Jpm Pom Course Mat - 1 Mba T-2

8/3/2019 Jpm Pom Course Mat - 1 Mba T-2

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PRODUCTION &PRODUCTION &

OPERATIONSOPERATIONS

MANAGEMENTMANAGEMENT(by :(by : Prof. J. P. MajumdarProf. J. P. Majumdar))

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What is ProductionWhat is Production??

ProductionProduction isis aa processprocess ofof creatingcreating orormanufacturingmanufacturing ofof somesome kindkind of of tangibletangiblegoodsgoods and/orand/or ofofrenderingrendering somesome servicesservices asas

perper thethe needneed && wantwant ofof thethe customerscustomers oror endend--usersusers..

ProductionProduction includesincludes :: ProductProduct DesignDesign &&Development,Development, ProcessProcess Design,Design, JobJob Design,Design,OperationOperation,, QualityQuality Control,Control, PackingPacking &&Delivery,Delivery, LogisticsLogistics && SupplySupply--ChainChain Design,Design,

CustomerCustomer Services,Services, etcetc.. 2


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What is meant byWhat is meant by

OperationOperation?? OPERATIONOPERATION isis thethe SystemSystem ofof processesprocesses whichwhich mainlymainlydealsdeals withwith thethe conversionconversion ofof variousvarious InputInput ResourcesResources intointousefuluseful OutputsOutputs withwith efficiency,efficiency, effectiveness,effectiveness, flexibilityflexibility &&adaptabilityadaptability..

Operation is a part of ProductionOperation is a part of Production [ All activities included[ All activities includedin Operation are included also in Production but all activitiesin Operation are included also in Production but all activitiesincluded in Production are not necessarily included inincluded in Production are not necessarily included in

Operation.Operation.

ExceptionException : PROJECT ACTIVITIES are included in Operation: PROJECT ACTIVITIES are included in Operationbut not included in Production (because, only after Projectbut not included in Production (because, only after Projectactivities are completed, Production activities start).activities are completed, Production activities start).

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## What are Input Resources for OperationWhat are Input Resources for Operation??

MaterialsMaterials ::Raw materials & ComponentsRaw materials & Components Man power (HR)Man power (HR) ::

Operators/ Laborers (Skilled and/or SemiOperators/ Laborers (Skilled and/or Semi--skilled and/orskilled and/orUnskilled)Unskilled)

SupervisorsSupervisors

ManagersManagers

Machineries (Plants & Equipment)Machineries (Plants & Equipment) for :for : ProcessingProcessing

Measuring InstrumentationMeasuring Instrumentation Instrumentation & ControlInstrumentation & Control

MaterialMaterial--handlinghandling

Testing & InspectionTesting & Inspection

Water & Effluent Treatment, Prevention of OccupationalWater & Effluent Treatment, Prevention of Occupational

Hazard, EnvironmentHazard, Environment--control, etc.control, etc. 4


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Resources for production & operation (Resources for production & operation (contdcontd))

UtilitiesUtilities ::1.1. Electric Power Electric Power (for Drive, Heating, Lighting, Fan, etc)(for Drive, Heating, Lighting, Fan, etc)2.2. FuelFuel (generating heat in Furnace or Kiln))(generating heat in Furnace or Kiln))3.3. WaterWater (for Cooling, Hydraulic m/(for Cooling, Hydraulic m/cscs, Instrument, Conveying, washing,, Instrument, Conveying, washing,

Cleaning, etc)Cleaning, etc)4.4. Air Air (for Cooling, Pneumatic(for Cooling, Pneumatic--control Instrument,control Instrument,

Conveying, Cleaning, etc)Conveying, Cleaning, etc)5.5. SteamSteam ( for Heating, Drying, etc)( for Heating, Drying, etc)

6.6. Illumination SystemIllumination System7.7. Sanitation & Occupational SafetySanitation & Occupational Safety8.8. Spare PartsSpare Parts9.9. ConsumablesConsumables

TechnologiesTechnologies (Process know(Process know--how) :how) :

-- Process Sequence (Process Sequence (Process Flow diagramProcess Flow diagram))-- Procedure & Work InstructionsProcedure & Work Instructions-- Process Control ParametersProcess Control Parameters-- Material requirement (Material requirement (Material BalanceMaterial Balance))-- Equipment Requirement (Equipment Requirement (Capacity BalanceCapacity Balance))-- Utility Requirement (Utility Requirement (Utility Balance : water, energy, etcUtility Balance : water, energy, etc))

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Functional ActivitiesFunctional Activitiesofof

ProductionProduction -- Operation ManagementOperation Management

1.1. Selection of Location of facilities (Plant / operational Site)Selection of Location of facilities (Plant / operational Site)2.2. Selection of Technology / Process knowSelection of Technology / Process know--how , Plant Capacity,how , Plant Capacity,

Plant & MachineriesPlant & Machineries3.3. Plant Layout Design, Materials Balancing, Capacity BalancingPlant Layout Design, Materials Balancing, Capacity Balancing4.4. Project Planning & Scheduling, Monitoring, Coordination andProject Planning & Scheduling, Monitoring, Coordination and

ControlControl

5.5. Product Design & Product DevelopmentProduct Design & Product Development6.6. Process Design / PlanningProcess Design / Planning7.7. Job DesignJob Design8.8. Materials Management (Procurement, Storage & Inventory Control)Materials Management (Procurement, Storage & Inventory Control)9.9. Material HandlingMaterial Handling

10.10. Materials AllocationMaterials Allocation11.11. Plant & Machines Loading and BalancingPlant & Machines Loading and Balancing12.12. Production SchedulingProduction Scheduling13.13. Production activities (Manufacturing or Service activities)Production activities (Manufacturing or Service activities)14.14. MaintenanceMaintenance15.15. Occupational Safety and Environmental SafetyOccupational Safety and Environmental Safety

16.16. Inspection, Testing, Quality Control and Quality ManagementInspection, Testing, Quality Control and Quality Management 6


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##MANUFACTURING Vs SERVICE OPERATIONMANUFACTURING Vs SERVICE OPERATIONMANUFACTURINGMANUFACTURING SERVICESERVICE

1.1. Output is physicallyOutput is physically tangibletangible

2.2. Output isOutput is durabledurable

3.3. Output can beOutput can be inventoriedinventoried

4.4. Capital intensiveCapital intensive

5.5. PricingPricing isis based mainly onbased mainly onmaterials and labourmaterials and labour

6.6. GenerallyGenerally lowlow CustomerCustomer--contactcontact

7.7. ResponseResponse--timetime isis longlong

8.8. Time scheduleTime schedule isis MarketMarket--basedbased

9. Quality can be measured easily9. Quality can be measured easilyand directlyand directly

10. Market may be regional, national10. Market may be regional, nationalor internationalor international

Output is physicallyOutput is physically intangibleintangible

Output isOutput is not durablenot durable

OutputOutput can not be inventoriedcan not be inventoried

Labour intensiveLabour intensive

PricingPricing isis based mainly onbased mainly onlabour onlylabour only

GenerallyGenerally highhigh CustomerCustomer--contactcontact

ResponseResponse--timetime isis shortshort

Time sch

eduleTime sch

edule isis customerscustomersrequirementrequirement--basedbased

QualityQuality can not becan not be measuredmeasuredeasilyeasily

Market is usuallyMarket is usually (preferably)(preferably)

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VALUE CHAINVALUE CHAIN

SuppliersSuppliersPURCHASEPURCHASE INVENTORYINVENTORY PRODUCTIONPRODUCTION

Materials Materials

INVENTORYINVENTORYINVENTORYINVENTORYMARKETINGMARKETINGCustomersCustomers

Products

Products

Suppliers Customers

Purchase Inventory Production Inventory Marketing

Activity Stages

Value

a

b

c

b > c > ab > c > a

VALUE MAPPINGVALUE MAPPING

Slope = Value Addition

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## InterInter--relationship of Operations with other Areasrelationship of Operations with other Areas ::

FINANCEFINANCE

SUPPLIERSSUPPLIERS MARKETINGMARKETINGOPERATIONOPERATION

HRHR

1) Budget (Fund)

2) Cost Analysis3) Capital Investment4) Performance analysis

1) Production & Inventory data2) Capital Budget Requirement3) Expansion Program4) Technology Plan

1) Material Availability 2) Quality Data

3) Delivery Schedule 4) Design details

1) Enquiry (Quantity & Quality Requirement)

2) Design & Performance Spec

3) Production & Delivery Schedule

4) Material Purchase Order

1) Personal Needs

2) Recruitment3) Performance Evaluation4) Incentive Plan5) Trade Union matters6) Legal issues

1) Need of Hiring & Firing

2) Training Requirement3) Job Design4) Skill requirement5) Work Measurement

1) Production & Service Availability 2) Lead Time

3) Status of Order processing 3) Delivery Schedule

1) Sales Forecast

2) Customer Order3) Customer Feed back4) Marketing Promotions

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Objectives of Operation ManagementObjectives of Operation Management

1.1. Achieving Customer SatisfactionAchieving Customer Satisfaction

2.2. Increased Efficiency (higherIncreased Efficiency (higherProductivityProductivity & Profitability& Profitability))

3.3. Maintenance & Improvement of Product QualityMaintenance & Improvement of Product Quality

4.4. Improvement of business competitiveness ( increasingImprovement of business competitiveness ( increasingmarket share)market share)

5.5. Higher Effectiveness to achieve the Objectives of theHigher Effectiveness to achieve the Objectives of theorganizationorganization

PRODUCTIVITYPRODUCTIVITYPRODUCTIVITYPRODUCTIVITY == Value of Output ProductsValue of Output Products (Goods/ Services)(Goods/ Services)

Cost of Input ResourcesCost of Input Resources (Materials, Manpower,(Materials, Manpower,

Utilities, Machines,, Engineering, Technology, OH, etc)Utilities, Machines,, Engineering, Technology, OH, etc)10


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## WAYS TO IMPROVE PRODUCTIVITYWAYS TO IMPROVE PRODUCTIVITY

1.1. Increase in value of outputIncrease in value of output withwith same cost of resourcesame cost of resourceinputinput

2.2. Decrease in cost of input resourcesDecrease in cost of input resources for thefor the same Valuesame Valueof outputof output

3.3. SimultaneousSimultaneous increase in value of outputincrease in value of output andand decreasedecrease

in cost of input resourcesin cost of input resources

4.4. Proportionately more increase in value of outputProportionately more increase in value of output thanthanthe increase in cost of resource inputthe increase in cost of resource input

5.5. Proportionately less decrease in value of outputProportionately less decrease in value of output thanthan

the decrease in cost of resource inputthe decrease in cost of resource input

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## INFLUENCING FACTORS / WAYS forINFLUENCING FACTORS / WAYS for

PRODUCTIVITY IMPROVEMENTPRODUCTIVITY IMPROVEMENT

1.1. StandardizingStandardizing the processthe process2.2. Improvement of Improvement ofProduct DesignProduct Design

3.3. Reduction of Reduction ofSCRAP generationSCRAP generation by improved product & processby improved product & processdesigndesign

4.4. Reduction (eliminating) ofReduction (eliminating) ofDEFECTSDEFECTS by effectiveby effective Quality ControlQuality Control

5.5. ReducingReducing INVENTORYINVENTORY (avoiding over(avoiding over--inventory)inventory)

6.6. AvoidingAvoiding underunder--utilizationutilization or unor un--utilization ofutilization ofRESOURCESRESOURCES(manpower, materials, machines, etc)(manpower, materials, machines, etc)

7.7. ReducingReducing BREAKBREAK--DOWN timeDOWN time (idle time) of equipment by effectively(idle time) of equipment by effectivelyimprovingimproving MaintenanceMaintenance

8.8. ImprovedImproved MotivationMotivation andand EffectiveEffective Incentive PlanIncentive Plan

9.9. Using ImprovedUsing Improved TECHNOLOGYTECHNOLOGY..

10.10. AllAll--outout ParticipationParticipation & Involvement& Involvement of employeesof employees

11.11. UsingUsing multimulti--skill labourskill labourin place of singlein place of single--skill labourskill labour

12.12. Total Quality ManagementTotal Quality Management 12


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ProblemProblem--11 ProductivityProductivityMarpet Corporation is producing 10,000 items per day, using 5 M.T. ofraw materials of unit cost $ 1000 per M.T. The labour-hour being used toaccomplish the job is 3500 per week. The labour cost is $ 9 per labour-hour

while the proportionate over-head cost for the product is $ 175,000 per week.If the selling price of the product is $ 10 per item, find(i) Labour Productivity and(ii)(ii) Multifactor ProductivityMultifactor Productivity (Overall Productivity).SolutionSolution

Input Labour Cost per day =(3500 7) labour-hour x $ 9 per labour-hour= $ 4,500Input Raw materials cost per day = 5 MT x $1000 per MT = $ 5,000OH cost per day = $ 175,000 7 = $ 25,000Total cost of Inputs per day = Labour cost + Material cost + OH cost

= 4,500 + 5,000 + 25,000 = $ 34,500

Value of Output per day = 10,000 items x $ 10 per item = $ 100,000$ 100,000(i) Labour Productivity = Value of output = 100,000 = 22.2222.22

Cost of Lab input 4,500(ii) Overall orMultifactor Productivity = Value of output = 100,000 = 2.92.9

Total Cost of input 34,500

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ProblemProblem 22 ProductivityProductivity

Walcott Industry Ltd. was producing 50 pieces of bushes per day,

using 150 kg of gunmetal per day having unit cost Rs 100 per kg

and 20 semi-skilled labours & 2 skilled labours. The Utility Costwas Rs 2000 per day.

The labour rate is Rs 2100 per week for semi skilled labour and

Rs 3500 per week for skilled labour. The Overhead Cost of the

Unit is Rs 70,000 per week.The selling price of the bush is Rs 1400 per item.

Recently the company changed the labour strength to 24 semi-

skilled and 1 skilled labour and thereby achieved production of70

pieces of bushes per day with Utility Cost ofRs 2300 per day.Compare the present LabourProductivity and Multifactor

Productivity with previous values.

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SolutionSolution--22Semiskilled Labour rate = 2100 / 7 = Rs 300 per day,Skilled Labour rate = 3500 / 7 = Rs 500 per day,OH cost = Rs 70,000/ 7 = Rs 10,000 per day,Previously,Labour Cost per day=(20 x Rs 300) + (2 x Rs 500) = Rs 6000 + 1000 = Rs 7,000Rs 7,000Raw materials cost per day = 150 kg x Rs100 per kg = Rs 15,000Utility Cost = Rs 2,000 /dayRs 2,000 /day (given)Total cost of Inputs = Lab cost + Mat cost + Utility cost + OH cost

= 7,000 + 15,000 + 2,000 + 10,000 = Rs 34,000Rs 34,000 per dayper dayValue of Output = 50 items x Rs 1400 per item = Rs 70,000Rs 70,000 per dayper day(i) Labour Productivity = Value of output = 70,000 = 1010

Cost of Lab input 7,000(ii) Overall Productivity = Value of output = 70,000 = 2.0592.059

Total Cost of input 34,000Recently,Labour Cost per day=(24 x Rs 300) + (1 x Rs 500) = Rs 7,700Rs 7,700

Raw materials cost per day = 210 kg x Rs100 per kg = Rs 21,000Utility Cost = RsRs 2,3002,300/day/day (given)Total cost of Inputs = Lab cost + Mat cost + Utility cost + OH cost

=7,700 + 21,000 + 2,300 + 10,000 = Rs 41,000Rs 41,000 per dayper dayValue of Output = 70 items x Rs 1400 per item = Rs 98,000Rs 98,000 per dayper day(i) Labour Productivity = = 98,000 / 7,700 = 12.72712.727

(ii) Overall Productivity = 98,000 / 41,000 = 2.392.39 15

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Jpm Pom Course Mat - 1 Mba T-2