrange the
plants equipment used to process a particular family of components. This represents small plants
within the plants. The group technology reduces production planning time for jobs. It reduces the
set-up time.
Thus group layout is a combination of the product layout and process layout. It combines
the advantages of both layout systems. If there are m-machines and n-components, in a group
layout (Group-Technology Layout), the m-machines and n-components will be divided into distinct
number of machine-component cells (group) such that all the components assigned to a cell are
almost processed within that cell itself. Here, the objective is to minimize the intercell movements.
The basic aim of a group technology layout is to identify families of components that require
similar of satisfying all the requirements of the machines are grouped into cells. Each cell is
capable of satisfying all the requirements of the component family assigned to it.
The layout design process considers mostly a single objective while designing layouts. In
process layout, the objective is to minimize the total cost of materials handling. Because of the
nature of the layout, the cost of equipments will be the minimum in this type of layout. In product
layout, the cost of materials handling will be at the absolute minimum. But the cost of equipments
would not be at the minimum if the equipments are not fully utilized.
In-group technology layout, the objective is to minimize the sum of the cost of transportation
and the cost of equipments. So, this is called as multi-objective layout. A typical process layout
is shown in Fig. 4.9.

Advantages of Group Technology Layout

Group Technology layout can increase—
1. Component standardization and rationalization.
2. Reliability of estimates.
3. Effective machine operation and productivity.
4. Customer service.
It can decrease the—
1. Paper work and overall production time.
2. Work-in-progress and work movement.
3. Overall cost.
Limitations of Group Technology Layout
This type of layout may not be feasible for all situations. If the product mix is completely
dissimilar, then we may not have meaningful cell formation.