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Production & Operations Management (OM)
Meaning of Production In Economic Sense, Production is the
creation of utilities Production is a value addition process. Production is a process by which goods &
services are created In a manufacturing Organization
Production is the Fabrication of physical object through the use of Men, materials & equipments.
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Meaning of Production Management
Production Management is a process of planning, organizing, directing & controlling the activities of the Production function.
Meaning of operations Management operations Management is concerned with the
activities, concepts & techniques employed in producing goods & services.
operations Management is the process of designing, operating,& controlling a productive system that capable of transforming physical resources & human talent into needed goods & services.
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Inputs Men
Machine Materials
Random Fluctuations
Adjustment Needed
Major Output
Conversion Process
Output Goods & Services
Comparison of Actual Vs Desired
Feedback
Production System/Process
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Production System characteristics
Production is an organized activity, so every production system has an objective
The system transforms the various inputs into usable outputs
Production system does not operate in isolation from the other organizational systems such as Finance, Marketing, e.t.c
There exist feedback about the activities which is essential to control & improve system performance.
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Functions of a production & Operations manager 1. Demand forecasting2. Job design3. Production planning4. Production control5. Quality control6. Method analysis7. Plant lay out8. Material handlings
9. Plant location
10. Inventory control
11. Wage incentives
12. Work measurement
13. Measurement of performance
14. Product development
& design
9. Maintenance
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Distinguish between Manufacturing & service Operations
Aspects of Differences are:1. Definition2. Nature of Product3. Consumption of
Product4. Degree of Customer
contact5. Customer perception6. Measurement of
performance7. Nature of work
8. Nature of inventory
9. Measurement of productivity
10. Quality
11. Expenses for material handling
12. Utilization of investment
13. Maintenance
14. Response time
15. Facilities
16. Nature
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Some of major issues facing production or operations managers or executives today in the constantly changing
business environmentor
Challenges faced by Operations Executives in the continuously changing global Environment
1. Reducing the development & manufacturing time for new product & services
2. Achieving & sustaining high quality while keeping cost down
3. Integrating new technologies & control systems into existing production systems
4. Obtaining, training & retaining qualified workers & Managers
5. Working effectively with other functional areas of business to accomplish the goals of the firm
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Challenges faced by operations Executives in the continuously changing global Environment
6. Controlling production & services at multiple sites in decentralized organization
7. Working effectively with suppliers & being user that is friendly for customers
8. Working effectively with New patterns formed by strategic alliances
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Critical Decisions areas/Scope/Subject matter of Production & Operations Management
A. Strategic Level Decisions are: that is1. New Product Identification & development design
2. Process design & planning
3. Facilities Location
4. Layout Planning
5. Capacity Planning
6. Job design
7. Selection of equipment
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Critical Decisions areas/Scope/Subject matter of Production & Operations Management
B. Operations Level Decisions are: that is1. Production Planning
2. Production controlling & scheduling
3. Inventory Control
4. Quality control
5. Material handlings
6. Labor control
7. Maintenance & Reliability
8. Cost control& improvement
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Principles of OM or how can you increase
Operational efficiency in an organization.
1. Get to Know the customer
2. Cut that is work that is in Process
3. Cut throughput time
4. Cut setup & change over time
5. Cut flow distance & space
6. Decrease cycle intervals for production
7. Cut number of suppliers to a few goods one
8. Cut number of components of the product or services
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Principles of OM or how can you increase Operational efficiency in an organization
9. Make it easy to make
10. Arrange the work place to climate search time
11. Cross train for mastery of more than one job
12. Record & retain production, quality & problem data at the work place
13. Assume that the line people get first check at problem solving
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Principles of OM or how can you increase Operational efficiency in an organization
14.Maintain & improve existing equipment & human work before thinking about new equipment
15.Look for simple, Cheap, & Movable equipment
16.Automate increasingly when process variability can’t otherwise be reduced.
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Today's Factors Affecting OM
Global Competition Quality, Customer Service, and Cost
Challenges Rapid Expansion of Advanced
Technologies Continued Growth of the Service
Sector Scarcity of operations Resources Social that is Responsibility Issues
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Historical Milestones in OM
The Industrial Revolution Post that is Civil War Period Scientific Management Human Relations and Behaviorism operations Research The Service Revolution
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The Industrial Revolution The industrial revolution developed in England in the 1700s. The steam engine, invented by James Watt in 1764, largely
replaced human and water power for factories. Adam Smith’s The Wealth of Nations in 1776 touted the
economic benefits of the specialization of labor. Thus the late is1700s factories had not only machine power
but also ways of planning and controlling the tasks of workers.
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The Industrial Revolution The first great industry in the US was the textile
industry. The industrial revolution spread from England to other European countries and to the United Sates.
In 1790 an American, Eli Whitney, developed the concept of interchangeable parts.
The first great industry in the US In the 1800s the development of the gasoline engine and
electricity further advanced the revolution. By the midthat is1800s, the old cottage system of
production had been replaced by the factory system. . . . more
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Postthat isCivil War Period During the postthat isCivil War period great
expansion of production capacity occurred. By postthat isCivil War the following developments
set the stage for the great production explosion of the 20th century: increased capital and production capacity the expanded urban workforce new Western US markets an effective national transportation system
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Scientific Management Frederick Taylor is known as the father of
scientific management. His shop system employed these steps: Each worker’s skill, strength, and learning ability
were determined. Stopwatch studies were conducted to precisely
set standard output per worker on each task. Material specifications, work methods, and
routing sequences were used to organize the shop.
Supervisors were carefully selected and trained. Incentive pay systems were initiated.
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Scientific Management
In the 1920s, Ford Motor Company’s Operations embodied the key elements of scientific management: standardized product designs mass production low manufacturing costs mechanized assembly lines specialization of labor interchangeable parts
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Human Relations and Behavioralism
In the 1927that is1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production. Researchers and managers alike were recognizing that
psychological and sociological factors affected production. From the work of behavioralists came a gradual change in
the way managers thought about and treated workers.
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operations Research During World War II, enormous quantities of resources
(personnel, supplies, equipment, …) had to be deployed. Military operations research (OR) teams were formed to
deal with the complexity of the deployment. After the war, operations researchers found their way
back to universities, industry, government, and consulting firms.
OR helps operations managers make decisions when problems are complex and wrong decisions are costly.
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The Service Revolution
The creation of services organizations accelerated sharply after World War II.
Today, more than twothat isthirds of the US workforce is employed in services.
About twothat isthirds of the US GDP is from services. There is a huge trade surplus in services. Investment per office worker now exceeds the
investment per factory worker. Thus there is a growing need for service operations
management.
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The Computer Revolution Explosive growth of computer and
communication technologies Easy access to information and the availability of
more information Advances in software applications such as
Enterprise Resource Planning (ERP) software Widespread use of email More and more firms becoming involved in Ethat
isBusiness using the Internet Result: faster, better decisions over greater
distances
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Today's Factors Affecting OM
Global Competition Quality, Customer Service, and Cost
Challenges Rapid Expansion of Advanced
Technologies Continued Growth of the Service
Sector Scarcity of operations Resources Socialthat isResponsibility Issues
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Facility Location
Meaning of Facility Location By Facility Location mean determining
an areas as well as site for establishment of an enterprise, the performance of an organization is considerably affected by its location.
Facility Location planning involves choosing the best place from the available options for setting plant /service facility.
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Importance & reasons for in the selection of Facility Location
1. A company’s Facility Location affects its operations & ability to compete
2. In manufacturing organization, location affects direct costs
3. In service operations Facility Location affects the demand for the service
4. Long lasting consequences
5. Effective marketing of products & services
6. Prospective location implies respective market area
7. Selection of Good Facility Location enables a company to provide convenient, dependable services to its customers.
8. Facility Location Influence public Relations
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Factors affecting choice of location of facilities
1. Materials & supplies availability & costs
2. Labor availability & costs
3. Proximity to market
4. Transportation system & costs
5. Utilities & costs
6. Infrastructure availability
7. Environmental regulations
8. Govt. restriction & incentives
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Factors affecting choice of location of facilities
9. Community attitude10. Social infrastructural facilities11. Proximity to related industry or
services12. Site availability13. Zoning restrictions14. Constructions costs15. Climate16. Political situation of a particular place.
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Factors affecting choice of location of service operations
1. Proximity to customers & market2. Transportation facilities & costs3. Location of competitors4. Residential density5. Proximity to support & services6. Image of the area7. Visibility of site8. Local ordinance9. Community attitude10. Law & order situation
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Reasons for relocation of existing facilities
1. Changes in availability of input resources
2. Shift in the structure in the market3. Undesirable labor situation4. Relocation of various associates
industries5. Demolition, Expropriation6. Merger7. Change in regulations & law8. Scientific discoveries
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Facility Location quantitative analysisthat is
BEP analysis,Factors Rating System, Transportation model
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Break even analysisProblem: For the
following data determine the best among of facility
Requirement: that is Find which location is best & the Break even quantity & cost
Location Fixed Cost (TK)
Variable Cost Per Unit (TK)
A TK200000 TK62
B TK500000 TK38
C TK600000 TK50
D TK400000 TK70
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Break even analysis
Location Fixed Cost (TK) Variable Cost Per Unit (TK)
TC=TFC+TVC
A TK200000 TK62×20000=1240000 TCa= TK200000+1240000
=TK 1440000
B TK500000 TK38×20000=760000 TCb= TK500000+760000
= TK 1260000
C TK600000 TK50×20000=1000000 TCc= TK600000+1000000
= TK 1600000
D TK400000 TK70×20000=1400000 TCd= TK400000+1400000
= TK 1800000
355000 10000 15000 20000
654321
25000
10
15
20
1800000
1260000
1440000
1600000
1250
Feasible Region for Location “A”
B
A
C
D
Feasible Region for Location “B’
Feasible Region for Location “B’
Quantity
CostsIn
0000
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Facility Layout Planning
Facility Layout/ Plant Layout: that is Plant layout is a plan of the most effective way of arrangement of the physical facilities & manpower for manufacturing of Products & services.
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Objectives of Facility Layout
Provide enough production capacity To reduce material handling costs Conform to site & building constraints To allow space for production machine To allow high labor, Machine & space
utilization & productivity Provide for volume & product flexibility Provide for employee safety & health To allow ease of Supervision To allow ease of Maintenance
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Types of Layout
1. Product or Line layout: Product or Line layout is a type of layout in which equipment, machineries or processes are arranged according to the progressive steps by which product is made.
Product or Line layout is a type of layout in which equipments & works are laid out according to the sequences of operations so that R & M started at the head of the line move progressively to adjacent item at the other end of the line.
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Process Layout
Process Layout is a type of layout in which work stations or work departments groups according to functions to accomplish the purpose of the organization.
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Figure:that is Product Layout
TurningOperations
MillingOperations
InspectionDrilling
OperationsAssembly
PackageDispatch
Milling
Grinding Inspection
Assembly
Shipping & Receiving
Lathes
Welding Painting/Printing
Figure:that is Process Layout
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Process LayoutEach Machine
Unit with MachinesEx -that is Lathe Department
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Hybrid Layout
Hybrid Layout is a flow strategy combines elements of both a product & process layout focus.
Process LayoutProduct or Line Layout
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Fixed position Layout
In this type of layout the product remains stationary at one location. This is called the project type layout. In Fixed position Layout, the materials or major components remain in a fixed location tools, Machineries, men & others materials are bought to this Location. EXthat is Construction of BRIDGE or Infrastructure.
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Factors Affecting the design of Layout of facilities
1. Nature of manufacturing System2. Production process3. Nature of product to manufacture4. Material handling systems used5. Volume of production6. Nature of factory building7. Availability of floor Place8. Flexibility required in the system9. Ease of supervision10. Accessibility to other related departments11. Provisions of Factory Act.
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Planning Product Layout: Planning Product Layout is the analysis production lines is the central focus of analysis of product layouts
Line Balancing: is an analysis process that tries to equally divide the work to be done among work stations so that the number of work stations or workers required on a production line minimized, it is also called line balancing staff techniques.
Work Elements: Work Elements are the smallest units of work that can be performed independently.
Desired outthat isRate: Desired outthat isRate is what should be line’s output rate.
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Some Terminologies
Cycle Time: Cycle Time is the maximum allowed time for work on a unit at each station.
C = Production time (I)
Rate of output
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Theoretical Minimum: is a benchmark or goal for the smallest number of stations possible, where the total time required to assemble each unit.
Formula; TM =Sum of work elements time (t)
Cycle Time (C)
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Balance Delay: Balance Delay is the amount by which efficiency falls short of 100%.
Efficiency = t
NC100
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Problemthat isLine balancing with the longestthat isTask time hurestic
Work Elements Time (Second)
“t”Immediate Predecessors
A 40 None
B 80 A
C 30 D,E,F
D 25 B
E 20 B
F 15 B
G 120 A
H 145 G
I 130 H
J 115 C,I
Total=720
(Seconds)
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Using the information above:
1. Draw the precedence diagram
2. Compute the cycle time
3. Determine the minimum number of work stations
4. Assign tasks to workstations using the longest that is task that is time heuristic
5. Calculate the efficiency & balance delay of the solution found
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Figure :that is Precedence Diagram
A40
B80
D25
E20
F15
C30
J115
G120
H145
I130
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Station Candidates Choice Work element time=“t”(Second)
Cumulative
Time
(Seconds)
Idle Time (Second)
Out of “c”=150
S1 A,B,D,E,F A
B
D
40
80
25
40
120
145
110
(150that is40)
30
(110that is80)
5 (30that is25)
S2 E,F,C,G E
G
20
120
20
140
130
10
S3 F,C,H H 145 145 5
S4 F,C,I F
I
15
130
15
145
135
5
S5 C,J C
J
30
115
30
145
120
5
∑t=720 Seconds
Total Idle time = 30
Seconds
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Figure :that is Precedence Diagram
A40
B80
D25
E20
F15
C30
J115
G120
H145
I130
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Materials HandlingMeaning of Materials Handling:that is Materials Handling involves movement of
materials mechanically or manually in batches or one by one within the plant. Movement may be vertical, horizontal or a combination of two.
Materials Handling system is the entire network of transportation that receive materials, store materials in inventories, moves them about between processing points within & between buildings, & finally deposits the finished products into vehicles that will deliver them to customers.
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Purposes of Materials Handling
1. Minimize the unit materials Handling cost
2. Reduce manufacturing cycle time
3. Provide for improved working conditions & greater safety in the movement of materials
4. Contribute toward better control of the flow of production
5. Gain higher productivity at lower manufacturing cost.
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Factors affecting the design of Materials handlings System
1. Nature of production process
2. Layout of the plant
3. Nature of factory building
4. Nature of materials to be moved
5. Paths over which materials to be moved
6. Volume of materials to move
7. Space of holding
8. Capacity of the holding equipments
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Principles of Materials handlings1. Materials should move through the facility in direct flow
patterns, minimizing zigzagging or back tracking2. Related production processes should be arranged to
provide for direct material flow3. Mechanical materials handling devices should be
designed & located and materials storage locations should be selected so that human effort expended through bending, reaching, lifting, & walking is mini9mized.
4. Heavy or bulky materials should be moved the shortest distance through locating processes that use them near receiving & shipping areas
5. The number of times each material is moved should be minimized
6. Provide for safe handling methods & equipments7. Replace obsolete handling equipments when more
efficient methods & equipments will improve operations
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Factors affecting the selection of efficient Materials handlings Equipments
1. Adaptability
2. Flexibility
3. Load capacity
4. Power & speed
5. Space requirement
6. Easy of maintenance
7. Cost of equipments
8. Safety
9. Efficient manpower availability
10. Supervision required
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Different Materials handlings Equipments 1. Conveyers: Conveyers primarily performs the
movement of uniform loads between fixed points.Types of Conveyers: Belt Conveyers Pipeline Conveyers Monorail Chain ConveyersConveyers are useful whenA. Loads are uniformB. Materials move continuouslyC. Routes don’t varyD. Movement rate is relatively fixedE. Movement is from one point to another point
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Different Materials handlings Equipments
2. Cranes: Cranes are devices capable of moving materials vertically & laterally in area of limited length & width & height. Cranes are employed for lifting & lowering heavy objects & moving them from one point to another. Cranes find their application in heavy engorging industries & in intermittent type of production
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Different Materials handlings Equipments
3. Hoists: Hoists are used for loading & unloading of heavy objects & they are also used for raising & lowering heavy & long objects.
Types of Hoists & cranes: Overhead traveling cranes Chain Hoists Electric Hoists Elevators
The hoists & cranes are useful when1. Movement is within fixed areas2. Movements are intermittent3. Loads vary in size & weight4. Loads handled are not uniformIndustrial trucks: Forklift, Platform truck, Tractor trailer
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Product Design & Development
Definition of Product Design: Product Design is the structuring of component parts or activities so that as a unit they can provide a specific value.
Product or Service Design is concerned with the functional & aesthetic requirements necessary to meet the demand of the market place & at the same time achieve an acceptable rate of return.
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How can you design product & service for an organization?or
Discuss the steps involved in the development of product &
service Design Steps Key Activities Key outputs
Step1 Idea
generation
Search for consumer needs Selection of ideas
Step2 Product selection Market analysis & feasibility study
Choice of specific products features
Step3 Preliminary Design Evaluation of alternative Design
Selection of best design including
Productivity
Step4 Final Design Process development & testing process
Final specification in the form of
assembly, drawing processing
formulas,procedure,statement etc.
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steps involved in the development of product & service Design
Steps Key Activities Key outputs
Step4 Final Design Process development & testing process
Final specification in the form of
assembly, drawing processing
formulas,procedure,statement etc.
Facility Exist New Facilities required
Capacity planningProduction planning
Scheduling
Process SelectionEvaluation
Technology alternativesStep5
Technological choice of specific equipment
& process flow
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Designing service organizations
Designing a service organization entails the execution of Four elements of what James Hoskett refers as the “Service Vision”.
The First element is Identification of target market that is who is our customer
The second is the service concept that is How we differentiate our service in the market
The Third is the service strategy – what is our service package& the operating focus of our service?
And Fourth is the service delivery system that is what are the actual process, staff, & facilities by which the service is created?
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Production Planning & control
Production Planning: - Production Planning implies formulation, coordination, & determination of activities in a manufacturing system necessary for the accomplishment of desired objectives.
Production Planning is the determination, acquisition & arrangement of all facilities necessary for future Production of products.
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Production Planning & control
Production control: - Production control is the process of maintaining a balance between various activities during Production Planning providing most effective & efficient utilization of resources.
Production Planning & control:- Production Planning & control can be defined as the direction & coordination of firms resources towards attaining the pre fixed goals
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Objectives of production Planning & control
1. To achieve the highest efficiency in production of goods
2. To determine the nature & magnitude of various input factors to manufacture the desired output
3. Establish targets & checking these against performance
4. To achieve the production objectives in respect of quality, quantity & cost & timeliness of delivery.
5. Ensure smooth flow of materials by eliminating bottlenecks, in production
6. Effective utilization of firm resources7. Conform to delivery commitments8. Make adjustments due to changes in demand & rush
orders.
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Different Manufacturing system
Intermittent Manufacturing: - In this type of system the goods are manufactured specially to fulfill orders made by the customers rather than for stock.
Intermittent Manufacturing systems are those where the production facilities are flexible enough to handle a wide variety of production & sizes.
Continuous manufacturing system:- In this system the items are produced for stocks & not for specific orders.
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Difference between Intermittent Manufacturing system
& Continuous manufacturing system Intermittent
Manufacturing system
Continuous
manufacturing system
Flexible production process Rigid production system
High product variety Low productivity
Work in process
inventory high
Low
Demand can be
discontinuous
Continuous demand
Customize product production Standardize product
Wide variety product produces Fewer variety of products are produced
Flexible sequence schedule required in this system
Standard set of process & sequence used
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Aggregate production planning (APP)
Aggregate production planning (APP) is related to the planning of overall production activities & their associated operating resources.
Aggregate production planning (APP) is a process by which a company determines level of capacity, level of production, level of subcontracting & even pricing over specified time period.
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Master Production Schedule
Master Production Schedule is an extension of aggregate production plan. It tells us the number of units of different models of product to be manufactured on a weekly or monthly basis.
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Maintenance
Defination (Marked)
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Factors emphasizing increasing importance of maintenance Increased mechanization Increased complexity of equipment Increased parts and supplies investment Tighter control of production Tighter delivery schedule Increased quantity requirement Rising costs
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How does maintenance contribute for incoming operations efficiency/competitive advantage to the enterprise?
By reducing cost of operations By ensuring manufacture or quality product By reducing lead time of production By reducing wastage By ensuring maximum utilization of efforts of human
resources and capacity of equipment By minimizing investment inventory By meeting delivery schedule to customer By minimizing machine downtime By increasing longibility of equipment and machines By ensuring smooth flow of production By providing safe working environment.
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Types of maintenance
Connective/Repair maintenance Connective or
Repair maintenance: Repair activities are reactive, that is they are performed after malfunction has occurred. This is also known as breakdown maintenance or corrective maintenance.
Objectives of repair program: operations managers implement repair programs to achieve the following activities:
To get equipments back into operations as quickly as possible in order to minimize interruptions to production.
To control the cost of repair crews. To control the cost of the operation of repair shops. To control the investment in replacement spare parts those
are used when machines are repaired. To control the investment in replacement spare machines. To perform the appropriate amount of repairs at each
malfunction.
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Preventive/planned/schedule maintenance
Preventive maintenance: this is a type of maintenance work which is undertaken before malfunctioning of equipments and buildings. It is a planned maintenance of equipment and machines. This is also called scheduled maintenance.
In broader sense “preventive maintenance is the periodical inspection and service activities which are aimed to detect potential failures and perform minor adjustments or repairs which will prevent major operating problems in future.
Objectives of preventive maintenance program: Reduce the frequency and severity of interruptions to production cause d by
machine malfunctions. Extend the useful life of production machinery. Reduce the total cost of maintenance by substituting preventive maintenance cost
for repair cots. Provide safe working environment for workers. Improve product quality by keeping equipment in proper adjustments well
serviced, and in good operating conditions. Advantages of preventive maintenance(marked) Limitations of preventive maintenance(marked) How preventive maintenance can be made effective?(marked) Page 20 Equipment malfunctions in manufacturing ands service industries have a
direct impact on : Production capacity Product and service quality Employee and customer safety Production cost Customer satisfaction
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Distinction between connective and preventive maintenance?
Autonomous/Total production maintenance Autonomous maintenance refers to take additional
responsibility to maintain the whole production system. In that approach production and maintenance department jointly take the responsibility. It is widely used maintenance approach which gives the competitive advantage.
Pre-requisites of Autonomous maintenance: Adequate and skilled people. Additional incentives for people Require necessary training
79
Chapter: Productivity Measurement
Productivity: Productivity refers to the efficiency of the production system.
Productivity is some relationship between inputs and outputs of an enterprise. It is the quantitative relationship between what we produced and the resources used. That it is the ratio of outputs to inputs
According to P.F. Drucker, “productivity means balance between all factors that will give the maximum output with the smallest effect. Productivity is therefore defined as = outputs/inputs
Symbolically; productivity= measure of
outputs/measure of inputs.
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Types of productivity measurement
there are a number of ways to measure productivity. The main criterion of measuring productivity are
In term of input performance by calculating changes in output per unit of input.
On the basis of output performance by calculating change in input per unit of output.
Total productivity=total(Tangible)output/total inputs=output/Labor+ Machine+ Capital +technology+ information +Management
multifactor productivity=output/L+M+C+T+I Partial productivity=output/L/M/C/I/T/M
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Productivity Measurements Advantages of total productivity measure:
Easy and more accurate representation of the total picture of the company.
Easily related to total cost Considers all quantifiable outputs and inputs. Limitations of total productivity measure: Difficulty in obtaining data. Requirement of special data collection system.
Advantages of potential productivity measure: Easy to understand and calculate. A tool to pinpoint improvement.
Limitations: Misleading of used alone. No consideration of overall impact.
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Maintenance
Maintenance means up-keep of property or plant. Types of Maintenance
Connective/Repair maintenance preventive/planned/schedule maintenance predictive maintenance
83
Importance of maintenance
Factors emphasizing increasing importance of maintenance
Increased mechanization Increased complexity of equipment Increased parts and supplies investment Tighter control of production Tighter delivery schedule Increased quantity requirement Rising costs
84
How does maintenance contribute for incoming operations efficiency/competitive advantage to the enterprise?
By reducing cost of operations By ensuring manufacture or quality product By reducing lead time of production By reducing wastage By ensuring maximum utilization of efforts of human
resources and capacity of equipment By minimizing investment inventory By meeting delivery schedule to customer By minimizing machine downtime By increasing legibility of equipment and machines By ensuring smooth flow of production By providing safe working environment.
85
Types of maintenance
Connective/Repair maintenance preventive/planned/schedule maintenance predictive maintenance
Connective or Repair maintenance:
Repair activities are reactive, that is they are performed after malfunction has occurred. This is
also known as breakdown maintenance or corrective maintenance.
86
Objectives of repair program:
operations managers implement repair programs to achieve the following activities:
To get equipments back into operations as quickly as possible in order to minimize interruptions to production.
To control the cost of repair crews. To control the cost of the operation of repair shops. To control the investment in replacement spare parts those
are used when machines are repaired. To control the investment in replacement spare machines. To perform the appropriate amount of repairs at each
malfunction.
87
Preventive maintenance:
Preventive maintenance: this is a type of maintenance work which is undertaken before malfunctioning of equipments and buildings. It is a planned maintenance of equipment and machines. This is also called scheduled maintenance.
In broader sense “preventive maintenance is the periodical inspection and service activities which are aimed to detect potential failures and perform minor adjustments or repairs which will prevent major operating problems in future.
88
Objectives of preventive maintenance program:
Reduce the frequency and severity of interruptions to production cause d by machine malfunctions.
Extend the useful life of production machinery. Reduce the total cost of maintenance by substituting
preventive maintenance cost for repair cots. Provide safe working environment for workers. Improve product quality by keeping equipment in
proper adjustments well serviced, and in good operating conditions.
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Inventory Management Good inventory management is essential to
successful operations of management of the organizations for a number of reasons. Inventory policies are important enough that production, marketing and financial managers work together to reach an agreement of these policies. There are conflicting a view concerning inventory policies under scores the balance that must be stuck among conflicting goals.
Reduce production costs, reduce inventory investment and increase customer responsiveness. An effective control of inventory becomes a must for smooth and efficient running of production cycle with last interruptions.
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Meaning /definition of Inventory
Inventory is defined as the stock of any item or resources used in an organization.
Inventory is the piles of raw materials and finished goods in the warehouse.
All materials, parts, and in-process or finished products recorded on the books by an organization and kept in its stores, warehouses and plants are known as inventories.
Inventory refers to the physical stock of goods which through remain idle in store but is essential for smooth sailing of the company and hence has economic value.
91
Characteristics of inventory
Inventories serve as cushions to absorb shocks.
Inventory for any organization is necessary evil.
Inventories are the result of many interrelated decisions and policies with in organization.
Inventory provides production economies.
92
Classification of inventories
Classification of inventories according to functions Transit inventories Cycle inventories Buffer inventories Decoupling inventories
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Purposes of Inventory
1. to protect against uncertainty1. to take the advantage of price discounts
2. to meet demand during the replenishment period
3. to keep face with or adapt with changing market conditions
4. to prevent loss of orders(sales)
5. to take advantage of economies of scale
6. to support a strategic plan
7. to hedge against price increase
8. generated by the transformation process
9. to ensure smooth flow of production
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Functions of Inventory
Inventories serve a number of functions. Among the most important are the following:
To meet anticipated demand. To smooth production requirements To decouple components of the production
distribution system. To protect against stock out. To take advantage of order cycles. To hedge price increases or to take advantage of
quantity discounts. To permit operations.
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Inventory Control
Inventory control is the techniques of maintaining the size of the inventory at some designed level keeping in view the best economic interest of an organization.
Inventory control is a panned approach of determining what to order, when to order , and how much to order, and how much to stock so that costs associated with buying and storing are optimal without interrupting production and sales.
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Techniques/Types/methods of Inventory Control
Techniques/Types/methods of Inventory Control ABC analysis Two-Bin System Economic order quantity Material Requirement Plan (MRP) Cad system JIT system
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ABC Analysis.
It is the process of dividing items into three classes according to their usages so that manages can focus on items that have the highest dollar value.
A class items typically represent about10pecent of the items but account 80%of the dollar usage i.e., dollar value. These items required right and strict control and need to be stocked in the smaller quantities. The inventory of A, class items is kept at minimum.
“B” class items account another 2%of the items (i.e., Quantity) but only 15% of the dollar usage (i.e., value) these are intermediate items. The control on these items should be intermediate between “A and C” items.
Finally, 70% of the items fall in class C .representing mean5% of the dollar usage (i.e., value). These items’ being less representative does not require strict control. These are ordered in bulk as against infrequent ordering of A class items.
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To Bin System or Two Bucket System
A visual system version f the Q system in the two bin system in which an items inventory is stored at two different locations. Inventory is first withdrawn from one bin. If the first bin is empty then second bin provides backup to cover demand until a replenishment order arrives. An empty bin signals the need to replace a new order.
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Economic Order Quantity (EOQ)
EOQ is an optimum quantity level which minimizes the cost and maximizes return.
Some Technologies of EOQ : Reorder point/Level=safety stock+ Lead time usage
wages =safety stock+ Lead
time*daily usage Maximum inventory= Safety stock+ EOQ Minimum Inventory=Safety stock Average inventory=Safety Stock+EOQ/2
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Some Technologies of EOQ Total Inventory cost= Total Carrying Cost+ Total Ordering Cost =EOQ/2*Carrying cost per unit+ D/EOQ*Ordering
cost per order MinimumTotalCost(MTC)=Total carrying cost +Total ordering
Cost+ Cost of the materials=EOQ/22*Carrying cost per unit+ D/EOQ*order cost per order+ Cost of the materials
EOQ= √ 2DCO/CC Where, D=Annual demand CO=Cost per order (per year) CC=Carrying cost per unit per year Time between successive order/Order cycle =360/No of orders per year
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(Purchase model with instantaneous replenishment and without storage)
Problem: Alpha Industry needs 5400 units per year of a bought out component which will be used in its main product. The ordering cost is taka 250 per order and the carrying cost per unit per year per year of average industry is Taka 30. Find EOQ, the number of orders per year and the time between successive orders. (Lead time)
