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MB0044 Productions & Operations Management Set- 1

Q1. What do you understand by Vendor-Managed Inventory (VMI)? Some firms have successfully improved their supply chain performance by implementing an approach known as Vendor Managed Inventory (VMI). With VMI, the vendor specifies delivery quantities sent to customers through the distribution channel using data obtained from EDI. Vendor Managed Inventory, Just-in-Time Distribution (JITD), and Efficient Consumer Response (ECR) all refer to similar concepts, but applied to different industries. For example, the grocery and apparel industries tend to use ECR, whereas the automobile industry tends to use VMI and JITD. The Vendor Managed Inventory Approach VMI reduces stock-outs and reduces inventory in the supply chain. Some features of VMI include: Shortening of the supply chain Centralized forecasting Frequent communication of inventory, stock-outs, and planned promotions. Electronic Data Interchange (EDI) linkages facilitate this communication. No manufacturer promotions Trucks are filled in a prioritized order. For example, items that are expected to stock out have top priority, then items that are furthest below targeted stock levels, then advance shipments of promotional items (promotions allowed only in transition phase), and finally, items that are least above targeted stock levels. Relationship with downstream distribution channels Result: Inventory reduction and stock-out reduction VMI Implementation Challenges VMI can be made to work, but the problem is not just one of logistics. VMI often encounters resistance from the sales force and distributors. At issue are roles and skills, trust, and power shifts. Some of the sales force concerns are: Loss of control

Effect on compensation - incentive bonuses may depend on how much is sold, but sales force has less influence under VMI. Possible loss of job Scepticism that it will function well - technical problems Concern that reduced inventory will result in less shelf space and therefore loss of market share. This concern can be addressed by filling the shelf space with other stock keeping units from the same vendor. Distributors also may have concerns about vendor managed inventory, including: Inventory will be pushed on them No more promotions, discounts, and forward buying With less inventory, more risk of disruptions due to strikes, adverse weather, etc. The vendor enjoys the benefits while the distributor gives up its only lever of power - data on what the retailers want. Danger of being replaced - vendor may decide to forward integrate. Addressing Concerns For a VMI system to work, the concerns of distributors and the sales force must be addressed. They can be at least partially addressed by the following: Transform the sales role into one of marketing. For example, bonuses can be given based on the number of new clients. Distributor scepticism can be addressed by implementing a pilot program with vendor-owned warehouses in order to demonstrate that the system works. Introduce system in distributor-owned warehouses on a pilot basis. Engage a neutral consultant in meetings among the vendor, distributor, and sales force. Allow some manufacturer promotions in the transition. Extensively simulate the system off-line before implementing. Don't exaggerate the benefits of VMI; otherwise, any delay in realizing the benefits may cause the supply chain to lose faith in the system.

Q2. Explain briefly the four classification of scheduling strategies & its approaches. Types of Scheduling Strategies Burst Campaigns: often associated with the awareness objective, the burst campaign compacts media activities into a series of relatively short time frames, with relatively long periods of absence from media activity in between. This pattern may be used when a new product is being introduced. Flighting: Wave method or the flighting method is another kind of scheduling. In flighting, advertisements are bunched with the intention of providing a concentrated impact. is another method of creating an advertising schedule. The phrase advertising flight describes the time when commercials are aired. When flighting is used in relation to a scheduling technique, it refers to a method that has advertising going on and off the air. The advantage of the flighting technique is that it allows a campaign that does not have funds for running spots continuously to conserve money and maximize the impact of the commercials by airing them at key strategic times during the campaign. Frequently when flighting is employed, radio or cable TV will be used to supplement the advertising campaign during the times when television commercials are off the air. This method of media planning allows the messages and themes of the campaign to reach the voter through radio or cable TV, less costly alternatives to broadcast TV. Overview: Henko Stain Champion Powder (HSCP) was launched in July 1994 in South India. It was clearly positioned as a brand in the premium segment of detergents among HLLs Surf Wash Booster (todays Surf Multi-Action). Battling consumer inertia to try out this new brand was its toughest challenge and carving out pride of association was the other issue. Continuous Campaign: Another approach mostly associated with reminder campaigns, is to extend the time frame of the advertising message over a long period. The campaign provides continuity of the message, although at the cost of the impact. These continuous patterns are often used for mature products, where reminder advertising is appropriate. Over a long term .this strategy is more appropriate for products and services where the demand is constant or there is a long purchase cycle. There can be perfect continuous advertising, rising continuity or falling continuity.

1. Rising continuity: this pattern is used when the advertising circles around a particular event. E.g. the advertisement for Paints generally increases during the festive seasons like divali. 2. Falling continuity: this pattern may follow an initial burst to launch a new product or to inform a product modification. Pulsing Campaign: A compromise between the burst and the continuous strategy is the development of the pulsing campaign. Here a comparatively low level of media activity is maintained over long period of time, with periodic increases in the expenditure patterns. It is often associated with seasonal or other influences on buyer activities. Normally, scheduling is done for a 4-week period. The six types of schedules available are: 1. Steady pulse: it is the easiest. For instance, one ad/week for 52 weeks or one ad/month for 12 months. 2. Seasonal pulse: ads are scheduled to meet seasonal peaks by appearing in concentrated doses ahead of buying season. Products like Vicks Balm, Glycodin Terp-Vasaka Syrup, and Ponds cold cream follow this approach. 3. Period pulse: Scheduling follows a regular pattern, e.g., media scheduling of consumer durables, non-durables, etc. 4. Erratic pulse: The ads are spaced irregularly. Perhaps, we want to change the typical purchase cycles. 5. Start-up pulse: It is concentrated media scheduling. It launches a new product or a new campaign. 6. Promotional pulse: A one-shot affair it suits only particular promotional theme. Heavy concentration during a period is the characteristic of this scheduling. For instance, financial advertising of companys issue.

Q3. Define production management. What functions involved in production management?

are

the

various

Production management means planning, organising, directing and controlling of production activities. Production management deals with converting raw materials into finished goods or products. It brings together the 6M's i.e. men, money, machines, materials, methods and markets to satisfy the wants of the people. Production management also deals with decision-making regarding the quality, quantity, cost, etc., of production. It applies management principles to production. Production management is a part of business management. It is also called "Production Function." Production management is slowly being replaced by operations management. The main objective of production management is to produce goods and services of the right quality, right quantity, at the right time and at minimum cost. It also tries to improve the efficiency. An efficient organisation can face competition effectively. Production management ensures full or optimum utilisation of available production capacity Functions of Production Management Functions of production management are depicted, listed & explained below.

The components or functions of production management are as follows: 1. Selection of Product and Design, 2. Selection of Production Process, 3. Selecting Right Production Capacity, 4. Production Planning, 5. Production Control, 6. Quality and Cost Control, 7. Inventory Control, and 8. Maintenance and Replacement of Machines The above functions of production management are briefly discussed below. 1. Selection of Product and Design Production management first selects the right product for production. Then it selects the right design for the product. Care must be taken while selecting the product and design because the survival and success of the company depend on it. The product must be selected only after detailed evaluation of all the other alternative products. After selecting the right product, the right design must be selected. The design must be according to the customers' requirements. It must give the customers maximum value at the lowest cost. So, production management must use techniques such as value engineering and value analysis. 2. Selection of Production Process Production management must select the right production process. They must decide about the type of technology, machines, material handling system, etc. 3. Selecting Right Production Capacity Production management must select the right production capacity to match the demand for the product. This is because more or less capacity will create problems. The production manager must plan the capacity for both short and long term's production. He must use break-even analysis for capacity planning. 4. Production Planning Production management includes production planning. Here, production manager decides about the routing and scheduling. the

Routing means deciding the path of work and the sequence of operations. The main objective of routing is to find out the best and most economical sequence of operations to be followed in the manufacturing process. Routing ensures a smooth flow of work.

Scheduling means to decide when to start and when to complete a particular production activity. 5. Production Control Production management also includes production control. The manager has to monitor and control the production. He has to find out whether the actual production is done as per plans or not. He has to compare actual production with the plans and finds out the deviations. He then takes necessary steps to correct these deviations. 6. Quality and Cost Control Production management also includes quality and cost control. Quality and Cost Control are given a lot of importance in today's competitive world. Customers all over the world want good-quality products at cheapest prices. To satisfy this demand of consumers, the production manager must continuously improve the quality of his products. Along with this, he must also take essential steps to reduce the cost of his products. 7. Inventory Control Production management also includes inventory control. The production manager must monitor the level of inventories. There must be neither over stocking nor under stocking of inventories. If there is an overstocking, then the working capital will be blocked, and the materials may be spoiled, wasted or misused. If there is an under stocking, then production will not take place as per schedule, and deliveries will be affected. 8. Maintenance and Replacement of Machines Production management ensures proper maintenance and replacement of machines and equipments. The production manager must have an efficient system for continuous inspection (routine checks), cleaning, oiling, maintenance and replacement of machines, equipments, spare parts, etc. This prevents breakdown of machines and avoids production halts.

Q4. Explain the various phases in project management life cycle. Phases of project management life cycle Project management life cycle has six phases:

Analysis and evaluation phase Marketing phase Design phase Execution phase Control inspecting, testing, and delivery phase Closure and post completion analysis phase

Analysis and evaluation phase Analysis and evaluation phase is the initial phase of any project. In this phase, information is collected from the customer pertaining to the project. From the collected information, the requirements of the project are analysed. According to the customer requirement, the entire project is planned in a strategic manner. The project manager conducts the analysis of the problem and submits a detailed report to the top management. Marketing phase A project proposal is prepared by a group of people including the project manager. This proposal has to contain the strategies adopted to market the product to the customers. Design phase Design phase involves the study of inputs and outputs of the various project stages

Inputs received consist of: project feasibility study, preliminary project evaluation details, project proposal, and customer interviews. Outputs produced consist of: system design specifications, functional specifications of the project, design specifications of the project, and project plan.

Execution phase In execution phase, the project manager and the team members work on the project objectives as per the plan. At every stage during the execution, reports are prepared. Control inspecting, testing and delivery phase

During this phase, the project team works under the guidance of the project manager. The project manager has to ensure that the team working under him is implementing the project designs accurately. The project has to be tracked or monitored through its cost, manpower, and schedule. The project manager has to ensure ways of managing the customer and marketing the future work, as well as ways to perform quality control work. Closure and post completion analysis phase Upon satisfactory completion and delivery of the intended product or service the staff performance has to be evaluated. The project manager has to document the lessons from the project. Reports on project feedback are to be prepared and analysed. A project execution report is to be prepared.

Q5. Explain the ingredients of a business process. Explain Physical Modelling. Business Process Modelling A process is a coordinated set of activities designed to produce a specific outcome. There are processes for saving a file, constructing a building, and cooking a meal. In fact, there is a process for almost everything we do. A business process is a type of process designed to achieve a particular business objective. Business processes consist of many components, including:

The data needed to accomplish the desired business objective Individual work tasks that manipulate, review, or act upon the data in some way Decisions that affect the data in the process or the manner in which the process is conducted The movement of data between tasks in the process

Individuals and groups which perform tasks Processes can be manual or automated, fully documented or simply knowledge in the minds of one or more people. They can be simple or complex. They can be formal, requiring exact adherence to all details; or flexible, provided the desired outcome is achieved.

Logical Process Modelling Logical Process Modelling is the representation of a business process, detailing all the activities in the process from gathering the initial data to reaching the desired outcome. These are the kinds of activities described in a logical process model:

Gathering the data to be acted upon Controlling access to the data during the process execution Determining which work task in the process should be accomplished next Delivering the appropriate subset of the data to the corresponding work task Assuring that all necessary data exists and all required actions have been performed at each task Providing a mechanism to indicate acceptance of the results of the process, such as, electronic signatures

All business processes are made up of these actions. The most complex of processes can be broken down into these concepts. The complexity comes in the manner in which the process activities are connected together. Some activities may occur in sequential order, while some may be performed in parallel. There may be circular paths in the process (a re-work loop, for example). It is likely there will be some combination of these. The movement of data and the decisions made determining the paths the data follow during the process comprise the process model. The contains only business activities, uses business terminology (not software acronyms, technical jargon, etc.), completely describes the activities of the business area being modelled, and is independent of any individual or position working in the organization. Like its sibling, Logical Data Modelling, Logical Process Modelling does not include redundant activities, technology dependent activities, physical limitations or requirements or current systems limitations or requirements. The process models a representation of the business view of the set of activities under analysis. Heretofore, many applications and systems were built without a logical process model or rigorous examination of the processes needed to accomplish the business goals. This resulted in applications that did not meet the needs of the users and / or were difficult to maintain and enhance. Problems with an un modelled system include the following: Not knowing who is in possession of the data at any point in time Lack of control over access to the data at any point in the process

Inability to determine quickly where in the process the data resides and how long it has been there Difficulties in making adjustments to a specific execution of a business process Inconsistent process execution. Ingredients of Business Process 1) Time: You must understand that time is money. In business, our objective is to make money. Period. But the question is how productively you convert your time into money. Are you making full use of your time or you just let the time pass by you? How much you make depends on how good you are at converting time to money. If you are already productive, then you may want to ask what are the things you can do to improve further the ratio of dollar/second? If you are making $0.01/second, what you can dote make it $0.02/second? Or even more. Remember time is the most valuable asset and once its gone, its gone. Also time is also the fairest distribution of resources every human beingreceives.2) People: To be successful in business, you must have people connections. I mean the right people. People consist of customers, suppliers, partners, staff, and associates. One thing that you must not leave out is your mentor or coach. Having genuine mentors or coaches is very important and it can make a very big difference in your business. To make sure that you have more profits, you must serve people well. Organize your database of people connections. By simply knowing who does what, who supplies what, whoneeds what, where to get what make you miles ahead of other people. To organize your connections, you can either use a paper folder or computer spreadsheet.3) Knowledge and Skills: When I talk about knowledge and skills, I am not referring toacademic knowledge that you find in schools or colleges. Whats more important to youis knowledge and skills that can bring you results you want.How many MBA holders that you know of have become business owners and have madetones of money? That shows getting the right knowledge and skills is important. Dont blindly go after knowledge that could drown you. Go for knowledge and skills that areuniversally tested and proven.Examples of right knowledge and skills are where to get what from who, money makingtrends, marketing strategies, art of dealing with people, negotiation skills, selling skills, skillsof managing and growing money, investment skills, universal laws of success, and more.Dont waste time on unnecessary knowledge as I went through that before. Theres only somuch that you need to know and learn. Be sharp and focus when you acquire knowledge andskills. Dont follow what normal people do.4) Personal Health: In fact, this is the most important ingredient of all. How can you run a business without a healthy body? In order to maintain an optimum health, you have to provide your body with proper nutrients and sufficient exercise. And also dont forget aboutemotional well being. Dont let anger and other negative

emotions control you.This is where positive and empowering attitudes come into play. Maintaining your body is just like maintaining your car. If you send your car to workshop for regular service and pump petrol regularly, why dont you do the same for your body? Its something for you to think about. Dont be stingy over spending money for your own health because physical andmental health can cause you a lot of money in the long run if your body is not taken care of properly.5) Money: Lets face it. It does take money to make money even you need a little. But youmight not need a lot of money to start a business because there are many ways tostart one with low capital.I meet a lot of people who want to be rich but are not willing to invest the money. You mustinvest in something in order to for you to get something. The law of sowing andreaping is at work. Dont expect something without investing anything. Money is one of theinvestments you need to make. Even though you dont need to have a capital for your business, but at least you must be ableto cover your expenses while building your business. You also need money to buy productsto stock up and other stuff. So, you must at least come up with whatever amount that youhave to start a business.These are the five basic ingredients of business success. Do your best to acquire or grow or invest in these ingredients. But the good thing is you dont need to have a perfectcombination of ingredients to get started. You can still perfect the ingredients along the way.Somehow, get it started with what youve got.

Q.6 Define the term quality. Explain the concept of quality at source.

Quality Control (QC) is a system of routine technical activities, to measure and control the quality of the inventory as it is being developed. The QC system is designed to: Provide routine correctness, and completeness; Identify and address errors and omissions; Document and archive inventory material and record all QC activities. and consistent checks to ensure data integrity,

The following seven are considered basic tools for achieving quality. Flow Chart

Check sheet Histogram Pareto Analysis Scatter Diagram Control Chart Cause and Effect Diagram

Flow Chart It is a visual representation of process showing the various steps. It helps in locating the points at which a problem exists or an improvement is possible. Detailed data can be collected, analyzed and methods for correction can be developed. A sample is shown below lists out the various steps or activities in a particular job. It classifies them as a procedure or a decision. Each decision point generates alternatives. Criteria and Consequences that go with decision are amenable to evaluation for purposes of assessing quality. The flow chart helps in pinpointing the exact at which errors have crept in. A simple chart is shown below.

Check Sheet These are used to record the number of defects, types of defects, locations at which they are occurring, times at which they are occurring, workmen by whom they are occurring. It keeps a record of the frequencies of occurrence with reference to possible defect causing parameter. It helps to implement a corrective procedure at the point where the frequencies are more, so that the benefit of correct will be maximum. A sample sheet is shown below.

Histogram Histograms are graphical representations of distribution of data. They are generally used

to record huge volumes of data about a process. They reveal whether the pattern of distribution whether there is a single peak, or many peak and also the extent of variation around the peak value. This helps in identifying whether the problem is serious. When used in conjunction with comparable parameters, the visual patterns help us to identify the problem which should be attended to.

Pareto Analysis This is a tool for classifying problem areas according to the degree of importance and attending to the most important. Pareto principle, also called 80-20 rule, states that 80 percent of the problems that we encounter arise out of 20 percent of items. If we find that, in a day, we have 184 assemblies have given problems and there are 11 possible causes, it is observed that 80 per cent of them i.e. 147 of them have been caused by just 2 or 3 of them. It will be easy to focus on these 2 or three and reduce the number of defects to a great extent. When the cause of these defects have been attended, we will observe that some other defect

Scatter Diagram These are used when we have two variables and want to know the degree of relationship between them. We can determine if there is cause and effect relationship between and its extent over a range of values. Sometimes, we can observe that there is no relationship, in which we can change one parameter being sure that it has no effect on the other parameter.

Control Charts These are used to verify whether a process is under control. Variables when they remain within a range will render the product maintain the specifications. This is the quality of conformance. The range of permitted deviations is determined by design parameters. Samples are taken and the mean and range of the variable of each sample (subgroup) is recorded. The mean of the means of the samples gives the control lines. Assuming normal distribution, we expect 99.97 per cent of all values to lie within the UCL when we take 3 standard deviations Upper Control Limit and LCL Lower Control Limit. The graphical representation of data helps in changing settings to bring back the process closer to the target.

Cause and Effect Diagram This is a diagram in which all possible causes are classified on quality characteristics which lead to a defect. These are arranged in such a way that different branches the causes are leading the stem in the direction of the discovery of the problem. When each of them is investigated thoroughly we will be able to pinpoint some factors which cause the problem. We will also observe that a few of them will have cumulative effect or even a cascading effect.

Deming Wheel

Demings approach is summarized in his 14 points. Constancy of purpose for continuous improvement Adopt the TQM philosophy for economic purposes Do not depend on inspection to deliver quality Do not award any business based on price alone Improve the system of production and service constantly Conduct meaningful training on the job Adopt modern methods of supervision and leadership Remove fear from the minds of everyone connected with the organisation Remove barriers between departments and people Do not exhort, repeat slogans and put up posters. Do not set up numerical quotas and work standards Give pride of workmanship to the workmen Education and training to be given vigorously State and exhibit top managements commitment for quality and productivity

Using the above principles, Deming gave a four step approach to ensure a purposeful journey of TQM. The slope is shown to indicate that if efforts are let up the program will roll back

Plan means that a problem is identified, processes are determined and relevant theories are checked out. Do means that the plan is implemented on a trial basis. All inputs are correctly measured and recorded. Check/Study/Analyze means that the trials taken according to the plan are in accordance with the expected results. Act When all the above steps are satisfactory regular production is started so that quality outcomes are assured

Crosbys Absolutes of Quality Like Deming, he also lays emphasis on top management commitment and responsibility for designing the system so that defects are not inevitable. He urged that there be no restriction on spending for achieving quality. In the long run, maintaining quality is more economical rather than compromising on its achievement.

His absolutes can be listed as under. Quality is conformance to requirements not goodness. Prevention, not appraisal, is the path to quality. Quality is measured as the price paid for non-conformance and as indexes. Quality originates in all factions not quality department. There are no quality problems people, design, process create problems. Crosby also has given 14 points similar to those of Deming. His approach emphasizes on measurement of quality, increasing awareness, corrective action, error cause removal and continuously reinforcing the system, so that advantages derived are not lost over time. He desires that the quality management regimen should improve the overall health of the organization and prescribed a vaccine.

The ingredients are: Integrity honesty and commitment to produce everything right first time, every time. Communication Flow of information between departments, suppliers, customers helps in identifying opportunities. Systems and operations These should bring in a quality environment so that nobody is comfortable with anything less than the best.

MB0044 Productions & Operations Management Set- 2

Q.1 What is value engineering? Explain the steps involved in Value analysis.

Value Engineering (VE) or Value Analysis is a methodology by which we try to find substitutes for a product or an operation.

The concept of value engineering originated during the Second World War. It was developed by the General Electric Corporations (GEC). Value Engineering has gained popularity due to its potential for gaining high Returns on Investment (ROI). This methodology is widely used in business re-engineering, government projects, automakers, transportation and distribution, industrial equipment, construction, assembling and machining processes, health care and environmental engineering, and many others. Value engineering process calls for a deep study of a product and the purpose for which it is used, such as, the raw materials used; the processes of transformation; the equipment needed, and many others. It also questions whether what is being used is the most appropriate and economical. This applies to all aspects of the product. Simplification of processes reduces the cost of manufacturing. Every piece of material and the process should add value to the product so as to render the best performance. Thus, there is an opportunity at every stage of the manufacturing and delivery process to find alternatives which will increase the functionality or reduce cost in terms of material, process, and time. The different aspects of value engineering can be encapsulated into a sequence of steps known as a Job Plan. Value Engineering in organisations helps to identify:

The problem or situation that needs to be changed/improved All that is good about the existing situation The improvements required in the situation The functions to be performed The ways of performing each function The best ways among the selected functions The steps to be followed to implement the function The person who executes the function

It should be remembered that we are not seeking a cost reduction sacrificing quality. It has been found that there will be an improvement in quality when systematic value analysis principles are employed. Examples of Value Engineering

Russian liquid-fuel rocket motors are intentionally designed to permit ugly (though leak-free) welding. This reduces costs by eliminating grinding and finishing operations that do not help the motor function better. Some Japanese disk brakes have parts toleranced to three millimeters, an easy-to-meet precision. When combined with crude statistical process controls, this assures that less than one in a million parts will fail to fit.

Many vehicle manufacturers have active programs to reduce the numbers and types of fasteners in their product, to reduce inventory, tooling and assembly costs. Often a premium forming process (like near net shape forming) can eliminate hundreds of low-precision machining or drilling steps. Precision transfer stamping can quickly produce hundreds of high quality parts from generic rolls of steel and aluminum. Die casting is used to produce metal parts from aluminum or sturdy tin alloys (theyre often about as strong as mild steels). Plastic injection molding is a powerful technique, especially if the parts special properties are supplemented with inserts of brass or steel. When a product incorporates a computer, it replaces many parts with software that fits into a single light-weight, low-power memory part or microcontroller. As computers grow faster, digital signal processing software is beginning to replace many analog electronic circuits for audio and sometimes radio frequency processing. On some printed circuit boards (itself a producibility technique), the conductors are intentionally sized to act as delay lines, resistors and inductors to reduce the parts count. An important recent innovation was to eliminate the leads of surface mounted components. At one stroke, this eliminated the need to drill most holes in a printed cricuit board, as well as clip off the leads after soldering. In Japan (the land where manufacturing engineers are most valued), it is a standard process to design printed circuit boards of inexpensive phenolic resin and paper, and reduce the number of copper layers to one or two to lower costs without harming specifications.

Q2. Describe dimensions of quality. Which are the quality control tools?

The Old Seven The First Seven. The Basic Seven. Quality pros have many names for these seven basic tools of quality, first emphasized by KaoruIshikawa, a professor of engineering at Tokyo University and the father of quality circles. Start your quality journey by mastering these tools, and you'll have a name for them too:"indispensable." Cause-and-effect diagram

(also called Ishikawa or fishbone chart): Identifies manypossible causes for an effect or problem and sorts ideas into useful categories. Check sheet: A structured, prepared form for collecting and analyzing data; a generictool that can be adapted for a wide variety of purposes. Control charts: Graphs used to study how a process changes over time. Histogram: The most commonly used graph for showing frequency distributions, or howoften each different value in a set of data occurs. Pareto chart: Shows on a bar graph which factors are more significant. Scatter diagram: Graphs pairs of numerical data, one variable on each axis, to look for arelationship. Stratification: A technique that separates data gathered from a variety of sources so that patterns can be seen (some lists replace stratification with flowchart or run chart). Q.3 What are the objectives of layout? Explain the classification of layouts.

Break Even Analysis refers to the calculation to determine how much product a company must sell in order to break even on that product. It is an effective analysis to measure the impact of different marketing decisions. It can focus on the product, or incremental changes to the product to determine the potential outcomes of marketing tactics. The formula for a break even analysis is: Break even point ($) = (Total Fixed Costs + Total Variable Costs). Total Variable Costs = Variable cost per unit x units sold Unit contribution (contribution margin) = Price per unit Variable cost per unit.

When looking at making a change to the marketing program, one can calculate the incremental break even volume, to determine the merits of the change. This determines the required volume needed such that there is no effect to the company due to the change. If making changes to fixed costs (changing advertising expenditure etc.): Incremental break even volume = change in expenditure / unit contribution. Thus if a company increased its advertising expenditure by $1 million, and its unit contribution for the specific product is $20, then the company would need to sell an additional 50,000 units to break even on the decision. If making changes to the unit contribution (change in price, or variable costs): Incremental break even volume = (Old Unit Volume x (Old Unit Contribution New Unit Contribution)) / New Unit Contribution Thus if a company increased its price from $15 to $20, and had variable costs of $10, it is increasing its unit contribution from $5 to $10, assume also an old unit volume of 1 million. It could therefore reduce its volume by 500,000 to break even on the decision. When making changes to a specific product, cannibalization of other products may occur. To calculate the effect of cannibalization, the Break Even Cannibalization rate for a change in a product is: New Product Unit Contribution / Old Product Unit Contribution. New Product is the planned addition to a product line (or change to a product within a product line), Old Product is the product that loses sales to the new product (or the product line that loses sales). The cannibalization rate refers to the percentage of new product that would have gone to the old product, this must be lower than the break even cannibalization rate in order for the change to be profitable. In manufacturing, facility layout consists of configuring the plant site with lines, buildings, major facilities, work areas, aisles, and other pertinent features such as department boundaries. While facility layout for services may be similar to that for manufacturing, it also may be somewhat differentas is the case with offices, retailers, and warehouses. Because of its relative permanence, facility layout probably is one of the most crucial elements affecting efficiency. An efficient layout can reduce unnecessary material handling, help to keep costs low, and maintain product flow through the facility. Firms in the upper left-hand corner of the product-process matrix have a process structure known as a jumbled flow or a disconnected or intermittent line flow. Upper-left firms generally have a process layout. Firms in the lower right-hand corner of the product-process matrix can have a line or continuous flow. Firms in the lower-right part of the matrix generally have a product layout. Other types of layouts include fixedposition, combination, cellular, and certain types of service layouts.

PROCESS LAYOUT Process layouts are found primarily in job shops, or firms that produce customized, low-volume products that may require different processing requirements and sequences of operations. Process layouts are facility configurations in which operations of a similar nature or function are grouped together. As such, they occasionally are referred to as functional layouts. Their purpose is to process goods or provide services that involve a variety of processing requirements. 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. Improving process layouts involves the minimization of transportation cost, distance, or time. To accomplish this some firms use what is known as a Muther grid, where subjective information is summarized on a grid displaying various combinations of department, work group, or machine pairs. Each combination (pair), represented by an intersection on the grid, is assigned a letter indicating the importance of the closeness of the two (A = absolutely necessary; E = very important; I = important; O = ordinary importance; U = unimportant; X = undesirable). Importance generally is based on the shared use of facilities, equipment, workers or records, work flow, communication requirements, or safety requirements. The departments and other elements are then assigned to clusters in order of importance. Advantages of process layouts include:

Flexibility. The firm has the ability to handle a variety of processing requirements. Cost. Sometimes, the general-purpose equipment utilized may be less costly to purchase and less costly and easier to maintain than specialized equipment. Motivation. Employees in this type of layout will probably be able to perform a variety of tasks on multiple machines, as opposed to the boredom of performing a repetitive task on an assembly line. A process layout also allows the employer to use some type of individual incentive system. System protection. Since there are multiple machines available, process layouts are not particularly vulnerable to equipment failures.

Disadvantages of process layouts include:

Utilization. Equipment utilization rates in process layout are frequently very low, because machine usage is dependent upon a variety of output requirements. Cost. If batch processing is used, in-process inventory costs could be high. Lower volume means higher per-unit costs. More specialized attention is necessary for both products and customers. Setups are more frequent, hence higher setup costs. Material handling is slower and more inefficient. The span of supervision is small due to job complexities (routing, setups, etc.), so supervisory costs are higher. Additionally, in this type of layout accounting, inventory control, and purchasing usually are highly involved. Confusion. Constantly changing schedules and routings make juggling process requirements more difficult.

PRODUCT LAYOUT Product layouts are found in flow shops (repetitive assembly and process or continuous flow industries). Flow shops produce high-volume, highly standardized products that require highly standardized, repetitive processes. In a product layout, resources are arranged sequentially, based on the routing of the products. In theory, this sequential layout allows the entire process to be laid out in a straight line, which at times may be totally dedicated to the production of only one product or product version. The flow of the line can then be subdivided so that labor and equipment are utilized smoothly throughout the operation. Two types of lines are used in product layouts: paced and unpaced. Paced lines can use some sort of conveyor that moves output along at a continuous rate so that workers can perform operations on the product as it goes by. For longer operating times, the worker may have to walk alongside the work as it moves until he or she is finished and can walk back to the workstation to begin working on another part (this essentially is how automobile manufacturing works). On an unpaced line, workers build up queues between workstations to allow a variable work pace. However, this type of line does not work well with large, bulky products because too much storage space may be required. Also, it is difficult to balance an extreme variety of output rates without significant idle time. A technique known as assembly-line balancing can be used to group the individual tasks performed into workstations so that there will be a reasonable balance of work among the workstations. Product layout efficiency is often enhanced through the use of line balancing. Line balancing is the assignment of tasks to workstations in such a way that workstations have approximately equal time requirements. This minimizes the amount of time that some workstations are idle, due to waiting on parts from an upstream process or to avoid building up an inventory queue in front of a downstream process.

Advantages of product layouts include:


Output. Product layouts can generate a large volume of products in a short time. Cost. Unit cost is low as a result of the high volume. Labor specialization results in reduced training time and cost. A wider span of supervision also reduces labor costs. Accounting, purchasing, and inventory control are routine. Because routing is fixed, less attention is required. Utilization. There is a high degree of labor and equipment utilization.

Disadvantages of product layouts include:

Motivation. The systems inherent division of labor can result in dull, repetitive jobs that can prove to be quite stressful. Also, assemblyline layouts make it very hard to administer individual incentive plans. Flexibility. Product layouts are inflexible and cannot easily respond to required system changesespecially changes in product or process design. System protection. The system is at risk from equipment breakdown, absenteeism, and downtime due to preventive maintenance. Discuss the role of

Q.4 List the benefits of forecasting. forecasting in modern business context.

Facilities management is an important strategic level decision taken by an organisation. It involves planning and management of the plant location and layout. A plant location cannot be changed frequently since a large capital needs to be invested to build the plant and machinery in the selected area. Therefore, before selecting a plant location, a long range forecasting is to be made to foresee the future needs of the company. Location decisions are made on the basis of parameters which make it suitable for various considerations of suppliers and markets. While locating a plant, the following long range forecasting needs are to be considered: The companys expansion plan and policy Diversification plan for the products Changing market conditions The changing sources of raw materials

Many other factors that influence the choice of the location decision Layout means the positioning of various equipments, machineries, and department facilities so as to maximise productivity and valuable space utilisation. They are, in turn, linked to the inventory strategy, such as, make or buy policies. The main concern of the operations manager will be the extent of flexibility he/she has regarding: What is the list of quantities of different products? What operations have to be outsourced? How to deal with surge or wane in demand? Considering the future needs, layout has to be prepared with a view to accommodate additional machines. Some of the manufacturing systems that have to be considered when layouts are planned are: Group Technology Flexible Manufacturing Systems Extent Kind of automation Materials need to be stocked and moved to various locations for operations. Since decisions in this area have long term implications, thorough analysis and involvement of senior managers from all departments is essential. Multi-locations for manufacturing and distribution to exploit situations of supplier availability or market requirements also become important. In this unit, you will learn about the various methodologies used to select the location of plant, the ways in which machineries and other facilities are laid to maximise productivity. You will also learn the methodology of flow of information with materials to facilitate the production process. Q.5 Mention the significance of plant location decision. Explain the location decision sequence.

Facilities management is an important strategic level decision taken by an organisation. It involves planning and management of the plant location and layout. A plant location cannot be changed frequently since a large capital needs to be invested to build the plant and machinery in the selected area. Therefore, before selecting a plant location, a long range forecasting is to be made to foresee the future needs of the company.

Location decisions are made on the basis of parameters which make it suitable for various considerations of suppliers and markets. While locating a plant, the following long range forecasting needs are to be considered: The companys expansion plan and policy Diversification plan for the products Changing market conditions The changing sources of raw materials Many other factors that influence the choice of the location decision Layout means the positioning of various equipments, machineries, and department facilities so as to maximise productivity and valuable space utilisation. They are, in turn, linked to the inventory strategy, such as, make or buy policies. The main concern of the operations manager will be the extent of flexibility he/she has regarding: What is the list of quantities of different products? What operations have to be outsourced? How to deal with surge or wane in demand? Considering the future needs, layout has to be prepared with a view to accommodate additional machines. Some of the manufacturing systems that have to be considered when layouts are planned are: Group Technology Flexible Manufacturing Systems Extent Kind of automation Materials need to be stocked and moved to various locations for operations. Since decisions in this area have long term implications, thorough analysis and involvement of senior managers from all departments is essential. Multi-locations for manufacturing and distribution to exploit situations of supplier availability or market requirements also become important. In this unit, you will learn about the various methodologies used to select the location of plant, the ways in which machineries and other facilities

are laid to maximise productivity. You will also learn the methodology of flow of information with materials to facilitate the production process.

Planning the location of the plant You will now study about planning for the location of a plant. You will also study the various factors that affect the economics of competing locations and helps in choosing the most optimal location. Factors influencing Plant Location can be broadly divided into two types namely: general factors and special factors (See Figure 5.1 Factors influencing plant location).

Figure 5.1: Factors influencing plant location In this section, let us know in detail about the factors influencing plant location. General factors The general factors that influence the plant location are listed below (See Figure 5.2 General factors influencing plant location). 1. Availability of land: Availability of land plays an important role in determining the plant location. Many-a-time, our plans, calculations and forecasts suggest a particular area as the best to start an organisation. However, availability of land may be in question. In such cases, we will have to choose the second best location. 2. Availability of inputs: While choosing a plant location, it is very important for the organisation to get the labour at the right time and raw materials at good qualities. The plant should be located: Near to the raw material source when there is no loss of weight At the market place when there is a loss of weight in the material Close to the market when universally available, so as to minimise the transportation cost

Figure 5.2: General factors influencing plant location Closeness to market places: Organisations can choose to locate the plant near to the customers market or far from them, depending upon the product they produce. It is advisable to locate the plant near to the market place, when: The projection life of the product is low The transportation cost is high The products are delicate and susceptible to spoilage After sales services are promptly required very often The advantages of locating the plant near to the market place are: Consistent supply of goods to the customers Reduction of the cost of transportation 4. Communication facilities: Communication facility is also an important factor which influences the location of a plant. Regions with good communication facilities viz. Postal and Tele communication links should be given priority for the selection of sites. 5. Infrastructure: Infrastructure plays a prominent role in deciding the location. The basic infrastructure needed in any organisation are: Power: For example, industries which run day and night require continuous power supply. So they should be located near to the power stations and should ensure continuous power supply throughout the year.

Water: For example, process industries such as, paper, chemical, and cement, requires continuous water supply in large amount. So, such process industries need to be located near to the water. Waste disposal: For example, for process industries such as, paper and sugarcane industries facility for disposal of waste is the key factor. 6. Transport: Transport facility is a must for facility location and layout of location of the plant. Timely supply of raw materials to the company and supply of finished goods to the customers is an important factor. The basic modes of transportation are by Air, Road, Rail, Water, and Pipeline. The choice of location should be made depending on these basic modes. Cost of transportation is also an important criterion for plant location. 7. Government support: The factors that demand additional attention for plant location are the policies of the state governments and local bodies concerning labour laws, building codes, and safety. 8. Housing and recreation: Housing and recreation factors also influence the plant location. Locating a plant with the facilities of good schools, housing and recreation for employees will have a greater impact on the organisation. These factor seems to be unimportant, but have a difference as they motivate the employees and hence the location decisions.

Q.6 What is meant by business process? Explain logical process modelling? Business Process Modeling A process is a coordinated set of activities designed to produce a specific outcome. There are processes for saving a file, constructing a building, and cooking a meal. In fact, there is a process for almost everything we do. A business process is a type of process designed toachieve a particular business objective.Business processes consist of many components, including: The data needed to accomplish the desired business objective Individual work tasks that manipulate, review, or act upon the data in some way Decisions that affect the data in the process or the manner in which the process isconducted

The movement of data between tasks in the process Individuals and groups which perform tasksProcesses can be manual or automated, fully documented or simply knowledge in the mindsof one or more people. They can be simple or complex. They can be formal, requiring exactadherence to all details; or flexible, provided the desired outcome is achieved. Logical Process Modeling Logical Process Modeling is the representation of a business process, detailing all theactivities in the process from gathering the initial data to reaching the desired outcome. Theseare the kinds of activities described in a logical process model: Gathering the data to be acted upon Controlling access to the data during the process execution Determining which work task in the process should be accomplished next Delivering the appropriate subset of the data to the corresponding work task Assuring that all necessary data exists and all required actions have been performed ateach task Providing a mechanism to indicate acceptance of the results of the process, such as,electronic signatures All business processes are made up of these actions. The most complex of processes can be broken down into these concepts. The complexity comes in the manner in which the processactivities are connected together. Some activities may occur in sequential order, while somemay be performed in parallel. There may be circular paths in the process (a re-work loop, for example). It is likely there will be some combination of these.The movement of data and the decisions made determining the paths the data follow duringthe process comprise the process model. The contains only business activities, uses businessterminology (not software acronyms, technical jargon, etc.), completely describes theactivities of the business area being modeled, and is independent of any individual or positionworking in the organization. Like its sibling, Logical Data Modeling, Logical ProcessModeling does not include redundant activities, technology dependent activities, physicallimitations or requirements or current systems limitations or requirements. The process modelis a representation of the business view of the set of activities under

analysis.Heretofore, many applications and systems were built without a logical process model or arigorous examination of the processes needed to accomplish the business goals. This resultedin applications that did not meet the needs of the users and / or were difficult to maintain andenhance.Problems with an unmodeled system include the following: Not knowing who is in possession of the data at any point in time Lack of control over access to the data at any point in the process Inability to determine quickly where in the process the data resides and how long it has been there Difficulties in making adjustments to a specific execution of a business process Inconsistent process execution. Ingredients of Business Process 1) Time: You must understand that time is money. In business, our objective is to makemoney. Period. But the question is how productively you convert your time into money. Areyou making full use of your time or you just let the time pass by you? How much you make depends on how good you are at converting time to money. If you arealready productive, then you may want to ask what are the things you can do toimprove further the ratio of dollar/second? If you are making $0.01/second, what you can doto make it $0.02/second? Or even more. Remember time is the most valuable asset and onceits gone, its gone. Also time is also the fairest distribution of resources every human beingreceives.2) People: To be successful in business, you must have people connections. I mean the right people. People consist of customers, suppliers, partners, staff, and associates. One thing that you must not leave out is your mentor or coach. Having genuine mentors or coaches is very important and it can make a very big difference in your business.To make sure that you have more profits, you must serve people well. Organize your database of people connections. By simply knowing who does what, who supplies what, whoneeds what, where to get what make you miles ahead of other people. To organize your connections, you can either use a paper folder or computer spreadsheet.3) Knowledge and Skills: When I talk about knowledge and skills, I am not referring toacademic knowledge that you find in schools or colleges. Whats more important to youis knowledge and skills that can bring you results you want.How many MBA holders that you know of have become business owners and have madetones of money? That shows getting the right knowledge and skills is important. Dont blindly go after knowledge thatcould drown you.

Go for knowledge and skills that areuniversally tested and proven.Examples of right knowledge and skills are where to get what from who, money makingtrends, marketing strategies, art of dealing with people, negotiation skills, selling skills, skillsof managing and growing money, investment skills, universal laws of success, and more.Dont waste time on unnecessary knowledge as I went through that before. Theres only somuch that you need to know and learn. Be sharp and focus when you acquire knowledge andskills. Dont follow what normal people do.4) Personal Health: In fact, this is the most important ingredient of all. How can you run a business without a healthy body? In order to maintain an optimum health, you have to provide your body with proper nutrients and sufficient exercise. And also dont forget aboutemotional well being. Dont let anger and other negative emotions control you.This is where positive and empowering attitudes come into play. Maintaining your body is just like maintaining your car. If you send your car to workshop for regular service and pump petrol regularly, why dont you do the same for your body? Its something for you to think about. Dont be stingy over spending money for your own health because physical andmental health can cause you a lot of money in the long run if your body is not taken care of properly.5) Money: Lets face it. It does take money to make money even you need a little. But youmight not need a lot of money to start a business because there are many ways tostart one with low capital.I meet a lot of people who want to be rich but are not willing to invest the money. You mustinvest in something in order to for you to get something. The law of sowing andreaping is at work. Dont expect something without investing anything. Money is one of theinvestments you need to make. Even though you dont need to have a capital for your business, but at least you must be ableto cover your expenses while building your business. You also need money to buy productsto stock up and other stuff. So, you must at least come up with whatever amount that youhave to start a business.These are the five basic ingredients of business success. Do your best to acquire or grow or invest in these ingredients. But the good thing is you dont need to have a perfectcombination of ingredients to get started. You can still perfect the ingredients along the way.Somehow, get it started with what youve got.