Production and
Operations
Management
Unit 1 - Basic Concepts
and Plant Layout
Production
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Production is a process through
which raw materials are converted
into finished product.
Transforms the various inputs such
as raw materials, labour, money,
management etc. into output i.e.
goods and services.
Features of Production


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
It involves transformation of raw
materials into finished product.
The place where production takes
place is known as a factory.
Undertaken in various departments.
May involve more than one process.
Can be undertaken either manually
or mechanically.


Production
process
involves
combination of resources such as
men, materials, money, machinery,
management.
Production
process
leads
to
uniformity of finished goods.
Production Management


Production Management is a branch of
general management which is concerned
with planning, organizing, directing and
controlling the activities of production.
According to Elwood S. Buffa, “Production
management deals with decision making
related to production process, so that the
resulting goods or services are produced
according to specification in amounts and
by the schedule demanded and at
minimum cost”.
Features




It is a function of management
which is concerned with production.
Output is obtained from input in
accordance with the specification
laid down.
Production is undertaken according
to the prevailing demand for goods.
Production is undertaken at a
minimum cost.
Operations Management

It is defined as the design,
operation and improvement of the
systems that create and deliver the
firm’s
primary
products
and
services.
Eg: Bank, Hospital, Airlines, Railways, Fast
food restaurant.
Functions of Operations Manager
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Planning.
Organizing.
Staffing.
Directing.
Coordinating.
Controlling.
Motivating.
Training & development.
Operations Management: A critical
responsibility of every manager


Whether the economy is booming or in
a recession, delivering a firm’s goods
and services in the most effective
manner is critical to its survival.
Operations management is about
getting the day-to-day work done
quickly, efficiently, without errors and
at low cost.


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It’s important to reduce the cycle time to
ultimately reduce the costs.
Efficiency means doing something at the
lowest possible cost.
Effectiveness means doing the right things
to create the most value for the company.
Value = Quality/Price.
The goal of Efficient process is to produce a
good or provide a service by using the
smallest input of resources.
Responsibilities of Operations
Manager

o
o
Basically, divided into two types:
Those who are involved in designing
the
production
system
or
subsystems (Upper level managers)
Those
who
are
involved
in
scheduling,
operating
and
controlling the system (Lower level
managers).
Design and Planning
Operation and Control
(a) Product design
(a) Aggregate/Intermediate
term planning
(b) Capacity planning
(b) Materials management
and inventory control
(c) Process design and choice
of technologies
(c) Maintenance
(d) Facility location
(d) Scheduling personnel,
equipment, jobs
(e) Facility design and layout
(e) Distribution and logistics
(f) Job design
(g) Product quality assurance
New product development

It begins with identification of a
consumer need and a way to satisfy
it with a good or service.
Stages of New Product
Development

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Identification and evaluation of the
market
Measuring
market
potential
and
determining the market size is very
important.
Market surveys, interviews etc. are used to
determine
which
features
are most
attractive.
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Development of a detailed product
design and prototyping
Desired features of the product must be
specified clearly.
Evaluation is based on various criteria:
Achievement of customer requirements and
product specifications.
Expected quality and reliability.
Cost.
Impact on production of the company’s
other products.

Prototype
A method that has been successfully
used at this stage is prototyping. A
prototype is a physical mockup of the
product.
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Ramp-up of production
Initially, the product can be produced in
small quantities.
Additional design changes may occur either
to improve the quality of the product or to
reduce the cost of production.
Based on feedback, either terminate or
increase (ramp-up) the rate of production.
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Product modification and redesign
Product and process design is an ongoing
activity.
When the company is producing at higher
volumes, then changes in design should be
performed that lower the cost of production
and improve the product’s quality.
Product design


Design
characteristics
of
the
product will affect the way the
production
system
should
be
designed and operated.
How well the customization can be
done.
Designing for the Customer


Designing for the user is generally
termed as industrial design.
IDEO is one of the most successful
industrial design firms in the world.
Quality Function Deployment
(QFD)



One approach to getting the voice of
the
customer
into
the
design
specification of a product is Quality
Function Deployment (QFD).
It uses inter functional teams from
marketing, design engineering and
manufacturing.
It has been credited by Toyota Motor
Corporation for reducing costs on its
cars by more than 60 percent by
significantly shortening design times.
QFD Process

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The QFD process begins with studying
and listening to customers to determine
the characteristics of a superior product.
Through
market
research,
the
consumers’
product
needs
and
preferences are defined and broken
down into categories called customer
requirements.
After the customer requirements are
defined, they are weighted based on
their
relative
importance
to
the
customer.
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Next, the consumer is asked to compare
and rate the company’s products with
the products of competitors.
This process helps the company to
determine the product characteristics
that are important to the consumer and
to evaluate its product in relation to
others.
The end result is a better understanding
and focus on product characteristics
that require improvement.
House of Quality
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Customer requirement information forms
the basis for a matrix called the House of
Quality.
By building a house of quality matrix, the
cross-functional
QFD
team
can
use
customer feedback to make engineering,
marketing and design decisions.
This process encourages the different
departments to work closely together.
The most important benefit of the house of
quality is that it helps the team to focus on
building a product that satisfies customers.
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The first step in building the house of
quality is to develop a list of customer
requirements for the product.
These requirements should be ranked in
order of importance.
Customers are then asked to compare the
company’s product to the competition.
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Next a set of technical characteristics of
the product is developed.
These technical characteristics should
relate directly to customer requirements.
These data are then used to evaluate the
strengths and weaknesses of the product.
Value Analysis/Value Engineering
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Another way to consider the customer in
designing products is by analyzing the
“value” they see in the end product.
The purpose of Value analysis/Value
engineering (VA/VE) is to simplify
products and processes.
Its objective is to achieve equivalent or
better performance at a lower cost while
maintaining all functional requirements
defined by the customer.
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VA/VE does this by identifying and
eliminating unnecessary cost.
Purchasing departments use VA as a
cost reduction technique.
Performed before the production stage,
value engineering is considered a costavoidance method.
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The VA/VE analysis approach involves
brainstorming questions such as:
Does the item have any design features
that are not necessary?
Can two or more parts be combined into
one?
How can we cut down the weight?
Are there non standard parts that can be
eliminated?
Facility location and Layout

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The decision on location has long
term strategic significance.
Decisions about the internal design
of facilities range from determining
the
layout
of
a
complete
manufacturing process to choosing
where to display products in a retail
store or how to arrange different
items in a warehouse.
Facility or Plant Location

Issues in Facility Location
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Proximity to customers

Helps in early delivery of products.
Also helps ensure that customer needs
are incorporated into products being
developed.
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Business climate
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It should be favourable like similar-sized
business are doing good and government
is facilitating business via subsidies.
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Total costs
Objective is to select a site with the
lowest total cost.
Infrastructure
Adequate road, rail, air and sea
transportation are vital.
Energy
and
telecommunications
requirements also must be met.
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Quality of Labour
Educational and skill levels of the labour
pool must match the company’s needs.
More important are the willingness and
ability to learn.
Suppliers
A high-quality and competitive supplier
base makes a given location suitable.
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Other Facilities
Location of other plants or distribution
centers of the same company may
influence a new facility’s location in the
network.
Free Trade Zones
A Free trade zone or foreign trade zone is
typically a closed facility (under the
supervision of the customs department)
into which foreign goods can be brought
without being subject to the normal
customs requirements.
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Political risk
Political risks in both the country of
location and the host country influence
location decisions.
Government barriers
Barriers like barriers to enter should be
considered in location planning.
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Trading Blocs
A group of countries that agree on a set of
special arrangements governing the trading
of goods between member countries.
Firms typically locate or relocate within a
bloc to take advantage of new market
opportunities or lower total costs.
Environmental regulation
Environmental regulations that impact a
certain industry in a given location.
Influence the relationship with the local
community.
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Host community
Host community’s interest in having the
plant in its midst is a necessary part of
the evaluation process.
Competitive advantage
A company should have its home base in
a country that stimulates innovation and
provides the best environment for global
competitiveness.
Plant Location Methods
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Factor-rating systems
Most widely used.
Provide a mechanism to
diverse
factors
in
an
understand format.
combine
easy-to-
Refinery example
Major factors
Range
(a) Fuels in region
0 to 330
(b) Power availability and
reliability
0 to 200
(c) Labour climate
0 to 100
(d) Living conditions
0 to 100
(e) Transportation
0 to 50
(f) Water supply
0 to 10
(g) Climate
0 to 50
(h) Supplies
0 to 60
(i) Tax policies and laws
0 to 20
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Each site was then rated against each
factor and a point value was selected
from its assigned range.
The sums of assigned points for each
site were then compared.
The site with the most points was
selected.
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Major problem
Do not account for the wide range of
costs that may occur within each
factor.
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Transportation
Programming
method
of
Linear
Application to problems involving
transporting products from several
sources to several destinations.
Objectives:
Minimize the cost of shipping n units to m
destinations.
Maximize the profit of shipping n units to
m destinations.
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Centroid method
Technique for locating single facilities
that considers the existing facilities,
the distances between them and the
volumes of goods to be shipped.
Often used to locate intermediate or
distribution warehouses.
Another major application is the
location of communication towers in
urban areas (Eg: Radio, TV and cell
phone towers).


Centroid is found by calculating the X
and Y coordinates that result in the
minimal transportation cost.
Formula:
Cx = ∑dixVi/∑Vi, Cy = ∑diyVi/∑Vi
Where,
Cx = X coordinate of the centroid
Cy = Y coordinate of the centroid
dix = X coordinate of the ith location
diy = Y coordinate of the ith location
Vi = Volume of goods moved to or from the ith
location
Questions

Ques. 1. The HiOctane refining
company needs to locate an
intermediate
holding
facility
between its refining plant in Gauhati
and its major distributors.
Locations
Liter of petrol per month
(in thousands)
Gauhati
1500
Calcutta
250
New Delhi
450
Lucknow
350
Mumbai
450

Solution
Cx =
(325x1500)+(400x250)+(450x450)+(350x350)+
(25x450) / 1500+250+450+350+450
= 923750/3000
= 307.9 = 308.
Cy =
(75x1500)+(150x250)+(350x450)+(400x350)+
(450x450) / 1500+250+450+350+450
= 650000/3000
= 216.7 = 217.
Hence, Centroid (308,217).

Ques. 2. Cool Air, a manufacturer of
automotive air conditioners, currently
produces its XB-300 line at three different
locations: Plant A, Plant B and Plant C.
Recently management decided to build all
compressors, a major product component
in a separate dedicated facility, Plant D.
Using the centroid method, determine the
best location for Plant D. Assume a linear
relationship between volumes shipped and
shipping costs (no premium charges).
Plant
Compressors required per
year
A
6000
B
8200
C
7000

Solution
Cx =
(80x6000)+(150x8200)+(130x7000) /
6000+8200+7000
= 123.6 = 124.
Cy =
(120x6000)+(180x8200)+(350x7000) /
6000+8200+7000
= 219.2 = 219.
Facility Layout (Basic Production
Layout Formats)

Basic types:

Process Layout.
Product Layout.
Fixed-position Layout.
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Hybrid type:
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Group technology or cellular layout.
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Process layout
Also called a job-shop or functional
layout.
A format in which similar equipment or
functions are grouped together.
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Product layout
Also called a flow-shop layout.
A format in which equipment or work
processes are arranged according to the
progressive steps by which the product is
made.
Eg: Automobile plant.
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Group technology or cellular layout.
A format in which dissimilar machines are
grouped into work centers or cells to work
on products that have similar shapes and
processing requirements.
Fixed-position layout.
Product remains at one location.
Manufacturing equipment is moved to the
product.
Eg: Construction sites.
Questions

(a)
(b)
Ques. 1 A university advising office has four rooms, each
dedicated to specific problems: petitions (Room A),
schedule advising (Room B), grade complaints (Room C)
and student counselling (Room D). The office is 80 feet
long and 20 feet wide. Each room is 20 feet by 20 feet.
The present location of rooms is A,B,C,D i.e. a straight
line. The load summary shows the number of contacts
that each adviser in a room has with other advisers in the
other rooms. Assume that all advisers are equal in this
value.
Load summary: AB = 10, AC = 20, AD = 30
BC = 15, BD = 10, CD = 20.
Evaluate this layout according to the material handling
cost method.
Improve the layout by exchanging functions within
rooms. Show your amount of improvement using the
same method as in (a).
Solution (a)
A
B
A
10
20
C
B
80’
30
15
C
D
20
10
D
20’

Using the material handling cost
method, assuming that every nonadjacency doubles the initial cost/unit
distance.
AB = 10 x 1 = 10
AC = 20 x 2 = 40
AD = 30 x 3 = 90
BC = 15 x 1 = 15
BD = 10 x 2 = 20
CD = 20 x 1 = 20
Current cost = 195.
(b) A better layout would be BCDA.
10
15
20
30
B
C
10
AB = 10 x 3 = 30
AC = 20 x 2 = 40
AD = 30 x 1 = 30
BC = 15 x 1 = 15
BD = 10 x 2 = 20
CD = 20 x 1 = 20
Improved cost = 155.
D
A
20

Ques. 2 The model J wagon is to be
assembled on a conveyor belt. Five
hundred wagons are required per
day. Production time per day is 420
minutes and the assembly steps
and times for the wagon are given.
Find the balance that minimizes the
number of work stations, subject to
cycle
time
and
precedence
constraints.
Task
Task time (in sec)
Tasks that must precede
A
45
---
B
11
A
C
9
B
D
50
---
E
15
D
F
12
C
G
12
C
H
12
E
I
12
E
J
8
F,G,H,I
K
9
J
Total
195
Solution:
B
(11)
F
(12)
C
(9)
A
(45)
G
(12)
J
(8)
D
(50)
E
(15)
H
(12)
I
(12)
K
(9)
Workstation cycle time
C = Production time per day /
Required Output per day (in units)
= 420 min. x 60 sec. / 500 wagons
= 25200/500
= 50.4 sec

Theoretical minimum number of
workstations required
Nt =Sum of task times(T)/Cycle time(C)
= 195 sec / 50.4 sec
= 3.87 = 4 (rounded up)



Prioritize tasks in order of the
largest number of following tasks.
Secondary rule is followed, when
there are ties which is prioritize
tasks in order of longest task time.
Task
Number of following tasks
A
6
B or D
5
C or E
4
F, G, H or I
2
J
1
K
0
Station
Task
Task Time
( in sec)
Remaining
unassigned time
Station 1
A
45
5.4 (idle)
Station 2
D
50
0.4 (idle)
B
11
39.4
E
15
24.4
C
9
15.4
F
12
3.4 (idle)
G
12
38.4
H
12
26.4
I
12
14.4
J
8
6.4 (idle)
K
9
41.4 (idle)
Station 3
Station 4
Station 5
F
(12)
B
(11)
C
(9)
A
(45)
G
(12)
J
(8)
D
(50)
E
(15)
H
(12)
I
(12)
K
(9)

Efficiency = T / NaC
= 195 / (5) (50.4)
= 0.77 or 77%.
So, Imbalance or Idle time = 23%.
or Idle time = 57 sec.

Ques. 3 The following tasks must be
performed on an assembly line in
the sequence and times specified.
Task
Task Time (Sec.)
Tasks that must precede
A
50
---
B
40
---
C
20
A
D
45
C
E
20
C
F
25
D
G
10
E
H
35
B,F,G
(a)
(b)
(c)
Draw the schematic diagram.
What is the theoretical minimum
number of stations required to
meet a forecast demand of 400
units per eight-hour day?
Use the longest-task-time rule and
balance the line in the minimum
number of stations to produce 400
units per day.
Solution: (a)
D
(45)
A
(50)
B
(40)
C
(20)
F
(25)
H
(35)
E
(20)
G
(10)
(b) Workstation cycle time
C = Production time per day /
Required Output per day (in units)
= 480 min. x 60 sec. / 400 units
= 28800/400
= 72 sec.

The theoretical minimum number of
stations to meet D = 400 is
Nt = T/C
= 245/72
= 3.4 = 4 stations.
(c)
Stations
Station 1
Station 2
Station 3
Station 4
Task
Task Time (Sec.)
Remaining
Unassigned
time
A
50
22
C
20
2 (idle)
D
45
27
F
25
2 (idle)
B
40
32
E
20
12
G
10
2 (idle)
H
35
37 (idle)
D
(45)
A
(50)
B
(40)
C
(20)
F
(25)
H
(35)
E
(20)
G
(10)

Efficiency = T/NaC
= 245/(4) (72)
= 0.85 or 85%.
So, Imbalance or Idle time = 15%.
or Idle time = 43 sec.
THANK YOU