MS 53[Production Operations Management]

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MS-53 SOLVED ASSIGNMENT 2015 PROVIDED BY WWW.MYIGNOU.IN

Course Code : MS-53

Course Title : Production/Operations Management

Assignment Code : MS-53/TMA/SEM-I/2015

Coverage : All Blocks

Note: Attempt all the questions and submit this assignment on or before 30th April, 2015 to the

coordinator of your study center.

Q1. What is the system view of operations Management? Identify

the input, process and output for the following production systems.

a) Automobile manufacturing

b) A restaurant

Ans:

System view of operations Management

A System is a group of interrelated items in which no item studied in isolation will

act in the same way as it would in the system.A system is divided into a series of

parts or subsystems, and any system is a part of a larger system.The system’s

boundary defines what is inside the system and what is outside.A system’s

environment is everything outside the system boundary that may have an impact on

the behaviour of the system.A system’s inputs are the physical objects of

information that enter it from the environment and its outputs are the same which

leave it for the environment.

The activities in an operations system can be classified as inputs, transformation

process and output. Inputs are classified into three general categories-external,

market and primary resources. Transformation resources are the elements that act

on, or carry out, the transformation process on other elements. These include such

elements as labour, equipment/plant and energy. The nature and mix of these

resources will differ between operations. The transformed resources are the

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elements which give the operations system its purpose and goal. The operations

system is concerned with converting the transformed resources from inputs into

outputs in the form of goods and services. There are three main types of

transformed resource of materials which can be transformed either physically(e.g.

manufacturing),by location (e.g. transportation),by ownership(e.g.retail) or by

storage(e.g.Warehousing) or other private services, Government services.

The sub-systems of a firm related to specific business disciplines are termed the

functional areas of a business.The three main functional areas in a business are the

operations, marketing and Finance functions.The marketing function works to find

and create demand for the company’s goods and services by understanding

customer needs and developing new markets.

a) Input process and output for automobile manufacturing

Inputs to the automobile manufacturing industry sector include the outputs from

the industry sectors that produce sheet metal, plate glass windshields, tires,

carpeting, as well as computers (for designing the cars), electricity (to operate the

facilities), etc. In turn, the sheet metal, plate glass windshield tire, etc. industry

sectors require inputs for their operations that are outputs of other sectors, and so

on. Each of these requirements for goods or services between industry sectors is

identified in an Input-output model.

b) Input process and output for a restaurant

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Q2.

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Q3. When to use product and process layouts? Give example of

organizations that have predominantly product, process and fixed

position layout.

Ans:

Manufacturing companies put a lot of thought into the way their facilities are

laid out. Strategic process selection and design are crucial to maximizing

productivity and reducing costs in manufacturing operations. Managers put

different facilities design philosophies into practice to reduce waste, increase

output and decrease the time and manpower required for each work task.

Process layouts and product layouts are two popular facilities layout

philosophies best suited to different production situations. Understanding the

difference between process and product layout manufacturing can give you

insight for structuring your own manufacturing operation.

Product Layout

A product layout groups different workstations together according to the

products they work on. Workstations in a product layout can quickly transfer

small batches of semi-finished goods directly to the next station in a

production line. Product layouts can be ideal for smaller manufacturing

businesses with lower volume than their large corporate competitors. As a

business's manufacturing output grows, however, it is wise to at least

consider implementing a process layout.

Example

In a product layout for a garment manufacturer, for example, stations for

sewing cloth, sewing on buttons, inspecting seams, wrapping finished

garments and boxing them up would all be located within close proximity for

an individual clothing item, allowing individual garments to pass from one

station to another quickly.

Process Layout

A process layout groups workstations together according to the activities

being performed, regardless of which products each workstation is working

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on. Workstations produce higher volumes of output at a time before sending

semi-finished goods in bulk to the next area, which may be located as close as

the other end of a building or as far as another facility on the other side of the

globe.

Continuing the garment manufacturing example, a process layout would

group multiple sewing stations together for different clothing items in one

area, then locate inspection, wrapping and packaging stations for different

items together in different areas.

A manufacturing example would be a machine shop. A machine shop

generally has separate departments where general-purpose machines are

grouped together by function (e.g., milling, grinding, drilling, hydraulic

presses, and lathes). Therefore, facilities that are configured according to

individual functions or processes have a process layout. This type of layout

gives the firm the flexibility needed to handle a variety of routes and process

requirements. Services that utilize process layouts include hospitals, banks,

auto repair, libraries, and universities.

Q4. Review Shigeo’s seven wastes. Which of these wastes are

addressed by the following JIT techniques?

a) Pull production

b) Kanban

c) JIT purchasing

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1. Over Production

• To produce sooner, faster or in greater quantities than the absolute customer

demand

• Manufacturing too much, too early or “Just in Case”

• Overproduction discourages a smooth flow of goods or services

• Takes the focus away from what the customer really wants

• Leads to excessive inventory

Caused by:

• MRP push rather than kanban pull

• Large batch sizes

• Looks better to be busy!

• Poor people utilisation

• Lack of customer focus

Why one of the 7 wastes?

• Costs money

• Consumes resource ahead of plan

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• Creates inventory

• Hides inventory/defect problems

• Space utilisation

2. Inventory

Any raw material, work in progress (WIP) or finished goods which are not having

value added to them

Caused by:

• Production schedule not level

• Inaccurate forecasting

• Excessive downtime/set up

• Push instead of pull

• Large batching

• Unreliable suppliers

Why one of the 7 Wastes ?:

• Adds cost

• Extra storage space required

• Extra resource to manage

• Hides shortages & defects

• Can become damaged

• Shelf life expires

3. Motion

• Adds cost

• Motion is the movement of “man”

• Waste motion occurs when individuals move more than is necessary for the

process to be completed

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Caused by:

• No standard operating procedure

• Poor housekeeping

• Badly designed cell

• Inadequate training


• It interrupts production flow

• Increases production time

• Can cause injury

4.Waiting

People or parts that wait for a work cycle to be completed

• Where are the bottlenecks?

• What are the major causes of lost machine availability?

• What are we doing to improve machine availability?

• Do people wait on machinery?

Caused by:

• Shortages & unreliable supply chain

• Lack of multi-skilling/flexibility

• Downtime/Breakdown

• Ineffective production planning

• Quality,design,engineering Issues

• ‘Black art’ processes


• Stop/start production

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• Poor workflow continuity

• Causes bottlenecks

• Long lead times

• Failed delivery dates

5. Transportation

Unnecessary movement of parts between processes

• Complex material flow paths

• Poor close coupling

• Wasted floor space

• Unnecessary material handling

• Potential damage to products

Caused by:

• Badly designed process/cell

• Poor value stream flow

• Complex material flows

• Sharing of equipment

Why one of the Seven Wastes ?:

• Increases production time

• It consumes resource & floorspace

• Poor communication

• Increases work in progress

• Potential damage to products

6. Over-Processing

Processing beyond the standard required by the customer

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By improving processing efficiency we ultimately use less resource to achieve the

same customer satisfaction

Caused by:

• Out of date standards

• Attitude - ‘Always done it like this’

• Not understanding the process

• Lack of innovation & improvement

• Lack of standard operation procedures

Why one of the Seven Wastes ?:

• It consumes resource

• It increases production time

• It’s work above and beyond specification

• Can reduce life of component

7. Non-Right First Time (Scrap, Rework and Defects)

A defect is a component which the customer would deem unacceptable to pass the

quality standard

• Defects reduce or discourage customer satisfaction

• Defects have to be rectified

• Rectification costs money with regard to time effort and materials

• Defects in the field will lose customers

• Right first time is the key

Caused by:

• Out of control/Incapable processes

• Lack of skill,training & on the job support

• Inaccurate design & engineering

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• Machine inaccuracy

• Black art processes


• Adds costs

• It interrupts the scheduled

• It consumes resources

• It creates paper work

• Reduces customer confidence

a)Pull production :

The pull production of inventory control involves forecasting inventory needs to meet

customer demand. Companies must predict which products customers will purchase along

with determining what quantity of goods will be purchased. The company will in turn

produce enough product to meet the forecast demand and sell, or push, the goods to the

consumer. Disadvantages of the push inventory control system are that forecasts are often

inaccurate as sales can be unpredictable and vary from one year to the next. Another

problem with push inventory control systems is that if too much product is left in

inventory. This increases the company's costs for storing these goods. An advantage to the

push system is that the company is fairly assured it will have enough product on hand to

complete customer orders, preventing the inability to meet customer demand for the

product.

An example of a push system is Materials Requirements Planning, or MRP. MRP combines

the calculations for financial, operations and logistics planning. It is a computer-based

information system which controls scheduling and ordering. It's purpose is to make sure

raw goods and materials needed for production are available when they are needed.

The pull inventory control system begins with a customer's order. With this strategy,

companies only make enough product to fulfill customer's orders. One advantage to the

system is that there will be no excess of inventory that needs to be stored, thus reducing

inventory levels and the cost of carrying and storing goods. However, one major

disadvantage to the pull system is that it is highly possible to run into ordering dilemmas,

such as a supplier not being able to get a shipment out on time. This leaves the company

unable to fulfill the order and contributes to customer dissatisfaction.

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An example of a pull inventory control system is the just-in-time, or JIT system. The goal is

to keep inventory levels to a minimum by only having enough inventory, not more or less,

to meet customer demand. The JIT system eliminates waste by reducing the amount of

storage space needed for inventory and the costs of storing goods.

b) Kanban

Kanban is a method for managing knowledge work with an emphasis on just-

in-time delivery while not overloading the team members. In this approach,

the process, from definition of a task to its delivery to the customer, is

displayed for participants to see and team members pull work from a queue.

Kanban in the context of software development can mean a visual process

management system that tells what to produce, when to produce it, and how

much to produce inspired by the Toyota Production System and Lean

manufacturing.

c) JIT purchasing :

Just-in-time (JIT) purchasing as a management innovation can be adopted by

organizations as a strategy to gain advantage over their competitors. Seven

characteristics of JIT purchasing are identified based on a comprehensive

literature review. These elements are supplier cooperation, materials quality,

quantities purchased, transportation, top management support, training and

employee relations. A review of benefits of JIT purchasing implies that

implementation of JIT purchasing can increase firms' performance. The

benefits include higher inventory turnover, increased product quality and

productivity, which theoretically lead to a reduction in product costs. High

product quality and reduced costs will usually result in lower prices. Lower

prices will lead to increased market share and profit. Data have been collected

by a mail survey from both large and small manufacturing and service

organizations. The subjects of the survey are business unit chief officers or

high-ranking managers.

Dell provides an example of JIT inventory. As a computer manufacturing

company, Dell allows customers to purchase computers directly online.

Everything from the hard drive to features such as color and screen width is

custom ordered. As soon as the order is finalized, the raw materials and parts

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are ordered. The raw materials are then assembled and made ready for the

customer in a relatively short period of time.

Q5) Discuss various vendor-rating techniques? Why an organisation

should try to rate its vendors?

Ans:

Various Techniques of Vendor Rating:

The purchase organizations watch his enlisted suppliers continuously and

take requisite corrective action. Following rating plans are utilized for vendor

rating:

(a) Categorical plan: The categorical plan is a sample of all vendor rating schemes.

It relies heavily on the judgement and experience of the decision maker. The

purchaser maintains a list of his suppliers and their products. The vendor

performance is reviewed periodically by an evaluation committee comprising of all

representatives.

(b) Weighted point plan: Quality, delivery or service and price are the three most

important attributes of a good supplier. Depending upon the importance, a

purchaser attaches to a particular attribute he fixes a weightage for it.

(c) Cost ratio method : This method relates to identifiable purchasing and

receiving costs to the value of shipment received from respective suppliers. The

higher the ratio of costs to shipments, the lower the rating applied to the supplier:

Quality, delivery, service and price are the usual categories to which costs are

allocated, after subdividing each factor into various elements.

(d) Eavaston’s vendor selection : The suppliers’ past performance is utilized in the

choice of vendors and the basic steps in this method are as follows: (i) The vendors

on the approved list are ranked on the basis of the buyer’s subjective evaluation, (ii)

The first satisfactory vendor, meeting or exceeding all the standards, (iii) If the

applied vendors do not fulfill the minimum standards, then the minimum standard

may be relaxed till a vendor is chosen. It presupposes that standards of acceptability

for every criterion are formed to fit in order to take decisions.

(e) Forced decision matrix : The attributes of rating like price, quality, service,

reliability of the supplier, lead time of supply etc. — are identified first. Then these

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factors are compared between themselves, like quality and price. If price is

considered more important than quality by the evaluation committee, then a

weightage of one is given to price and zero to quality.

(f) Service cost ratio : There are other intangible aspects of a supplier’s services. They can only be measured subjectively. The procedure is as follows:

(i) Listing the service factors like R&D, Labour stability, financial stability, flexibility in production for rush orders, etc.

(ii) Assigning weights to each factor according to its importance to the purchaser.

(iii) Setting an acceptable norm e.g., out of a total of a 100 service points 70 may be an acceptable norm.

(iv) Rating suppliers for each service factor.

(v) Determining the percentage by which the supplier is over or under the acceptable norm.

(vi) Multiplying the percentage obtained in (v) by value of package percent. For sophisticated items the value of package percent may be 10% and for common Bazzar items it may be just 1%.

(vii) The percentage figure arrived at in (vi) is minus if the percentage in (v) is over the acceptable norm and is plus if it is below the acceptable norm.

(g) Bell quality rating system : The bell helicopter company developed a Lot

Quality Index (LQI), which give an assessment of all lots received against lots

rejected, by disposition and category, as the company attaches greater importance

to quality. The LQI is given by: LQ1 – X/L, where

L = total number of lots received during the period, x = (L1 x 1.00) + (L2 x 2.10) +

(L3 x 2.90) + (L4 x 3.10)+ (L5 x 3.90)

L1 = Number of lots acceptable as received

L2 = Number of lots rejected by sampling inspection but labelled.

L3 = Number of lots rejected and dispositioned, rework at supplier’s end.

L4 = Number of lots rejected and dispositioned, returned not usable and

L5 = Number of lots rejected and dispositioned rework at Bell helicopter company.

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The weights 1.00, 2.10 etc. were determined at the company after a careful study of

the complexity and number of operations required to have a usable lot from a

particular dispositioned lot. It is clear from the above equation, that the best lot

quality index figure rates is 1.0, the worst is 3.90. The formula can be modified

easily to suit the needs of a particular firm. The quality rating can be combined with

rating for other parameters, to develop suitable vendor rating schemes.

(h) IBM quality rating system.: The IBM rating system uses quality costs as the basis

for rating suppliers. The formula for the vendor quality rating is:

VGR = Desired cost of inspection / Actual cost of inspection x 100

The cost incurred in inspecting acceptable material is the desired cost, the cost of

inspecting rejected material being excluded from it. The actual cost of inspection

includes cost incurred in inspecting acceptable as well as rejected material plus cost

associated with extra handling of rejected material.

Inspection cost is obtained by multiplying the actual time spent on inspection by the

standard rate. The material handling cost is found by multiplying the number of

documents to process the rejected material by a standard cost.

Organization need to rate its vendors

Here are seven tips and tools you'll need to effectively rate your suppliers and vendors,

track their performance, and ultimately increase your company's overall productivity.

1. Establish Performance Indicators

At the onset of the vendor relationship you have to determine what characteristics a

vendor needs to have, demonstrate, or maintain to continue doing business with your

company. Create specific performance criteria for tracking and evaluating your suppliers

and vendors on a regular basis—monthly, quarterly, and/or annually. Considerations

include size of the company, number of certifications, quality management systems,

complaint history, and financial stability. For instance, you might consider if they have a

documented procedure for the product or service they provide? 'We look at a couple of

driving metrics to evaluate how good our vendors are,' says Greenblatt, 'including

percentages of on-time performance, number of times we received a quality part or

product, and how quickly the vendor responded to requests for quotes.'

Your own processes and needs will dictate what criteria you apply. For a business owner

who is looking for a shipping company, the biggest concerns might revolve around what is

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that supplier's on time delivery track record, how many trucks they own, how many

accidents have their drivers reported, and what certifications do they hold.

A basic consideration for every business owner should be whether the supplier has a

quality management system in place. 'This doesn't just apply to manufacturing but any

business including service providers,' explains Miriam Boudreaux, president of Mireaux

Management Solutions, a Houston-based consulting that specializes in the implementation

of quality management systems. 'It's really about if the supplier has a certain set of

procedures in place that its people are expected to follow. Is there a system for handling

complaints or problems? Are there corrective or preventive actions?' Such standards will

be addressed if the vendor is ISO certified.

2. Classify Multiple Suppliers and Vendors

If you have a huge number of suppliers and vendors and you intend to craft a survey to

evaluate them, it will be cumbersome to apply the same survey to each and every one, says

Boudreaux. It is better to separate suppliers into levels (1, 2, and 3) based on how critical

they are, she advises. Decide the classification that is best for you and evaluate suppliers

according to the effect they have on your product or service in order of importance,

Boudreaux adds.

Marlin Steel exports wire baskets and forms all around the world including Japan,

Columbia and China. Greenblatt points to the fact that 'about 80 percent of my vendors do

20 percent of my dollar amount of work and about 20 percent of my vendors do 80 percent

of my activity.'

By divvying up suppliers into two categories such as critical and non-critical or primary

and secondary, you can devote more time to measuring the performance of your critical

suppliers.

3. Devise an Evaluation Method

There are common techniques for rating a supplier's performance including evaluation

forms, surveys, system metrics, and software applications. Marlin Steel tracks vendor

performance using a customized program he created in QuickBooks Enterprise Solutions

accounting software, the Manufacturing & Wholesale edition.

You can craft a survey where you ask your own employees to answer questions and to rate

suppliers and vendors. You can review how many corrective actions you had to issue a

supplier or vendor, how many products you had to scrap or return because the supplier or

vendor failed to meet specifications, or how many customer complaints you received due to

a bad part or service from a vendor. You also can monitor suppliers and vendors by doing

an audit periodically. The bottom line is that you need to generate measurements or

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reports at the onset of the purchase and throughout the course of the supplier and vendor

relationship.

'We did vendor reviews where we would bring them together offsite at a hotel with our IT

and procurement people,' says Wright, who in his last business life for eight years was vice

president and director of procurement for a large global engineering company. At the point

he retired, the company had 100 plus suppliers and vendors ranging from Microsoft to

United Airlines to a small staffing agency. 'We would line them up. So, at 9 in the morning

AT&T would be making a presentation to our group. When AT&T finished and left the room

they would find the Verizon salespeople standing in the lobby waiting for their turn,'

Wright explains. 'We created a little competition amongst vendors.'

Wright says periodic vendor reviews would also entail a discussion about what the

company had been buying, how much it had been buying, what did that vendor have on the

shelf or working on for push out six months or a year down the road and did it represent a

significant improvement over what had been previously purchased, and what were

competitors buying from a particular vendor.

4. Determine Who's Calling the Shots

Once you establish the criteria for evaluating suppliers and vendors, who in your company

will be responsible for reviewing the data. It depends on how much resources you have to

dedicate to evaluating your suppliers, says Boudreaux. 'You may want to assign one person

or a team with this task.' For instance, selecting and evaluating level 1 suppliers and

vendors, might require the chief financial officer or someone from the finance department

along with the president and representatives from purchasing, operations, and engineering

or IT. With level 2 and 3 suppliers and vendors, it may be the purchasing or procurement

officer who approves the supplier or vendor list and monitors performance.

'I always made sure that the user group was involved in the process. The individuals who

were using the product or service were very active in the process from the very

beginning—at the point of selection,' Wright says.

5. Maintain Good Relationships

Consider your suppliers and vendors as part of the team and treat them as such.

Communicate often and openly. Technology is great but don't overlook the personal touch

of a phone conversation or face to face meetings,. Also, avoid supplier and vendor conflicts

by paying on time or at least honestly addressing late payment issues and talking with your

supplier or vendor about it. Be upfront and transparent with suppliers and vendors. Make

sure they understand your needs and expectations.

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'To improve our relationship and communication with our vendors, we added a page to all

of our print materials (drawings) calling out exactly how we are going to package things,'

adds Greenblatt. 'So, if it is going to be two layers of bubble wrap or an extra layer of

padding between each part so that there is no scratching. We go through that level of detail

so that we are not disappointed when parts come in.'

6. Decide When to Issue a Red Flag

As you monitor a supplier's performance, you have to decide when to praise them and

when to issue a read flag, says Boudreaux. Show appreciation for a job well done; give a

supplier additional business because of excellent performance. 'A bad supplier will provide

you with mediocre or poor products and services and cause a problem with your

customers,' adds Boudreaux.

You can drop a supplier for poor performance but strategically it is better to retain your

vendors and not to flip around all of the time to replace them. By giving a warning, you give

the supplier or vendor an opportunity to correct the problem. Use data that you have

collected like on-time delivery rate, return rate, and number of supplier corrective actions

to work with your suppliers, says Boudreaux. 'This process is not just about reviewing your

suppliers but helping them to improve their performance.'

7. Cut Loose Weak Links

No one of course should tolerate ongoing bad service. There may come a time when you

have to let go of an underperforming supplier or vendor. 'We fired a vendor that was really

cheap but was not meeting the ship dates. They were also non-responsive to complaints.

They cut corners and handed in shoddy paperwork,' Greenblatt cites an example.

'We give a warning and then put them on notice or a short leash before we cut ties

completely,' he explains. 'We will call the vendor and give them an opportunity to correct

the situation. We will send them digital pictures, e-mails, and quality reports. So, there is no

mystery when there is a challenge or an issue.'

The relationship with your supplier is a business partnership, says Wright, and if both

parties are working to make sure that the partnership is a success it will be a success. In the

long run, having a win-win supplier and vendor relationship will be a competitive

advantage.

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MS 53[Production Operations Management]