Manufacturing Organization and Management

BITS Pilani
Pilani Campus

BITS Pilani
Pilani Campus

Review Session Lecture 18

Problem-1
A company is planning to introduce a new product. It must select one product from three available and has estimated the data shown in the table. Which product would you recommend?
Factor A Expected sales each year Unit cost of production Unit selling price Fixed cost incurred before production 600 $680 $760 $200000 900 $900 $1000 $350000 Product B 1200 $1200 $1290 $500000 C

Expected product life

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Answer-1
i) The breakeven point for each product are calculated from
N = FC/(UP UC) So for each product we have A : N = 200,000/(760 - 680) = 2500 B : N = 350,000/(1000 900) = 3500 C : N = 500,000/(1290 1200) = 5556 If the company wants the lowest break even point it would select product A.

ii) Time taken to break even:

Time taken to break even = break-even point/demand For each product this gives: A : 2500/600 = 4.2 years B : 3500/900 = 3.9 years C : 5556/1200 = 4.6 years In this case, product B would be least.

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Answer-1 cont
iii) To maximize long term profit
Total profit = revenue total cost With : Revenue = lifetime * annual demand * unit profit Total cost = lifetime * annual demand * unit cost + fixed cost So: Total profit = L * D * (UP - UC) FC Where : L = lifetime D = Demand For each product the lifetime profit is: A : 3 * 600 * ( 760 680) 200,000 = -56,000 B : 5 * 900 * (1000 900) 350,000 = 100,000 C : 8 * 1200 * (1290 1200) 500,000 = 364,000 Product A would make a net loss over its expected life while producer C would give the best profit. Overall, we can only say that the best decision would depend on the objectives of the company, but product B seems useful.

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Problem-2
A project has activities with duration and precedence requirement as given in Table. Draw the network diagram for this project.

Activity A B C D E F G H I J

predecessors A A A A B,C F,D,E E F I,G,H

duration 7 8 10 6 2 5 8 7 5 2

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Answer-2

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The Madras Plumbing Supply Company stocks thousand of plumbing item sold to regional plumbers, contractors and retailers. Mr. Chelladurai, firms general manager, wonders how much money could be saved annually if EOQ were used instead of the firms present rules of thumb. He instructs Prabhakaran an inventory analysist to conduct an analysis of one material only (Material #4000 a brass valve) to see if significant saving might result from using the EOQ. Prabhakaran develops the following estimates from accounting information: Annual demand 200000 valves per year, quantity 8000 valves per order, carrying cost $0.60 per valve per year and set up cost $10.50 per order. Find the EOQ and annual savings in stocking costs.

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The present total annual stocking costs: TSC1 = (Q/2) + (D/Q)S = = 2400 + 262.5 = 2662.5 EOQ is calculated : EOQ = = 2645.75 Total annual stocking costs if EOQ were employed: TSC2 = (Q/2) + (D/Q)S = = 793.725 + 793.725 = 1587.45 The estimated annual savings in stocking Savings = TSC1 TSC2 = 2662.5 - 1587.45 = $1075.05 Thus, the savings from EOQ would be significant.
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Discuss the steps required for good purchasing with a suitable example. Draw a chart of the process involved when a person goes to a bank and ask for a personal loan.

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(a)

The primary objective of a good purchasing is to contribute towards the profits of the manufacturing activity. Another important objective is to ensure the availability of materials so that delivery schedules can be maintained, thus keeping the customer satisfied. The complete purchasing cycle consists of the following steps Receipt and analysis of the purchase requisition Selection of potential sources of supply Issuance of requests for quotations Receipt and analysis of quotations Selection of the right source Determination of the right price Issuance of the purchase order Follow up to ensure scheduled delivery Analysis of receiving reports Analysis and approval of vendors invoice for payment For example, when purchasing a standard item from an old and established source, it is often assumed that price and terms of purchase are right and the purchase order will be placed upon receipt of the purchase requisition.

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Process chart : Personal bank loan Movement Step number Description Inspection Operation Time (min) distance ( meters) Comment

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Customer selects banks & visits Initial screening Move to loans office Wait Discuss with loans officer Complete application forms Carry forms to verifier Forms are checked Wait as credit analysis verification is done Supply further information Move back to loans office Wait Forms are checked Complete arrangement Leave

X X X X X

X X X X X

X X

X X X

Storage

Delay

(b) Process chart:

5 2 10 15 15 2 2 25 5 2 20 5 15

15

10

15

Summary: Sno : Operation Movements Inspections Delays Storage Total : No 5 5 2 3 0 15 Time 55 6 7 55 0 123 Time : 123 min Distance : 40 meters

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Explain the significance of organization planning in manufacturing environment.

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Ans: Provides for succession Facilitates promotion from within and the improvement in morale that accompanies adoption of such a policy. All will have a better understanding of what is required on their jobs and consequently will perform better. Provides a long range plan for the handling of special problems. Provides for the long-run strength of business. Explanation of these points

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Explain the factors to be considered for determining the number of machine required in a plant.

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Ans: The number of machines required in a plant is dependent upon: Quantity of parts to be manufactured. Number of working hours in the plant. Production rates on the operations to be performed. Set up time Operating efficiency of the plant. Scrap loss

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A manufacturing unit has six departments A, B, C, D, E and F. they are located as shown in figure. The daily expected load transaction are: From A to B 20 tons, From B to A 10 tons, From B to C 15 tons, From A to F 25 tons, From C to D 30 tons, From D to C 50 tons, From E to F 10 tons, From E to A 10 tons. Check whether the given arrangement of department is optimal or not. If not suggest a best layout.
A
D

B
E

C
F

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A To From

A B C D E F

10

20 15 50 30 -

25

10

10 -

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Assumption: Load from B A = A B

To From A B C D E F

30 15 80 -

10

25

10 -

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Given Layout is:

A D

B E

C F

Total Non Adjacent load = 115 tonnes (CD + AF +AE) Hence, the best lay out is the layouts below as the Non adjacent load is reduced from 115 tonnes to 10 tonnes(AE).

C OR D

B E

A F

C D

B A

E F

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Differentiate between intermittent and continuous manufacturing with respect to volume of production, product variety, frequency to change the setup, equipment, labor force, capital cost and unit cost in a tabular form.

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Intermittent Manufacturing o o o Volume of production Low to medium Product variety Many, varied Frequency to change the setup Very easy to change the set up for different product variety o o o

Continuous Manufacturing Volume of production Very high Product variety Very few Frequency to change the setup It is fixed and cannot be modified easily and involves top management commitment based on demand of the product /market Equipment It uses special purpose equipment Labor force As here most of the process is automated the workers are expected to serve as a equipment monitor Work force is less as compared to intermittent process Capital cost It involves high investment in plant & equipment installation as the process is to be highly automated Unit cost Cost of the unit is low as the volume of production is high but may increase if there is a dis- economies of scale

o o

Equipment It uses general purpose equipment Labor force Workers are required to have wide range of skills so as to handles all types of equipment involved in the layout Work force is more

o o

Capital cost Initial cost of the equipment is high

Unit cost Cost of the unit is very high because of slow operation speed of the general purpose equipment used

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Discuss the advantage of value analysis. Discuss the strength and weakness of line type organization.

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(a) Value analysis is the application of a set of techniques to an existing

product with a view to improving its value. It is thus a remedial process. Value engineering is the application of exactly the same set of techniques to a new products at the design stage , project concept or preliminary design when no hard ware exists to ensure that bad features are not added. Value engineering is thus a preventive process.
As a value engineering/ value analysis aims at Simplifying the product Use cheaper and better materials Modify and improve the design of product Use of efficient processes Reduce the product cost Increase the utility of the product by economical means Save money & increase the profits
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Value Engineering helps the organization in bringing out the following advantages when implemented Value engineering is a much faster cost reduction technique as it reduces the operating and maintenance cost It is less expensive technique Value engineering reduce production costs and adds value to sales income of the products Improves quality management Improves resource efficiency Simplifies the complex procedures & Increases procedural efficiency Minimizes paperwork Helps to compete more successfully in marketplace Value Engineering helps the individuals you to learn how to Improve your career skills Separate "Symptoms" from "problems" Solve "root cause" problems and capture opportunities Become more competitive by improving "benchmarking" process Take command of a powerful problem solving methodology to use in any situation

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(b) Line structures are organizational structures that involve linear decision making that's done from the top down.
Line structures usually operate with a small number of departments that are in direct communication with decision makers, as opposed to large organizations in which subordinates may have little, if any, contact with decision makers Line structures by nature are fairly informal and involve few departments, making the organizations highly decentralized. Employees are generally on a first-name basis with the president, who is often available throughout the day to answer questions and/or to respond to situations as they arise. Strengths: Simplicity Clear cut division of authority & responsibility Strong discipline Unified control Prompt decisions Flexibility Weaknesses Heavy burden work Concentration of authority Lack of specialization Lack of communication Scope for favoritism

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Thank You

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