Production and

Operations
Management
by
Dr J S Lamba

Production and
Operations Management

Dr. J S Lamba

Reference Books

Production and Inventory Management

By
Donald W. Fogarty, John H. Blackstone, and
Thomas R. Hoffmann
South-Western Publishing Company
$175.96

Production and Inventory Management in

the Computer Age by Oliver W Wight
APICS Training Material
Operations Management by K. Shridhara
Bhat

Objectives
To understand what is Operations
Management
Classification of industries and production
systems
Emerging challenges for operations

Introduction to Manufacturing Systems

Products and services

Transformation Processes

Aggregate Planning, MPS, MRP

New Product Development and Process Design

Recent Trends in Manufacturing

Introductio
n

Major sectors in a country - Manufacturing, Service

and Agriculture
In India Manufacturing and Services constitute
around 80% of the GDP

Nature of Transformations
Manufacturing transformations
------ Machine tool mfg
Service transformations
------- banks, repair garage, restaurant
Differences in terms of
Tangibility
Simultaneous production &
Consumption
Perishability
7

Goods-service Continuum

Goods

Service
Surgery, teaching
Song writing, software development
Computer repair, restaurant meal

Automobile Repair, fast food

Home remodeling, retail sales
Automobile assembly, steel making

1-8

Food Processor
Inputs

Processing Outputs

Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment

Cleaning
Canned
Making cans vegetables
Cutting
Cooking
Packing
Labeling

1-9

Hospital Process
Inputs

Processing Outputs

Doctors, nurses Examination Healthy

Hospital
Surgery
patients
Medical Supplies Monitoring
Equipment
Medication
Laboratories
Therapy

1-10

INDUSTRY CLASSIFICATION

EXTRACTIVE
AGRICULTURE, FISHING, FORESTRY, MINING

TRANSFORMATIVE
* MACHINERY, CHEMICAL & PHARMA, METALS, TEXTILES
* MANUFATURING, CONSTRUCTION, FOOD PRODUCTS, UTILITIES

DISTRIBUTIVE
* TRANSPORTATION & STORAGE
* COMMUNICATIONS
SERVICES

* WHOLESALE & RETAIL TRADE

* POSTAL & COURIER

PRODUCER SERVICES
* BANKING/ CREDIT/ FINANTIAL SERVICES, INSURANCE, LEGAL
* ACCOUNTING/ BOOK-KEEPING, ENGG./ ARCH, MGT. CONSULTANCY

PERSONAL SERVICES
*HOTELS/LODGING, LAUNDRY, REPAIRS and MAINT,
ENTERTAINMENT

SOCIAL SERVICES
*MEDICAL/ HEALTH, EDUCATION, WELFARE, RELIGIOUS

Production Management Definition - 1

Planning, implementation, and control of
industrial production processes to ensure
smooth and efficient operation. Production
management techniques are used in both
manufacturing and service industries.
Production management responsibilities
include the traditional five M's: Men and
women, Machines, Methods, Materials, and
Money.
Of their duties involving money, inventory
control is the most important. This
involves tracking all component parts,
work in progress, finished goods,

 Managers are expected to maintain an efficient

production process with a workforce that can
readily adapt to new equipment and schedules.
Managers may use industrial engineering
methods, such as time-and-motion studies, to
design efficient work methods.
The Managers are responsible for managing both
physical (raw) materials and information materials
(paperwork or electronic documentation).
The production cycle requires that sales, financial,
engineering, and planning departments exchange
informationsuch as sales forecasts, inventory
levels, and budgetsuntil detailed production
orders are dispatched by a production-control
division. Managers must also monitor operations
to ensure that planned output levels, cost levels,
and quality objectives are met.

Production Management
Definition - 2
Production Management addresses order
sequencing
and
execution,
tracking
and
genealogy, and interactive manufacturing process
control. By synchronizing actionable real-time
information
across
manufacturing
methods,
materials, manpower and machines, you can
improve coordination of multiple production
processes regardless of location.
Achieve real-time coordination across the plantwide production processes: Order scheduling and
execution Tracking and genealogy Resource
management Multi-site production synchronization

Production Management
Definition - 3
The design, Operation and Control of
systems for the manufacture and
distribution of products.

Input
s

MATERIALS FLOW THROUGH A

MANUFACTURING COMPANY

Outputs

Vendors
Orders

Purchasing

Receiving

Raw Material
Storage

Shipping

Sell to
Customer
s

Conversion Stages

Finished Goods
Inventory
In Process
Storage

Distributors
16

THE DRAGON
VS THE ELEPHANT
INDIA

FACTOR

1947
1947
1991
1978
5-6 %
9-10%
100 Cr +
130 Cr
$100
$450
$ 3-5 bn
$45-60 bn
Rs 5-7/unit
Rs 3/unit

CHINA

ECONOMIC RACE STARTED

LIBERALISATION INITIATED
GDP GROWTH
POPULATION
PER CAPITA INCOME
FDI
ELETRIC POWER
17

COMPETITIVENESS IN MFG
-FACTORS
INDIA

FACTOR

10 million
million
56 m tons
tons
$30 bn
$ 15 bn
3 million
5.5 million

CHINA

TV sets produced
Steel production

40
578 m

Textiles production $ 145 bn

Textiles exports
$ 80 bn
Automobiles production

18

Customer focus.

19

Car choices in 1980

Ambassador
Premier
StandardHerald

20

Car choices NOW

BMW
Audi
Mercedes
Hyundai
Nissan
Toyota
Tata
Honda
Porsche
Volkswag
en
Fiat
Volvo
Chevrolet
..

21

Issues
Flexibility: with regard to product,
volume, mix.
Make-or-Buy: Vendor management,
long-term identity.
Basic Capacity Calculations:
stand-alone capacities and
congestion effects (e.g., blocking)

22

Dealing with Trade-Offs

Cost
(Value)
Flexibility

Delivery (Speed)

Quality
WCM -companies adopt TQM, Pull
systems, JIT, TPM
23

Types of industries

Basic industries

Manufacturing

Discrete

Service

Project

Process

24

Manufacturing Reference
Model
Low volume

D
I
S
C
R
E
T
E

JOB/ASSEMBLY
Machine-Tools
Farming Equipments
Shutters
Jewelry

HIGH VOLUME/
REPETITIVE
Electronic
Components
Spinning Mills
Batteries
Tyres

BATCH/MIX
Food
Beverages,
Wine
Dairy Products
Pharmaceutical
s
Paint
PROCESS/FLOW
Refineries
Glass
Graphite
Paper Mills
Steel
Fertilizers

High Volume

25

P
R
O
C
E
S
S

Types of Production
systems
Job Shop Type of Production
Batch Type of Production
Mass Production
Flow /Continuous Production

26

Factors Influencing Process

Choices
Volumes: Average quantity of the products
produced in a manufacturing system

Low volume: Turnkey project management firms such as L&T and BHEL
High volume: Consumer non-durable and FMCG sector firms, Automobile,
Chemical Processing
Mid-volume: Consumer durables, white goods and several industrial products

Variety: Number of alternative products and

variants of each product that is offered by a
manufacturing system

Variety of product offerings is likely to introduce variety at various processes in

the system; alternative production resources, materials, and skill of workers (Titan
,Telco)

Flow: Flow indicates the nature and intensity of

activities involved in conversion of components
and material from raw material stage to finished
goods stage
31

MANUFACTURING STRATEGIES
raw materialscomponentssemi finished finished goods
eng

prod

prod

prod

make-to-stock
assemble-to-order
s
u
p
p
make-to-order
l
i
e
r engineer-to-order

standard

c
u
s
t
o
m
e
r

customer driven

32

Stake holders

Top Management
Share Holders
Employees
Production and Operations Manager

33

Issues and Challenges

Co-ordinating the relationship between mutually
supportive but separate organizations (outsourcing)
The implementation of global ERP systems has forced
companies to use the information to optimally control
resources such as inventory, transportation and
production equipment.
Some of the challenges faced by firms include
Low productivity and long lead time
Quality management
Inability to relate the system to market/customer
34

Key Takeaways
Operations Management is a systematic
approach to address all issues pertaining to the
transformation process that converts some
inputs into useful output.
Globally, India is emerging as an important
manufacturing base. Several recent studies
point to emerging opportunities for Indian
manufacturing to grow and attain a global
presence.

35

Operations

A key functional area in an Organisation

Finance

Operations

Marketing

HRM

Operations Interfaces
Industrial
Engineering
Maintenance

Distribution

Purchasing

Operations

Public
Relations

Legal
Personnel
Accounting

MIS
1-37

Scope of Operations Management

Operations Management includes:
Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
Supply chain management
And more . . .
1-38

Types of Operations
Operations

Examples

Goods Producing

Farming, mining, construction

,
manufacturing, power generation
Storage/Transportation
Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange
Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment
Films, radio and television,
concerts, recording
Communication
Newspapers, radio and television
newscasts, telephone, satellites
1-39

Operations Function
Linkages with other functions
Customer Layer
Ultimate
Customer

Operations Support Layer

Marketing

Dealers
Retailers

Core Operations Layer

Layer of
Innovation
Innovation
Strategy
Research &
Development

Testing
Fabrication

Maintenance

Costing

Planning

Material

IT

Quality

Tooling

Design

IE

Assembly
Machining

Service Delivery system

Supplier Layer
Sub-contractors

Suppliers

Other service providers

Operations Management
A systems Perspective
Forecasting

PROCESSING

Operations
Planning &
Control

Quality
Management

Purchasing &
Inventory
Control
Material &
Capacity
Planning

Maintenance
Management

Process
Improvement

Goods

Services

Feedback

Capital

INPUT

Material

Process &
Product
Design

OUTPUT

Labour

Manufacturing Process

Resources of an Enterprise

Machines
Methods
Materials
Men
Money
Time
Information

Key Decisions of Operations Managers

What
What resources/what amounts

When
Needed/scheduled/ordered

Where
Work to be done

How
Designed

Who
To do the work
1-44

Production Planning and

Scheduling

Objectives
What are the generic strategies adopted by
organizations in an aggregate planning exercise?
What is a Master Production Schedule ?
What are the basic building blocks of Materials
Requirement Planning?
What is the linkage between MRP and modern day
ERP systems?

46

AGGREGATE PRODUCTION
PLANNING

47

Hierarchical Approach to
Planning
Level 1

Business Plan
Financial Plan

Marketing Plan
Production Plan
(rough cut capacity)
Level 2

Master Production Schedule

Materials
Requirement
Plan

Level 3

Capacity
Requirement
Plan
Detailed Scheduling
Shop Floor Control
48

Hierarchical Planning Process

Items

Production PlanningCapacity PlanningResource level

Produ
Aggregate
Resource
ct
Production Plan Requirements PlanPlants
lines
or
Individual
Critical
Rough-Cut
familie Master Production
products
work
Schedule
Capacity Plan
s
centers
All work
Material
Capacity
ComponentRequirements Plan Requirements Plancenters
s
Manufacturin
g operations

Shop Floor
Schedule

Input/Output
Control

49

Individual
machines

Aggregate Units for Capacity

Examples

Sl. No

Product

Aggregate Unit of Capacity

Phenyl Acetic Acid

Metric tonnes

Data Entry

Numbers

Mini computer

Value (ex-factory) in Rs.

Printed Circuit Board

Square Metres

Alloy Iron Castings

Metric tonnes

Cement

Metric tonnes

50

Aggregate Production
Planning
Why is it necessary?
Demand fluctuations
Capacity fluctuations
Difficulty level in altering production
rates
Production systems are complex and
varying the rate of production requires
prior planning and co-ordination with
supplier and distributor
Benefits of multi-period planning

51

Aggregate Production Planning

Framework
Alternatives for
Modifying demand

Forecasting

Targeted Demand
to be fulfilled

Actual period-by-period
Supply Schedules

Arriving at effective
Period-by-period
Demand to be met
Arriving at
Period-by-Period
Supply Schedules

Alternatives for
Modifying supply
52

Alternatives for managing

demand
Reservation of Capacity
Influencing Demand
- Special Tariffs
- Differential Discount Structures
- Limited period special offers

53

Alternatives for Managing

Supply

Inventory Based Alternatives

Stock out, Backordering/ Backlogging
Carrying Inventory

Capacity Adjustment Alternatives

Hiring/ Lay-off of workers
Varying shifts/ shift timings
Varying Working Hours (OT)

Capacity Augmentation Alternatives

Sub-contracting/Outsourcing
De-bottlenecking
Addition of new capacity
54

Aggregate Production Planning

Two generic strategies

In Level strategy, the emphasis is not to

disturb the existing production rate at all

In Chase strategy, no effort is made to carry

inventory from one period to another; the
supply demand mismatch is addressed during
each period by employing a variety of capacity
related alternatives

55

Planning Levels

Figure adapted from the CPIM Exam Content Manual, APICS, 1997

MRP Logic

Some terminologies
The iterative process of computing all requirements at a
level and then moving down the level is known as
explosion in MRP
Product Structure graphically depicts the dependency
relationships among various items that make up the final
product
A Bill of Material (BOM) is a list of all materials needed to
assemble or put together one unit of the final product
BOM exists in various formats
Single level BOM
Indented BOM
Modular BOM

Master Production
Schedule

A time-phased planning chart which

presents firm and planned quantities of
demand
supply
inventory balances

It contains lines for :

Forecast
Master planning supply
Available to promise
Projected available inventory balances

MPS OBJECTIVES
REPRESENTS CONTRACT
BETWEEN SALES & PRODUCTION
OBJECTIVES
MAINTAIN DESIRED LEVEL OF
CUSTOMER
SERVICE
MAKE OPTIMUM USE OF RESOURSES
KEEP INVENTORY AT DESIRED LEVELS

Master Production
Schedule (MPS)
Makes possible valid order
promises
Disaggregates the production plan
Steps: preliminary MPS, RCCP,
resolve differences (available
capacity required capacity) or
alter plan / increase capacity
ATP : unconsumed planned
production and inventory (MPS
scheduled receipt - customer
orders)

Master Production
Schedule
Drives MRP process with a schedule of finished
products
Quantities represent production not demand
Quantities may consist of a combination of customer
orders & demand forecasts
Quantities represent what needs to be
produced, not what can be produced

Master Production Schedule

(MPS)
Time-phased plan specifying how
many and when the firm plans to
build each end item.
Aggregate Plan
(Product Groups)

MPS
(Specific End Items)

MPS MRP CRP

Iterative Process

Begin
Modify MPS

Master Production
Scheduling (MPS)

No
Feasible?

Modify MPS

Modify MRP
Material Requirements
Planning (MRP)

Yes

No
Capacity Requirements
Planning (CRP)

Feasible?
Yes

Finalise
Plan

BOM (BICYCLE)
BICYCLE (END

DRIVE

SADDLE

DRIVE ASSY

CHAIN

PEDDLES (2)

FORKS (2)

FINAL ASSY.

ITEM)

HANDLE BAR

FRAME

FRAME ASSY.

CRANKS (2) DRIVE DOGS(2)

WHEELS(2)

WHEEL ASSY.

TUBES (5 M)

CHAIN ASSY.

LINKS (65)
64

RIM

SPOKES (36)

Routing

Sequentially defines the work

Defines the location of the work

Defines labor and machines which perform

the work

Includes time estimates used by planning,

costing, and shop floor control

Manufactured Item: CYCLE FRAME

W/C 205
6001
Cutting

Routing Code: 1
W/C 300

6002
Welding

5001
Painting

W/C 501
7000
Inspection

Routing Data
Work
Centre

Machine

Employee

Task
Norm
Table
Operation
(Routing)

Company
Calendar

Shop Calendar

Types of Time Fences

Frozen

No schedule changes allowed within this

window.

Moderately Firm

Specific changes allowed within product

groups as long as parts are available.

Flexible

Significant variation allowed as long as

overall capacity requirements remain at
the same levels.

Example of Time Fences

Moderately
Firm

Frozen
Capacity

Flexible

Forecast and available

capacity
Firm Customer Orders

15
Weeks

26

Materials Requirements
Planning
MRP Logic and Product Structure
Trees (BOM)
Time Fences
Lot Sizing in MRP Programs

Material Requirements Planning

Defined

Materials requirements planning (MRP)

is the logic for determining the number
of parts, components, and materials
needed to produce a product.
MRP provides time scheduling
information specifying when each of the
materials, parts, and components should
be ordered or produced.
Dependent demand drives MRP.
MRP is a software system.

Example of MRP Logic and Product Structure Tree

Given the product structure tree for A and the lead time and demand
information below, provide a materials requirements plan that defines
the number of units of each component and when they will be needed.
Product Structure Tree for Assembly A

A
B(4)
D(2)

C(2)

E(1) D(3)

F(2)

Lead Times
A 1 day
B 2 days
C 1 day
D 3 days
E 4 days
F 1 day
Demand
Day 10 50 A
Day 8
20 B (Spares)
Day 6
15 D (Spares)

First, the number of units of A are scheduled backwards to

allow for their lead time. So, in the materials requirement plan
below, we have to place an order for 50 units of A in the 9th
week to receive them in the 10th week.

Day:
A Required
Order Placement

9
50

LT = 1 day

10
50

Next, we need to start scheduling the components that make up A. In

the case of component B we need 4 Bs for each A. Since we need 50
As, that means 200 Bs. And again, we back the schedule up for the
necessary 2 weeks of lead time.
Day:

A Required
Order Placement
B Required
Order Placement

20

LT = 2
A
B(4)
D(2)

20

50
200

200

Spares
4x50=200

C(2)

E(1) D(3)

F(2)

10
50

75

Finally, repeating the process for all components, we have the final materials
requirements plan:
Day:
A
LT=1
B
LT=2
C
LT=1
D
LT=3
E
LT=4
F
LT=1

Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement
Required
Order Placement

20

20

50
200

10
50

200
100

55
20

400

55

400

20

200

100
300

300

200
200
200

A
B(4)
D(2)

C(2)

E(1) D(3)

Part D: Week 6
40 + 15 spares

F(2)
The McGraw-Hill Companies, Inc.,

Material Requirements Planning

System
Based on a master production
schedule, a material requirements
planning system:
Creates schedules identifying the
specific parts and materials
required to produce end items.

Determines exact unit numbers

needed.

Determines the dates when orders

for those materials should be
released, based on lead times.

77

Firm orders
from known
customers

Aggregate
product
plan

Forecasts
of demand
from random
customers

Engineering
design
changes

Master
production
schedule
(MPS)

Inventory
transactions

Bill of
material
file

Material
planning
(MRP)

Inventory
record
file
Reports

The McGraw-Hill Companies, Inc.

Additional MRP Scheduling Terminology

Gross Requirements
On-hand
Net requirements
Planned order receipt
Planned order release

Backward and Forward

Scheduling

Reprinted with permission, BMS Associates, Inc.

Infinite
Loading

versus

Source: Bihun and Musolf, Capacity Management Review Course, 1985

Finite

Finite Capacity Planning

Three step procedure:
1. Ideal Plan (infinite Plan):

2. Backward Leveling:

3. Forward Leveling:

Result: Feasible Plan

Finite Capacity Planning

Step 1 : Ideal Plan - Demand without leveling
78
78
76
74

Weekly Production Hours =>

72

Maximum Capacity

70

68

68

66

66
64

62

62
60

58

58
56

56

54
52
50
w eek 21 w eek 22 w eek 23 w eek 24 w eek 25 w eek 26
Today

Finite Capacity Planning

Step 3 - Demand with forwards leveling done too
78
76
74

Weekly Production Hours =>

72

Maximum Capacity

70

70

70

70

68
66
64

62

62

60

60
58
56

56

54
52
50
w eek 21 w eek 22 w eek 23 w eek 24 w eek 25 w eek 26
Today

Lead-Time Elements
Lead Time
Queue

Setup

Run

Wait

Move

Queue

Time waiting before operation begins

Setup

Time getting ready for operation

Run

Time performing operation

Wait

Time waiting after operation ends

Move

Time physically moving between operations

Adapted from Material and Capacity Requirements Planning Certification Review Course, 1993, APICS

Resolving Differences
Change the available Use overtime or
undertime
capacity: Hire or layoff
Shift work force
Use alternate routings
Subcontract
Alter the load: Alter lot sizes
(May complicate schedule Reschedule
for other work centers)

MRP II Modules

Forecasting
Customer order entry
Production planning / Master Production Scheduling
Product structure / Bill-of-Material processor
Inventory control
Material Requirements Planning
Capacity planning
Shop floor control
Purchasing
Accounting
Financial analysis

Scheduling Rules
Shortest processing time (SPT): Chooses the job with the least
processing time among the competing list and schedules it ahead
of the others
Longest processing time (LPT): The job with the longest processing
time is scheduled ahead of other competing jobs
Earliest Due Date (EDD): Establishes priorities on the basis of the
due date for the jobs.
Critical Ratio (CR): Critical ratio estimates the criticality of the job
by computing a simple ratio using processing time information and
due date. A smaller value of CR indicates that the job is more
critical.

Critical Ratio CR =

Re maining time
Re maining Work

Due DateCurrent Date

Re maining Pr oces sin g Time

First Cum First Served (FCFS): Schedules jobs simply in their order
of job arrival

90

Cycle time (TAKT time)

Cycle time is the ratio of the available time to the actual
(desired) production rate

Available Time
Actual ( Desired ) Cycle Time
Actual ( Desired ) Pr oduction
Minimum No. of work stations required

Sum of all task times

Cycle Time

Sum of all task times

Average Re source Utilisation
Number of workstations * Cycle time
91

MRP Issues
Problems MRP systems potentially face:
Bad data integration
Lack of discipline in updating the required data bases as and
when changes take place elsewhere in the organisation

How often MRP must be updated and

rerun?
Regenerative Method
Net Change Method

Handling uncertainties affecting the

system by incorporating:
Safety Stock
Safety Lead times

92

Key Takeaways
Aggregate production planning serves to translate
business decisions to operational plans.
APP is done to match demand with available
capacity.
Dependent items exhibit certain characteristics
and parent child relationship can be exploited
while planning for organizations.
Various lot sizing techniques can be used for
planning which strike a balance between carrying
and ordering costs.
Modern day ERP systems are extension of MRP
logic.
93

Services

Definition of Services: The results generated by

the activities at the interface between the
Supplier and the Customer and by the suppliers
internal activities to meet customer needs
Many a times the Customer is an integral part
of the Service delivery process

Service Businesses Defined

A service business is the

management of organizations
whose primary business requires
interaction with the customer to
produce the service
Facilities-based
services: Where
the customer must go to the
service facility
Field-based services: Where the
production and consumption of
the service takes place in the
customers environment
Jan Mar 2006

Design and New Product

Development 3
By

Service
Service characteristics
Those requirements of service that are
observable and are subjected to
Customer evaluation.

Service delivery characteristics

Characteristics of the delivery process
that directly affect the service
performance.

Three Contrasting Service

Designs
The production line approach (ex.
McDonalds)
The self-service approach (ex.
automatic teller machines)
The personal attention approach (ex.
Ritz-Carlton Hotel Company)

Jan Mar 2006

Design and New Product

Development 3
By

Characteristics of a WellDesigned Service System

1. Each element of the service system is
consistent with the operating focus of
the firm
2. It is user-friendly
3. It is robust
4. It is structured so that consistent
performance by its people and systems
is easily maintained
Jan Mar 2006

Design and New Product

Development 3
By

Characteristics of a Well-Designed
Service System (Continued)

5. It provides effective links

between the back office and the
front office so that nothing falls
between the cracks
6. It manages the evidence of
service quality in such a way that
customers see the value of the
service provided
7. It is cost-effective
Jan Mar 2006

Design and New Product

Development 3
By

Examples of characteristics
related to Service
Facilities, capacity, number of personnel,
quantity of material
Waiting time, delivery time, processing
time.
Hygiene, safety, reliability, and security
Responsiveness, accessibility, courtesy,
comfort, aesthetics, competence,
dependability, accuracy, completeness,
state of the art, credibility, effective
communication, etc.

New Product
Development
101

Objectives
What are the various stages of the
product development process ?
What does concurrent engineering
mean ?
To understand the focus of new
product development and the use of
IT to shorten time to market.

102

New Product
Development

103

New Product Development

IT IS NOT THE STRONGEST AND THE MOST
INTELLIGENT, WHO WILL SURVIVE,
BUT THE ONES MOST RESPONSIVE TO CHANGE,
WHO WILL SURVIVE
- Charles Darwin.
Hence change thru NEW PRODUCT DEVELOPMENT
is a must for survival and growth

104

Life Cycles of Products or

Services

Saturation

Demand

Maturity
Decline
Growth

Incubation
Time
105

Cheap car from China

106

An Effective Design Process

Matches product/service characteristics

with customer needs
Meets customer requirements in
simplest, most cost-effective manner
Reduces time to market
Minimizes revisions

107

Stages In The Design

Process

Idea Generation
Product Concept
Feasibility Study
Performance Specifications
Preliminary Design
Prototype
Final Design
Final Design Specifications
Process Planning
Manufacturing Specifications

108

Design Teams
Marketing, manufacturing,
engineering
Suppliers, dealers, customers
Lawyers, accountants, insurance
companies

Nov 2011

Design and New Product

Development 2
By

Slide 109 of 43

Design Teams (concurrent

design)
No more sequential design
No more physical walls between
depts.
No more mental walls between
depts.
More interactive discussion
More feedback
More collaboration on the design
Nov 2011

Design and New Product

Development 2
By

Slide 110 of 43

Concurrent Design
Improves quality of early design
decisions
Decentralized - suppliers complete
detailed design
Incorporates production process
Often uses a price-minus system where
the selling price is determined design
details are developed (not cost-plus)
Scheduling and management can be
complex as tasks are done in parallel.
Project scheduling techniques are used
to coordinate concurrent
design
Design and New Product
Nov 2011

Development 2
By

Slide 111 of 43

Production Design
How the product will be made
Design that are difficult to make often result
in poor quality products
Tendency: overdesign products with too
many features.
Approaches:
Simplification
Standardization (interchangeable parts and high
volume production)
Modularity (Camry, Corolla, and Lexus share the
same body chassis)

Nov 2011

Design and New Product

Development 2
By

Slide 112 of 43

Computer Aided Design and

Engineering (CAD/CAM/CAE)
Computer Aided Design (CAD) Assists Designers in:
Product/component design and layout
Display, rotation of product image on screen
Development of detailed specification for
manufacturing.
Computer Aided Manufacturing.
-Numerically controlled Machines (CNC)
Computer Aided Engineering (CAE) Assists
Designers & Engineers in:
Selecting components and materials for products
Performing engineering analysis, i.e. mathematical
model analysis and performance simulation
Rapid prototyping
113

Design for Manufacturing and Assembly

Greatest improvements related to

DFMA arise from simplification of the
product by reducing the number of
separate parts:
1. During the operation of the product,
does the part move relative to all
other parts already assembled?
2. Must the part be of a different
material or be isolated from other
parts already assembled?
3. Must the part
be separate from all
Design and New Product
2
Nov 2011
Slide 114 of 43
other parts toDevelopment
allow
the disassembly
By

TOOLS
CAD

CAM

CAE

PLM

Unigraphics

UNIGRAPHICS

LS DYNA 3D

Iman

CATIA V4, V5

CATIA

NASTRAN

TeamCenter

IDEAS

IDEAS

ADAMS

Windchill

PRO ENGINEER

EUCLID

IDEAS

Matrix One

EUCLID

HYPERMESH

ENOVIA

AUTOCAD

ANSA

SAP-PLM

SOLID WORKS

OPTRIS

EIGNER PLM

CADDS5
ALIAS

KBE
ICAD
Knext
115

STRATEGY- New Products

3M dictates that 30% of revenues will come from

new products every year.

Netscape introduces a new product about every

six months.

British Airways refreshes its services classes

every five years.

Starbucks opens 300 stores per year.

Gillette brings out about 20 products each year.

116

Future of shopping
.

117

Stakeholders
Design Engineers
Value engineering personnel
All functional heads.

118

Issues and Challenges

Controlling part proliferation through

standardisation, modular design and product
platforming for mass customisation.
Reduce time to market by using IT.
Interphasing the design process with the
production process

119

Key Takeaways

Product development process consists of a

structured set of activities including concept
generation, design, development and production
Concurrent engineering is an approach to build a
cross-functional team of professionals cutting
across various departments and suppliers to
accelerate the new product development process

Indian companies are using IT to

reduce the time to market.

120

Value Engineering

Value Engineering /
Analysis
Developed in 1947 by GE to eliminate features
and functions in product design.
Ratio of value / cost
Assessment of value :

1. Can we do without it?

2. Does it do more than is required?
3. Does it cost more than it is worth?
4. Can something else do a better job
5. Can it be made by less costly method, tools,
material?
6. Can it be made cheaper, better or faster by
someone else?

Value Analysis/Value Engineering

(VA/VE)
Achieve equivalent or better performance at
a lower cost while maintaining all functional
requirements defined by the customer
Does the item have any design features
that are not necessary?
Can two or more parts be combined into
one?
How can we cut down the weight?
Are there nonstandard parts that can be
eliminated?

Activity Flow Diagram for Process

Mapping
Symbols Used

Operation
Movement
Inspection

Storage
Delay

Decision
Origination/Termination

CASE STUDY OF PROCESS

IMPROVEMENT AS-IS
PROJECT MEMBER RAISES VOUCHER
SENDS VOUCHER TO PROJECT MGR
PROJECT MGR TAKES 2 DAYS TO READ VOUCHER
AND DECIDES WHETHER TO APPROVE AND IF
APPROVED SENDS TO HOD
HOD TAKES 2 DAYS TO PASS THE VOUCHER -26RS
VOUCHER RECD BY INITIATOR AT 1630(MON)
CASH DISBURSEMENT ON MON,WED,FRI 2-4PM
WAITING FOR CASH IS A PROCESS WASTE

CASE STUDY OF PROCESS

IMPROVEMENT TO-BE

CODE OF AUTHORIZATION TO ALL PROJECT MGRS TO SIGN

AND APPROVE VOUCHERS NOT GT 250 RS AND TOTAL
AUTHORIZATION OF SIGNING VALUE FOR PROJECT
EXPENSES IS NOT GT 20% OF PROJECT VALUE
ALTERNATIVE SIGNATORIES APPOINTED IN CASE PROJECT
MGR IS ABSENT
POLICY ISSUED FOR CLEARANCE OF ALL VOUCHERS WITHIN
24 HRS OF RECEIPT

METHOD STUDY

METHOD STUDY IS SYSTEMATIC RECORDING AND CRITICAL

EXAMINATION OF WAYS OF DOING THINGS
OBJECTIVE OF METHOD STUDY IS TO IMPROVE ACTIVITY
ACTIVITY CAN BE IMPROVED THROUGH PROCESS
REENGINEERING BY ELIMINATING NVA ACTIVITIES OR BY
REDUCING EXISTING TIMINGS OF ACTIVITIES THROUGH
BETTER WAYS
NEED TO DRAW PROCESS CHARTS AND ACTIVITY CHARTS
WITH
MOVEMENT,STORAGE,DELAY,INSPECTION,ACTIVITY,DECISIO
N ALONG WITH TIMINGS

How to arrive at Standard

Time

OBJECTIVES OF Business
Process Improvement

MAKING PROCESSES EFFECTIVE

OUTPUTS OF PROCESS MEETS NEEDS AND EXPECTATIONS OF
CUSTOMERS eg QUALITY
EFFECTIVENESS IS RIGHT OUTPUT AT RIGHT PLACE AT RIGHT TIME AT
RIGHT PRICE

MAKING PROCESSES EFFICIENT WHICH IS EXTENT TO

WHICH RESOURCES ARE MINIMIZED AND WASTE IS
ELIMINATED IN PURSUIT OF EFFECTIVENESS eg
PRODUCTIVITY
MAKING PROCESSES ADAPTABLE WHICH IS FLEXIBILITY OF
PROCESS TO HANDLE DYNAMICALLY CHANGING REQMNTS.
KEY WORD IS AGILITY
MINIMIZE DELAYS,COSTS
MAXIMIZE QUALITY AND ASSET UTILIZATION

AREAS OF IMPROVEMENT COMMONLY SOUGHT

PERFORMANCE IMPROVEMENT IN
PEOPLE MACHINES PROCESSES
IMPROVEMENT IN OFFICE
PRODUCTIVITY
SAVINGS IN ENERGY AND COST OF
GOODS OR SERVICES
IMPROVEMENT IN PRODUCT QLTY
IMPROVEMENT IN CUSTOMER
RELATIONSHIP

Just In Time

Just in Time Philosophy

Salient features

The notion of waste in any operating

system
JIT as a philosophy of elimination of
waste
As a deliberate and a systematic
attempt
On a continuous basis

JIT Manufacturing
Basic Elements
Originally referred to production of goods to
meet customer demand exactly, in time,
quality and quantity, whether the `customer' is
final purchaser of the product or another
process further along the production line
Now means producing with minimum waste.
"Waste" is taken in its most general sense and
includes time and resources as well as
materials

Goal of JIT

JIT/ Lean Production

Just-in-time (JIT): A highly coordinated

processing system in which goods
move through the system, and
services are performed, just as they
are required
JIT pull (demand) system

Elements of JIT
Continuous improvement
Attacking fundamental
problems - anything that does
not add value to the product
Striving for simplicity - simpler
systems may be easier to
understand, easier to manage
and less likely to go wrong
Quality control at source - each
worker is responsible for the
quality of their own output

Elements of JIT
Poka-yoke
Preventative
Maintenance
Good
Housekeeping

Foolproof tools, methods, jigs

etc. prevent mistakes
Total productive maintenance ensuring machinery and
equipment functions perfectly
when it is required, and
continually improving it
Workplace cleanliness and
organisation

Set-up time
reduction

Increases flexibility and allows

smaller batches. Ideal batch size is
1item

Multi-process
handling

A multi-skilled workforce has

greater productivity, flexibility and
job satisfaction

Tools of JIT
Kanban
Simple tools to
`pull' products and
components
Jidoka
through the
process (Autonomation
) providing
machines with the
autonomous
Andon: (trouble
capability to use
lights) - to signal
problems to initiate
judgement, so
corrective action.
workers can do
more useful
things than
standing
watching them
work.

Eliminating waste
The seven types of waste:
Waste from
overproduc
tion

Waste of
waiting
time

Transporta
tion waste

Processing
waste

Inventory
waste

Waste of
motion

Waste from
product
defects

JIT Philosophy
Core Logic

Heightened
awareness of
problems & causes

Ideas for
cutting
lot sizes

Lot size
reductions

Less
inventory

Ideas for
improving
JIT delivery

Ideas for
controlling
defects

JIT
Productions

Deliberate withdrawal
of buffer inventories

Reduced buffer
inventories
Fast feedback
on defects

Scrap/quality
control

Less indirect costs

Smoother
output rates

Fewer
rework

Less
material waste

High quality
Finished goods

Less material, labour, indirect costs & better quality

Source: Schonberger, R..J. (1982), Japanese Manufacturing Techniques: Nine hidden lessons in simplicity, Free Press, pp 26.

JIT Philosophy
Overall Impact

Just-in-time' is a management philosophy and not

a technique.

Minimizing Waste: Just-In-Time

Production
WHAT IT IS
Management philosophy
Pull system though the plant

WHAT IT REQUIRES

Employee participation

Industrial engineering/basics
Continuing improvement
Total quality control
Small lot sizes

WHAT IT DOES
Attacks waste
Exposes problems and bottlenecks
Achieves streamlined production

WHAT IT ASSUMES
Stable environment

Minimizing Waste: Inventory

Hides Problems
Machine
downtime
Scrap

Vendor
delinquenciesChange
orders

Work in
process
queues Engineering design Design
(banks)
redundancies
backlogs

Paperwork
backlog

Inspection
backlogs

Decision
backlogs

Example: By identifying
defective items from a
vendor early in the
production process the
downstream work is
saved.
Example: By identifying
defective work by
employees upstream,
the downstream work is
saved.

Minimizing Waste:
Kanban Production Control Systems
Withdrawal kanban

Machine
Center

Storage
Part A

Production kanban

Storage
Part A

Assembly
Line

Material Flow
Card (signal) Flow

Summary JIT Goals and Building Blocks

Ultimate
Goal

Supporting
Goals

Building
Blocks

A
balanced
rapid flow

Eliminate disruptions
Make the system flexibleEliminate waste

Product
Design

Process
Design

Personnel
Elements

Manufacturing Planning

Supporting Goals

Eliminate disruptions
Make system flexible
Eliminate waste, especially excess
inventory

Sources of Waste

Big vs. Little JIT

Big
JIT
Broad
focus

Vendor relations
Human relations
Technology management
Materials and inventory
management

Little
Scheduling materials
JIT
Narrow Scheduling services of production
focus

JIT Building Blocks

Produc
t
Design

Process
Design

Personnel/Organisation
al
Elements

Manufactu
ring
Planning
and
Control

Product Design

Process Design
Small Lot
Sizes
Little
Inventory
Storage
Productio
n
Flexibility
Quality
Improveme
nt

Setup
Time
Reduction
Manufacturi
ng Cells
Limited
WIP

Benefits of Small Lot Sizes

Reduces
inventory
Less rework

Less
storage
space

Easier to
Problems
balance
are more
operations
apparent
Increases
product
flexibility

Production Flexibility

Reduce downtime by
reducing changeover
time
Cross-train workers
to help clear
bottlenecks

Use preventive
maintenance to
reduce breakdowns

Personnel/Organizational Elements

Manufacturing Planning and Control

Pull/Push Systems
Pull system:
System for
moving work
where a
workstation pulls
output from the
preceding station
as needed. (e.g.
Kanban)

Push system:
System for
moving work
where output is
pushed to the
next station as it
is completed

Kanban Production Control System

Kanban: Card or other

device that communicates
demand for work or
materials from the
preceding station

Kanban is the Japanese

word meaning signal or
visible record

Paperless production
control system

Authority to pull, or produce

comes
from a downstream
process.

Kanban Formula
N

DT(1+X)
C

N = Total number of containers

D = Planned usage rate of using work center
T = Average waiting time for replenishment of parts
plus average production time for a container of parts
X = Policy variable set by management - possible inefficiency in the
system
C = Capacity of a standard container

Comparison of JIT and Traditional

System
Factor

Traditional

JIT

Inventory

Much to offset forecast

errors, late deliveries

Minimal necessary to operate

Deliveries

Few, large

Many, small

Lot sizes

Large

Small

Setup; runs

Few, long runs

Many, short runs

Vendors

Long-term relationships are Partners

unusual

Workers

Necessary to do the work

Assets

Transitioning to a JIT System

Get top management commitment

Decide which areas need maximum effort
Obtain support of the workers
Start by trying to reduce setup times
Gradually convert operations
Convert suppliers to JIT

Obstacles to Conversion
Management may not be
committed
Workers/management may not
be cooperative
Suppliers may
resist
Why?

JIT in Services
The basic goal of the demand flow
technology in the service organization is to
provide optimum response to the customer
with the highest quality service and
lowest possible cost.
Eliminate disruptions
Make system flexible
Reduce setup and lead times
Eliminate waste
Minimize WIP
Simplify the process

Benefits of JIT Systems

Reduced
Inventory
levels
Increased
Productivity

Reduced
Lead Time

High Quality

Flexibility

Benefits of JIT Systems (contd)

Increased
Equipment
Utilization

Reduced Need for

Indirect Labor

Pressure for Good

Vendor
Relationships

Reduced Scrap
and Rework

Reduced Space
Requirements

Elements of JIT
Smooth flow of work (the ultimate goal)
Elimination of waste
Continuous improvement
Eliminating anything that does not add value
Simple systems that are easy to manage
Use of product layouts to minimize moving
materials and parts
Quality at Source

PUSH PULL

Impact on the system

Just in Time Manufacturing

JIT systems have an unambiguous definition of what
constitutes waste in the system
The philosophy of Just in Time system is one of
continuous waste elimination
Contrary to the traditional thinking, the inventory in a
JIT system is deliberately removed to expose hidden
problems
These problems are solved resulting in fewer inventory
and waste in the system and greater productivity
Implementation of JIT requires that the manufacturing
architecture is converted into a chain of internal
customers
Lot size reduction and use of standard containers are
other elements of a JIT system

Just in Time Manufacturing

Production Planning and control in JIT systems is
achieved through the use of Kanban
Kanban enables waste elimination from the
system by preventing overproduction and
exposing problems in processes

JIT systems utilise a Pull type scheduling

Pull type scheduling are very effective in

providing visible control of the processes and
bringing the problems to the surface rapidly

Recent Trends in POM

Strategic Aspects in POM

1.International Facility Location
International Facility Location is a concept related to optimal placement of facilities in
order to optimal utilization of global resources and to serve international customer base
at its best.
Features of Facility Location
A. Closeness of site to market
B. Business Environment
C. Total Costs
D. Infrastructure
E. Labor Aspects
F. Suppliers
G. Free Trade Zones
H. Government Restrictions
I. Environmental Regulation
J. Competitive Advantage with Home Base

2. Production Facilities and their Standards

The next strategic aspect is International Production and Operations Management is
production facilities and their standards. Multinational Corporations generally use same
production process, facility layout, control systems and degree of capital invested in all
their units located in different countries.

3. Contract Manufacturing
Contract manufacturing is a process that established a working agreement between two
companies.

4. Procuring and Vertical Integration

Procuring
Procuring is the acquisition of appropriate goods or services at the best possible total
cost of ownership to meet the needs of the purchaser in terms of quality and quantity,
time and location.

Vertical Integration
Vertical integration is the degree to which a firm owns its upstream suppliers and its
downstream buyers.

5. Adoption of International Service Standards

The service operations with the world class standards are assuming greater importance
in both developing and developed countries.

6. Research and Development Activities

The research and development refers to creative work undertaken on a systematic basis
in order to increase and use of the stock of knowledge to devise new applications.

Recent Trends in IPOM

1.Outsourcing
Outsourcing is often viewed as involving the contracting out of a business function to an
external provider.

Implications of Outsourcing
There can be various implications which are explained as below:
.Quality Risk
.Quality of Service
.Productivity
.Staff Turnover
.Failure of delivery at proper time
.Security
.Labor Issues

(A)Business Process Outsourcing

Business process outsourcing (BPO) is a type of outsourcing. It is concerned with
delivering certain business process to another company i.e. service provider through a
contractual agreement.

(B) Knowledge Process Outsourcing

Knowledge process outsourcing (KPO) is a type of outsourcing, which is concerned
with knowledge-related and information-related activities.

(C) Products
The product can be understood as the result of an act or a process, by supplying required
inputs.

(D) Services
Service is a type of economic activity that is intangible, is not stored and does not result
in ownership.

Supply Chain Management

Supply chain management (SCM) is the management of complete distribution channel
which is a network that starts from production point to the ultimate provision of product
/ service to end users.

Customer Relationship Management

Customer relationship management (CRM) comprises of strategies and activities for
managing and nurturing a companys relationship with customers.

Transfer of World Class Technology

The up-gradation of technology takes place in every sphere of human life. New
products developments, process improvements, innovative technological transformation
methods and prompt and quality service inputs have a revolutionized each and every
industry on the global basis.

Managing Internationalization of Quality Standards

The quality is an aspect which is most wanted by every consumer irrespective of a
country boundary. After the globalization of various economies all over the world it has
become of utmost importance that the quality standards of various products and services
have to be made uniform, consistent and well acceptable.

Recent Trends in Production and Operations

What has been happening that affects the way, the products and services are produced?
For example:
The food we eat has been changed from the food we ate five years ago.
Same is the case with clothes.
There is tremendous change in the financial/insurance services sector.
The things we buy and the way we buy, they have also been changed.
All these lead to new trends, which can be categorized as below:
I. Focus Changed from Seller to Buyer/ Customer
Traditional view
Recent view
II. Globalization
III. Production System: Contribution of Japan
IV. Quality Management Systems (QMS)
V. Business Processes: Analysis, Improvement and Reengineering (BPR)
VI. Supply Chain Management (SCM)
VII. Service Operations Management (SOM)
VIII. Environmental and Social Issues
IX. Ethical Production

X. New Technologies
XI. The New Information Age
XII.
Impact of Information Technologies (IT) on Productivity
XIII. Flexibility Manufacturing System (FMS)
XIV.
Time Reduction