5th Term - Operations Management

Module-1
PRODUCTION AND OPERATIONS MANAGEMENT

Definition:“production” and “ management” are general terms that have been defined in many ways.
Directories state broadly that production is the act or process of producing and management is the art
of managing. This is certainly true, but these definitions give a very little insight into the meaning of
the subject of “production management”.
The basis of production is the transformation of input into goods and services. Five input factors
are:
1) Information
2) Management
3) Materials and land
4) Labour and capital
The above inputs are employed within a firm to create a mix of output i.e. goods and services. Fig-1
is a graphical representation of this process.
Figure –1
OUTPUT: Goods and /or
Inputs: Information, Transformation Services
Management, Land,
Process
Labour, Material,
capital
Production management then, is the management of the transformation process. In general it is

responsible for the performance of following tasks:
a) Specifying and accumulating the input resources required

b) Designing and installing the assembly or conversion process that will be employed to
transform the input resources into outputs. I.e. Goods and or services.
c) Co-coordinating and operating the production process so that the desired goods and or
services are made efficient
Inputs: The inputs to a system can be classified in several ways. For convenience we will divide into
the following. The first will comprise of materials that flow through the conversion process. Work is
performed on these materials which are called the systems load. Let us take some examples to
understand the systems load.
S.R.P* 5TH TERM OPERATION MANAGEMENT Page 1

In a hospital, the system load denotes the patient. The patients come to the hospital which is similar
to a material to be processed in a production line which undergoes change in its physical
characteristic or shape. This is analogous to a patient coming into a hospital with certain disease.
The patient is first diagnosed for his ailments through an examination process. He is directed to the
proper department who can be a specialist to study the patient and recommend a correct treatment
procedure. There after the patient is administered proper treatment through a given procedure could
be anything from a simple medication to a surgical process. In this stage he undergoes a change in
his health condition, further he is advice rest following the treatment and the person comes out of the
hospital in a cured condition. Here the change that is brought about to the person is improvement in
his health condition by undergoing a certain process or treatment. Similar we can draw many
analogies by studying the operating system in any given organization is it a hospital, a bank, a beauty
parlor, a service or repair centre for automobiles etc. Hence in production or service system
(operations system) one should be able to identify the system load and be able to define it precisely
without any ambiguity.
The second kind of input is the environment that affects the system operations. The environment is
composed of those influences on the system, which constrain the system and over which the system
designers have no control.
The third and final category of the input covers the management, labour, capital, land, information
inputs. The design of the amount, placement, timing and type of these inputs is in fact the design of
the conversion facility either it is for an office operation, a manufacturing unit or for a corporate
hospital for a star hotel.
Conversion process:’
The second basic part of a system is he conversion process, through which the inputs flow to produce
the desired outputs. To be both effective and efficient, system must be designed so that the correct
process acts on the inputs at the proper time. E.g. Parts for automobiles must flow into the
production line at the correct place and time to be properly assembled into the finished automobile.
Each step in the conversion process must perform the work assigned to it.
Output:
The third component of the system is output, which comprise the accomplishment of the system.
E.g., in the automobile factory it is the number of completed cars of a desired model and quality
produced within the specified time.
If goals are well defined and measurable, an evaluation of the effectiveness and efficiency of the
system can be made. Without well defined and measurable goals, systems calculation becomes
extremely difficult if not even impossible. Consequently output criteria are important part of any
system. In fact the critical problem in the design of a system is to determine the inputs and the
conversion process, with its capacity and flows, that will best meet the output measurement criteria.

NATURE OF PRODUCTION AND OPERATION MANAGEMENT
Production management involves both “theory” and “art”, the theory portion is concerned with
methodology or approaches used in making management decisions. These range from simple
diagram as flow charts, factory layouts to complicated mathematical models.
The art portion of production management encompasses a mixture of intuition and judgment. As with
all forms of art, these aspects are difficult to place it into a book for teaching. Consequently, in
teaching production management we are purely concerned with presenting the nature of the
transformation process and the decision approaches which lead to an effective production system.
The breadth of the concept of production management and the fact that the production process is
essentially used for production project and government organizations have in the recent years lead to
the use of the term production/ operations management. This term has a high generality to
encompass production function and its application to all types of organisation.
OPERATIONS MANAGEMENT:
Operations management is concerned with the management of physical resources for carrying out
the operations whether it is a manufacturing unit producing a product or providing service / offering
service. In a pure manufacturing content, operations management includes production management,
but may also include supplies management and distribution management.
Constituting operations Management
Supplies Transformation Process Distribution

Management Management
CHARACTERESTICS OF OPERATIONS MANAGEMENT:
1) Number of people employed in these areas far outweigh than those employed in other
functions in the organization
2) A major proportion of the total revenue is spent in operations.
3) In most of the manufacturing companies about 80% of the capital investment expenditure will
be in the operations area.
LIMITATIONS OF OR:
OR is an aid in decision making. There are certain limitations which make the role of OR some what
limited in many cases. Though many of these are related with time and cost constraints manager
should be well aware of these limitations which are of following nature;
1) Magnitude of calculation
2) Lack of quantification of variables
3) Gap between Manager and operations research analyst

SYSTEMS APPROACH TO THE STUDY OF PRODUCTION MANAGEMENT
Webster defines a “system as a regularly interacting or inter dependent group of items forming unified
whole.”
A system has a purposeful means of achieving objectives.
The objective of the systems approach to study of production management problem is to provide
management with a frame work with which
- It can identify
- Describe
- Inter- relate
The processes and components that make up the particular system.
Stated in another way, the system approach will allow a manager to maintain the perspective of
the whole process while analyzing its parts / or components.
Stated formally: e = f (xi, yj)
Where e = effectiveness
Xi= constitutes controllable variable
Yj= constitutes un-controllable variable
E.g. xi= in a production system could be
A) material planning
b) Facilities planning
c) production planning
Eg yj= in a production system could be
A) Consumer demand
b) Cost of material
c) Duties and taxes on materials.
Figure-3: indicates the various sub-systems of the total production system.
In system studies one prefers to obtain a sub-optimal solution of the total system by comparing and
analyzing each system to the point where it can be studied separately by suitable optimizing method.
Stated formally
Sub-opt ( s1+s2+s3 …. + Sn) = opt (s1) + opt (s2) + opt (s3) + ……. Opt (sn)
Where s1,s2,s3,s4…..sn are highly inter dependent sub-system.

SCOPE OF STUDY OF PRODUCTION MANAGEMENT
Management: the study of production system for decision making process involves techniques like
a) Decision theory- event tree analysis
b) Scientific method
c) Mathematical model
d) Physical model
e) Economic model (setting price based on supply and demand study)
f) Dynamic model (simulation)
Inputs:
1) Product development
2) Product reliability and quality assurance
3) Product line determination
4) Capital planning, capital allocation method
5) Human factor and design of work conditions
6) Development of labour statistics
7) Selection and payment of labour
8) Materials management- purchase, stores, material control
9) Demand forecasting
10) Inventory control
Transformation process:
Under this the following study are considered:
1) Plant location analysis

2) Plant layout analysis
3) Material handling system
4) Production planning and control
5) Maintenance analysis
6) Quality control system
7) Costing system.
Definition: operations research is a quantitative objective approach to the problems of management.
American encyclopedia defines it; the quantitative study of an organization in action carried out in
order to find ways in which its functions can be improved.

CHARACTERESTICS OF MODERN PRODUCTION:
1) The first characteristics of production today are of specialization: specialization refers to

restrict production to a line of related products. The benefit of this is lower cost of production,
improve in quality. Specialist ion also means division of work or effort, and this operates at
both the worker level and management level. The efficiency of an individual working in an
organization increases as the scope of his assigned responsibility is narrowed.
2) Second characteristic is mechanization: this is transfer of human skills to machine. This is

the process of mechanization in which certain amount of intelligence is built into machines by
suitably designing it. This in other word means transfer of human effort t those carried out by
machines. Modern manufacturing has 2 characteristics i.e. Mechanization and automation.
Mechanization means carryout job by machines designed to carry out job by suitably designed
mechanisms. Automation refers to intelligence built-in machines. It refers to feed back control
loops incorporated into machine. A higher level of automation denotes loading, unloading,
transfer of job between machines without being touched by operators.
3) The third characteristics of modern manufacturing are the application industrial engineering
techniques. It elimates waste and inefficiency in production line by application of work study
techniques of method study and time study.
4) A fourth characteristic of modern manufacturing is the increased use of computer and data
processing equipment. Computer has made possible the handling of enormous amounts of
data and solving of complex mathematical problems.
5) The fifth characteristics are the use of scientific method. The steps followed to yield
consistent result are:
- Clearly state problem

- Gather all facts relating to the problem in hand
- Analyze facts
- After analysis , put together i.e. synthesis
- Arrive at a solution to the problem
- Test solution to prove or disprove.
These steps may be applied to any problem either relating to engineering or those relating to
management.
6) The sixth characteristic of modern manufacturing is the use of operations research

techniques as an aid in decision making. Or places particular emphasis on reducing the
available facts to quantitative terms that permit use of mathematical models or scientific
formulas in determining relationship between cause and effect.

Many improvements of industrial operations have resulting from use of operations research. Example
of its application is:
a) Establish most desirable quantities to purchase material

b) Planning production schedule for minimum cost.
c) Loading machine for max. Utilization.
d) Determining the most favorable preventive maintenance budget.
e) Minimum waiting time between operations
f) Scheduling flow of material to minimize handling cost.
g) Minimizing freight costs by proper location of ware house.
Limitations of operations research are:
1) Magnitude of calculation discourages it to be used for short run solutions

2) Lack of quantification of variables
3) Knowledge of mathematical ability of managers
PRODUCTION SCENARIOS- CHALLENGES OF OPERATIONS MANAGEMENT:
Production management needs to cope with different scenarios:
The kind of managerial skill and expertise varies depending upon the situation. All industrial projects
essentially fall into one of the three categories outlined in the following:
SCENERIO#1: a new organization is started exclusively to achieve a defined set of objectives:

infrastructure is established from scratch (termed as grass root project). If the product is designed in-
house, infrastructure should also include facilities for design & development; in case technology is
acquired from a third party, say, through a license agreement, only manufacturing facilities, as
recommended by the licensor, need to be setup. In this scenario, it is likely that the product will enter
the market for the first time and project management as well as product management assumes great
importance.
SCENERIO #2: in this scenario the organisation, production facilities and man power already exist.
A new product perhaps as a part of the diversification programmed, is to be launched. Two variants,
as highlighted above i.e. namely handling both design and manufacture or only manufacture may
arise. This scenario calls for product management skills of a high order.
Scenario #3: thesis limited to the management of an existing product line. This is typical of
operations management situation. Emphasis is on shop floor and maintenance management.
The challenges in operation management are: production planning and control – to draw a concrete
plans for manufacturing – i.e., what to manufacture and how much to manufacture, production
technology: how to manufacture or produce. Job loading: where to manufacture, job scheduling:
when to manufacture.

 Material management: this has four components- purchase, stores, material control, supply
chain management.
 Management of shop floor activities.
 Maintenance management
 Quality management
 Cost planning and control
 Budgets and budgetary control
 Computer aided design and computer aided manufacture (cad/cam)
 Management services- provides a host of services such as method study, time study, design of
incentive schemes, installation of management information system to all department in a
production plant to perform their duties more effectively and promptly.
Product, Classification, Process , Types Of Production Process,

Production Management, Production Of Engineering Goods,
Production System , Technology, Characterestic Of High Technology
Products.
Product; a need is “a state of felt deprivation of some basic satisfaction” e.g. the need to travel from
ones residence to ones place of work. Wants are desires for specific satisfier of these needs.
Wanting a kinetic Honda, Bajaj chetak on which i want to travel or a maruti 800 for travel. Products
satisfy people needs and wants.
Product is classified as:
a) Capital goods
b) Agricultural goods
c) Basic goods: steel, cement, aluminum
d) Industrial goods: 2 types: raw material and semi- manufactured goods. These are used to
produce capital goods as well as consumer goods.
e) Consumer goods: a) durable consumer goods- motor cars, washing machine, micro oven b) non
durable: items like clothing, drugs, sugar etc.

Types of production: the manufacturing process can be classified as:
A) Metallurgical process e.g. Steel making, aluminimum making
Manufacture takes place through stages of: ore mining, ore dressing, conveying, smelting in blast
furnace, purification etc.
b) Chemical process: production of drugs: in this manufacturing the process can take place
either in batches or in bulk. Production takes place through stages as dictated by stages in the
process like heating, cooling, steaming, centrifuging, decantation, distillation, filtration, drying,
polishing, de-odorizing etc.
c) Engineering process: e.g. Manufacturing takes place on machine tools eg. Manufacture of
automobiles, washing machine.
Stages in manufacture proceeds step by step.
Step-1 raw material to manufactured part

Step-2 assembly of manufactured part with manufactured part with standard components. - Sub
assembly-I
Step-3: assembling of sub assemblies i.e. called sub- sub assembly.
Step-4: assembling of final product from sub, sub, and sub assemblies.
PRODUCTION SYSTEM: based on the volume of production, technology there are 4 systems of
production
A) One off production b) batch production c) process production d) process production
Technology:
Science studies the properties of space, matter and energy and its interactions. Engg is application of
scientific knowledge to meet desired objectives. Technology is application of the results of scientific
research to industrial processes.
 Electricity is a science
 Electric motor is the result of engineering
 Manufacturing processes required for production of electric motor constitutes technology.
Lathe- cutting tool technology has, carbide tool, tool bits
Manual technology to numerical controlled machines.

Types of technology:
Material technology, process technology, cam technology, information technology, conventional

technology, state of art technology, key technology e.g. Semi conductor, emerging technology.
Technology management: acquisition of technology, development of a given technology in- house.
Characteristics of high technology products:
a) Expensive production facilities 5 axis cnc machine

b) Close tolerance
c) Fine surface finish
d) High degree of interchangeability
e) Sophisticated inspection aids
f) Complex test procedures
g) Expensive storage facilities
h) Special packing
i) Long lead lead time, high product cost and limited number of manufacturers. ( gas turbine
part adopting investment wax casting
PRODUCTION ORGANISATION
The organization structure of a firm is really a formal plan for the most efficient employment of human
resources. There are a great number of alternative organisation patterns depending upon:
1) The type of production system

2) The nature of manufacturing process
3) The magnitude of operations.
1) TYPES OF PRODUCTION SYSTEM
Production systems are classified as follows:
Classification based on volume of production as
a) One – off production system

b) Batch type production
c) Mass production
d) Process production
Classification based on the layout as:
a) Product focused system (continuous)

b) Process focused system (intermittent)

a) One off production system:
The order quantity is for one or two numbers. A special purpose machine built or a one off type
project say an international airport can be an example to the specific customer requirement. Such
production is carried out using what are called as “jobbing method” (this term is only related to
engineering products/components/systems).
The workers engaged in this type of production have to be versatile, highly skilled and experienced.
In this work is carried out any significant tooling. Products fabricated by jobbing methods tend to be
expensive
Examples: ship building, bridge construction, prototype fabrication of a missile and the like project.
These are planned and controlled much like a project using pert/cpm net work planning technique.
b) Batch type production:
In this type of production the total order quantity is split into convenient batches depending upon
annual rate of production. For example let us assume that the e order placed by the defense
department on Hindustan aeronautical limited (a govt of India public sector undertaking) for a
certain model of mig air craft is 400 in nos to be delivered over a period of 10 years.
The annual rate of production is worked out as: 400 / 10 = 40 mig air craft‟s annually.
There is alternative choice to produce these 40 nos in batches of 2 or 3.
If it is 2 batches it will have 20 nos per batch
If it is 4 batches it will have 10 nos per batch.
In the former case the detail parts are produced in batches of 20, but the air craft gets assembled
one after the other. In this case the manufacture of parts is carried out using external tooling in
manufacturing shops having process layouts. The assembly operations take place on a series of
jigs and fixtures laid out in process way in the assembly shop.
All air craft bodies – fabrication process- fab shop

All engines parts – foundry process – foundry shop
Forging process- forge shop
Machinating process- machine shop
Instrumentation: instrument assembly – assembly
Controls- hydraulics and pneumatics – systems shop
This is also called intermitted flow process and is common to engineering industries. Manufacture of
machine tools, large electrical machines, aero planes, sports cars etc. This is a multi-product,
fluctuating demand, high technology, high product cost, involves long manufacturing cycle time. Each
product has many models and each model is made up of thousand of different parts.

c) Mass production:
The type of production (also called flow production) is adopted when manufacturing “off-the-
shelf” or stock items for the consumer market. Production per year is in tens of thousands of
units. Special purpose machines, specially tooled up machine tools and transfer lines are so
arranged so as to facilitate continuous and fast flow of production to cope with large volume of
output. Robotics finds application in mass production lines for jobs like assembly, welding and
painting. In this type cost of production facility is high but justified by large output. When the
product changes the layout may have to be partially or fully changed.
Characteristic of this production system are: planning is simple, management challenges lies in
marketing of the product rolling out of the manufacturing unit. Facility and tooling are specific to the
product. Flow of raw material and standard components into the assembly line must be managed well
with a strong supply chain. Examples are: passenger cars, vacuum cleaners, washing machines, TV
sets, other consumer durables.
d) Process production: it his is also known as continuous production. A mix of materials is

continuously fed into a hopper and is carried through pipe lines to a series of process plants,
the output of one being input of the next stage till the final product comes out. The process is
automatic and nonstop as long as raw materials are fed and power is turned on to run the
mixers, grinders, heating and cooling appliances, the pumps and conveyor belts. Chemicals,
pharmaceuticals, food products and synthetic materials are produced using this system.
Characteristics: this type of production is highly automated, the control of parameters is very critical.
The process parameters need to be maintained otherwise the production may incur a heavy loss if
the parameters in the process is not controlled. Planning is relatively simple, operational challenges
are critical.
2) NATURE OF MANUFACTURING PROCESS:
Manufacturing process is classified as:
a) Metallurgical process e.g. Steel-making
This has distinct stages of production such
I) Ore dressing ii) ore treatment iii) ore smelting IV) modification by addition of
alloying elements to get the required properties.
b) Chemical process of production may be found in drug and paint industries

c) Engineering process e.g. Manufacture of machine tools, construction machinery and
engineering goods like pumps and motors. Etc.

3) Magnitude of operation: is the operation for a small, medium scale or heavy industry. How
the units are to be organized geographically, how much resources need to be deployed for
operating. These are the points examined under the head.
OPERATION STRATEGIES FOR COMPETITIVE ADVANTAGE
The best way to determine an organisation‟s strategy is to observe what the organization actually
accomplishes over time. M/s gati logistics has followed a growth strategy, staying in service
business and market area it knows best.. The logistics business has yielded it a profitable growth
with quality customer service, productive operations and orderly development of capable operations ,
managers and employees.
Strategic planning for production operations:
In the production or operations function, strategic planning is the broad overall planning that precedes
the more detailed operational planning. This is done by the executives who head the production and
operations function. There are three contrasting modes of strategic planning.
1) The entrepreneurial mode: in this mode one strong , bold leader takes planning action on
behalf of the production / operations function.
2) The adaptive mode: a manager‟s plan is formulated in a series of small, disjointed steps in
reaction to a disjointed environment.
3) Planning model mode: this uses planning essentials combined with logical analysis of
management science.
OPERATIONAL STRATEGY FRAME WORK:

A) Strength (internal)
B) Weakness ( “ )
Corporate objectives ---------c) opportunity(external)
Operates at the corporate and divisional level d) threat(external)
( A shipyard company has given itself the following mission or objective “to build ships at a profit if we
can, at a loss if we must but always build good ships ”.)

MARKET BASED CRITERIA FOR SUCCESS
Market: defined
A collection of customer and competitors for a product/ service constitute market. Markets need to be
carefully, researched, forecast and analyzed before embarking upon product planning. Even well
conceived, beautifully designed and efficiently produced articles may not sell and secondly may not
earn profits until it is geared to the customer requirements.

The steps in formulation of marketing strategy are:
Market Market Market Market Sales

forecasting potential share strategy strategy
techniques
Product Distribution Promotion Pricing Policy

Planning networking Strategy
Note: Students must prepare their own notes for market/ sales forecasting which a study material is
issued in the first semester under marketing subject. Students must be familiar with the various
forecasting techniques taught to them . Students must be go through the old notes :
a) Intuitive method: opinion of marketing and sales personnel is considered to forecast the
demand.
b) Moving average method:
c) Weighted moving average
d) Exponential smoothing
e) Trend analysis
The sequence of events leading to formulation of market strategy is shown in the figure above.
Market orientation is normally based on different considerations as may be seen in the following
categorization:
Territory wise: example Product wise:
 Global world over  Consumer cosmetics

 National India,  Chemical fertilizers.
Singapore etc.  Light engineering small pumps
 Regional middle east,  Medium engineering machine tools
Persia  Heavy engineering ships
 Electronics semi
conductor chips
 High technology fighter air craft.

Competition wise:
 One producer ( monopoly) defense equipment (in India)And one customer ( monopoly)
 Few producers & many customers‟ .e.g. heavy engineering industries manufacturing power
plant equipment like steam turbines and generators.
 Few producers (oligopoly) luxury items like sports cars, special purpose machineries. E.g.
Hmt, fiat etc.
 Perfect competition consumer goods – cars, washing machines etc.
The market – product matrix shown in the diagram at figure-I is an important input for corporate
planning.
Figure-I
-NEW MARKET - NEW MARKET

- NEW PRODUCT
-EXISTING PRODUCT
(B)
(A)
- EXISTING MARKET - EXISTING MARKET

- EXISTING PRODUCT - NEW PRODUCT
(A)
(C ) (D)
A) Market diversification: this strategy calls for strong marketing thrust to develop new
markets. This is called market diversification
B) New market , new product: this is a high risk strategy. Hence a high risk quadrant,
organization should carry out strategic planning.
C) Existing market , existing product: Market penetration to increase the volume of sales
in the existing market is called for in this strategy.
D) Existing market, new product: this is called product diversification strategy.. In this
strategy more attentions is given to design and development and project management
areas.
S.R.P* 5TH TERM- OPERATION MANAGEMENT Page 16

PRODUCT PROCESS MIX
A product process structure is illustrated in figure-I. Representative industries are listed on the
diagonal of the matrix and the two “voided” corners indicate product-process combinations
that are incompatible and infeasible. Most companies, plants can be located on the matrix,
depending upon the current life cycle stage of the dominant product line. As the product shifts
to a different stage, the manufacturing process also shifts and new manufacturing priority
emerges. Manufacturing flexibility and quality are competitive priorities in earlier stages.
Priorities shift toward dependable delivery and competitive cost at later stages.
The product – process matrix helps one to understand why and how companies change their
product operations. As products, market requirements, and competition change, so must
equipment, procedures and human resources. If process change is not made to
accommodate product life cycles, product and process become incompatible: the result is
competitive dis-advantage.
PROCESS TECHNOLOGY LIFE CYCLE
Process technologies have life cycles related to product life cycles, as shown in figure ii. Over time,
unit manufacturing cost diminishes for matured products. From product start-up to decline,
manufacturing change in organisation, through put, volume, rate of process innovation, and
automation take place. This is illustrated in the diagram typically starting with job shop at start up
and moves towards continuous flow technology if the product survives to become a commodity.
Through put volumes and automation are low at startup and high during maturation and decline.
These needs matching up of manufacturers product and process structures.

PRODUCT LIFE CYCLE:
The product life cycle which shows the relationship between profitability and life span of product, is
displayed in figure i. Unless strategic planning is effective and a new product is launched at the
right time, the organization may go into decline by clinging to existing product line. Customer
creation and customer satisfaction should be
viewed as the key objectives of not only the
marketing department but all the departments in
the organization.
Matching major stages of product and

process life cycles – i.e. the product – process
matrix.
I=low volume, low standardization, one of a kind
Ii = multiple products, low volume
Iii = few major products, high volume
IV = high volume, high standardization commodity
product
A= jumbled flow, job shop
B= disconnected line flow (batch)
C= connected line flow (assembly line)
D= continuous flow.
ORGANISATION DYNAMICS
An organisation is said to be dynamic when it can quickly respond to the unexceptional actions of
the:
 Market
 Competitors
 Employees/ labour unions
 Government
 Community
 Technological advances / inventions
It should be flexible enough to diversify, market wise, product wise, divest ( get rid of non profitable
product or product lines), innovate ( adopt new technologies, management styles) develop growth
strategies involving globalization, mergers, amalgamation and so on. The goal of good strategic or
long term plan is to provide flexibility as well as dynamism for the organisation

Strategic PERSPECTIVE
One of the important aspects of production and operations management is to devise a strategy
leading to managing conversion operations and results. The process is guided by competition and
market conditions in the industry , which provide the basis for determining the organisation‟s
strategy.
The questions considered in formulating the strategy are:

Where is the industry now?
Where will it be in future ?
What are the existing and potential markets?
What market gaps exist, and what competencies do we have for filling them?
A careful analysis of market segments and ability of our competitors and ourselves to meet the
needs of these segments will determine the best direction for focusing our organizational efforts.
After this, overall organisational strategy must be developed. Priorities must be established on the
following 4 characteristics:
 Quality ( product performance)

 Cost efficiency ( low product price)
 Dependability ( reliable, timely delivery of order to customers)
 Flexibility ( responding rapidly with new products or changes in output volume)
Based on above primary objectives

and secondary objectives must be set.
These basic strategic choices must be
made, then set the tone for the shape
and content of operation function and
what it accomplishes.
A conversion process designed for one

type of focus is often ill suited for
success in another, alternative form.

Inputs process outputs for different kinds of production/operations management systems.
FACILITY INPUT CONVERSION OUTPUT

PROCESS
1) Bank cash checks serviced
customers customers
Teller window
make deposits
2)
OPERATIONS CAPACITY:
When a company expands its capacity, it encounters much more than just physical changes.
Management system and control procedure have to be upgraded to the newer conditions.
Generally three models are commonly applied for evaluating short term capacity utilization of
production and operations systems the first two models are applied , for long term capacity problem of
facility expansion the decision tree analysis model is applied.
a) Linear programming
b) Computer simulation
c) Decision tree analysis
a) Linear programming: are suitable for product mix problem. A decision situation involving limited
resources that can be used to produce any of several combinations of products. This is a
mathematical method for selecting the optimal allocation of resources to maximize profits or
minimize cost.
Problem: a paper mill produces two grades of paper namely x and y. Because of raw material
restrictions, it cannot produce more than 400 tons of grade x and 300 tons of grade y in a week. There
are 160 production hours in a week. It requires 0.2, 0.4 hours to produce a ton of products x and y
respectively with corresponding profits of rs 200 and rs 500 per ton.. Formulate to maximize profit and
find the optimum product mix.
Decision variables: let it be x1 and x2 be the number of two grades of paper of x and y.
Objective function: since the profit for two grades of paper x and y are given, the objective function is
to maximize the profit.
Max z = 200 x1 + 500 x2.

Constrains: there are two constraints, one with respect to raw material and the other with reference to
production hours.
Maximize z = 200 x1 + 500 x2
Subject to x1 < or = 400
X2 < or = 300
0.2 x1 + 0.4 x2 < or = 160
Further x1 and x2 are non negative numbers and can be expressed as x1,x2 > or = to 0
b) Computer simulation: In many systems is it service or production proper scheduling of the

conversion facility can lead to better use of existing capacity.. Sometimes careful analysis reveals
greater output rate than was thought possible. This makes use of the strategy to build Monte Carlo
simulation model to evaluate capacity. Several improvement in operations have resulted using
computer simulation.
c) Decision tree analysis applied to capacity expansion:
One technique applied for analyzing long term capacity expansion is the application of decision tree
analysis.
This is used to structure and analyze a decision problem, a systematic, sequential lying out of decision
points, alternatives and chance events..
Steps:
1) Tree diagramming
a) Identify all decision points and the order in which they occur
b) Identify alternative decision for each decision point
c) Identify the chance events that can occur after each decision
d) Develop a tree diagram showing sequence of decisions and chance events.
2) Estimation:
a) Estimate the possibility for each possible outcome of each chance event
b) Estimate the financial consequence of each possible outcome and decision alternative
3) Evaluation and selection:
a) Calculate the expected value of each decision alternative

b) Select the decision alternative offering the most attractive expected value.

DECISION THEORY
The success or failure that an individual or organization experiences, depends to a large extent on the
ability of making appropriate decisions. Making a decision requires and enumeration of feasible and
viable alternatives (course of action and strategies). Decision models are useful in helping decision
makers make the best possible decisions. This depends upon scale of certainty. The scale of certainty
falls between the 2 extreme points i.e. complete certainty to complete uncertainty. The region which
falls between these two extreme points corresponds to the decision making under risk ( probabilistic
problems).
a) Decision alternatives
b) State of nature – a possible future condition ( consequence or event) resulting from choice of
decision taken
c) Pay off- a numerical value resulting from each possible combination of alternatives and states of
nature.
I) Decision making under certainty- dm has Complete knowledge

II) Decision-making under uncertainty-dm has incomplete knowledge of the outcomes.
III) Decision making under risk- unable to specify the probabilities
Steps in decision approach

1) List all possible future events
2) Identification of the course of action ( alternatives or decision choices)
3) Expressing the pay offs (p ij) resulting from each pair of course of action
4) Choosing an appropriate course of action.
Problem: a firm manufactures three types of products. The fixed and variables are given below:
Fixed cost(rs) variable cost (rs)
Product-a 25,000 12
Product-b 35,000 9
Product-c 53,000 7
The likely demand (units) of the products is given below:
Poor demand : 3000

Moderate demand: 7000
High demand: 11,000
If the sale price of each type of product is rs 25, then prepare the pay off matrix.
General form of payoff matrix
States of nature courses of action (alternatives)

S1 s2 s3 …………..sn

N1 p11 p12 …… p1n
N2 p21 p22 ………. P2n
N3 p31 p32 ……………. P3n
.
.
Nn pn1 pn2 ………………pnn
Solution:
Let d1, d2, d3 be the poor, moderate and high demand respectively. Then pay offs given by
Pay off= sales revenue-cost
The calculations for payoff for each pair of alternative demand and type of product are shown below: (
000s are dropped in the fig. Given below for simplification)
D1a = 3 x 25 – 25 – 3x12 = 14
D1b = 3 x 25 –35 – 3x9 = 13
D1c= 3x25 – 53 – 3 x 7 = 1
D2a= 7 x 25 – 25 – 7 x 12 = 66
D2b= 7 x 25 – 35 – 7 x 9 = 77
D2c = 7 x 25 – 53 – 7 x 7 = 73
D3a = 11 x 25 – 25 – 11 x 12 = 118
D3b = 11 x 25 – 35 – 11 x 9 = 141
D3c = 11 x 25 – 53 – 11 x 7 = 145
The pay off matrix is :
Product type alternate demand

D1 d2 d3
A 14 66 18
B 13 77 141
C 1 73 145
Problem: a glass factory specializing in crystal is developing a substantial backlog and the firm‟s
management is considering three courses of action:
a. Arrange for sub contracting (s1)

b. Begin over time production (s2)
c. Construct new facilities (s3)
The correct choice depends largely upon future demand which may be low, medium or high. By
consensus management ranks the respective probabilities as 0.1, 0.5 and 0.4, a cost analysis reveals
effect upon the profits that is shown in the table:;

Demand probability course of action
==========================================
S1 s2 s3
(Subcontracting) (Begin overtime) (Construct facility)
Low (l) 0.1 10 -20 - 150
Medium (m) 0.5 50 60 20
High (h) 0.4 50 100 200
Depict this decision situation in the form of a decision tree and indicate the most preferred decision and
corresponding expected value.
Solution:
The most preferred decision at the decision

node 0 is found by calculating expected value of
each decision branch and selecting the path
(course of action) with high value.
Result : since node 3 has the highest expected

money value therefore the decision at node 0
will be to choose the course of action s3 i.e.
Construct new facilities.
COMPUTER SIMULATION USED TO EVALUATE CAPACITY
In many systems, proper scheduling of conversion facilities can lead to better use of existing capacity.
A simulation study was carried out to assess the capacity of the number of servicing stations at a super
market. The pattern of the customer arrivals at the serving or billing stations was studied by day of the
week and by time of day. The pattern included both periods of slack and periods of very high customer
loads. The analysis used the simulation model to test experimentally the effect of setting the number
of serving stations. T he simulation experiments were implemented in the super market and sever
improvements in its operation resulted.
The monte-carlo simulation is a technique in which statistical distribution functions are created by
using a series of random numbers. This method is generally used to solve problems which cannot be
adequately represented by mathematical models or where the solution of the model cannot be arrived
at by analytical method. This technique can yield a solution very close to the optimal solution.

Steps:
1. Define the problem

2. Construct an appropriate model
3. Prepare model for experimentation
4. Experiment with the model
5. Summaries and examine the results
6. Evaluate results of solution
Case: a sample of 100 arrivals of customers at a retails sales depot is according to the following
distribution.Table-1 (arrivals)
Time between arrival ( minutes) Frequency
0.5 2
1.0 6
1.5 10
2.0 25
2.5 20
3.0 14
3.5 10
4.0 7
4.5 4
5.0 2
A study of the time required to service customers by adding up the bills, receiving payments and
placing packages, yields the following distribution.
Table-2 (service at counter)

Time between service ( minutes) Frequency
0.5 12
1.0 21
1.5 36
2.0 19
2.5 7
3.0 5
Estimate the average percentage of customer waiting time and average percentage of idle time of the
server by simulation for the next 10 arrivals.
Solution: tag nos are allocated to the events in the same proportions as indicated by the probabilities.
Arrivals Frequency Probability Cum.prob. Tag-number
0.5 2 0.02 0.02 00-01
1.0 6 0.06 0.08 02-07
1.5 10 0.10 0.18 08-17
2.0 25 0.25 0.43 18-42
2.5 20 0.20 0.63 43-62
3.0 14 0.14 0.77 63-76

3.5 10 0.10 0.87 77-86
4.0 7 0.07 0.94 87-93
4.5 4 0.04 0.98 94-97
5.0 2 0.02 1.00 98-100
Service time Frequency Probability Cum.prob. Tag-number

(minutes)
0.5 12 0.12 0.12 00-11
1.0 21 0.21 0.33 12-32
1.5 36 0.36 0.69 33-68
2.0 19 0.19 0.88 69-87
2.5 7 0.07 0.95 88-94
3.0 5 0.05 1.00 95- 100
The random number are generated by computers and linked to the appropriate events. The first 10
random numbers simulating arrival at the service station of the retail sales depot, the second 10
simulating the service time.
The results are shown in table-3 , the assumption is made that system starts at 0.00 am.
Average waiting time per customer is 4.5/10 = 0.45 minutes
Average idle time of the servers = 7.00/10 = 0.7 minutes.
Decision can now suitable made based on predetermined criteria whether to accept or increase the
capacity of the servers.
Arriva Rando Inter Cum. Rando Service Ser Vice Waiting Time
l m m of
Arrival Arrival Time(min End
Number time(,min Number ) custome
Time(min ) Star Finis r
) t h Serve
r
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1 93 4.0 4.0 78 2.0 4.0 6.0 - 4.0
2 22 2.0 6.0 76 2.0 6.0 8.0 - -
3 53 2.5 8.5 58 1.5 8.5 10.0 - 0.5
4 64 3.0 11.5 54 1.5 11.5 13.0 - 1.5
5 39 2.0 13.5 74 2.0 13.5 15.5 - 0.5
6 07 1.0 14.5 92 2.5 15.5 18.0 1.0 -
7 10 1.5 16.0 38 1.5 18.0 19.5 2.0 -
8 63 3.0 19.0 70 2.0 19.5 21.5 0.5 -
9 76 3.0 22.0 96 3.0 22.0 25.0 - 0.5
10 35 2.0 24.0 92 2.5 25.0 27.5 1.0 -
Total 4.5 7.0
Waiting end customer: column 7 - column 4
Column 9 represents customer waiting time
Column 10 represents server waiting time.

PLANT LOCATION
Production units that are established at one particular location represent culmination of many man-
hours of planning, countless decisions, such as the products to be made at a particular plant, the plant
and machinery required the type of structure needed, and the land development costs. The various
factors to be considered in plant location and the cost benefit is depicted in the following illustrations.
Factors commonly considered in locating a plant. Some of them are important in selecting both region
and community
Factors Region Community site

1. Proximity to labour ………… x x …………. x
2. Labour supply x x
3. Nearness to Market x
4. Nearness to raw material x
5. Nearness to an existing plant x…………… x
6. Suitable land and land cost…… ……………. x
7. Transportation………………… x…………… x
8. Water supply………………….. x………….. x
9. Power supply…………………… x…………. x
10. Waste disposal………………. …………. x
11. Taxes…………………………… …………. x
12. Climate………………………… x
13. National defense……………… x
14. Community administration
and attitude ………. x
15 Schools , place of workship
Residential areas ……… x
16 Zoning restrictions ……….. x
17 Space for expansion ……. x
Evaluation of Plant location

It is very difficult to make a final decisions as to the choice for a plant locaiton. One location may have
the advantage from Market stand point, another may be closer to Raw material supply and the third
may provide a better labour supply in attempting to weigh these and other factors against one another,
2 methods are commonly used. These are Rating Plans and Cost analysis
Rating plan: weights are assigned to each of the factors that should be considered. The factor deemed
most important is given the highest weight and each other factor a lesser amount

RATING CHART FOR 3 ALTERNATIVE PLANT LOCATIONS
Factor Max.possible Location
Points ------------------------------------------
city-A city-B city-C
1 Nearness to Raw Materialt 400 300 250 150
2 Nearness to Market 300 1 50 200 250
3 Labour supply 275 150 225 175
4 Transportation 125 125 100 125
5 Water supply 200 100 150 175
6 Power supply 200 150 150 100
7 Waste disposal 100 50 75 75
8 Land & const. Cost 70 60 50 50
9 Climate 50 25 40 35
10 Taxes and laws 40 35 25 40
11 Local site4 40 40 30 35
Total 1800 1185 1295 1210
COST ANALYSIS
As an aid in evaluating alternative plant location estimate is made for all costs entering into operation
of the plant in each locations. This must cover Intial cost of physical facilities, raw materials, cost of
manufacture, and cost of distribution. After determination of these costs, the unit cost of manufacture
of product in each of these location can be reckoned and may be used to aid in deciding on the
optimum location
COST COMPARISION CHART FOR 3 PLANT ALTERNATIVE LOCATIONS
Cost comparision chart
COSTS Location
------------------------------------------------------
City-A City-B City-C
Operating cost per year:
Transporation costs:
a) Incoming materials 100,000 90,000 85,000
b) Out going materials 160,000 165,000 170,000
Labour 200,000 225,000 250,000
UTILITES:
Power 60,000 65,000 65,000
Water 30,000 28,000 32,000

Fuel 60,000 70,000 65,000
PLANT OVERHEAD:

Rent or carrying costs 60,000 55,000 64,000
Taxes 10,000 12,000 14,000
Insurance 5,000 5,000 5,500
Miscellaneous 5,000 8,000 8,500
Total 690,000 723,000 759,000
Construction costs:
Land 100,000 50,000 75,000

Building 1,500,000 1,250,000 1,600,000
Special requirements 40,000 --- -------------
TOTAL 1,640,000 1,300,000 1,675,000
TYPES AND CHARACTERESTICS OF SERVICE SYSTEM
Many productive systems , such as hospitals, beauty solons, consulting companies, banks and air lines
do not produce tangible product that can be stored for later consumption. Instead the output of such
systems is a service – for example, health care, good looks, advice, loans and transportation, moving
of materials (logistics) that is realized in the process of production. From our day to day experience we
know that the cost and quality of services even within the same industry can vary a great deal. As
consumers, we discriminate among alternative service provisions, much the same way as we do for
products. Similarly we have preference and are willing to pay for different component of service, such
as speed, quality, degree of variety so on and so forth. Better management of the system that
provides the service, consistent with customer preferences and requirements leading to greater
profitability for the firm. We must therefore understand the nature of the various types of service
systems and the associated management tasks that are required to improve a service firm‟s
competitiveness.
Distinctive features of service systems:
The inputs to a service productive system are the consumer themselves. The productive process that
transforms the inputs into outputs consists of labour, technology, information, and the like. The output
of such system is the altered state of consumer
For example:
 A cured patient
 A transported traveler
 An informed client (consultancy)
 A served customer (supermarket)

The operation manager can control the design and mix of the productive process to meet customer
requirements.
The following picture depicts a simplified productive process for a doctor‟s office .
PATIENTS CURED
PATIENTS
HISTORY/Medical exam/Tests/Prescription
Inputs transformation or conversion process output
Resource reqts.:nurses,doctors Test equipment, drugs.
CLASSIFICATION OF SERVICE SYSTEMS
The service sector does not consist of a homogeneous group of services. The grouping within service
is too heterogeneous for a common frame of analysis a classification proposed by Baume(1984) is
given below. They are classified into 4 categories:
1) Stagnant personal services

2) Substitutable personal services
3) Progressive services
4) Explosive services.
1) STAGNANT PERSONAL SERVICES:
These services frequently require direct contact between the customer and service provider. Some
examples are hair cutting, live artistic performance, psychiatric counseling. Since the quality of such
service is highly correlated with labor time, it is difficult to realize significant productivity gains for these
services without an appreciable reduction in quality. The challenge in managing stagnant personal
services is to improve their effectiveness thro better management. Productivity gains are minimal in
stagnant services
2) Substitutable personal services
These services also require personal contact and they have characteristic similar to above. However it
is possible to substitute for these services with technological or other alternatives. An ex. would be
service of security guards that can be substituted with electronic surveillance systems. In the recent
times we have seen how servant maid is substituted by dish washer, washing machine, micro oven
etc.

A great leap in productivity in substitutable personal service is provided by technological innovation. It
should be noted that substitutes for personal service are often less costly, they are also inferior. A
personal cook cannot be compared with an automatic cooker or an assortment kitchen device.
Watching on a TV is different from a live watching of a programmed
3) Progressive services
These services have 2 components-one requires a little labour & considerable cost reduction is
possible with it. The second one is highly labor intensive an is much like stagnant personal services
For e.g. computational services of the result of eamcet examinations
These services can be conceptualized as consisting of hardware and soft ware. The cost of hard
ware per computation has declined steadily conversely the cost of soft ware has increased
considerably. This is because soft ware is produced by human labor and offers limited productivity
growth. Progressive services can exhibit phenomenal productivity growth and cost reduction if
properly strategised and implemented.
Numerical ex: suppose the share of hardware is 80% and the share of soft ware is 20% in the
beginning. Further if the cost of 1st component declines at the rate of 30% per year and the cost of 2 nd
component rises at the rate of 10% per year. The picture at the end of the year would look: 80 - 80 x
0.3 = say 56 units for component-1 and 20 + 20 x 0.1 = 22,the total being 56+22 = 78 units
4) Explosive services
Explosive services involve virtually no contact between customers and production labor. Ex.
Telephone communications is one example of such service. These services involve high innovation
potential as technological advances decrease cost substantially. In telephone communications, the
technology has progressed from open wires, to optic fibers, microwaves, coaxial, satellite, digital
technology. The productivity growth is enormous. The benefit to consumer will be greater variety of
services at declining cost with technological break through
Seeing from above the productivity growth possibilities for each category are significantly different.
Overall however, the service sector exhibits a lower productivity growth and offers fewer opportunities
for cost reduction compared to manufacturing sector.
OPERATION DECISIONS
The design and control of the process for producing and delivering services critically depends on the
position of the firm. Operations decisions involving
a) Capacity expansion b) technology choices, c) work force size d) job design e) vendors f)
vertical integration depend upon the service strategy of the firm.
Four criteria for defining service strategy of a firm are: cost, quality, dependability and flexibility. A
manager has to gain a clear understanding of which criteria are relatively more important for his or her
firm. All operating decisions should then be consistent with these criteria.

Module 9
PLANNING AND SCEDULING OF BATCH TYPE PRODUCTION

PRODUCTION PLANNING
Production planning and control is an essential Production Management Tool that assists the Manager
in charge of Production to achieve his target efficiently, economically and in the time allotted. The
Production Planning and Control department therefore figures very Prominently in the structure of any
organization There are many additional aspects of production Management which closely functions for
instance:
1. Plant layout
2. Equipment policy
3. Maintenance
4. Work measuremen
5. Methods analysis
In some establishments mainly small and middle sized these additional aspects or some of them are
included in the production planning and control department , in othere the department responsibility is
grouped under a separate department, bearing the name of „ INDUSTRIAL ENGINEERING
DEPARTMENT‟.
The purpose of a Health Production organization structure is to provide:
 a system for collecting and recording uptodate facts

 an efficient communication system, to facilitate flow of instructions downward and flow of
information upward and side ward.
 A demarcation of authority and responsibility, which clearly specifies the mechanism of facts,
evaluation and decision making.
 An organization structure grows and develops in relation to the past, present policies ad future
plans of the firm. It is the outcome of an evolutionary process. It changes with circumstances
and personalities, it can seldom be imposed.

CENTRALIZATION AND DECENTRALIZATION OF PRODUCTION PLANNING &
CONTROL FUNCTION
 Manufacturing units ( factories) doing Job lot work often tend to decentralize the control of shop
operations. Order writing, scheduling and routing are centralized. But after the orders are prepared
they are turned over to the foreman, who controls the operations of h is department in his own way.
 Large factories in continuous manufacturing don‟t decentralize as much as do Job lot shops .
Every departments operations must be closely coordinated with operations of other departments .
All of them have to meet exact schedules, that upsets othere department operations.
 Departments operating continuously, there is less paper work than in job lot manufacturing
because men doing the same thing day after day need a few directions . Centralization is therefore
feasible as well as necessary.
 Medium size cost differ from both large and small cos in that neither centralized nor decentralized
control is decidedly better than the other if medium size cos want to decentralize, they can
decentralize.
 Centralized control that details of how and when to do work are planned centrally. In this
Materials reqts are calculated, Materials requisitions are made in the Central Office, shop orders
generated, Job Tickets issued and move orders for Truckers/ shipping department issued from
central office. Papers are handed over to the shop only when it is ready to commence the work.
Reports are receivied of everything done and record is kept of the work completed and progress
made against work order till date. In this type ( centralized ppc) production control department
really does control shop operation. The dept keeps track of where jobs are done and when it is
being done ( plan and scheduling aspect)
 Centralized control is usually an effective way to get coordination but the extra paper work costs
money. It is also not as flexible as decentralized control. In contrast to when dispatching is done
under foremans control you get more flexibility. Centralisation tends to reduce foremans
responsibility.

 In Decentralization control. Departmental dispatch offices are often set up almost exactly as they
are centralized, except that dispatchers are responsible to the production control dept. The
foreman is responsible for running the shop (dept) and this he may be able to do more effectively.
The difficulty in Decentralised Production Planning is that the Foreman does not give attention to
planning, many will be poor planners, the flow of information to control Production will be delayed
as well as distorted.
Production Planning and control in Small industries is characterized by planning carried out by shop
mangers who are engrossed in many other aspects of the business. One of the reasons for failure of
deliveries in these set ups are due to pre occupation of the owner and shop managers and very little
time and importance to planning activity . Many times they will not able to provide information to the
customer about the order status accurately in a short time.

ORGANIZATION OF PRODUCTION PLANNING AND CONTROL
1PRODUCTION WORK STUDY PRODUCTION 1 MATERIAL CONTROL

PLANNING CONTROL (SHOP FLOOR)
PURCHASE MATERIALS RECORDING EXPEDITING
RECORDS
TOOL & METHOD ANALYSIS DESPATCHIN RECEIVING
FIX.PLANNING
ROUTING WORK SHIPPING QUALITY Control
MEASUREMENT
SCHEUDLING TRAINING
PLANNING:
The input to planning is the Forecasting. From this emerges the Long range planning ( 5 yrs, 3 yrs, 2
yrs 1yr-Aggregate planning). The input to aggregate planning the Annual production planning.
In aggregate planning we plan for aggregate production and take DECISION ON THE
FOLLOWING:
 To decide on production rate ( qty produced per month/day/hr)

 To decide on the work force level ( man power)
 To decide on the invetory levels.
WITH THE ABOVE FACTORS WE HAVE THE FOLLOWING PURE STRATEGIES AVAILABLE FOR
DECISION IN PRODUCITON / OPERATIONS MANGEMENT
STRATEGIES:
 Recruiting and laying off workers (work force)

 To have constant work force ( consequence: idle time when there are insufficient orders and
provide for overtime during heavy booking)
 To have constant work force and build up inventory levels to meet emergency orders (this has
disadvantage of inventory carrying cost if stocks are not sold)
 To maintain minimum inventory level (buffer stock), fix definite production rate, deliver goods as
situation exist. (provision for back ordering if need be)

SCHEDULING:
Once a definite production plan has been established the next step is to schedule the planned quantity
of product through the manufacturing process. This function falls into the area most commonly known
as -PRODUCTION SCHEDULING.
The details required in the schedule is a function of a) type of production.
If the manufacturing process is an assembly line involving few products, it is possible to schedule the
required number of units into the line.
If the plant is a Job shop type it is economical to schedule the detail operations , movements etc. of
each piece, part, sub assemble, major assembly and final assembly. In fact the work may be assigned
to individual machines or individual classes of machines ( all lathes or all milling operations). Such
scheduling requires far more detail information than just a Production Plan. It is essential to know the
capability of each facility or machine each fixture , operation , section and department. These
capabilities include size and t ype of the part, time for each operation, time available, time for
maintenance, time for change over. To be effective the scheduler must be highly competent individual
acquainted with all aspects of manufacturing.
SCHEDULING JOBBING TYPE OF PRODUCTION
PRIORITY RULES:
1. First cum first served basis

2. Scheduling first longest processing time jobs
3. Scheduling first shortest processig time jobs
4. Scheduling first jobs which have shortest processing time.
5. Scheduling emergency order jobs
6. Scheduling jobs of h igh value ( order value)
MACHINE LOADING AND SCHEDULING- PROCESSING OF ‘n’ JOBS ON ‘2’ MACHINES.
A major problem in scheduling is one of assigning jobs to machines. The optional schedule is assumed
to call for minimum total idle time on 2 machines ie. The sum of idle time on Machine-1 plus idle time
on Machine-2 is to be minimum. A solution to this problem was discovered by S.M.Johnson and
published in 1954 ( manual method)

AIM; The aim of the alogorithm proposed by Johnson was to reduce the total elapsed time “T” to the
minimum.
ASSUMPTIONS: a) only 2 machines are involved Machine-A,Machine-B
b) each job is process in order of First on Machne-A and then on Machine-B
c) The exact processing time A1, A2.A3…..An and B1,B2,B3….Bn are known.
The solution determines the sequence of Jobs scheduled through the machines in such a way that the
Total elapsed time is minimum.
RULES: 1) select the smallest processing time occurring in the given set A1,A2,A3…An etc and B1,
B2,…..Bn. If there is a tie select either of the smallest processing time.
If the smallest processting time happens to be “ Ar”, then do the r th job first. If it is “Bs” then do the „s‟
th job last. Now there are (n-1) jobs left to be scheduled.
Apply the steps 1 and 2 to the reduced set of processing time by deleting the two machine processing
time corresponding to job already assigned. Continue in this manner till all the jobs have been
sequenced.
The resulting sequence will minimize the total elapsed time.
PROCESSING OF ‘N’ JOBS ON ‘N’MACHINES PROVIDED THE MACHINE HOURLY RATE ARE FURNISHED( RS/HR)
PROBLEMS: Jobs 1,2,3 & 4 can be machined on Machine-A, B,C,D.

Assign jobs to machines which yields minimum total cost ( machine hours rates provided)
JOBS MACHINES HOURLY RATE ( RS/HR)

1 A 5
1 B 6
1 C 7
1 D 8
2 A 6
2 B 8
2 C 5
2 D 7
3 A 8
3 B 5
3 C 7
3 D 6
4 A 8
4 B 7
4 C 6
4 D 5
ASSIGNING: MACHINE
JOBS A B C D
1 5 6 7 8
2 6 8 5 7
3 8 5 7 6
4 8 7 6 5
SOLUTION:
JOB 1 ASSIGNED TO MACHINE A
JOB 2 ASSIGNED TO MACHINE C
JOB 3 ASSIGNED TO MACHINE B
JOB 4 ASSIGNED TO MACHINE D
TOTAL COST: 5+5+5+5= RS 20

LINE OF BALANCE
The “line of balance” technique developed in us department of the navy during world war ii is a useful
device for controlling the execution of a production plan for a line production operation ( e.g. Electric
motor production line, an automobile or an air craft assembly line). It also may be a useful device for
controlling the production of any item, composed of a number of parts and sub-assemblies, under a
plan that calls for a series of deliveries spread over a sizeable number of months ( or other time
periods) irrespective of whether production facilities are organized in line functional or mixed.
STEPS IN LOB
The technique is applied graphically through the use of a set of charts.
1) First of these is a chart of cumulative deliver requirements.

2) The second c hart is a schematic diagram of the manufacturing process that shows the lead
times required between selected “ key stages” in the manufacturing sequence.
3) The third chart used is a bar chart showing the cumulative quantities of materials, parts or sub
assemblies received (or manufactured) and the production of items at each of the key points
selected for analysis.
4) The cumulative delivery schedule chart (fig1) and schematic diagram (fig 2) showing process
lead time are used periodically on every review date to construct a balance line for each key
point( fig 4) . For each key point there is a determined the cumulative quantities of parts or
assemblies that would be required as the date of study to fulfill the cumulative delivery schedule
for end items upto that date.
The line of balance chart has found to be especially useful in summarizing the status of line production
operation for the top management. It quickly focuses attention on procurement and production
imbalance ( both shortages and overages) in relation to the basic production schedule and each item in
relation to the others.
Practical application:
The defense military electronics division of general electric company has used the line of balance
technique for scheduling military contract production since 1956. In addition to the type of charts
already described their system also calls for a limiting item repot on each item that is behind schedule
on each review date. The report indicates source of supply ( a vendor perhaps) the number of
schedule to date and a start of action taken or promised to get back on schedule. This system also
calls for a second report, designed to prevent undue inventory accumulation, on each item that is
ahead of schedule on each review date..
Another source reports that a single line of balance study was found to be useful as a diagnostic tool,
in identifying bottle necks and developing realistic new schedule for a plant that had become badly
delinquent.

At a management level below top management, the charts maybe less useful, for these personnel are
likely to be concerned with selected items only and not with all items, such manager may profit just as
much from having available the same information about their items, but the scope of responsibility in
each of their cases is narrow, and it is easier and just as informative under these circumstances to
maintain the data in numerical rather than graphical form.
Line of balance
This technique may be divided into four major stages.

1_ the objective
2 The program plan
3 The program progress
4 The line of balance
Problem: m/s Voltas has set its production schedule of 60 units of their new refrigerator product model
in the next 6 months. The production is scheduled batch wise of 10 units delivery each month
aggregating to 60 units at the end of 6 months. They are using the line of balance approach for
production control. The steps in the production program are shown and described in the figures.
Data:
The production schedule calls for 10 units to be completed in each month. At the end of the first month
the progress report show the following progress at each stage.
S no Steps Units
1 A 45
2 B 45
3 C 30
4 D 25
5 E 15
6 F 5
A) Construct a line of balance for the current state of the program

B) What are the most critical events?
C) Is the program in balance?
D) What management principle is made use of in this technique.

VALUE ENGINEERING
1.0 concept:
“ value engineering is an organised , creative technique for analysing the function of a product, service
or a system with the purpose of achieving the required functions at the lowest overall cost consistent
with the requiremnts which comprise of its value, such as
A) Performance
B) Quality
C) Reliability
D) Maintainability
E) Appearance
Etc.
It is basically a team effort.
2.0 VALUE ANALYSIS AND VALUE ENGINEERING
Is value analysis same as value engineering?
Definitions:
Pre-design application of principles of cost reduction represented by value analysis is value

engineering, but when the technique is applied for the current product it is value analysis.
“A value engineered” product can always be “ value analysed” after it has gone for production and
more exact and factual data are available.
Value engieering results in the increased use of alternative , less expensive materials ( material
substitution), cheaper design (design improvements), weight reduction, new methods of amnufacture (
technology development), indigenisation etc. To give the same performance, quality and efficiency at a
lower cost.
Value engineering is an effective tool of cost reduction.
Value engineering (ve) =
worth to you (w) = worth = utiltiy
price you pay (c) cost cost

3.0 OBJECTIVES:
1. Identify the customer needs

2. To find out functions and their costs
3. To identify high cost functions
4. To eliminate unnecessary costs
5. To help in establish alternative ways of prividing the needed functions by creating
techniques.
6. To determine lowest cost for the reliable fulfilment of all functions.
7. It enhances the companies competitive position by
a. improving profitability
b. getting more business
c. providing continuity to business it has at present.
d. retaining customer confidence.
4.0 Types of values:
value is the combination of quality, efficiency, price, performance and service which ensures the
ultimate economy and satisfaction of the consumer. Several components make up “value”
=
Total value Cost value+exchange value+use
value+ esteem value
1. Use value: value arising from the function, service, durability, realiability, end use of an item.
2. Esteem value: subjective aspect of value in terms of esteem or prestige or artistic or aesthetic
value.
Exchange value: this is the resale value which may be taken as the ability of the item to
withstand deprecation.
4. Cost value: this is made up of the material , labour, machines, overheads and other costs
incurred in producing the item.
Value programs:
 Value engineering – Describes value study on a project or product that is being developed
 Value analysis – Describes the value study of a project or product already developed/ designed
 Value management – Identifies the methodology and techniques used in value work
The value of product may be increased by
a) Improving the utility without change in cost

b) Maintaining the same utility for less cost
c) Resulting improved utility with less cost.

The ratio of product worth/utility to its cost is the principal measure of value . Value is the least cost that
can accomplish reliably a function or service.
Concept of Value management:

 Value Engineering is a systematic approach to obtaining optimum value for every rupee spent.
 Through a system of investigation, unnecessary expenditures are avoided
 It is a creative effort directed towards the analysis of functions
 It is concerned with the elimination or modification of anything that adds to cost to an item
without adding to its function
 During the process all expenditures relating to construction, maintenance, operation,

replacement etc. are considered
 Through the use of creative techniques and latest technical information regarding new materials
and methods, alternate solutions are developed for the specific function
 Instead of reducing quantities and using cheaper materials, following questions are asked:
I. What is it?
II. What does it do?
III. What must it do?
IV. What does it cost?
V. What other material or method could be used to
VI. do the same thing?
VII. What would the alternate material or method cost?
. Value planning - VE Job Plan:
 Information – Get facts: Study all aspects of the job and collect information on design,
architectural, construction, operation and maintenance aspects. The information must be
identifiable and should form main or secondary function. Following questions are asked:
a) What is the item?

b) What does it do? (Define)
c) What is the worth of the function?
d) What does it cost?
e) What is the cost/worth ratio?
f) What are the needed requirements?
g) What high cost or poor value areas are indicated?
h) How long this design has been used?

Techniques of value management:
I. Breakdown analysis: The systems and subsystems are ranked from highest to lowest in terms
of total cost and selecting elements as per Pareto‟s law of distribution
II. Cost Models: Unit cost of materials, design, construction, labour are listed for analysis.
III. Previous study areas: The areas previously studied provide excellent source of information and
valuable data
IV. Life Cycle Cost Impact: Total effect of related elements, hidden costs have a considerable
impact on ownership costs. Some of them are: Maintenance and operation & Money charges,
interest, insurance etc
5.0 sources of unnecessary cost:
In an industry with definite time target products will not be manufactured in an economical manner,
since a designer will always like to use existing materials, a shop man would like to use existing tools,
handling methods etc. Which are at his disposal. A s per statistics collected ¼ of the cost is un-
necessary and for products which are hastily introduced into the market, ½ the cost is unnecessary.
Mr. Cameron of ford motors is of the opinion that 5% cost can be reduced just by mere accurate
knowledge of cost contributing factors, without intensive search for cost reduction .
A value analysis team can always set a target for 5% to 20% reduction in cost.
Area of attack:
I. Value analysis: work added because of unwanted design and specification features.
II. method study: work added by in-efficient methods of processing
III. Production control: cost of idle men, idle machine and wasted materials.
6.0TECHNIQUES OF VALUE ENGINEERING.

The techniques of value engineering as followed by p.r.atwood is known as the “darsiri” method .
Darisiri stands for
Step-1: d for data collection
Step-2: a for analysis
Step-3: r for record ideas
Step-4: s for speculation
Step-5: i for investigation
Step-6: r for recommendation
Step-7: i for implementation.

7.0 PHASES OF A JOB PLAN
phases of job plan key questions
I Project selection what is it ?
Ii Information phase What does it cost ?
 What does it do?

Iii Function phase
 What must it do? Functions wise costs?
Iv Creative phase What else will perform the needed functions?
V Judicial/development phase Will that work?
Vi Evaluation phase What will that costs?
Vii Recommendation phase How can we sell the idea?
 How to start?
Viii Implementation phase  Co-operation of all concerned and related?
 Availability of resources?
Ix Feed back to management Has it achieved results.?
Extension phase or collateral

X Where else can we use the same ideas?
applications
8.0 FAST TECHNIQUE
Fast stands for function analysis system technique . It is a diagramming technique which reveals the
relationships and inter-relationshsips of all known functions. It will display in logical sequence all the
functions and show their dependency and priorities.
A simple part may have one or more functions. It is not unusual to find some of them having 20 or 30
functions. A complex product, project or system may have hundreds of functions.
Procedure
1) List the functions

2) Place the functions identified.
3) With each function ask-how is (the function) to be accomplished?
4) Place the answer- how – on the right. The answers to the questionwhy is (the function)
necessary?, why on the left.
5) Continue the process with each function, until completed.

Productivity and work study Techniques in construction Projects-I
Standard of living
 The extent to which a person is able to provide the things that are necessary for sustaining and
enjoying life.
 Standard of living of a representative family differs greatly in different parts of the world.
 What is considered a necessity in one part of the world could be considered a luxury in the
other.
 Basic necessities of a minimum decent standard of living: Food, clothing, housing and hygiene.
Also, security and education also considered constituents.
 Greater the amount of goods and services produced in any community, the higher its the
average standard of living.
 There are two ways of increasing the amount of goods and services produced:
- Increase the employment and investment in creating jobs. So that more people are
producing goods required for the society.
- Increase productivity. Same amount of labor produces more goods.
We want:
 More and cheaper food by increase in agricultural productivity
 More and cheaper clothing and housing by increased industrial productivity
 More hygiene, security and education by increasing overall productivity.
Productivity
 Ratio between output and input.
 Arithmetic ratio of the amount produced to the amount of any resources used in the production.
 The resources may be: land, material, plant, machines, tools, labor. It could be combination of
all!
 Over a period of time, one can say that productivity has increased.
How?
 Combination of improved technology, better planning, greater skills etc.
 Note that, increased production does not mean increased productivity.
 Higher productivity means that more is produced with the same expenditure of resources; that
is, at the same cost in terms of land, material, machine, time or labor.
 Alternatively, same amount is produced at less cost in terms of land, labor, material etc; thereby
releasing some of these resources for the production of other things.
 If more is available at the same cost, or the same amount is available at lesser cost the whole
community benefits.
As per the ILO, higher productivity provides ways for raising the standard of living by:
1. Larger supplies of both consumer goods and capital goods at lower cost and prices
2. Higher real earnings
3. Improvement in working conditions, e.g. by reduced working hours
4. In general, strengthening of the economic foundations of human well-being.

Productivity in industry
Many factors affecting productivity of each organization; also, they are dependent.
Depending on the individual environments, decisions are to be made.
Industries where labor and capital costs are low compared to the material costs, better use of
material and plant gives the greatest scope of cost reduction.
In countries where capital and skilled labor are in shortage compared to unskilled labor, one
should look to increase the output per machine or per skilled worker.
Increasing the number of unskilled workers may be beneficial if by doing so an expensive
machine or skilled craftsmen are enabled to increase production.
Government’s responsibility
Government can create conditions favorable to raise productivity. It can:
1. Have a balanced programs of economic development
2. Take steps necessary to maintain employment
3. Make opportunities for employment.
 Last step is specifically important for a developing country like India.
 Government should make provisions for workers who are going to loose jobs because of
technology improvement – training and education programs.
Management’s responsibility
 The main responsibility for raising productivity in an individual organization lies with the
management.
 It can implement productivity programs.
 It can create a positive environment and obtain co-operation of the employees.
 Trade unions should encourage its members to provide such co-operation when the productivity
program is beneficial to workers, as well as the organization on the whole.
 We will look at management‟s role in increasing productivity of individual resource:
Productivity of material
At the design stage:
 Ensure least consumption of material,
 Purchase equipments and plants such that consumption of material is economical.
At the operation stage:
 Use of correct process
 Right use of the process
 Operator training
 Proper handling and storage of products at all stages
 Proper packaging to reduce damage in transit
Productivity of land, machines and manpower

 Effective utilization and maximum productivity is an important source of cost reduction.
 Reduction in the original specification, before the land is purchased saves capital outlay (as well
as interest expenses)
 A savings in material which has to be imported saves import duty and excise.
 Productivity of manpower and machines is typically measured in terms of time (man-hours;
machine-hours).
FACTORS TENDING TO REDUCE PRODUCTIVITY
Work content added due to the product for a manufacturing firm:

 The product or its components are designed such that it is impossible to use most economical
manufacturing processes.
 Excessive variety or lack of standardization.
 Incorrect quality standards.
 Excessive amount of material removal required.
Work content added due to process

 Incorrect production process (and/or machine) used
 Process not operated properly
 Non-optimal layout with wasted movements.
 Working methods of operation causing wasted movements, time and efforts.
Ineffective time due to management

 Marketing policy which demands unnecessarily large number of products.
 No standardization of components between as well as within products.
 Failing to meet customer‟s requirement from the beginning.
 No plan for flow of work.
 Improper supply of material, equipment.
 Improper maintenance of plant and machines.
 Insufficient safety measures.
 Improper working conditions resulting in interrupted work.
Ineffective time within the control of worker

 Taking time off without good cause: by lateness, by idling at work etc.
 Careless workmanship causing scrap or rework.
 Failing to observe safety standards.

MANAGEMENT TECHNIQUES TO REDUCE WORK CONTENT
Nature of management
 Management is the organization and control of human activity directed towards specific ends.
 Management techniques are systematic procedures of investigation, planning and control which
can be applied to management problems.
 Systematic approach to the solution of the problems proceeds step by step from known to the
unknown, always on the basis of ascertained facts.
 Since management deals with human beings, it can never be completely scientific, and must
partly be regarded as an art.
Reduce work content due to the product

 Coupling of product design and process design phases (design products such that most
economical processes can be used).
 Pilot project/ prototyping to avoid mistakes at a advanced stage (very common in chemical
companies).
 Standardization of components.
 Setting correct quality standards
 Stricter standards lead to increased manufacturing time, lenient standards lead to greater
variability.
 Knowing the customer – Management should conduct market research and consumer surveys
to know the customer better.
Reduce work content due to the method

 Process planning – Identification of correct machines for the process. In chemical industry, this
is specified by the R&D division or the license seller.
 Process research – Identification of best manufacturing technique.
 Proper maintenance.
 Method study – Combine with process planning to give most suitable tools for the operative.
Includes factory layout, working methods of the operative.
 Operator training – Improve working methods of the operative.
Reduce ineffective time due to the management

 Strategic decisions – Which markets to enter can affect ineffective time to a great extent.
 Production planning – It is planning of proper programs of work so that plant and workers are
kept supplied without having to wait.
 Proper programs should be applied only on the basis of sound standards of performance.
 Work measurement – Setting up those standards.
 Material control – Workers and machines should not be idle because of non-availability of
material and tools.
Reduce ineffective time within control of the worker

 Training.
 Make worker want to reduce ineffective time.
 Effective personnel policy and management‟s attitude towards the worker.
 Good relationship between management and worker.
 A sound wage structure, including incentive schemes (typically based on time standards derived from work measurement).

IMPROVING SITE PRODUCTIVITY
• Two important contributors to productivity improvements are getting the site layout done in a
right way and maximising the site activity.
• Lower the level of activity on the site, lesser money will be made in the contract and if it is too
low, the contractor might even make a loss.
• Workers who stand idle either because they have nothing to do or because they are waiting for
another operation to finish still have to be paid and it is just like investing in an idle machinery
with no returns.
CONTRIBUTORS TO PRODUCTIVITY
 Productivity is a comparison between how much is put into the project in terms of manpower,
material, machinery/ tools etc and the result that came out of the project.
 Productivity covers every activity that goes into completing the construction site works from
“Planning” stage to „Final site clearing”.
Reasons for low productivity:

 Supervisors looking after too many people.
 Dissatisfied workers with a perceived grievance ( ex. Low pay)
 Heavy work on a hot day
 Waiting for materials / tools
 Waiting for instructions
 Machine breakdown
 Waiting for another operator to finish so that they can follow on ( poor site layout)
 Working in a confined space and getting in each other‟s way
 Too many labourers attached to one mason resulting in gangs going out of balance
 More people allocated to a task than is needed to complete
Ways of increasing productivity

 Efficient site layout.
 Efficient tools
 Incentive schemes.
 Efficient use of equipment
 Efficient supervision.
 Use of more skilled workers and training the workforce
 Reduction in waiting time.
 Every site has an average level of activity and every contractor should know what that level is
when preparing the quotation and when calculating the allowables.
 At the end of each day if the actual activity level is less than average activity level, the job is
losing money. Hence, there is a need to look closer at the day‟s work and incorporate changes
to improve productivity on the jobs where money was being lost.

IMPROVING WORK METHODS:
• Select the Job / operation
• Record and describe the present method of doing the job.
• Improve the method by thinking of better ways to do the job
• Install new methods on the job.
REASONS FOR SELECTING AN OPERATION FOR IMPROVEMENT

a) High production costs.
b) Not achieving the quality standards.
c) Danger & fatigue
d) Low activity level
e) Limiting factor for other activities
f) Double handling of materials.
(a): High production costs:

• This may be due to (a) increase in operation costs through wages,rent of an equipment, material
costs (b) more workers are needed than calculated (c) operation taking longer time than
expected or consuming more materials than estimated.
(b) Limiting factor for other activities:
• If for some reason, are held up and there is a temporary delay, then the running costs due to
delay will decrease the profits. Examples are:
1) Lorries waiting to be loaded
2) Masons waiting for blocks
3) Concrete gang waiting for steel fixers to finish.
(c) Double handling of materials:
• When materials for a particular operation are repeatedly located in a wrong place, they have to
be picked up again and taken to place of their use. This means extra costs in wages and
additional delays. The materials may also be damaged when handled. Move a pile of bricks
three times and you‟ll have a pile of rubble” goes the apt saying and this should be avoided.
(d) Not achieving the quality standards

• The reputation as a competent contractor is at risk whenever the specified quality standards
are not met. Poor quality standards lead to low productivity because part of the work has to be
done again or the contractor loses retention money. Some of the reasons for not meeting the
quality standards are:
1) Wrong tools
2) Wrong materials
3) Wrong methods
4) Unclear instructions.
(e) Danger and fatigue

• A building site, workshop or fabrication yard is a hazardous place and when an operation is
dangerous, it means that people‟s lives are put at risk. The risk can be reduced/eliminated by
improving the method of work and providing proper equipment. When the work becomes
extremely strenuous, productivity also goes down because the workers operate at reduced
capacity.

• For example, it may pay to add a few extra workers to the concreting gang at the time of pour,
so that the work can be completed more quickly, but if the productivity is low because the
scaffolding is dangerous, then the solution lies in not hiring workers but to make the scaffolding
safer. Safety also means higher profit through a more loyal and productive workforce.
(f) Low activity level:
• If the activity level is generally too low on a site or on a certain job, action must be taken to
raise it. A low activity level means that a lot of money is lost everyday.
• There is no point in selecting an operation where the cost of improvement are greater than the
savings for the improved method.
• Before choosing an operation for improvement, an assessment of the cost in terms of money
and time to change and how much saving will result from the improvement will have to be made.
Motivation and incentives.

On any construction activity, contractors financial gain depends upon 1. work completion in time 2.
least cost. These two lies on how labor is utilised.
The performance of labour depends upon
1. the human capacity for work
2.the competence of site management
3. the motivation of the workers
The human factors are summarised are as follows.

factor explanation Comments and suggestions for
improving the capacity
age Peak capacity for physical works generally In older persons, especially in skilled
reached between the age of 20- 35 jobs, experience and efficiency
compensate for lower work capacity.
nutrition Capacity is related to calorie and protein Establish project canteens to
content of food provide balanced meals. Arrange
talks on nutrition.
Temperature Affect the rate at which heat can be Start work first light and avoid
humidity dissipated from the human body by working during the heat of the day.
radiation, convection and evaporation of
sweat. Heat and humidity increase dangers
of heat stroke and reduce work capacity
health Resistance to disease is affected by diet . enforce strict site hygiene. Arrange
Good hygiene and sanitation is essential to talks on hygiene and sanitation.
avoid occurrence of debilitating intestinal
parasites

Incentive is an act or promise for greater action. It is also called as a stimulus to greater action.
Incentives are something which are given in addition to wagers. It means additional remuneration or
benefit to an employee in recognition of achievement or better work. Incentives provide a spur or zeal
in the employees for better performance. It is a natural thing that nobody acts without a purpose
behind. Therefore, a hope for a reward is a powerful incentive to motivate employees. Besides
monetary incentive, there are some other stimuli which can drive a person to better. This will include
job satisfaction, job security, job promotion, and pride for accomplishment. Therefore, incentives really
can sometimes work to accomplish the goals of a concern. The need of incentives can be many:-
1. To increase productivity,
2. To drive or arouse a stimulus work,
3. To enhance commitment in work performance,
4. To psychologically satisfy a person which leads to job satisfaction,
5. To shape the behavior or outlook of subordinate towards work,
6. To inculcate zeal and enthusiasm towards work,
7. To get the maximum of their capabilities so that they are exploited and utilized maximally.
Therefore, management has to offer the following two categories of incentives to motivate employees:-
1. Monetary incentives- Those incentives which satisfy the subordinates by providing them
rewards in terms of rupees. Money has been recognized as a chief source of satisfying the
needs of people. Money is also helpful to satisfy the social needs by possessing various
material items. Therefore, money not only satisfies psychological needs but also the security
and social needs. Therefore, in many factories, various wage plans and bonus schemes are
introduced to motivate and stimulate the people to work.
2. Non-monetary incentives- Besides the monetary incentives, there are certain non-financial
incentives which can satisfy the ego and self- actualization needs of employees. The incentives
which cannot be measured in terms of money are under the category of “Non- monetary
incentives”. Whenever a manager has to satisfy the psychological needs of the subordinates, he
makes use of non-financial incentives. Non- financial incentives can be of the following types:-
a. Security of service- Job security is an incentive which provides great motivation to
employees. If his job is secured, he will put maximum efforts to achieve the objectives of
the enterprise. This also helps since he is very far off from mental tension and he can
give his best to the enterprise.
b. Praise or recognition- The praise or recognition is another non- financial incentive
which satisfies the ego needs of the employees. Sometimes praise becomes more
effective than any other incentive. The employees will respond more to praise and try to
give the best of their abilities to a concern.
c. Suggestion scheme- The organization should look forward to taking suggestions and
inviting suggestion schemes from the subordinates. This inculcates a spirit of
participation in the employees. This can be done by publishing various articles written by
employees to improve the work environment which can be published in various
magazines of the company. This also is helpful to motivate the employees to feel
important and they can also be in search for innovative methods which can be applied for
better work methods. This ultimately helps in growing a concern and adapting new
methods of operations.

d. Job enrichment- Job enrichment is another non- monetary incentive in which the job of
a worker can be enriched. This can be done by increasing his responsibilities, giving him
an important designation, increasing the content and nature of the work. This way
efficient worker can get challenging jobs in which they can prove their worth. This also
helps in the greatest motivation of the efficient employees.
e. Promotion opportunities- Promotion is an effective tool to increase the spirit to work in
a concern. If the employees are provided opportunities for the advancement and growth,
they feel satisfied and contented and they become more committed to the organization.
The above non- financial tools can be framed effectively by giving due concentration to the role
of employees. A combination of financial and non- financial incentives help together in bringing
motivation and zeal to work in a concern.
Positive Incentives
Positive incentives are those incentives which provide a positive assurance for fulfilling the needs and
wants. Positive incentives generally have an optimistic attitude behind and they are generally given to
satisfy the psychological requirements of employees. For example-promotion, praise, recognition,
perks and allowances, etc. It is positive by nature.
Negative Incentives
Negative incentives are those whose purpose is to correct the mistakes or defaults of employees. The
purpose is to rectify mistakes in order to get effective results. Negative incentive is generally resorted
to when positive incentive does not works and a psychological set back has to be given to employees.
It is negative by nature. For example- demotion, transfer, fines, penalties.
Competence of site management

It is essential for the workers to have confidence in their supervisors. If it is observed poor, unfair , or
currupt , their morale , motivation and consequent productivity will be reduced.
The reasons for decrease in productivity is
1. Inadequate instructions,
2. delay in delivery of material tools , equipments.
3. provision of poor tools, and equipments.
4. unbalanced work gangs ,
5. use of wrong methods
6. bad advanced planning
7. failure to delegate authority from senior to lower – level supervisors
1. Financial incentives
It is widely used in industrial countries. This scheme enables workers to earn more money above the
normal rate of pay for achieving a rate of output at or above a predetermined standard. Different
schemes of payment system are introduced .it depends on type of tasks.

Motivation of worker
Workers are motivated by variety of methods,
1. fear 2. decipline 3. job satisfaction 4. financial incentives.
 Fear ;- if fear in mind loosing job , productivity go down if confident it is a type of incentive after
finishing the job other project is ready for you.
 Discipline;- lack of absenteeism , good standards of work manship and the obesrvance of site
cleanliness, and hygiene.when descipline is lacking , site morale is generally low and
productivity is unsatisfactory
Ways of achieving site descipline as follows
 Site rules must be explained to all workers
 Supervisors must be possesing high descipline
 workers must be encouraged to to feel that they are working with the good
desciplined supervisor .
 Developing self descipline through pride in achievment, good work should always be
praised. Supervisor must be fair no favourism.
 Disciplinary action should be taken eith defaulters
 Job satisfaction ;- it obtained through a sense of achievements as to quality ,output

particularly if that achievment is recognised and acknowledged pride in craft and skill and a
sense of responsibility are to be encouraged, and rewarded with promotion.
 Financial incentives ;- this scheme helps in to earn bonus over and above normal rate of pay
for achieving a rate of output above a pre determind standard.it is not always easy to work out
what this standard performance should be , different schemes are their , as follows.
IMPROVING PAYMENT SYSTEMS

• The method used for paying the workers can have a major effect on productivity and efficiency
at site.
• If an effective payment scheme is introduced, profits can be increased through higher efficiency
and at the same time the workers also earn more.
• There are many different ways of rewarding the workers. Various methods of payment which
reward workers with money, time off or both are:
1) daily wage- Fixed wage/day
2) Piece work- A fixed amount /unit of work done
3) task work- Finish the job and go home when it is ready
4) Bonus schemes- extra reward for efficient work.
DAILY WAGE:
• The advantage of paying each worker a fixed daily rate is that it is easier to administer. The
disadvantage is that there are no extra incentives for the workers to improve their productivity. In
India, however, most workers expect to be paid on daily wage basis.
PIECE WORK:
• The idea of this system is that more the workers produce, the more they earn. Piecework
requires considerable preparation, administration & supervision. The workers are paid according
to the unit of work done such as number of blocks made, cubic metres excavated or square
metres of roofing laid. Piecework can be used for gangs or for individuals.
TASK WORK:
• A lumpsum is fixed for a complete task- for example clearing the site of bushes and trees.
When it is completed, the workers earn their wage and can chose to move to next task and have
the facility of earning more.The incentive is that the faster they get the job done, the sooner
they get paid, either in money or free time.
PERFORMANCE INCENTIVE:
• A bonus is an extra reward for good performance which is added to the existing system of
payment, whether it is a daily wage, piecework or taskwork. A reward should be given when the
result of workers extra effort gives the entrepreneur an advantage in getting the job done in time
and thereby avoiding the need to pay liquidated damages.
ADVANTAGES AND DISADVANTAGES OF INCENTIVES SCHEMES.

Advantages
1. the worker is given an opportunity to earn more than the basic for higher output;
The system encourage self descipline and supervisor can concentrate on quality rather than output;
Disadvantages
In concentrating on higher output ,quality and safety may be neglected;
Difference between good and bad worker is exists in workers and labor problem on site
Benefits of safe working condition building construction site

Prevention of accidents improve overall contract performance
Prevention of accidents can be achieved through following methods.
a. effective communication
b. record keeping.
c. Motivation of work force
Providing safety bonus for the workers
 Use of safety equipments
 Examples of accidents
 Collapse of walls
 Over turning of ladder ,scaffolding
 Welding and cutting operations
 Dangerous gasses
Causes of accidents
 Poor planning or organisation during the execution of work
 Construction defects , use of unsuitable material
 Lack of equipments ,defects in equipments ,lack of safety devices
 Workers behaviour careless, irresponsible act
 Management and conduct of work , inadequate preparation of work,

 FINANCIAL INCENTIVES
 Incentive schemes of this nature are widely used in industrial countries , but are often a source
of contention and dispute between the management & workforce.
 The schemes enable workers to earn bonus over & above the normal rate of pay for achieving a
rate of output at or above a pre-determined standard.
 It is not always easy to determine what this standard performance should be, so that the output
targets set by management on which bonus earnings depend are often inaccurate.
 There are basically to different types of financial incentive schemes . These are described
below:
Bonus targets:
 Targets are set before the work starts usually in the form of :
 (a) Piecework targets i.e payments based on amount of work done
 (b) time targets i.e a target time is set for completing a specific task & if the task is completed in
lesser time, the bonus will be paid for the time saved.
Basis for setting targets:
 (i) Work measurement: This is the best method as targets are more likely to be accurate.
Depending upon the policy, it is usual to offer a bonus over & above the basic wage for a
standard performance of 100
 (ii) The estimate: Where a bill of quantities has been prepared and the labour cost component
of each operation is known, this can be used a basis for target setting.
 (iii) The records of output figures fed back from previous projects are used for both estimating &
setting bonus targets.
PIECEWORK
 Piecework is the payment of fixed price per unit of work done. The price is fixed so that a 75%
of standard performance would entitle a worker to earn equivalent of basic daily wage and an
output equal to 100% of standard performance will enable the worker to earn bonus equal to
133.33% of basic wage
Example: Casual labour is employed to break stones for use as aggregate. Broken stones are
stacked for ease of measurement in standard heaps of 0.5 m high on level ground, the mean
volume of stone being 0.125 cu.m.If the standard performance over 8hr/day is 0.75 cu.m, and the
basic daily wage is Rs100, what is the fair piecework price /heap of stones?
A Standard performace of 100 of 0.75 cu.m, will enable the worker to earn Rs 100 ( daily wage) +
Rs 133.33 ( bonus @ 133.33% of daily wage) = Rs. 233.33
Therefore, for 0.125 cu.m, it will be 0.125/0.75 * 233.33 = Rs. 38.90

Thus the fair piece work rate is Rs 38.90
 The piece work system is particularly applicable to repetitive work or to manufacturing units .
 Piecework rates are also expressed in time units, by giving the worker a target time to complete
a certain task.
Several shallow manholes are to be constructed on the drainage system of construction project. A
brick layer is engaged to raise the brickwork off prepared bases, to form the benching and to set
covers to the required levels. The amount of work & standard times per manhole are:
Work Standard time
Laying 770 bricks @ 70 bricks/hr 11 hrs
Extra time for cutting around pipes 0.1 hrs
Form benching 0.6 hrs
Bed & set cover 0.25 hrs
Total 11.95 hrs say 12 hrs
If a normal rate of 8 hr/day is Rs. 150, & a standard performance is to earn a bonus of 133.33 %, then
the time allowed / manhole is
12* 133.33/100 = 16 hrs i.e this means that if a worker completes his job in standard time of
12 hours , he is entitled for bonus and no bonus if he takes time of more than 12 hrs and less than 16
hrs to complete the work
 If the brick layer‟s efficiency is 75, then each man hole would take 12*100/75 = 16 hrs or 2 days
to complete. Hence, he would receive the same pay as a worker whose efficiency is 100 &
completes the work in 12 hrs.
Guaranteed daily wage bonus plan:
 In most of the countries, a minimum daily wage is in force.
 In construction projects, where motivation is low, and particularly where workers are new to a
job, the performance of labour can be lower than 50% of standard.
 A scheme of paying the bonus only after efficiency of 75% is reached may offer no incentive
to the workforce who may remain content to receive the minimum wage for their very low
performance.
 Therefore, it will be of benefit to pay bonus payments at a lower level of performance so that
all workers can achieve @ at the same time guaranteeing the basic daily wage.
 The table below shows a comparison of the earnings for different performances under
piecework & 50% bonus scheme expressed as a percentage of daily wage:
Performance Earnings as % of 50% bonus

basic daily rate scheme
piecework
50 66 .66 100
75 100 116.66
100 133.33 133.33
125 166.66 150
Ex: The work content of a particular task is 120 standard hours. It is proposed that a 100 performance
shall earn a bonus of 133.33%.

What target times are to be set if the bonus is to be 100% of time saved?
 (a) for 100% of time saved, the target set up should be
 120*133.33/100 = 160 hrs. Thus a standard performance saves (160-120) = 40 hrs . The
workers are paid 100% of this saving so that they receive 160 hrs pay for 120 hrs work.
 (b) For a performance efficiency of 125, the target time would be
 120* 166.66/100= 200 hrs.
hence the standard performance of 120 hrs saves 80 hours & if the workers are paid 50% of this
as bonus, they are entitled to receive (120+40)= 160 hrs pay for 120 hours work.
Bonus payments for various performances( 100 % bonus)
 Performance Time taken Time Bonus Paid Labour cost

in hrs saved Hrs % (hrs)
120 100 60 60 60 160
100 120 40 40 33.3 160
50 160 0 0 0 160
50 240 0 0 0 240
Examples of use of target rates:

 A gang comprising one foreman carpenter, three carpenters and two labourers is engaged in
erecting formwork. The quantities of work done during the week, unit target rates and the hours
worked are given below. The basic wage is Rs.20 / hr and the bonus paid is 50% of time saved.
The bonus is shared in the ratio of 1.5(f) : 1.25 (c) : 1(l). The bonus earning for the week is
calculated below:
 Total target time = 417 hours

 Actual time taken = 256 hrs.
 Total time saved = 161 hrs.
 Total bonus earned = 50% of 161 = 80.5 @ Rs. 20/hr = Rs.170
Worker Hours worked Bonus Bonus earned

Eligible(hrs)
Foreman 44 66 66 /311*170 = Rs34
Carpenter 1 44 55 55/311 *170 = Rs31
Carpenter 2 44 55 = Rs31
Carpenter 3 44 55 = Rs31
Labourer 1 44 44 44/311*170 = Rs 24
Labourer 2 36 36 36/311*170 =Rs 19
Total 256 311 Rs 170

Task work:
 This is another form of incentive , though not as effective as financial incentives.
 The incentives is to finish a task early & go home, but be paid for the full day‟s work
 This task requires pre-measurement, such as completing a specified concrete pour.
 The task is equivalent to 75 performance over 8 working hours/day.
 Thus , if the worker‟s rating is 100, he will finish the task in 8*100/75 = 6 hours thus saving a
time of hrs for himself.
Advantages of financial incentive schemes:

 The worker is given an opportunity to earn more than the basic wage as a reward for higher
input.
 The worker‟s output will be higher, so that the job can be completed in lesser time, with a
more predictable performance & at a lower cost.
 The systems encourage self discipline and quality rather than on output.
 The operation of the scheme will keep the site management on its toes, since the workers
will protest against any delays or mismanagement that will reduce their opportunity to earn
bonus.
Disadvantages:
 If bonus rates are too low, the incentive for hard work may be lost.
 The differences in earnings between good & bad workers or due to inaccurate bonus rates
may give rise to a feeling of ill will and labour problems @ site.
 Bonus systems are complicated to operate and require special staffing & organisational
procedures.
Rules to be observed in operating financial incentive schemes:
 When it is proposed to introduce a bonus system at a site, the project manager should
discuss & agree with the principles & operation of the scheme with the worker‟s
representative.
 The method of payment & the targets for the work set should be understood by the workers
before starting any particular item of work. This system should be simple & easy to operate.
 Dangerous work should not be offered on bonus work basis
 The workers should not be penalised for matters outside their control & where they are
required to work a full normal day, they should never receive less than the daily rate for
normal day‟s work.
 The rates set should be high enough for an average worker who does a good work without
over exertion so as to earn a reasonable bonus above the ordinary daily rate.
 Once a particular item of work has started, the bonus rate should not be changed unless it is
found to be too low to offer any incentive. If the bonus rate requires to be changed, it should
be done in agreement with the workers.
 Any dispute about earnings must be investigated in a fair manner as early as possible.
 Care should be exercised while setting bonus for raw & unskilled workers.

5th Term - Operations Management

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5th Term - Operations Management

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Module-1

PRODUCTION AND OPERATIONS MANAGEMENT

Production management then, is the management of the transformation process. In general it is

a) Specifying and accumulating the input resources required

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 1

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 2

Constituting operations Management

Supplies Transformation Process Distribution

CHARACTERESTICS OF OPERATIONS MANAGEMENT:

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 3

A system has a purposeful means of achieving objectives.

The processes and components that make up the particular system.

Stated formally: e = f (xi, yj)

Xi= constitutes controllable variable

Yj= constitutes un-controllable variable

E.g. xi= in a production system could be

Eg yj= in a production system could be

Figure-3: indicates the various sub-systems of the total production system.

Where s1,s2,s3,s4…..sn are highly inter dependent sub-system.

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 4

Under this the following study are considered:

1) Plant location analysis

Definition: operations research is a quantitative objective approach to the problems of management.

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 5

1) The first characteristics of production today are of specialization: specialization refers to

2) Second characteristic is mechanization: this is transfer of human skills to machine. This is

- Clearly state problem

6) The sixth characteristic of modern manufacturing is the use of operations research

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 6

a) Establish most desirable quantities to purchase material

Limitations of operations research are:

1) Magnitude of calculation discourages it to be used for short run solutions

PRODUCTION SCENARIOS- CHALLENGES OF OPERATIONS MANAGEMENT:

Production management needs to cope with different scenarios:

SCENERIO#1: a new organization is started exclusively to achieve a defined set of objectives:

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 7

Product, Classification, Process , Types Of Production Process,

Product is classified as:

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 8

A) Metallurgical process e.g. Steel making, aluminimum making

Stages in manufacture proceeds step by step.

Step-1 raw material to manufactured part

A) One off production b) batch production c) process production d) process production

Lathe- cutting tool technology has, carbide tool, tool bits

Manual technology to numerical controlled machines.

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 9

Material technology, process technology, cam technology, information technology, conventional

Technology management: acquisition of technology, development of a given technology in- house.

Characteristics of high technology products:

a) Expensive production facilities 5 axis cnc machine

1) The type of production system

1) TYPES OF PRODUCTION SYSTEM

Production systems are classified as follows:

Classification based on volume of production as

a) One – off production system

Classification based on the layout as:

a) Product focused system (continuous)

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 10

b) Batch type production:

All air craft bodies – fabrication process- fab shop

S.R.P* 5TH TERM OPERATION MANAGEMENT Page 11

d) Process production: it his is also known as continuous production. A mix of materials is

2) NATURE OF MANUFACTURING PROCESS:

Manufacturing process is classified as: