Foundation of Modern Operations Management: Production Viewed As A System Customers

Design and Re - design
Receipt and Test of Materials
Consumer Feedback
Distribution
Suppliers of Materials and Equipment
Production
Assembly
Inspection
Tests of Processes , Machines , Methods , Costs
Customers
Production Viewed as a System

I believe this Diagram made the difference in Japan. the greatest way I accomplished anything there was through this diagram W. Edwards Deming
Foundation of Modern Operations Management
A META Group Study

Energy Telecommunication Manufacturing Financial Information Technology Insurance Retail Pharmaceutical 30 crores per hour 20 crores per hour 17.5 crores per hour 15 crores per hour 15 crores per hour 12.5 crores per hour 10 crores per hour 7.5 crores per hour
Evolution of Operations Management Pre Industrial Revolution Era

Agriculture Organising and coordinating groups of people to carry out tasks in the fields Military Operations Regimented organisation of groups of people established to protect a settlement from tyranny or conquer Creation of Professions Essentially artisans who developed and passed on trade secrets within their immediate families Handcrafting products or services for individual customers Guilds Structured group of people involved with the same profession creating their own set of rules
Evolution of Operations Management Industrial Revolution

Harnessing of Steam Energy
The First Steam Engine
James Watt George Stevenson
The First Steam Machine

Division of labour
Ginning Machines by Eli Whitney Economist Adam Smith conceives Division of Labour Eli Whitney invents interchangeability of parts
Interchangeable parts
Evolution of Operations Management Industrial Revolution
Principles of Scientific Management

Fredrick W. Taylor
Time and Motion Studies

Frank and Lillian Gilbreth
Activity Scheduling
Henry Gantt
The Moving Assembly Line

Henry Ford
Evolution of Operations Management

The Focus Work Breakdown Structures One best Way of carrying out Processes Piece Rate System The Outcomes The Meteoric Rise of Financial Accounting Extensive interest in Advertising and Branding The rise of Motivational Theorists Elton Mayo Abraham Maslow Fredrick Herzberg Douglas McGregor
Evolution of Operations Management

The Return of Operations The Quality Revolution in Japan W. Edwards Deming and Joseph M. Juran The Development of the Toyota Production System Eigi Toyoda , Taichi Ohno and Shiego Shingo Modern Trends in Operations Business Process Reengineering Six Sigma
Operations in Todays World

The Internet Revolution E Commerce E Businesses B2B OEMs or First Fit Businesses B2C Franchises C2B Consultation C2C eBay,Portals,etc Globalisation of trade Globalisation of Operations ( Development of the Virtual Organisation )
Definition of Operations Management

Operations Management is the system of Designing , Running and Improving all transformational processes Transformational processes include : Governmental Creating and Running Societal Structures Physical Manufacturing Exchange Retail Operations , Banks Locational Logistics and Transportation
Physiological Healthcare and Hospitality

Psychological Entertainment Informational Communications Educational Structured Knowledge Transfer Production is but the physical transformation of materials to finished product carried out as a planned activity Production Planning involves accumulating demand information and formulating production plans and schedules . These include short range ; medium range and long range plans .
The Need for Operations Management in todays World

In the ever changing Business Scenario in todays fast developing world where we are witnessing Incessant Fragmentation of Markets Highly Informed and Vocal Customers Creation of Disruptive Technologies resulting in Specialised Knowledge Volatile Inter Organisational Relationships
Objectives of Operations Management

Strategy Gaining a Competitive Edge Processes and Systems Alignment of Backend activities Quality Scientific Methods to Create and Deliver Products / Services Improvement A Constant effort to challenge the Status Quo / Obvious
Topic 1 Introduction to Operations Management Topic 2 Facility Location Topic 3 Facility ( Plant ) Layout Topic 4 Production Planning and Control Topic 5 Materials Management Topic 6 Materials Handling Topic 7 Work Study Topic 8 Systematic Maintenance Topic 9 Quality Management Topic 10 Modern Techniques in Operations Management
Regional Location Factors

Business climate Proximity to customers Number of customers Availability of sites Land cost Construction / leasing costs Infrastructure (e.g., roads, water, sewers) Financial services Community incentives Community services Governmental Incentive Government regulations Environmental regulations
Regional Location Factors

Labour (availability, education, cost, and unions) Modes and Quality of transportation Transportation costs Local business regulations Government services (e.g., Chamber of Commerce) Raw material availability Commercial travel Climate Quality of life Taxes Proximity of suppliers Education system
Global Location Factors

Government stability Government regulations Political and economic systems Economic stability and growth Exchange rates Culture Climate Export import regulations Duties and tariffs Raw material availability Number and proximity of suppliers
Global Location Factors

Transportation and distribution system Labour cost and education Available technology Commercial travel Technical expertise Cross-border trade regulations Group trade agreements
Types of Facilities
Heavy-manufacturing facilities
Large, require a lot of space, and are expensive
Light-industry facilities
Smaller ( as compared to Large Industries ), cleaner plants and usually less costly
Retail and service facilities

Smallest and least costly
Location Analysis Techniques

Multiattribute Preference Theory ( Location Rating Factor ) for Local Sites
Is used when choices are available Has no scientific basis just an agreed upon weighted technique
Attribute
Labour Force Proximity to Customers Wage Rates Proximity to Suppliers Environment Modes of Transport Community Support
Weight
0.30 0.20 0.15 0.15 0.10 0.05 0.05

Guidelines for Scores : Labour Force
Highly Skilled Adequately Skilled Semi Skilled Unskilled 75 100 50 75 25 50 0 25

Guidelines for Scores : Proximity to Customers
Within 15 kilometres 75 100
Between 15 to 30 kilometres
Between 30 to 50 kilometres Above 50 kilometres
50 75
25 50 0 25

Guidelines for Scores : Wage Rates
Upto 10 % of total cost 75 100
Between 10 15 % of total cost

Between 15 20 % of total cost Above 20 % of total cost
50 75
25 50 0 25

Guidelines for Scores : Proximity to Suppliers
Within 15 kilometres 75 100
Between 15 to 30 kilometres
Between 30 to 50 kilometres Above 50 kilometres
50 75
25 50 0 25

Guidelines for Scores : Environment
Conducive to Ceaseless Productive Work Conducive to Productive Work over 25 % Conducive to Productive Work for a day Conducive to Productive Work for less than a day 75 100 50 75 25 50 0 25

Guidelines for Scores : Modes of Transport
Access to any two modes of transport at any given moment Access to any one mode of transport at any given moment Need to plan a day in advance for any mode of transport 75 100 50 75 25 50
Need to plan more than a day in advance for 0 25 any mode of transport

Guidelines for Scores : Community Support
Extremely harmonious relationships with communities in close proximity Have Legal relationships with communities in close proximity Have dispassionate relationships with communities in close proximity 75 100 50 75 25 50
Have hostile relationships with communities 0 25 in close proximity
Example A company wanting to relocate its operations has assessed three sites and have tabulated the following results
Attribute Labour Force Proximity to Customers Wage Rates Proximity to Suppliers Environment Modes of Transport Community Support
Site 1 70 80 60 75 65 85 80
Site 2 60 90 95 80 90 90 65
Site 3 90 75 70 80 95 65 90
Which Site qualifies based on the Multiattribute Preference Theory ?
Using Weights ascribed we get
Weight Site 1 0.30 0.20 0.15 0.15 0.10 0.05 0.05 70 80 60 75 65 85 80
Site 2 60 90 95 80 90 90 65
Site 3 90 75 70 80 95 65 90
Weighted Scores Scores : Site 1 72.00 ; Site 2 79.00 ; Site 3 81.75
Site 1 21.00 16.00 9.00 11.25 6.50 4.25 4.00
Site 2 18.00 18.00 14.25 12.00 9.00 4.50 3.25
Site 3 27.00 15.00 10.50 12.00 9.50 3.25 4.50
Site 3 The preferred location
Typical Attributes that an MNC looks for in a Global Operations Site

Attribute Political Stability Economic Growth Port Facilities Airline Support Weight 0.25 0.20 0.13 0.10 0.08 0.08 0.07 0.05 0.02 0.02
Trade Regulations Duties and Tariffs Container Support

Transportation / Distribution Area Roads Land and Construction Cost
Centre of Gravity Technique

Normally used in computing location of sites for Warehouses / Distribution Centres
Current Location is set as ( 0 , 0 ) on a Cartesian Plane

Average Annual Despatch Loads to different sites are indicated in parenthesis
Distribution Site co-ordinates are computed accordingly

A Pictorial Representation in the form of a Graph is drawn
y2
2 (x2, y2), W2
y1
1 (x1, y1), W1
y3
3 (x3, y3), W3
Current Site of Operations
x1
x2
x3
Co-ordinates of New Location ( x , y ) are computed thus (x1)(W1) + (x2)(W2) + (x3)(W3) W1 + W2 + W3
x=
y=
(y1)(W1) + (y2)(W2) + (y3)(W3) W1 + W2 + W3
Example
y
700
C
600 500 400 300 200 100 0
x y Wt (130)
A 200 200 70
B 100 500 100
C 250 600 130
D 500 300 60
Kilometres
(100) D A (70)
(60)
100
200
300
400
500
600
700
Kilometres
Co-ordinates of New Location ( x , y ) are computed thus

(200)(70) + (100)(100) + (250)(130) + (500)(60)
x=
70 + 100 + 130+ 60
240
(200)(70) + (500)(100) + (600)(130) + (300)(60)
y=
70 + 100 + 130+ 60
444
Location of the Warehouse

y
700
C
600 500 400 300 200 100 0
(130)
B (100)
Kilometres
( 240 , 444 )
D (60)
(70)
100
200
300
400
500
600
700
Kilometres
Load Distance Technique

Variation of the Centre of Gravity Technique
Used when Options available for Sites Use of the Straight Line concept ( Based on Geometric Distance Formula )
LD =
LD = li di = = load-distance value
i=1
ld
i
load expressed as a weight being despatched distance between proposed site and location i (x,y) = coordinates of proposed site (xi , yi) = coordinates of existing facility
di = (xi - x)2 + (yi - y)2
Suppliers
A x 200 y 200 Wt 70 B 100 500 100 C 250 600 130 D 500 300 60
Potential Sites Site X Y 1 360 180 2 420 450 3 250 400
x y Wt
A 200 200 70
B 100 500 100
C 250 600 130
D 500 300 60
Potential Sites Site X Y 1 360 180 2 420 450 3 250 400 dC = = (xC - x1)2 + (yC - y1)2 (250-360)2 + (600-180)2
Computing distances for Site 1 dA = = (xA x1)2 + (yA + y1)2
(200-360)2
(200-180)2
= 161.2 dB = (xB - x1)2 + (yB - y1)2 dD =
= 434.16 (xD - x1)2 + (yD - y1)2
(100-360)2 + (500-180)2
(500-360)2 + (300-180)2
= 412.3 = 120019.2
= 184.31
Load Distance = (70)*(161.2)+(100)*(412.3)+(130)*(434.16)+(60)*(184.31)
x y Wt
A 200 200 70
B 100 500 100
C 250 600 130
D 500 300 60
Potential Sites Site X Y 1 360 180 2 420 450 3 250 400 dC = = (xC x2)2 + (yC y2)2 (250-420)2 + (600-450)2
Computing for Site 2 dA = = (xA x2)2 + (yA + y2)2
(200-420)2
(200-450)2
= 333.02 dB = (xB x2)2 + (yB y2)2 dD =
= 226.71 (xD x2)2 + (yD y2)2
(100-420)2 + (500-450)2
(500-420)2 + (300-450)2
= 323.88 = 97036.8
= 170
Load Distance = (70)*(333.02)+(100)*(323.88)+(130)*(226.71)+(60)*(170)
x y Wt
A 200 200 70
B 100 500 100
C 250 600 130
D 500 300 60
Potential Sites Site X Y 1 360 180 2 420 450 3 250 400 dC = = (xC x3)2 + (yC y3)2 (250-250)2 + (600-400)2
Computing for Site 3 dA = = (xA x3)2 + (yA + y3)2
(200-250)2
(200-400)2
= 206.19 dB = (xB x3)2 + (yB y3)2 dD =
= 200 (xD x3)2 + (yD y3)2
(100-250)2 + (500-400)2
(500-250)2 + (300-400)2
= 180.27 = 74614.8
= 269.25
Load Distance = (70)*(206.19)+(100)*(180.27)+(130)*(200)+(60)*(269.25)
Facility Layouts
Definition of Facility Layout
Planned arrangement of areas within a facility commensurate with the product to be realised or service to be delivered
Objectives of Facility Layout

Optimise material-handling ( transaction ) costs Utilise space efficiently Utilise manpower efficiently Work around bottlenecks Facilitate interaction Reduce cycle time Reduce customer turnaround time Eliminate redundant movement Increase capacity Provide for entries, exits, placement of material ( in all stages of realisation ), finished goods, and people
Facility Layouts
Objectives of Facility Layout ( continued ) Incorporate safety and security measures Promote product and service Quality Facilitate proper maintenance activities Provide for visual control Provide for flexibility to adapt to changing conditions
Different Organisational Layouts

Departmental Layout Material Flow Layout Equipment Layout Transportation and Handling Layout Utilities Layout Communication Channel Layout
Basic Types of Layouts

Fixed-position layouts are used where product cannot be moved Process layouts group similar activities together according to process or function they perform Product layouts arrange activities in line according to sequence of operations for a particular product or service
Modern Approach toward Creating Layouts More inclined towards Mass Customisation Traditional Type of Layout Suitable for Mass Production Used for Large Products and Projects Usually one-of-a-kind products or projects
Fixed-position layouts
Typically manufacture of Construction Projects , Rocket Launchers , Space Shuttles , Aircrafts , Ships , Events Equipment, workers, materials, other resources brought to site Highly skilled labour
Process Layout - Bookstore

Video CDs , DVDs
Cassettes
Audio CDs , DVDs
Cookbooks
Billing and Information
Technical and Management Section
Childrens Books
Entry and display area
Coffee Shop
Process Layout - Manufacture

Lathe Section Milling Section Drilling Section
L L L L L
L L L L L
M
G G
M
G G G G
D
P P
Grinding and Finishing Receiving and Shipping
Painting Department
A
Assembly
Product A
Product B
Product Layout - Manufacture
In
Product A
Out
In
Product B
Out
In
Product C
Out
Comparisons between Product and Process Layouts
Product Layout Sequential arrangement of Activities Intermittent work Adaptable Machinery Workers are extensively crosstrained Occupy smaller areas Highly flexible lines Lesser travel time
Process Layout Functional Grouping of Activities Continuous work General Purpose Machinery Workers are trained in a particular process Occupy larger areas Largely Rigid More travel time
Designing Layouts
Relationship Diagramming
based on location preference between areas used when quantitative data is not available Schematic diagram that uses weighted lines to denote location preference
Use of a grid called Muthers grid
Muthers Grid
Different Sections / Areas in an organisation
Extent of their Interactions / Relationships
Production
O U
A Absolutely necessary E Especially important I Important O Okay U Unimportant X Undesirable
Offices
Stockroom
A
O U O
I E X O U A
A
Shipping and receiving
U
Locker room Toolroom
Original layout
Offices
Locker room
Stockroom
Toolroom
Production
A E I O U X
Relationship diagram of original layout
Offices
Locker room
Stockroom
Toolroom
Production
A E I O U X
Production 2 Absolutely Necessary transactions ; 1 Especially Important transaction ; 1 Important transaction ; 1 Okay transaction
Therefore Production needs to be centrally located with the other departments around it .
Solution 1
Stockroom
A E I O U X
Offices
Toolroom
Production
Locker room
Solution 2
Stockroom
A E I O U X
Offices
Locker room
Production
Toolroom
Block Diagramming
Purpose is to minimise nonadjacent loads Used when quantitative data is available Steps : Create load summary chart Calculate composite (two way) movements Develop trial layouts minimising number of nonadjacent loads
Load Summary Chart

To
1
1
From
2
100 100
3
50 200 -
4
50 40 -
5
50 60
60 -
2 3 4
50
Composite Movements
Movement 23 24 13 12 45 35 25 34 14 15 Total Load 200 150 110 100 60 50 50 40 0 0
Arranged in a 2x3 Grid
110
100
200
50
60
40
Blocks Rearranged with Non-adjacent loads cancelled out
100
150
200
50
60
Cellular Layouts
1. Identify outputs with similar flow paths 2. Group processes into cells based on output 3. Arrange cells so transactions are minimised 4. Locate shared processes at point of use
Original Machine Layout
5
2 1 3 10
12
11
Original Process Layout

Outputs
5
2 1 3 10
12
11
Inputs
Determine Flow Logic A : 1 2 4 8 10 B : 5 7 11 12 C:369 D : 1 2 4 8 10 E : 5 6 12 F:148 G : 3 6 9 12 H : 7 11 12
Part Routing Matrix

Outputs
A B C D E F G H
1 X
2 X
4 X
X X X X
X
X
Workstations 5 6 7 8 9 X X X X X X X X X X X X
10 11 12 X X X X X X X
Create Binary Algorithm

The procedure works like this :
Assign a value to each column k , where the value is 2N-k N = total number of workstations ; k = chronological workstation number For each row obtain a sum by adding the 2N-k values Rearrange the rows in the decreasing order of the sums obtained Assign a value to each row k where the value is 2M-k M = total number of products ; k = chronological ( rearranged ) sequence number of the product For each column obtain a sum by adding the values Rearrange the columns in decreasing order of the sums obtained
1 A B C D E F G H
2048
2
1024
4
256
Workstations 5 6 7 8 9 10 11 12
16 128 32 64 8 16 128 64 16 64 32 8 2 1 1 4 1 4 2 1 3348 163 584 3348 193 2320 585 35
512 2048 1024 256
2048 512
256
1 A D F G C E B H
2048 2048 2048
2
1024 1024
4
256 256 256
Workstations 5 6 7 8 9 10 11 12
16 16 16 64 64 128 128 64 32 32 2 2 8 8 1 1 1 1 4 4 3348 3348 2320 585 584 193 163 35
512 512
2
x x
4
x x x
Workstations 5 6 7 8 9 10 11 12
x x x x x x x x x x x x x 128 64 32 16 8 4
A D F G C E B H
x x x
x x
x
x
x
x 224 24 192 3
x
x 23
2
1
224
192
24
224
28
Group and Rearrange within the group in descending order
1 A D F G C E B H
224 x x x
4
x x x
8
x x x
2
x x
Workstations 10 6 9 3 12 5 7 11
x x 128 64 32 x x x x x x x x x x x x x x 6 3 x x 3 x 16 8 4 2 1
224
224
192
192
28
24
24
23
Grouping we get
A : 1 2 4 8 10 D : 1 2 4 8 10 F:148 C:369 G : 3 6 9 12 B : 5 7 11 12 E : 5 6 12 H : 7 11 12
Revised Layout
Outputs
10
12
11 4
Cell 1
Cell 2
Cell 3
7
1 A
3 B C
Inputs
Flow Logic A:568 B:5689 C:2457 D:13 E:56 F:134 G:4568-9 H:247
Workstations 3 4 5 6
X X X X
8
X X
9
X
A B C D E F G H
X X X
X X X X X X
16
16
8
2
2
9
26
1 27 180 320
A B C D E F G H
8
8 4
128 256 64
32
16
16 256 64 32 32 128 32 16
24 352
8 4
59 164
3
64
64
32
9
352
320
F D C H G B A E
256
256 128 128
32 32 32
16
4 4
180 164 2 2 2 1 1 59 27 26 24
16 16 16 16
8 8 8 8
1 F D C H G B A E
X X
3
X X
X
9
128 64
X X
X X X
X X
32 16 X X X X X 8 4 2 1
X X X X
X X X X
1 F D C H G B A E
X X
3
X X
X
9
128 64
X X
X X X
X X
32 16 X X X X X 8 4 2 1
X X X X
X X X X 15 48
192
48
192
184
47
14
12
1 F D C H G B A E
X X
3
X X
4
X
9
128 64
X X X
X X
X X
32 16
X X X X
X X X X 15
X X X
X X
8 4 2 1
192
192
184
48
48
47
14
12
Direction of part movement within cell HM VM
Paths of three workers moving within cell

Material movement S = Saw L = Lathe HM = Horizontal milling machine VM = Vertical milling machine G = Grinder
Worker 3
VM
Worker 2
L
Final inspection
Worker 1
Finished part
In
Out
Line Balancing
Cycle Time
The Maximum amount of time a product spends at a workstation

Flow Time The Total Time required to complete the production of an item
T=4 Piece 1 T=8 Piece2
T=9 Piece 1 T = 14 Piece2
T = 13 Piece 1 T = 18 Piece2
1
4 minutes
2
5 minutes
3
4 minutes
Flow Time = 13 minutes Cycle Time = 5 minutes
Desired Cycle Time

Cd = production time available desired units of output (8 hours x 60 minutes / hour) (120 units) 480 Cd = = 4 minutes 120
Cd =
Number of Workstations
ti = ( t1 + t2 + t3 + t4 + . )
Cd
ti= completion time for element i Cd = desired cycle time
Efficiency
E =
ti = ( t1 + t2 + t3 + t4 + . )
n*Ca
ti = completion time for element i n = actual number of workstations Ca = actual cycle time
Line Balancing Process

1. Draw and label a precedence diagram. 2. Calculate the desired cycle time required for the line. 3. Calculate the theoretical minimum number of workstations. 4. Group elements into workstations, recognising cycle time and precedence constraints. 5. Calculate the efficiency of the line. 6. Stop if theoretical minimum number of workstations on an acceptable efficiency level is reached. If not, go back to step 4.
Steps in the Process A B C D Press out sheet of dough Cut into strips Outline different shapes Bake and package
Precedence Chart
Steps in the Process Press out sheet of dough Cut into strips Precedence A
Outline different shapes

Bake and package
A
B,C
Precedence Diagram
B
0.2
0.1 0.4 C
0.3
Desired Cycle Time

Cd = production time available desired units of output (48 hours x 60 minutes / hour) (7200 units) 2880 Cd = = 0.4 minutes 7200
Cd =
Number of Workstations
N =
ti = ( t1 + t2 + t3 + t4 + . )
Cd
( 0.1 + 0.2 + 0.4 + 0.3 )
0.4
~
3
= 2.5
Cycle Time = 0.4 minutes

B
0.2
0.1 0.4 C
0.3
Wk Stn 1
Wk Stn 2
Wk Stn 3
A,B
0.3 minute
C
0.4 minute
D
0.3 minute
Assembly Line Diagram
Efficiency
E =
ti = ( t1 + t2 + t3 + t4 + . )
n*Ca
( 0.1 + 0.2 + 0.3 + 0.4 )
= =
3*0.4 83.33 %
Service Layouts
Usually process layouts respond to customer needs Minimise flow of customers or transactions Retailing tries to maximise customer exposure to products Layouts must be aesthetically pleasing
Types of Layouts for Service Organisations
Freeflow Layout
Grid Layout
Spine Layout
Loopy Layout
Production Planning and Control Introduction

Coordination of materials function with suppliers Efficient utilisation of people and machines Efficient flow of materials within the organisation
The Seepok Model

Production
Inputs
Suppliers
Outputs Customers
Decision Support
PPC system does not make decisions but provides support for decision making Managers make decisions
Software for Decision Support

Software not only to support decision makers but also make some of the decisions
Expert Systems Neural Networks Algorithms Evolutionary Programming Genetic Programming Tabu Search Simulated Annealing
Activities
Materials Planning Purchasing Raw Material Inventory Control Capacity Planning Scheduling Machine and People Work-in-Process (WIP) Inventory Control Coordinate Customer Orders Finished Goods Inventory Control
Ill-effects of a lack of PPC

poor customer service excessive inventories low equipment and people utilisation high rate of part obsolescence large number of expediters
Specifications
Work Study
Inventory Management
Production Planning and Control
Routing
Scheduling
Loading
Despatching
Expediting
Production Plan
Hierarchical Planning
1. Overall Planning 2. Detailed Materials and Capacity Planning 3. Execution of Plans 4. Facilitating Feedback and Corrective / Preventive Action
Routing
Determine the Processes to be followed Determine the Sequence of the Processes Determine the Flow of Materials / Activities
Loading
Determine the Number of Workstations Determine their operational characteristics ( speeds , capabilities ) Selection of Workstations Creating a Contingency Plan
Scheduling
Determining the exact time at which the Operations will materialise Timing the arrival of material ( finished / semi-finished part at different workstations ) Usually done on a Gantt Chart
Despatching
Creating Work Orders Creating Shop Travelers Issuing Authorisations
Expediting
Creating Routine Reports Creating Check Points Follow up
Production Planning and Control General Framework

Resources Planning Demand Management
Rough-Cut Capacity Planning
Master Production Scheduling
Detailed Capacity Planning
Detailed Material Planning
Material and Capacity Plans
Work Order
Purchase Order
Demand Management
Forecasting Order Processing Order Acceptance Order Confirmation
Resource Planning
Long-Range Capacity Requirements Number of Plants Number of Workstations Number of Employees Shifts Overtime
Production Planning
Plans for Product Families Master Planning Schedule ( MPS ) Anatomy of a Plan
Annual Plan
Quarterly Plan Monthly Plan
Fortnightly Plan
Fixed
Could be subject to minor changes
Rough-Cut Capacity Planning Capacity Requirement Planning for Master Production Scheduling Open Orders Planned Orders Resource Profiles
Detailed Materials Planning Materials Requirements Planning Inputs : Master Production Schedule (MPS) Bill of Materials (BOM) Inventory Status Leadtime (LT)
Bill of Material (BOM)

Shows the constituent components and how many of those are required to build the composite part
Product Structures and Parts

Finished Product
Manufactured Part
Sub Assembly
Purchased Parts
Single Level Bill of Material

2 units of component X are used to make 1 unit of item A Level 0 Level 1 Parent Component
A X
X2
Indented Bill of Material ( BOM ) for A is
Level Part ( nos ) 0 A(1)

1 X(2)

2 units of component X and 1 component of Y are used to make 1 unit of item B
Level 0
Level 1 Level 1
Parent
Component Component
B X Y
X2 X1
Indented Bill of Material ( BOM ) for B is
Level Part ( nos ) 0 B(1)
1
1
X(2)
Y(1)

Level 0 Level 1 Parent Component
C A
X2
Level 1
Component
X3
2 units of component A and 3 components of B are used to make 1 unit of item C Indented Bill of Material ( BOM ) for C is
Level Part ( nos ) 0 C(1)
1
1
A(2)
B(3)
Multi Level Bill of Material
Level 0
Parent
Level 1
2xA
3xB
Level 2
2xX
2xX
1xY
Summary Bill of Material

Level Part Cumulative
0 1 2 1 2 2
C A X B X Y
1 2 4 3 6 3
Summary BOM for C

X Y 10 3
Create a BOM for a Two layered McDonalds Maharaja Mac
Sesame Seed Top bun
Bottom Bun Sub Assembly Bottom Bun Patty Sauce Lettuce
Middle Bun Sub Assembly Cheese Patty Onions
Middle Bun
Inventory Status
On Hand (OH) Quantity What is physically available in the warehouse On Order or Scheduled Receipt (SR) What has been ordered but not received ( transitory ) Allocated Inventory (AI) What is in the warehouse but reserved for existing orders (i.e., not available to be used for incoming orders)
Leadtime
Time between placing an order and receiving the parts Parts could be Purchased Dependant on Vendor Manufactured or assembled in house Dependant on Process / Manufacturing Personnel
Leadtime Offsetting
1. Front Schedule Approach Schedule as early as possible Advantage: Minimise risk of shortage Disadvantage: Higher Inventory Levels 2. Back Schedule Approach Schedule as late as possible Advantage: Minimise Inventory Disadvantage: Higher Risk of Shortage
Important Terms / Conventions used in MRP

Gross Requirements Derived from the MPS of the Parent Part Scheduled Receipts On Order or Scheduled to be received On Hand Physical Available Inventory Allocated Inventory Inventory scheduled to be used Nett Requirements Actual Quantities Required Planned Order Receipts Offset time when Materials are needed Planned Order Releases Offset Time when materials need to be ordered ( function of lead time )
MRP Matrix
Heading Gross Requirements
Week Number
1 85 2 95 3 4 5 120 100 100
Scheduled Receipts On Hand Allocated Inventory

Nett Requirements Planned Order Receipts Planned Order Releases
175 45 20
MRP Matrix
Week Number
1 85 2 95 3 4 5 120 100 100

175 45 115 20
0
MRP Matrix
Week Number
1 85 2 95 3 4 5 120 100 100

175 45 115 20
0 0
20
MRP Matrix
Week Number
1 85 2 95 3 4 5 120 100 100

175 45 115 20
0 0 100 100 100
20
MRP Matrix
Week Number
1 85 2 95 3 4 5 120 100 100

175 45 115 20
0 0 100 100 100 100 100 100
20
MRP Matrix
Week Number
1 85 2 95 3 4 5 120 100 100

175 45 115 20
0 0 100 100 100 100 100 100 100 100 100
20
Detailed Capacity Planning Capacity Requirements Planning
Creates a load profile Identifies under-loads and overloads Inputs

Planned order releases Routing file Open orders file
Routing File
Inputs Flow Time Cycle Time Number of Workstations Capabilities of Work Stations
Scheduling Last stage of planning before production occurs Specifies when labour, equipment, facilities are needed to produce a product or provide a service
Objectives in Scheduling
Meet customer due dates Minimise response time Minimise completion time Minimise time in the system Minimise overtime Minimise work-in-process inventory
Shop Floor Control
Loading
Check availability of material, machines and labour
Sequencing
Release work orders to shop and issue despatch lists for individual machines Maintain progress reports on each job until it is complete
Monitoring
Loading
Process of assigning work to limited resources Perform work on most efficient resources
Assignment Method
1. Perform row reductions subtract minimum value in each row from all other row values 2. Perform column reductions subtract minimum value in each column from all other column values 3. Cross out all zeros in matrix use minimum number of horizontal and vertical lines to cover all the 0s 4. If number of lines equals number of rows in matrix then optimum solution has been found. Make assignments where zeros appear 5. Else modify matrix subtract minimum uncrossed value from all uncrossed values add it to all cells where two lines intersect other values in matrix remain unchanged 6. Repeat steps 3 through 5 until optimum solution is reached
Example
Time taken for completing task 1 Duryodhan Dushyasan Jarasandha Jayadratha 10 6 7 9 2 5 2 6 5 3 6 4 5 4 4 10 6 6 10
Name
Step 1 Row Reduction

Name
Step 2 Column Reduction

Name
Step 3 Cover all 0s

Name Duryodhan Dushyasan Time taken for completing task
1
3 2
2
0 0
3
1 2
4
4 3
Jarasandha
Jayadratha
0
3
1
1
0
0
0
5
Number of Lines = 3 ; Number of Rows = 4 Modify Matrix
Step 4 Modify the Matrix

Name
Duryodhan Time taken for completing task 1 3 2 0 3 1 4 4
Dushyasan
Jarasandha Jayadratha
2
0 3
0
1 1
2
0 0
3
0 5
Take the lowest value in the uncovered cells ( in this case = 2 ) and reduce the column to which it belongs Add this value to the values of the intersecting cells as shown
Step 5 Select the tasks

Name Duryodhan Dushyasan Time taken for completing task
1
1 0
2
0 0
3
1 2
4
4 3
Jarasandha
Jayadratha
0
1
3
1
2
0
0
5
Example
Name
Example
Time taken for completing task 1 Gauravi Vidheya Antara Amala 20 40 30 60 2 90 45 70 45 3 40 50 35 70 4 10 35 25 40
Name
Step 1 Row Reduction

Name
Step 2 Column Reduction

Name
Step 3 Cover all 0s

Name
Number of lines = Number of Rows
Step 4 Assign Jobs

Name
Step 4 Assign Jobs

Name
Sequencing
Prioritise jobs assigned to a resource Standardised Sequencing Rules
Sequencing Rules
FCFS - first-come, first-served LCFS - last come, first served DDATE - earliest due date CUSTPR - highest customer priority SETUP - similar required setups SLACK - smallest slack CR - critical ratio SPT - shortest processing time LPT - longest processing time
Sequencing Jobs Through Two Serial Processes

Johnsons Rule 1. List time required to process each job at each machine. Set up a one-dimensional matrix to represent desired sequence with number of slots equal to number of jobs. 2. Select smallest processing time at either machine. If that time is on machine 1, put the job as near to beginning of sequence as possible. 3. If smallest time occurs on machine 2, put the job as near to the end of the sequence as possible. 4. Remove job from list. 5. Repeat steps 2-4 until all slots in matrix are filled and all jobs are sequenced.
Johnsons Rule
Example
Machines
Jobs
A B C D E F
M1
M2
4
6
8
3
3
7
6
2
7
8
5
4
Sequence
35 34 33 32 31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 A C F Machine 1 C 1 Machine 2 A E F B E B D D
5
4 3 2
Example
Jobs A B 12 2 C 8 4 D 15 1 E 16 5
Machines
Machine 1 10 Machine 2 3
Machine 3
6
7
4
12
7
8
3
10
Machine 4 14
Example
Machines Jobs A B 12 C 8 D 15 E 16
Machine 1 10
Machine 2
Machine 3
3
5
2
6 7 E
4
4 12 D
1
7 8 B
5
3 10
Machine 4 14 C A
Sequence Machine 1 Machine 2 Machine 3 Machine 4

IN C 0 OUT 8 IN 8 OUT IN 12 12 OUT 16 IN 16 OUT 28
IDLE TIME
M1 M2 8 M3 12 M4 16
A
E D B
8
18 34 49
18
34 49 61
18
34 49 61
21
39 50 63
21
39 50 63
26
42 57 69
28
42 57 69
42
52 65 76
6
13 10 11
5
13 8 6 44
5 4 25
NIL 48
Example
Machines Machine 1 Jobs A 4 B 3 C 1 D 3
Machine 2
Machine 3 Machine 4
3
7 8
7
2 5
2
4 7
4
3 2
Add the time taken on Machines 1 and 2 to create a new Machine Compute similarly for Machines 3 and 4
Example
Machines Machine 1 Jobs A 7 B 10 C 3 D 7
Machine 2 15
11
Sequence Machine 1 Machine 2 Machine 3 Machine 4 IN C 0 OUT 1 IN 1 OUT IN 3 3 OUT 7 IN 7 OUT 14
IDLE TIME M1 M2 1 M3 3 M4 7
A B D
1 5 8
5 8 11
5 8 15
8 15 19
8 15 19
15 17 22
15 23 28
23 28 30
NIL
2 3
1 2
6
1 8
Material Procurement
Objective of the Purchasing Function
To provide materials of the right Quality , in the right quantity , at the right time , at the right price from the right source thus enabling the organisation to meet customer requirements
Ten Principles from the Vendee Vendor Relationship from the standpoint of Quality Control
Purpose Both Purchaser and Supplier should sincerely practice the following ten principles while fostering a spirit of mutual trust , cooperation and tolerance and inculcate a sense of social responsibility 1. Purchaser and Supplier are responsible for understanding each others Quality Control Systems and working together to implement Quality Control ( 1957 ) 1. Purchaser and Supplier are jointly responsible for understanding each others Organisational Systems and working together to create value for the end user ( 2000 ) 2. Purchaser and Supplier should preserve their individual autonomy while respecting each others independence ( 1957 ) 2. Purchaser and Supplier must be interdependent i.e. must depend on each other while preserving their independence ( 2000 ) 3. The Purchaser is responsible for presenting his requirements to the supplier in such a way that the Supplier clearly understands what he should manufacture ( 1957 ) 3. The Purchaser and Supplier must talk in the same language so that there is no ambiguity in understanding and realising requirements ( 2000 )
4. Before starting any business transactions , purchaser and supplier should draw up and sign proper contracts covering matters such as Quality , Quantity , Price , Delivery Deadlines and Payment conditions ( 1957 ) 4. Before starting any Business Transactions , the purchaser and supplier must document requirements for Quality , Quantity , Price , Delivery , and Payment terms . There must also be a quest for continual improvement ( 2000 ) 5. The Supplier is responsible for guaranteeing that the materials supplied are of a Quality that will satisfy the purchaser during use . He is also responsible for providing the objective data needed to confirm this , as required ( 1957 ) 5. The Supplier must look beyond merely conforming to purchaser specifications . This could involve studying the end use of the component in the purchasers system and providing relevant evidence of performance where possible ( 2000 ) 6. When the purchasing contract is drawn up , purchaser and supplier should decide on evaluation methods satisfactory to both parties ( 1957 ) 6. Periodic checks ( pre determined audits ) on the Suppliers Systems by the Purchaser need to be carried out in accordance with standards or mutually agreed and documented procedures ( 2000 )
7. When preparing the contract , purchaser and supplier should decide on methods and procedures for the amicable settlement of disputes ( 1957 ) 7. An empathetic approach toward settling disputes between the purchaser and supplier must be encouraged should any such occasion arise ( 2000 ) 8. Purchaser and Supplier should give due consideration to each others standpoints and exchange the information needed by each party for Quality Control ( 1957 ) 8. Improvement and Innovation of the Product and/or Process at the Suppliers end must be encouraged through continual exchange of information , knowledge and training between the purchaser and supplier ( 2000 ) 9. To ensure a trouble-free relationship , both purchaser and supplier should , at all times , properly manage business activities such as ordering , production , inventory planning , administration and organisation ( 1957 ) 9. A seamless integration of business processes (through the use of technology at both ends wherever possible) must be encouraged at all times ( 2000 ) 10. In all business transactions , both the supplier and purchaser should always take full account of the final consumers interest ( 1957 ) ( 2000 )
Classification - Priorities
Purpose of Classification Addressing Customer Requirements
Conventions used Critical Affects the Customer in a drastic manner
Major Causes irritation to the Customer

Minor Affects the performance of the product but does not cause concern
Incidental Could be a source of minor concern over a long period of time
Purpose of Classification Addressing Cost Initiatives
Conventions used Critical Could significantly impact the overall budget concerns of the organisation or customer Major Could impact the functional budget concerns of the organisation or supplier Minor Could cause a change which can be absorbed by the organisation or supplier Incidental Could cause a very minor change that is of not much concern to either the customer or supplier
Purpose of Classification Addressing Delivery Issues ( Lead Time )
Conventions used Critical Is a process or transportation issue spanning months
Major Is a process or transportation issue spanning fortnights

Minor Is a process or transportation issue spanning weeks / days
Incidental Is a process or transportation issue spanning days / hours
Purpose of Classification Addressing Storage Issues ( Bulk )
Conventions used Critical Occupies large amount of space or requires special handling Major Requires significant amount of space and no special handling Minor Does not occupy much space nor handling Incidental Can be stored anywhere
Purpose of Classification Addressing Storage Issues ( Shelf Life )
Conventions used Critical Have limited shelf life and require special storage
Major Have limited shelf life but no special storage required

Minor Have shelf life but can be restored partially and reused Incidental Dont have shelf life
Three Levels of Supplier Approval

Product Approval Sample / Prototype Approval Pilot Batch Continual Audits and feedback Stage Stage Stage Stage 1 2 3 4 : : : : 100 % Inspection LTPD ( Lot Tolerance Percentage Defective ) AQL ( Acceptable Quality Levels ) Parts Per Million ( ppm )

Process Approval Set up Approval Pilot Run Continual Audits and feedback Stage Stage Stage Stage 1 2 3 4 : : : : Process Control Process Capability Error Proofing Parts Per Million ( ppm )

System Approval
Level 0 - No System followed Level 1 - System followed but not documented Level 2 - System followed but not entirely documented Level 3 - System Documented but not all records in place Level 4 - System documented and thoroughly followed ( all records in place ) Level 5 - System Certified Level 6 System continually growing and improving with time
Level 0
No System Followed Not much elaboration is needed about this level of competence . This is a level of incompetence rather than competence .
Suppliers at this level should work towards performing at the next level - though this does not stop the Suppliers from aiming at any of the higher levels .
Level 1
System followed but not Documented
At this level of competence , observations normally indicate that all personnel in the organisation perform operations through experience and word of mouth . There do not exist any kind of documentation or records that provide evidence of following the system . Even if records do exist , these are largely to do with the finance or despatch functions only . The aim should be to begin documentation of all the processes in the organisation beginning with the manufacturing processes
Level 2
System followed but not entirely Documented At this level of competence , only the visible and tangible processes are documented All the manufacturing processes are documented indicating among other important features :
Control Plans indicating in detail the critical characteristics that are to be controlled during operations . Check Sheets based on the Control Plans Reports based on the Check Sheets Analysis and feedback of reports and records
The aim at this level is to create a discipline of generic process analysis and to move from a basic meeting requirements paradigm toward a designing something of value paradigm of management
Level 3
Quality System Documented but not all records in place At this level of competence , when the organisation has begun altering their products to meet and exceed customer requirements , they also begin improving the effectiveness of all their processes as well The aim of the organisation should now be to extend the documentation of all processes in the organisation using the lessons learned from documentation of the manufacturing processes . This means that initially all the processes can be documented but resulting records should also be analysed and improvements resulted accordingly . The aim now becomes to improve Business Processes of the organisation
Level 4
Quality System Documented and thoroughly followed
At this level of competence , all the organisational functions are documented , maintained and controlled akin to the Manufacturing Processes . These include Marketing , Personnel , Finance , Purchasing , Manufacturing , Tool Engineering , Stores , Packaging , Quality Control , Quality Assurance , Research and Development and Despatch . The aim of the organisation should now be to upgrade its Systems to meet the ISO 9001 or any other equivalent system certification standard as required .
Level 5
At this level of competence , the System has been certified to the ISO 9001 Model for Quality Assurance . This indicates that all Systems are in place , audited and are being thoroughly followed . The aim for Suppliers at this level of competence should be to continuously improve their systems to adapt to the latest changes in Technology , Business , Statutory and Regulatory Requirements , Environmental Regulations and Socio Economical Structure .
System Certified
Tools such as Quality Function Deployment , Product / System Reliability , Design of Experiments , ppm ( parts per million ) should be used .
Level 6
System continually growing and Improving with time At this level of competence , the System is said to be in a mature state . The aim of the organisation should be to sustain current level of systems and to simultaneously improve systems .
Total Cost of Ownership

Pre-acquisition Pre-procurement Cost
Cost of Design / Engineering
Cost of Supplier Survey Cost of Supplier Audit / Site Visits Cost of Product testing / Technical Review Cost of Regulatory Compliance Cost of Market Assessment Cost of Customer Review / Briefings

Acquisition Equipment Cost
Price of Equipment
Special Features Shipping / Handling / Storage Spares Leased Items Applicable Taxes

Acquisition New Technology Costs
Modification / Retrofit Costs
Training Costs

Acquisition Foreign Acquisition Costs
Foreign Surtax
Import Duties Currency Conversion Risk Factors Country Specific Regulatory Taxes

Ownership Operating Costs
Administration / Overhead Costs
Ongoing Labour Costs Testing / Verification Costs Ongoing Training Costs Energy Costs Maintenance Costs ( Breakdown / Preventative / Predictive )

Ownership Inventory Costs
Personnel Costs
Inventory Carrying Costs

Ownership Failure Costs
Downtime Costs
Replacement ( Spares ) Costs

Ownership Regulatory Costs
Environmental Costs
Licensing Costs Permission Costs Standardisation Costs

Disposal Disposition Costs
Removal Costs
Salvage Costs Discarding Costs
The Raytheon Supplier Rating System (SRS) provides three numeric ratings of supplier performance: the Quality Rating, the Delivery Rating and the Quantitative Rating (a composite of the quality and delivery ratings). The underlying methodology used to calculate these ratings is described below. 1.0 SRS Quality Rating
SRS Quality Algorithm
The SRS Quality rating is based on 3 components: Parts Per Million (PPM), Lot Acceptance Rate (LAR) and the number of Supplier Corrective Action Requests (SCAR).
Quality Rating = 0.55*(ppm Score)+0.27 * (LAR) + 0.18*(NCR The quality rating is calculated as follows: Score)
(1.1) Quality Rating = 0.545*(PPM Score) + 0.273*(LAR) + 0.182*(SCAR Score)
1
(1.2)
First term, Weighted 55%, is the PPM Score : PPM Score is The PPM Score is obtained from the graph below based on the calculated PPM value . PPM = Based Failures + Incoming Failures + Floor Failures)/Total Receipts * 1,000,000.the graph (Source on the calculated PPM level according to When PPM exceeds below. 500,000 the PPM Score is zero (0).
1.0 0.9 0.8 0.7
PPM Score
0.6 0.5 0.4 0.3 0.2 0.1 0.0
10 20 30 40 50 60 70 80 90 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 1,000 00 00 00 00 00 00 00 00 00 ,00 0
Supplier's Calculated PPM
New SRS Quality Algorithm

Second term, weighted 27 %, is LAR (Lot Acceptance Rate) LAR = (Number of Quality lots accepted) / (Number of total lots received) Third term, weighted 18%, is the NCR score (NonConformance Report). NCR Score is based on number Non Conformance Reports are issued to the supplier in last 3 months & the score is obtained from the table.
Quantitative Criteria & Weights

Major Criteria Criteria Weight Sub-Criteria Source of Incoming And Floor Failures PPM Quality 60% Incoming Lot acceptance Rate % Non Conformance Report issued to the supplier Sub-Criteria Total Delivery & Quantity 20% each Delivery & Quantity Sub-Criteria Total Sub-Criteria Weight 55% 27% 18%
Quantitative Ratings
100%
100%
100% 100%
Total Quantitative Rating
Quality Rating
Quality Rating is 60% of the Quantitative Rating and composed of 3 Sub-Criteria:
55% for rejected Parts Per Million (PPM) PPM = (total rejects / total receipts) * 1000000 PPM Score is based on the calculated PPM value 27 % for Lot Acceptance Rate (LAR) at receiving. LAR = (Quality Lots Accepted) / (Total Lots Received) 18% for NCR (3 month period) issued to the supplier and has not responded by the due date. 0 NCR = 18% 1 NCR = 12% 2 NCR = 6% >2 NCR = 0%
Delivery & Quantity Rating

Delivery & Quantity Rating is 40% of the Quantitative Rating and based on the average delivery rating for all lots. Delivery Rating = Delivery Score / Total Lots Received for lots received over last 3 months. Individual lots are scored As per Schedule Delayed by 3 days Delayed by 7 days Delayed by 14 days Delayed by 21 days Delayed by 28 days or more. as defined below for Delivery Score. 1.0 0.8 0.6 0.4 0.2 0.0
Delivery & Quantity Rating

Quantity Rating = Quantity Score / Total Lots Received for n lots received over last 3 months. Individual lots are scored as defined below for Delivery Score. If If If If If As per Order 10% </> order 25% </> order 50% </> order 75% </> order >75% </> order 1.0 0.8 0.6 0.4 0.2 0.0
SRS Quantitative Rating

The SRS Quantitative Rating is an overall composite rating of supplier performance on the calculated Quality, Delivery & Quantity Ratings.
Quantitative Rating = 0.60 * (Quality Rating)+0.20 * (Delivery rating)+ 0.20 * (Quantity rating)
Example
Quality Rating Elements
PPM = Total failures in 3 months / Received Quantity in 3 months = 114 / 51532 = 2212 PPM Score = 0.9901 ( from Algorithm ) Calculated PPM = 0.9901*(55) = 54
LAR = Lots accepted / Lots received = 886 / 887 = 99.9 Calculated LAR = 0.999*(27) = 26.97 NCR = 0 So Calculated NCR = 18 Quality Rating = 54+26.97+18 = 98.97 Delivery Rating = Sum of Delivery Ratings / Deliveries Delivery Score = 450 / 887 = 0.507 = 50.7% Quantity Rating = Sum of Quantity Ratings / Lots received Quantity Score = 689 / 887 = 0.777 = 77.7% Total Score = 0.9897(60) + 0.507(20) + 0.777(20) = 85.06
Grades AA A B C D E Zero defects - Keep it Up - Ship to use Status Keep it Up To be Improved further Must Improve Not Tolerable Serious Concern
Score 100 98-100 91-97 76-90 60-75 < 60
Assumptions of Basic EOQ Model

Demand is known with certainty and is constant over time Lead time for the receipt of orders is constant Order quantity is received all at once
Inventory Order Cycle

Order quantity, Q Inventory Level
Demand rate
Reorder point, R
Lead time Order Order placed receipt
Lead time Order Order receipt placed
Time
EOQ Cost Model

Co cost of placing order D annual demand Cc annual per-unit carrying cost Q order quantity Annual ordering cost = C oD Q C cQ 2 CcQ 2
Annual carrying cost =

Total cost = C oD Q
Optimum Quantity
Qopt = Optimum Quantity
Deriving for Qopt

TC = CoD + Q CcQ 2
TC = CoD + Cc Q2 2 Q C0D Cc 0= + 2 Q 2
Qopt = 2CoD Cc
Proving EQuality at the Optimum Point
CoD = Q Q2 =
CcQ 2 2CoD Cc 2CoD Cc
Qopt =
Example for EOQ

Cc = 0.75 per metre Co = Rs. 150 D = 10,000 metres Qopt = 2CoD Cc TCmin =
CoD + Q
CcQ 2
Qopt =
2(150)(10,000) (0.75)
TCmin =
(150)(10,000) + 2,000
(0.75)(2,000) 2
Qopt = 2,000 metres
TCmin = Rs. 750 + Rs. 750 = Rs. 1,500
Example
Demand = 1200 Personal Computers annually Inventory Carrying Cost = Rs. 170 per PC Cost of placing the order for the PC is Rs. 450 Determine Optimal Order Quantity and Total minimum inventory cost Cc = Rs. 170 Co = Rs. 450 D = 1200
Qopt =
Qopt =
2CoD Cc 2(450)(1200) (170)
Qopt = 79.7 ~ 80 nos
Example CoD + Q
TCmin =
TCmin =
CcQ 2
+ (170)(80) 2
(450)(1200) 80
TCmin = Rs. 6750 + Rs. 6800 = Rs. 13,550
Production Quantity Model

An inventory system in which an order is received gradually and inventory is simultaneously being depleted Non-instantaneous receipt model assumption that the quantity Q is received all at once is relaxed p - daily rate at which an order is received over time, rate at which production should take place d - daily rate at which inventory is actually demanded

Inventory level Maximum inventory level Average inventory level 0 Order receipt period Demand period Begin order receipt End order receipt
Time

Order Quantity = Q Rate of receiving orders = p Demand Rate = d Time taken to get the order = Q / p For example Order size = 100 Production Rate = 20 Demand rate = 2 Time taken to get the order = 100 / 20 = 5 days Quantity Demanded = ( Q / p ) * d Substituting = ( 5 ) * 2 = 10 units

Order Quantity = Q Quantity Demanded = ( Q / p ) * d Maximum Inventory Level = Q ( Q / p ) *d Which is Q [ 1 d/p ] Average Inventory level = {Q[1-d/p]}/2 Which is Q/2 [ 1 d/p ] Total Carrying Cost for Average Inventory is CcQ/2[1-d/p] Annual Inventory Cost is CoD/Q + CcQ/2[1-d/p]

Solving for Optimum Value
2CoD
Qopt =
Cc 1 -
d p

Inventory level
Production and Demand
Demand only
Maximum inventory level Average inventory level
Q(1-d/p)
Q (1-d/p) 2
0 Order receipt period
Begin End order order receipt receipt
Time
Production Quantity Model Example

Cc = Rs 0.75 per metre Co = Rs. 150 D = 10,000 metres d = 10,000/311 = 32.2metres per day 2CoD Qopt = Cc 1 - d p =
p = 150 metres per day
2(150)(10,000) 0.75 1 - 32.2 150 = 2,256.8 metres
TC =
CoD CcQ d 1Q + 2 p
= Rs. 1,329 2,256.8 150
Q Production run = = p
= 15.05 days per order

Number of production runs = D = Q 10,000 = 4.43 runs/year 2,256.8 d = 2,256.8 1 p 32.2 150
Maximum inventory level =
Q 1-
= 1,772 metres

Cc = Rs 2.75 per metre Co = Rs. 720 D = 20,000 metres d = 20,000/360 = 55.56 metres per day p = 400 metres per day 2CoD Qopt = Cc 1 - d p = 2(720)(20,000) 2.75 1 - 55.56 400 = 3487.4 metres
TC =
CoD CcQ d 1Q + 2 p
= Rs. 8258 3487 400
Q Production run = = p
= 8.72 days per order

Number of production runs = D = Q 20,000 = 5.73 runs/year 3487 d = p 3487 1 - 55.6 400
Maximum inventory level =
Q 1-
= 3003 metres
Reorder Point
Level of inventory at which a new order is placed R = dL where d = demand rate per period L = lead time
Reorder Point Example

Demand = 10,000 metres/year Store open = 311 days/year Daily demand = 10,000 / 311 = 32.154 metres/day Lead time = L = 10 days R = dL = (32.154)(10) = 321.54 metres So when the stock falls to 321.54 metres ; a new order is to be placed
Material Handling
Definition of Material Handling The efficient and effective method of facilitating a controlled flow of product between locations and storing thereafter constitutes the activity of Material Handling
* the term product includes hardware , software , a combination thereof , people and information
Objectives of Material Handling

To eliminate product damage To enhance product flow To optimise operating costs ( high volumes at lower time frames ) To ensure asset protection To ensure safety
Anatomy of Material Handling

The Logical flow of materials in a facility
Receiving
Sorting
Storage
Pick-up
Processing
Packaging
Shipping
Important terms in Material Handling

Distribution The function of transporting finished goods in a safe condition to a separate storage facility or to the customer Storage The act of safekeeping of goods and preserving them in a usable condition until they are required by another facility , workstation or the Customer
Logistics Combines the above activities and includes the flow of related information
Types of Product Movement ( flow )

Horizontal Product Movement This movement takes place at a single level or elevation between workstations between functional areas between adjacent structures within a warehouse either at floor level , above the floor level , or overhead at the same facility location
Types of Product Movement ( flow )

Vertical Product Movement This movement takes place at multiple levels or elevations between workstations between functional areas between adjacent structures within a warehouse either at floor level , above the floor level , or overhead at the same facility location
Types of Transportation Concepts

The different types of Transportation Concepts are based on the following The Power Source Weight and Load Carrying Capacity Required Travel Space or Path Volume handled Ability to load and unload the goods
Types of Transportation Concepts Above Floor Non powered Transportation Concept

These require Gravity Force or Human Power to facilitate product flow between locations Horizontal This concept is applied at a single level or elevation . Commonly used methods are Gradients ( from a higher level to lower level ) Ropeways Chain-Pulley Blocks Movable Frames Weight Differentials Wheels
Types of Transportation Concepts Above Floor Non powered Transportation Concept

Vertical This concept is applied at multiple levels or elevations . Commonly used methods are Gradients ( from a higher level to lower level ) Ropeways Chain-Pulley Blocks Weight Differentials
These require an Electric Motor , Fuel Powered Motor , Air Pressure or Vacuum to propel a load carrying surface or product to facilitate product flow between locations Horizontal This concept is applied at a single level or elevation . Commonly used methods are Trolleys ( Electric Powered , Air Cushioned , Pneumatic , Hydraulic ) Caddie Cars ( usually Electric Powered ) Pipes ( Vacuum powered )
Types of Transportation Concepts Above Floor Powered Transportation Concept
Types of Transportation Concepts Above Floor Powered Transportation Concept

Vertical This concept is applied at multiple levels or elevations . Commonly used methods are Lifts ( Electric Powered , Pneumatic , Hydraulic ) Cable Cars ( usually Electric Powered ) Pipes ( Vacuum powered )
These have a travel path that is embedded in the floor and utilise Gravity or Human Power to facilitate product flow between locations Horizontal This concept is applied at a single level or elevation . Commonly used methods are Trolleys on Rails Cars on Specially Designed trenches Gradient enabled Conduits
Types of Transportation Concepts In Floor Non Powered Transportation Concept
Vertical This concept is applied at multiple levels or elevations . Commonly used methods are Light Trolleys with Wall Scaling Rails Gradient enabled Conduits
Types of Transportation Concepts In Floor Non Powered Transportation Concept
These have a travel path that is embedded in the floor and require Electric Powered Motor and Fuel Powered Motor Trolleys besides Air Pressure to facilitate product flow between locations. Horizontal This concept is applied at a single level or elevation . Commonly used methods are Mini Trains on Rails Cars on Specially Designed trenches Vacuum Conduits
Types of Transportation Concepts In Floor Powered Transportation Concept
Vertical This concept is applied at multiple levels or elevations . Commonly used methods are Elevators Escalators Vacuum Conduits
Types of Transportation Concepts In Floor Powered Transportation Concept
These are unique in characteristics in this that the travel path is above the floor level . These require Gravity or Employee power to facilitate product flow between locations. The support for the travel path is from the ceiling , the wall or from the floor with stands or racks . These facilitate movement from a higher to a lower gradient only . Chutes Tubes or pipes Suspended Platforms
Types of Transportation Concepts Overhead Non Powered Transportation Concept
These also have the travel path above the floor level . These require Electric Power , Air Pressure or vacuum to propel the load carrying surface or the product to facilitate flow between locations. Horizontal Used for a single level or elevation Conveyor Belts or Lines Tubes or pipes ( vacuum powered ) Powered Platforms ( suspended )
Types of Transportation Concepts Overhead Powered Transportation Concept
Vertical Used for multiple levels or elevations Conveyor Belts or Lines Tubes or pipes ( vacuum powered ) Powered Platforms ( suspended )
Types of Transportation Concepts Overhead Powered Transportation Concept
These are Load Carrying Surfaces that follow an orderly sequence or travel path through the facility . These are powered by an Electric Motor , air pressure or vacuum or computerised . Assembly lines Trains or Cars Fork lifts
Types of Transportation Concepts Fixed Travel Path Transportation Concept
These are Load Carrying Surfaces that do not follow an orderly sequence or travel path through the facility . These are powered by an Electric Motor or Fuel Powered Motors and are driven by employees . Cars Fork lifts
Types of Transportation Concepts Variable Travel Path Transportation Concept
Types of Activities
There are two types of activities in each of the Product Transportation concepts Static Activities Dynamic Activities Static Activities Static activities occur at a Workstation ( either at origination or at the culmination ) before the load carrying surface or the load is readied for transportation
Types of Activities
Dynamic Activities Dynamic activities occur at a workstation ( as before ) and during the transportation process ( as found fit ) at the instant the load carrying surface or the load is readied for transportation
Types of Activities
Static Activities These activities include Compiling necessary information Presenting the information in a comprehendible form ( to a person or a machine ) Issuing Authorisations accordingly
Types of Activities
Dynamic Activities These activities include Readying the Product and / or the Load Carrying Surface Loading the Product / Surface Despatching the Product / Surface manually mechanised automated Traversing the Path Diverting wherever necessary
Types of Activities
Dynamic Activities Ensuring correct halts Unloading Run Out
Concept Design Parameters

These Parameters include Product Dimensions ( length , width , height , weight , shape ) Product Quantities ( Volumes ) Product Mix ( based on processing , shapes , dimensions , despatch ) Open Space required for the Product or Load Carrying Surface Customer or Workstation working space Fragility of the Product Crushability of the Product
Concept Design Parameters

Transportation or traversed distance Orientation of Traversed Distance Goodness of Traversed Distance Effort of the Traversed Distance Number of Pickup and Delivery Points Location of Pickup and Delivery Points Loading and Unloading Methods Production Method Number of trips in a defined time bucket Geographic Location of Facility and Safety Measures
Latest Trends in Design Concepts

These include Numerically Controlled Devices Automatic Identification Methods Flexible Labour Usage Cross-Dock Operations
Future Trends in Design Concepts

These include Automatically Guided Vehicles Code Delivery Destination Entry These will result in Narrower Travel Paths Faster Traversing Time Lesser Human Intervention Multiple elevations
Relationship between Concept and Layout

The following factors have a great influence on the layout of a facility The product travel length between two workstations The product travel width ( inclusive of the load carrying surface ) The product travel height ( inclusive of the load carrying surface ) Elevation of the load carrying surface above the floor Number of Load Carrying Surface trips Required Personnel Backup travel paths
Relationship between Concept and Layout

The Number of turns in the Travel Path The number of elevations in the travel path The kind of power source
Factors for Travel Length

The minimum travel path length , width and height Loading and Unloading surface area The Return Travel path length Personnel travel path Area for Maintenance Travel Path run-out distance
Factors for Travel Width

The Width of the product including the Load Carrying Surface Width required for movement of Personnel
Factors for Travel Height

The height of the transportation concept is determined by The required drive train mechanism Load carrying surface side guards Travel path structural support members Product characteristics Product stability Seismic location
Factors for Elevation

The elevation of the transportation concept is determined by Support for the propelling mechanism Number of surfaces that carry the maximum weight
Number of Turns
The number of turns of the transportation concept is determined by Workstation sequence Load Carrying surface
Some Standardised Rules

For Powered Pallet Trucks recommended width is 9 feet For Powered Counterbalanced Lift Truck the recommended with is 13 feet For all Train of Carts transportation concept recommended width is 12 feet All aisles must indicate travel path of the trucks along with zebra crossing lines to indicate movement of personnel All doors and door frames must have guard rails or posts
Occupational Safety and Hazards Administration ( OSHA ) OSH Act 2002 Documents OSHA 2236 Materials Handling and Storing OSHA 3072 Sling Safety OSHA 3077 Personal Protective Equipment OSHA 3100 Crane or Derrick Suspended Platforms OSHA 3106 Concrete and Masonry Construction OSHA 3120 Control of Hazardous Energy ( Lockout / Tagout )
Occupational Safety and Hazards Administration ( OSHA ) OSH Act 2002 Hazardous Materials Acetylene Acetaldehyde Butadiene Cyclopropane Diethyl Ether Ethylene Ethylene Oxide Hydrogen Isoprene Propylene Oxide Unsymmetrical Dimethyl Hydrazine
Occupational Safety and Hazards Administration ( OSHA ) OSH Act 2002 Services Offered Safety and Health Management Programme Management Leadership and Employee involvement Worksite Analysis Hazard Prevention and Control Safety and Health Training Voluntary Protection Programme Awards Demonstration Merit Star
Factors in Job Design

Task analysis how tasks fit together to form a job Worker analysis determining worker capabilities and responsibilities for a job Environment analysis physical characteristics and location of a job Ergonomics optimising number of limb and eye movements to complete the task Technology and automation replacing the human element in the task to be performed
Task Analysis

Description of tasks to be performed Task sequence Function of tasks Frequency of tasks Criticality of tasks Relationship with other jobs/tasks Performance requirements Information requirements Control requirements Error possibilities Tasks duration(s) Equipment requirements
Work Analysis
Capability requirements Performance requirements Evaluation Skill level Job training Physical requirements Mental stress Boredom / Fatigue Motivation Number of workers Level of responsibility Monitoring level Quality responsibility Empowerment level
Environmental Analysis
Workplace location Process location Temperature and humidity Lighting Ventilation Safety Logistics Space requirements Noise Vibration
Three Aspects of Job Instructions

Knowledge of Supposed to do Knowledge of Is Doing Knowledge of Regulating the Process
Checklist Product Knowledge of Supposed to do

1. Are there written product specifications, process specifications, and work instructions? If written in more than one place, do they all agree? Are they legible? Are they conveniently accessible to the worker? 2. Does the specification define the relative importance of different Quality characteristics? Are advisory tolerances on a process distinguished from mandatory tolerances on a product? If control charts or other control techniques are to be used, is it clear how these relate to product specifications? 3. Are standards for visual defects displayed in the work area? 4. Are the written specifications given to the worker the same as the criteria used by inspectors? Are deviations from the specification often allowed? 5. Does the worker know how the product is used?
Checklist Product Knowledge of Supposed to do

6. Has the worker been adequately trained to understand the specification and perform the steps needed to meet the specification? Has the worker been evaluated by test or other means to see if he or she is qualified? 7. Does the worker know the effect on future operations and product performance if the specification is not met? 8. Does the worker receive specification changes automatically and promptly? 9. Does the worker know what to do with defective raw material and defective finished product? 10.Have the responsibilities in terms of decisions and actions been clearly defined?
Checklist Product Knowledge of Is Doing

1. Are gauges provided to the worker? Do they provide numerical measurements rather than sort good from bad? Are they precise enough? Are they regularly checked for accuracy? 2. Is the worker told how to evaluate measurements to decide when to adjust the process and when to leave it alone? 3. Is there a check to see that the worker does follow the special instructions on making process adjustments? 4. Are inspection results provided to the worker, and are these results reviewed by the supervisor with the worker?
Checklist Product Ability to Regulate

1. Has the worker been told how often to reset the process or how to evaluate measurements to decide when the process should be reset? 2. Is there a process adjustment that the worker can make to eliminate defects? Under what conditions should the worker adjust the process? When should the worker shut down the machine and seek more help? Whose help? 3. Have the worker actions that cause defects, and the necessary preventive action, been given to the worker, preferably in the written form? 4. Is there an adequate preventive maintenance program on the process? 5. Is there a hidden knack possessed by some workers that needs to be discovered and transmitted to all workers?
Checklist Service Knowledge of Supposed to do

1. Do personnel know who their customers are? Have they ever met them? 2. Do personnel who perform the job have any impact on the formulation of the job procedure? 3. Are job techniques and terminologies consistent with the background and training of personnel? 4. Are there guides and aids (e.g., computer prompts) that lead personnel to the next step in a job? 5. Are there provisions to audit procedures periodically and make changes? Are changes communicated to all affected personnel? 6. Are there provisions for deviations from home office directives to meet local conditions? 7. Have personnel responsibilities been clearly defined in terms of decisions and actions?
Checklist Service Knowledge of Supposed to do

8. Does supervision have a thorough knowledge of the operations to provide assistance when problems arise? 9. Do personnel know what happens to their output in the next stage of operations and understand the consequences of not doing the job correctly? 10.If appropriate, is job rotation used? 11.Are personnel given an overview of the entire organisation? 12.Is there regularly scheduled training to provide personnel with current information on customer needs and new technology? 13.Where appropriate, are personnel who are new to a job provided with mentors?
Checklist Service Knowledge of Is Doing

1. Are personnel provided with the time and instructions for making self-review of their work? 2. Can errors be detected easily? 3. Are independent checks on Quality needed? Are they performed? Are these checks performed by peer personnel or others? 4. Is a review of work performed at various checkpoints in a process, not just when work is completed? 5. Where appropriate, are detailed logs kept on customer contracts? 6. Is feedback provided to those who need it? Is it timely? Is it personnel specific? 7. Does feedback provide the level of detail needed particularly to correct problem areas? Have personnel been asked what detail is needed in the feedback?
Checklist Service Knowledge of Is Doing

8. Is positive in addition to negative (corrective) feedback provided? 9. Is negative (corrective) feedback given in private? 10.Are there certain types of errors that are tracked with feedback from external customers? Could some of these be tracked with an internal early indicator?
Checklist Service Ability to Regulate

1. Is the process (including procedures, equipment, software, etc.) given to personnel capable of meeting standards on Quality and quantity of output? Has this capability been verified by trial under normal operating conditions? 2. Has the design of the job made use of the principles of error-proofing? 3. Does the job design minimize monotonous or unpleasant tasks? 4. Have provisions been made in the job design to anticipate and minimize errors due to normal interruptions in the work cycle? 5. Can special checks be created (e.g., balancing of accounts) to detect errors? 6. Can steps be incorporated in data entry processes to reject incorrect entries?
Checklist Service Ability to Regulate

7. Does the job design include provisions for action when wrong information is submitted or information is missing as an input to a job? 8. Are there external factors (e.g., no account number on a cheque, cash received instead of a cheque, etc.) that hinder the ability to perform a task? 9. Has equipment, including any software, been designed to be compatible with the abilities and limitations of personnel? 10.Is there an adequate preventive maintenance program for computers and other equipment used by personnel? 11.Is there a hidden knack possessed by some personnel that needs to be discovered and explained to all personnel? 12.When personnel encounter an obstacle on a job, do they know where to seek assistance? Is the assistance conveniently available?
Different Types of Process Charts

Outline Process Chart Flow Process Chart ( Man , Material , Equipment ) Two Handed Process Chart Multiple Activity Chart
Worker-Machine Multiple Activity Chart

Job Photo-Id Cards Time (min) Operator Date Time (min) 2.6 3/2 Photo Machine Idle
Key in customer data on card Feed data card in Position customer for photo Take picture
2
3 4
0.4 1.0 0.6 Accept card Idle Begin photo process
5 6 7
Idle 3.4 Photo/card processed
8
Inspect card & trim edges 1.2 Idle
Worker-Machine Time Chart

Summary Operator Time Work Idle Total 5.8 3.4 9.2 min % 63 37 100% Photo Machine Time % 4.8 4.4 9.2 Min 52 48 100%
Work Measurement
Determining how long it takes to do a job ( in manufacture and in service ) Time studies
Standard time
is time required by an average worker to perform a job once incentive piece-rate wage system was based on time study ( now used for improvement purposes only )
Work Measurement
1. 2. 3. 4. 5. Establish standard job method Break down job into elements Study job Rate workers performance (RF) Compute average time (t)
Work Measurement
6. Compute normal time
Normal Time = (Elemental average) x (rating factor) Nt = (t )(RF)
Normal Cycle Time = NT = Nt
7. Compute standard time

Standard Time = (normal cycle time) x (1 + allowance factor)
ST = (NT)(1 + AF)
Computation of Standard Time

Normal Time Standard Time
Relaxation Allowance Contingency Process Allowance Allowance Special Rating Allowance Factor Policy Observed Allowance Time
Performing a Time Study

Time Study Observation Sheet Identification of operation Sandwich Assembly Operator Cycles 1 Grasp and lay out 1 bread slices Spread mayonnaise 2 on both slices 3 Place ham, cheese, and lettuce on bread R .04 R .11 2 3 4 5 6 7 8 9 10 t t .04 .05 .05 .04 .06 .05 .06 .06 .07 .05 .38 .72 1.05 1.40 1.76 2.13 2.50 2.89 3.29 .77 .077 1.00 .077 .44 .79 1.13 1.47 1.83 2.21 2.60 2.98 3.37 t .07 .06 .07 .08 .07 .07 .08 .10 .09 .08 Approval Date 6/2
Observer Summary t RF Nt .53 .053 1.05 .056
t .12 .11 .14 .12 .13 .13 .13 .12 .14 .14 1.28 1.28 1.10 .141 R .23 .55 .93 1.25 1.60 1.96 2.34 2.72 3.12 3.51 t .10 .12 .08 .09 .11 .11 .10 .10 .12 .10 1.03 1.03 1.10 .113
Place top on 4 sandwich, Slice, and stack
R .33 .67 1.01 1.34 1.71 2.07 2.44 2.82 3.24 3.61

Average element time = t = t = 10 0.53 10 = 0.053 Normal time = (Elemental average)(rating factor) Nt = ( t )(RF) = (0.053)(1.05) = 0.056
Normal Cycle Time = NT = Nt = 0.387

ST = (NT) (1 + AF) = (0.387)(1+0.15) = 0.445 min

How many sandwiches can be made in 2 hours? 120 min = 269.7 or 270 sandwiches 0.445 min/sandwich
Example

Job Element 1 2 3 4 Cycles 1 2 3 4
0.16 0.12 0.33 0.15 0.6 0.6 0.59 0.61
0.33 0.37 0.35 0.35 0.5 0.5 0.49 0.51
Operator is Rated at 110 % Compute Standard Time Allowable Factor is 9.1 % Compute Output in 8 hours Fatigue Factor is 10 %
Learning Curves Illustrates improvement rate of workers as a job is repeated Processing time per unit decreases by a constant percentage each time output doubles
Processing time per unit
Units produced
Learning Curves Time required for the nth unit = tn = t1nb

where: tn = time required for nth unit produced t1 = time required for first unit produced n = cumulative number of units produced loger b= where r is the learning curve percentage loge2 (decimal coefficient)
Learning Curve Example A Process designed to assemble Computers had the following attributes. t1 = 18 hours learning rate = 80% What is time taken for 9th, 18th, 36th units? t9 = (18)(9)ln(0.8)/ln 2 = (18)(9)-0.322 = (18)/(9)0.322 = (18)(0.493) = 8.874hrs t18= (18)(18)ln(0.8)/ln 2 = (18)(0.394) = 7.092hrs t36= (18)(36)ln(0.8)/ln 2 = (18)(0.315) = 5.674hrs
Learning Curve for Mass Production Job

Processing time per unit
End of improvement
Standard time
Units produced
What is Quality ?
Usual Responses Inspection Responsibility of the Quality Control Department Measurement Activity Statistics Technical Activity Support Function
What is Quality ?
Walter A. Shewhart in 1924 Quality has Four Major Dimensions A Set of Characteristics How Constituted An Attribute Absence indicates not Quality As a relationship between Characteristics Realities Objective and Subjective Objectives are Measurable Subjectives are related to Use , Cost , Value and Exchange
What is Quality ?
Quality is a state in which value entitlement is realised for the customer and provider in every critical aspect of the business relationship Mikel Harry ( 2003 ) the degree to which a set of inherent characteristics fulfills requirements ISO 9000 : 2000
ACPL approach to Quality

The definition of Quality at ACPL is..
The level of Excellence with which we continually create Customer Value in the most economical way
Quality aimed at , to meet the needs of the consumer , must be stated in terms of specified Quality characteristics that can be measured . It is necessary to predict what Quality characteristics of a product will produce satisfaction in use . Quality , however , to the consumer , is not a set of specifications . The Quality of any product is interaction between the product , the user , his expectations , and the service that he can get in case the product fails or requires maintenance .
The needs of the consumer are in continual change . So are materials , methods of manufacture , and products .
Quality of a product does not necessarily mean high Quality . It means continual improvement of the process , so that the consumer may depend on the uniformity of the product and purchase it at low cost . ..W. Edwards Deming 1980
Quality Management
A people focussed management system that aims at continual increase in customer satisfaction at continually lower cost , working horizontally across functions and departments , involving all employees and processes , top to bottom , extending forwards and backwards to include the Supply chain as well as the Customer chain .
PRODUCTION
Specification Production Inspection
A commitment that has to be met implying satisfied requirements An effort that is carried out to meet these requirements An act carried out to assess the effectiveness of the efforts to meet these requirements
SHEWHART CYCLE
8 7
h rc a se e R
1 2 3
D es ig n
6 5 4
n io ct u od Pr
The Cycle for Executives
s le Sa
The Cycle for Engineers
1. Idea for placing importance on Quality 2. Responsibility for Quality 3. Research 4. Standards for Designing and Improvement of Products 5. Economy of Manufacturing 6. Inspection of Products 7. Expansion of Sales Channels 8. Improvement
1.Design the Product (with appropriate Tests)
Customer
2.Make it, test it in the Production Line and in the Laboratory
3. Put it on the Market
THE DEMING WHEEL manufacturer the user and the non user
Act - Adopt the change , or abandon it , or run through the cycle again
Plan a change or a test aimed at improvement
Study the results . What went wrong? What did we learn?
Do - Carry out the change or test ( preferably on a small scale )
Definition of Statistical Thinking Statistical Thinking is a philosophy of learning and action based on the following fundamental principles : All work occurs in a system of interconnected processes Variation exists in all processes
Understanding and reducing variation are keys to success.
Like it or not, variation is everywhere! Our drive time to work each day.
The quantity of production each shift. Departure time of trains !! Know it, model it, learn to deal with it!
Common & Special Cause Variation

Common Causes Variation Variation that exists in a system due to inherent properties of the system itself ( its design ) or the way its managed...
Special Cause Variation Variation that exists in a system due to some external factors factors not a part of the system but alien to it...
Tips for Statistical Thinking

If a process or system is not stable showing signs of Special Cause
Use the tools of problem solving to identify the root cause(s). Try to identify exactly when, where, how, and why the process changed. If a Special Cause hurts the process, develop procedures to eliminate the return of the problem. If a Special Cause is beneficial, develop procedures to make it a permanent part of the process.
Tips for Statistical Thinking

If a process or system is stable showing only Common Causes of variation
Use the tools of improvement to study all the data (not just the good or the bad points) and identify factors that cause variation. Determine what needs to be permanently changed to achieve a different level of Quality.
Without a Process View

People have problems understanding the problem and their role in its solution. It is difficult to define the scope of the problem. It is difficult to get to root causes. People get blamed when the process is the problem (85/15 Rule). Process management is ineffective Improvement is slowed You cant improve a process that you dont understand
Without Understanding Variation

Management by the last data point Theres lots of fire fighting Using special cause methods to solve common cause problems Tampering and micromanaging abound Goals and methods to attain them fail Understanding of the process is handicapped Learning is slowed Process management is ineffective Improvement is slowed
Without Data
Everyone is an expert : discussions produce more heat than light Historical memory is unreliable Difficult to get agreement on : What the problem is What success looks like Progress made Process management is ineffective Improvement is slowed
Without Statistical Thinking

Your management and improvement processes are handicapped Its like Growing crops without fertilisers Doing research without measurements Playing cricket without your bat
Early on, we failed to focus adequately on core work processes and statistics.
David Kearns ( CEO ) and David Nelder ( CFO ) Xerox Corporation
Comparison of Statistical Thinking and Statistical Methods

Statistical Thinking Overall approach Desired application Primary requirement Logical sequence Conceptual Universal Knowledge Leads Statistical Methods Technical Targeted Data Reinforces
Improvement Model
Business Process
Customer
Data
Process Improvement Problem Solving
Improvement System
Use of Statistical Thinking

Depends on levels of activity and job responsibility.
Where we're headed Managerial processes for guidance
Strategic
Executives
Managerial
Managers
Where the work gets done
Operational
Workers
Use of Statistical Thinking A Systems View
Executives
Strategic Where we're headed
Managerial Managerial processes for guidance
Managers
Operational Where the work gets done
LEADERS
Workers
Statistical Thinking and Methods
Statistical Thinking
Statistical Methods
Process
Variation
Data
Improvement
Philosophy
Analysis
Action
Statistical Methods What is a Control Chart? A Control Chart is a statistical tool used to distinguish between process variation resulting from common causes and variation resulting from special causes.
Statistical Methods
What Are the Control Chart Types? X-Bar and R Chart
Individual X and Moving Range Chart

Other Control Chart types: nP Chart c Chart p Chart u Chart
Control Chart Decision Tree

Are you charting attribute data?
NO Data are variables Data Is sample Size equal to 1? YES Use XmR chart for variables data
YES
NO
Use XmR for Attributes data or other control chart types
For sample size between 2 and 15, use X-Bar and R Chart
Control Chart used where the Sample size is the Same nP Chart
UCL = nP + 3 nP(1 P) LCL = nP - 3 nP(1 P) nP = Average Number of Rejections P = Overall Proportion of Rejects
Example
A lot of 60 pieces were being produced per hour in a factory . The following rejects were observed every hour . Draw a Control Chart and state your conclusions .
Time
10 11 12
13
14
15
16
18
19
20
Count 11 20 19
Time 21 22 23
24
24 26
19
1 19
18
3 22
16
4 21
42
5 32
18
6 22
24
7 8
Count 15 17 19
33 30
nP = Average Rejections = Total number of Rejections / Total number of lots = 467 / 21 = 22.24 P = Overall Proportion of Rejects = Total number of Rejections / total number of Products = 467 / 21*60 = 467 / 1260 = 0.3707 Now UCL = nP + 3 nP(1 P) LCL = nP - 3 nP(1 P)
= 22.24 + 3 22.24(1 0.3707) = 22.24 - 3 22.24(1 0.3707) = 22.24 + 3 13.996 = 22.24 + 3(3.741) = 33.46 = 22.24 - 3 13.996 = 22.24 3(3.741) = 11.02
45 40 35 30 25 20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
UCL = c + 3 c LCL = c - 3 c
Sample
Defects Sample Defects Sample Defects
Control Chart used where the Bulk Sample is the Same c Chart
c = Average Number of Blemishes
A Two Yard sample of fabric was being observed for blemishes every half an hour in a factory and the following observations were recorded . Draw a Control Chart for the same .
1
2 18 3 33 3
2
4
3
1
4
1 20 4 35 4
5
4
6
5
7
2
8
1
9
2
10 11 12 13 14 15 16 17
4 4 3 5 2 1 1 2 32 2
19 2 34 6
21 22 23 3 2 4
24 25 26 27 3 2 3 5
28 29 30 31 1 4 3 4
36 37 38 0 1 2
39 40 3 1
Control Chart used where the Bulk Sample is the Same c Chart
c = Average Number of Blemishes = Total number of blemishes / Total number of Samples = 109 / 40 = 2.725
UCL = c + 3 c
= 2.725 + 3 2.725
LCL = c - 3 c
= 2.725 - 3
2.725
= 2.725 + 4.952
= 7.68
= 2.725 - 4.952
= - 2.232
LCL = 0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
XmR Chart
Steps in drawing an XmR Chart 1.Decide what are the data to be collected
2.Collect Data
3.Arrange data in their chronological sequence 4.Calculate Average ( X bar ) 5.Compute Moving Range ( MR ) 6.Calculate Average Moving Range ( MR bar ) 7.Substitute in the formulae 8.UCL = Xbar+2.66(MRbar) 9.LCL = Xbar-2.66(MRbar)
XmR Chart
Example
Date 1/8 2/8 3/8
22 16
4/8
18
5/8
19
6/8
23
7/8
18
8/8
15
9/8
19
10/8
18
Minutes 19
XmR Chart
Calculating MR bar Compute differences between successive values arranged in their chronological sequence and take the modulus of those values ( MR ) Calculate the average of the differences (MR bar) Example
Date Ranges 1/8 2/8 3/8 4/8 5/8 6/8 7/8 8/8 9/8 10/8
Minutes 19
22
3
16
6
18
2
19
1
23
4
18
5
15
3
19
4
18
1
Average = 187 / 10 = 18.7 ; MRbar = 29 / 9 = 3.2
XmR Chart
Steps in drawing an XmR Chart Substituting in the formulae
UCL = Xbar+2.66(MRbar) = 18.7+2.66(3.2) = 27.27

LCL = Xbar-2.66(MRbar) = 18.7-2.66(3.2) = 10.13 Plotting the Chart we get
30.0
25.0
20.0
15.0
10.0
5.0 1 2 3 4 5 6 7 8 9 10
Constructing an X bar and R Chart Step 1 - Determine the data to be collected. Step 2 - Collect and enter data by subgroup Step 3 - Calculate and enter subgroup averages Step 4 - Calculate and enter subgroup ranges Step 5 - Calculate grand mean Step 6 - Calculate average of subgroup ranges Step 7 - Calculate UCL and LCL for subgroup averages Step 8 - Select scales and plot Step 9 - Document the chart
Average X = X1 + X2 + X3 +..+Xn n Where X is the average and X1 are the individual values in the subgroup n is the total values in the subgroup X = X1 + X2 + X3 + +Xn n Range R = Largest value in each Subgroup Smallest value in each Subgroup Average R = R1 + R2 + R3 +..+Rn n Where R is the average Range and R1 are the individual Ranges of the subgroups n is the total number of Subgroups
UCL = X + A2 R LCL = X A2 R Use value of A2 based on number of values in subgroup = n
n 3 4 5
A2 1.023 0.729 0.577
6 7 8 9 10 11 12 13 14
0.483 0.419 0.373 0.337 0.308 0.285 0.266 0.249 0.235
Subgroup
X1
X2 X3 X4 X5
Averages Ranges
15.3
14.9 15.0 15.2 16.4
15.36 1.5
14.4
15.5 14.8 15.6 14.9
15.04 1.2
15.3
15.1 15.3 18.5 14.9
15.82 3.6
15.0
14.8 16.0 15.6 15.4
15.36 1.2
15.3
16.4 17.2 15.5 15.5
15.98 1.9
14.9
15.3 14.9 16.5 15.1
15.34 1.6
15.6
16.4 15.3 15.3 15.0
15.52 1.4
14.0
15.8 16.4 16.4 15.3
15.58 2.4
14.0
15.2 13.6 15.0 15.0
14.56 1.6
Grand Average = 15.40 Range Average = 1.82
16.50
16.00
15.50
15.00
14.50
14.00 1 2 3 4 5 6 7 8 9
Evolution of Quality Standards 1942 1945

1959
: MIL STDs
: MIL Q 9858
1963
1968
: MIL Q 9858 A
: AQAP 1 / 4 / 9
1970
1979
: DEF / STD 05 8
: BS 5750
1987
: ISO 9000 series
ISO ISO ISO ISO
9000 9001 9002 9003
: : : :
1987 1987 1987 1987
Revised to ISO 9000 : 1994 ISO 9001 : 1994 ISO 9002 : 1994 ISO 9003 : 1994
QS 9000 : 1995 ISO 9001 : 1994 + additional requirements QS 9000 : 1998 ISO 9001 : 1994 + additional requirements ( second revision ) ISO / TS 16949 : 1999 = QS 9000 adopted by the ISO based on ISO 9001 : 1994 ISO / TS 16949 : 2002 = QS 9000 reworded by the ISO based on ISO 9001 : 2000
Act
How do we improve next time?
Plan
What do we do? How do we do it?
PLAN
establish the objectives and processes necessary to deliver results in accordance with customer requirements and the organisation's policies implement the processes monitor and measure processes and product against policies, objectives and requirements for the product and report the results take actions to continually improve process performance
DO
Check (Study)
Do
Do what was planned
Did things happen according to plan?
CHECK (STUDY)
ACT
The Methodology known as Plan Do Check ( Study ) Act [ PDC(S)A ] can be applied to all processes . PDC(S)A is briefly described as above
Quality Management Principles

Customer Focus Leadership Involvement Of People Process Approach System Approach To Management Continual Improvement Factual Approach To Decision Making Mutually Beneficial Supplier Relationships
CUSTOMER FOCUS
SYSTEM APPROACH TO MANAGEMENT PROCESS APPROACH LEADERSHIP
CONTINUAL IMPROVEMENT
INVOLVEMENT OF PEOPLE
FACTUAL APPROACH TO DECISION MAKING
MUTUALLY BENEFICIAL SUPPLIER RELATIONSHIPS
Continual Improvement of the Quality Management System
Customer Satisfaction
Customer Requirements
Management Responsibility
Resource Management
Measurement , Analysis and Improvement
Input
Product and / or Service realisation
Output
Product and / or Service
Quality Management System Value Adding Activities Information Flow
Model of a Process Based Quality Management System
Maintaining and Improving Equipment

Maintenance Often viewed as an Overhead Cash Pit Largely : Breakdown Repair Highly understaffed Carried out in haste
Maintaining and Improving Equipment

Breakdown Maintenance Finding the Breakdown Remedying the Breakdown Shuffling to make up for lost time Outcomes : Unnecessary Capital Investment Large Inventories of finished / semifinished product Large Inventories of Spares
Equipment Problems
Machine Malfunction Machine Breakdown
Equipment Problems
Machine Malfunction Machine Deterioration resulting in shortened machine life Machine Inefficiency resulting in eventual high costs Incorrect output Scrap and Rework
Equipment Problems
Machine Breakdown Safety Hazards resulting in Injuries Idled workers resulting in High Inventories Idled Facilities resulting in Schedule delays
Preventive Maintenance
The practice of tending to equipment so that it is never idle because of a malfunction or a breakdown thus being in a state of optimal operation at all times
Maintainability
Maintainability is the effort and cost of performing maintenance . There are two measures of maintainability Mean Time To Repair ( MTTR ) Mean Time Between Failures ( MTBF )
Mean Time To Repair ( MTTR )

MTTR = ( Downtime for Repair ) / Number of Repairs Downtime for repair includes : Waiting for repair Personnel Diagnose Problem Locate necessary Spares Remedy the problem ( Repair ) Test the Equipment Handover to owner
Mean Time Between Failures ( MTBF )

MTBF = Total Running Time / Total Number of Failures MTBF is used to estimate Reliability of an item expressed as a function of time So Reliability R(t) = e-lT where l = 1 / MTBF ( failure rate ) T = Specified time e = Naperian Logarithm ( 2.718 )
Example
Twenty Machines are operated for 100 hours . One Machine fails at 60 hours and another machine fails at 70 hours . The rest of the eighteen machines run for the complete 100 hours . Calculate MTBF .
Total Running Time for the machines is 18 ( 100 ) + 60 + 70 = 1930 hours Total Number of Failures = 2 So MTBF = 1930 / 2 = 965 hours
Example
For the same example what would be the reliability of the machine at a)500 hours b)900 hours
l = 1 / MTBF = 1 / 965 = 0.0010362 So by the formula

R ( 500 ) = e And R ( 900 ) = e
-0.0010362(500) -0.0010362(900)
= 0.596 or 60 % = 0.394 or 40 %
Example
For the same example suppose there is a component that helps the machine revert to a reliability of 100 % , when should it be replaced so that the machine performance does not slip below 90 % Reliability R(t) = e-lT where R(t) = 0.9 So , substituting 0.9 = e -0.0010362(T) Solving by transposing , T = 109.2 hours (101.3)
Availability
Availability is the proportion of time the equipment is actually available to perform work out of the time it should be available to perform work Taking into account MTBF and MTTR The total time of running of a machine in a given period of time is MTTR + MTBF Time it is available is MTBF So Availability ( A ) = MTBF / ( MTBF + MTTR )
Relationship between Availability and MTTR + MTBF

MTTR MTBF
MTTR = 5 ; MTBF = 15 ; A = 75% MTTR MTBF
MTTR = 5 ; MTBF = 20 ; A = 80%
MTTR
MTBF
MTTR = 2 ; MTBF = 20 ; A = 90%
Availability
Availability can also be given as A = Actual Running Time / Planned Running Time where Planned Running Time = Total Plant Time Planned Downtime Actual Running Time = Planned Running Time All other Downtime
Availability
Planned Downtime includes Meals Rest Breaks Scheduled Preventive Maintenance All other Downtime includes Setup Time Equipment Breakdown Unavailability of Material
Example
A plant working in 2 shifts of 8 hours each has 2 hours of planned downtime per shift . On an average it has been observed that 110 minutes are consumed for set up of the machine and 75 minutes for breakdown / malfunction . Calculate availability Planned Running Time = 16 2(2) hours = 12 hours = 720 minutes Actual Running Time = 720 110 75 = 535 minutes A = 535 / 720 = 0.7431 = 74 %
Efficiency
Efficiency is a measure of how well an equipment performs when its running . There are two components of efficiency Rate Efficiency Speed Efficiency Rate Efficiency = Actual Production Volume x Actual Cycle Time / Actual Running Time
Example
If in 535 minutes it has been observed that 830 units have been produced but the actual cycle time for each unit is 0.6 what is the rate efficiency of the equipment ? Rate Efficiency = Actual Production Volume x Actual Cycle Time / Actual Running time = 830 x 0.6 / 535 = 498 / 535 = 0.9308 = 93 %
Efficiency
Speed Efficiency The Ratio of Designed Cycle Time to Actual Cycle Time is called as Speed Efficiency of the Equipment Speed Efficiency = Designed Cycle Time / Actual Cycle Time Example If designed cycle time is 0.5 per unit for previous example Speed Efficiency = 0.5 / 0.6 = 0.833 = 83%
Efficiency
Performance Efficiency Performance Efficiency = RE x SE = 0.9308 x 0.8333 = 0.7756 = 77 %
Yield
Yield is also termed as Quality Rate and is expressed as a ratio of Good Units Produced / Total Units Produced Example If the equipment under consideration produces 800 good units out of 830 units , Yield is given as 800 / 830 = 0.9639 = 96 %
Overall Equipment Effectiveness ( OEE )

OEE = Availability x Performance Efficiency x Yield Example For the equipment under consideration , OEE = 0.7431 x 0.7756 x 0.9639 = 0.55 55 %
The Need for TPM

Operators accepted chronic stoppages as inevitable Operators suffered from an attitude of I operate you clean and fix The relation between the chronic stoppages and equipment components was not explored fully Maintenance Operators were not trained in the Science of Investigation and Remedy of Equipment Problems Slight Defects were often ignored
TPM = Total Productive Maintenance
TPM
First implemented at Toyota Motor Company in 1962 The Mission Advanced Products for an Advancing Society The Policy Aim for World-class Quality Corporate Growth through Product Leadership Product Development through Technological Research Greater Efficiency through Greater Flexibility Revitalise the Corporation through Employee Talent
The Need for TPM

The Purpose The purpose of TPM is not only to keep the equipment in a state of optimal operation at all times but also to tailor the equipment so that it becomes robust enough to withstand any changes in its vicinity and flexible enough to be adaptable in the wake of technological advances The Philosophy We are all responsible for our Equipment
TPM Policy and Objectives

To Maximise Overall Equipment Effectiveness through Total Employee Involvement To continually improve reliability and maintainability of equipment resulting in higher productivity and Quality To maximise economy of operation for the entire life of the Equipment To continually enhance skills and expertise of all employees ( with relation to their equipment ) To continually enhance the work environment and enrich jobs
Eight Steps to TPM

1. 2. 3. 4. 5. 6. 7. 8. Conduct Initial Cleaning Address causes of Dirty Equipment Reduce the number of Hard-to-Clean areas Document and Standardise Maintenance Activities Familiarise Operators with Optimal operating conditions Develop Diagnostic Skills and Cultivate Autonomy Organise and Manage the entire Workspace Strive for Continual Improvement
Conduct Initial Cleaning

Get rid of all debris and prevent accelerated deterioration Identify hidden problems made apparent by cleaning and correct them Familiarise Operators with the nuances of equipment operation
Cleaning is Inspection
Causes of Dirty Equipment

Prevent Scattering of dust and contaminants wherever possible Prevent dirt from adhering to different parts of the equipment Work on Improving Equipment
Localise scattering of Debris
Work on Hard-to-Clean Areas

Design better methods for continual cleaning Work on creating Visual Controls Make equipment more transparent
Hard to Clean is Hard to Inspect
Standardise Maintenance Activities

Enlist factors of Deterioration Draft provisional standards of cleaning , inspecting and maintenance Study the structure and function of the Equipment thoroughly
Adhere and Empower
Develop Operating Conditions

Learn of Equipment Optimal Performance Parameters Work with experts to learn of Equipment Deterioration Document relationship of deterioration to surroundings and effects of deterioration Work on establishing early warning signals
Establish Conditions
Develop Diagnostic Skills

Create Checklists and Use them appropriately Improve Operational Reliability and Clarify Abnormal conditions Establish and Document appropriate Corrective and Preventive Measures
Control Conditions
Manage Entire Workspace

Standardise and Document Workshop Housekeeping Procedures Facilitate an All-encompassing Companywide Maintenance Programme Establish the 5S System Cover all areas and all assets in the organisation
Manage Conditions
Improve Continually
Train each and every person in the organisation in TPM Record and Analyse Equipment Data continually and facilitate organised feedback Relate Maintenance Goals to Company Goals Integrate Equipment Management into Long term and Annual Organisational Plans
Transcend Performance Standards
5 Technique 5 SS Process The 5 - S practice is a technique used to maintain a Quality Culture in an organisation. The name stands for 5 Japanese words Seiri Seiton Seiso Seiketsu Shitsuke
5 S Process
Seiri = Sort
Arrange and discard unnecessary items Have all unnecessary items been removed ? Is it clear why the unnecessary items were there in the first place ? Are all loose wires tied up and bundled ? Have all hoses / pipes been grouped ? Are all walkways clearly outlined ?
5 S Process
Seiton = Straighten
Everything has a place and everything in it's place Have special Areas been designated for different items ? Are things put away after use ? Have all joints been tightened / fastened ? Are all workstations , drawers , shelves and cleaning implements kept in an orderly fashion ? Are any visual indicators used to indicate things out of place ?
5 S Process
Seiso = Scrub
Clean all areas / remove dust and grime Are all workstations free from dry dust and wet dust ? Are all relevant fixtures , jigs , tools clean ? Are the work areas clean ? Are suitable ventilation equipment / exhausts clean ?
5 S Process
Seiketsu - Standardise
Standardise the above three activities Have procedures been written for the above three activities ? Have instructions for cleanliness and 'everything in it's place' been given ? Are regular checks being carried out ? Is maintenance a part of activities being carried out ?
5 S Process
Shitsuke - Systemise
Systemise all of the above activities Have all of these disciplines been extended for personal activities ? Have all office spaces been assigned 5S activities ? How often are audits carried out companywide ? What are the improvements being carried out ?
Seiri
Typical Activities
Throw away things that are not needed Deal with causes of dirt leaks and noise Organise cleaning the floors and housecleaning Treat defects, leakage and breakage Organise the storage of parts and files Policy of One-is-best - one set of tools/stationery - one page form/memo - one day processing - one stop service for customer - one location file
Location Action by
Seiton
Typical Activities Everything has a clearly designated name and place 30-second retrieval and storage Filing standards and control Zoning and placement marks Eliminate covers and locks First in, first out arrangement Neat notice boards (also remove obsolete notices) Easy-to-read notices (including zoning) Straight-line and right angle layout Functional placement for materials, parts, tools etc Location Action by
Seiso
Typical Activities Location Action by
Individual cleaning responsibility assigned Make cleaning and inspection easier Regular cleaning campaigns Cleaning inspections and correct minor problems Clean even the places most people do not notice
Seiketsu
Typical Activities
Transparency ( e.g. glass covers for see-through) Inspection OK marks or labels Danger zones marked on meters and switches Danger warning signs and marks Fire extinguisher and Exit signs Directional markings on pipes, gangways etc Open and shut directional labels on switches etc Colour-coded pipes Foolproofing (Poka-yoke) practices Responsibility labels Electrical/telephone wire management Colour coding - paper, files, containers etc Prevent noise and vibration Department/office labels and name plates Park-like environment (garden office/factory)
Location Action by
Shitsuke
Typical Activities Location Action by
All-together cleaning Practice pick-up of components and waste Wear your safety helmet/gloves/shoes etc Public-space 5-S management Practice dealing with emergencies Execute in individual responsibility Good telephone and communication practices Design and follow the 5-S manual Seeing-is-believing: check for 5-S environment
Criteria Purposes The Criteria are the basis for organisational selfassessments, for making Awards, and for giving feedback to applicants. In addition, the Criteria have three important roles in strengthening U.S. competitiveness: to help improve organisational performance practices, capabilities and results to facilitate communication and sharing of best practices information among U.S. organisations of all types to serve as a working tool for understanding and managing performance and for guiding organisational planning and opportunities for learning
Criteria for Performance Excellence Goals

The Criteria are designed to help organisations use an integrated approach to organisational performance management that results in delivery of ever-improving value to customers, contributing to marketplace success improvement of overall organisational effectiveness and capabilities
organisational and personal learning
Core Values and Concepts

The Criteria are built upon the following set of interrelated Core Values and Concepts :
visionary leadership
customer-driven excellence organisational and personal learning
valuing employees and partners

agility focus on the future
managing for innovation
management by fact social responsibility

focus on results and creating value
systems perspective
The Core Values and Concepts are embodied in seven Categories, as follows: Leadership
Strategic Quality Planning

Customer Focus and Satisfaction
Measurement, Analysis, and Knowledge Management

Human Resource Development and Management
Management of Process Quality

Quality and Operational Results
Customer and Market Focussed Strategy and Action Plans 2 Strategic Quality Planning
5 Human Resource Development and Management
1 Leadership
7 Quality and Operational Results

3 Customer Focus and Satisfaction 6 Management of Process Quality
Measurement, Analysis, and Knowledge Management
Malcolm Baldrige Quality Award

There are a total of 1000 points for evaluating these seven sections. Each section is assigned certain points or weightage for evaluation. The sections are broadly categorised under three main headings Driver System Results
Balridge Award Model

System Results
Driver
Information and analysis (75) Strategic Quality planning (60) Human Resource development and management (150) Management of process Quality (140)
Quality and operational Results (180)
Leadership (95)
Customer focus and Satisfaction (300)
Note: Figures in bracket indicate number of points kept for evaluation ( Total points = 1000 )
Leadership
Criteria Points
Senior executive leadership Management for Quality Public responsibility Total
45 25 25 95
Information & analysis
Criteria
Points
Scope &Management of Quality & performance data 15 Competitive comparisons & benchmarking 20 Analysis & uses of company-level data 40 Total 75
Strategic Quality Planning
Criteria
Points
35 25 60
Strategic Quality & performance planning process Quality & performance plans Total
HRD & Management

Criteria
Human resource planning and management Employee involvement Employee education and training Employee performance and recognition Employee wellbeing and satisfaction Total
Points
20 40 40 25 25 150
Management of Process Quality
Criteria
Points
40 35 30 20 15 140
Design and introduction of Quality products Product production and delivery processes Business and support service processes Supplier Quality Quality assessment Total
Quality & Operational results

Criteria Product and service Quality results Company operational results Business and support services results Supplier Quality results Total Points 70 50 25 35 180
Customer focus & satisfaction

Criteria Current & future customer expectations Customer relationship management Commitment to customers Customer satisfaction determination Customer satisfaction results Customer satisfaction comparison Total Points 35 65 15 30 85 70 300
Objectives of Waste Assessment

To identify the quantum of current Waste in the entire value stream of the company To assess the cost of Waste To determine the reduction potential of Waste
Use the above information to Prioritise the improvement action needed to eliminate the waste Develop Improvement Action Plan
What is Waste
Waste is defined as any human activity which absorbs resources but creates no value
Mistakes which require rectification Production of unwanted items resulting in inventory pile up Unnecessary Processing Purposeless Movement of employees and transport of goods from one place to another Idle time ( People Waiting for material / work ) Goods and services which do not meet the needs of customer
Types of Waste
Waste Waste Waste Waste Waste Waste Waste Waste Waste Waste Waste Waste Waste Waste of Over production of Unnecessary Inventory of Defects of Unnecessary Motions of Inappropriate Processing of Waiting of Transporting of Untapped Human Potential of Inappropriate Systems of Natural Resources of Material in the Office of Customer time of Defecting Customers
1. Waste of Overproduction
Produced to compensate loss in production due to absenteeism, equipment break down, higher rejection rate, inconsistency in operation Instead of eliminating the root causes companies produce more than what is required
2. Waste of Inventory
More than the required stock of finished product, work-in process and raw materials that do not add any value Increased requirement of transportation, storage and handling costs are outcomes Scrapping due to limited shelf life or obsolete designs / products
3. Waste of Defects
Interruption of production and expensive rework Scrapping of Rejects Damaged tools , jigs and fixtures
4. Waste of Motion
Any motion of a persons body not directly related to adding value Lifting or carrying heavy loads
5. Waste of Processing
Inadequate technology or design leading to waste in processing
6. Waste of Waiting
Operators work put on hold because of line imbalances, lack of parts, or machine downtime or operator monitoring the machine when machine is adding value to the job
7. Waste of Transport
Transport is an essential part of operations, but moving materials and products add no value Any process physically distant from main line adds waste of transport Use of modern material handling concepts could be a solution
8.Waste of Untapped Human Potential
The purpose of efficient system is to create thinking people Not using creative brain power of employees, not listening, thinking that only managers have idea worth pursuing
9. Waste of Inappropriate system
Unnecessary record keeping, reconciling is pure waste
checking,
10. Waste of Energy & Water
Energy here refers to sources of power:
electricity, gas, oil, coal and so on Energy & water are not only the significant sources of cost , but there is moral and social responsibility to preserve them for future generations
11. Waste of Materials
To reduce the wastage of materials a Life Cycle Cost approach is needed. Material conservation to be incorporated during design, manufacturing, consumer usage and beyond use in recovery
12. Service & Office Waste

All manufacturers are linked with service operations. Overproduction, relates to excess photocopying, wasted food and excess meetings.
13. Waste of Customer Time

Where a customer is forced to wait in a queue or to wait for value adding services. This is primarily a scheduling issue. More of this waste occurs where a customer has to provide the same information several times Waiting causes customer inconvenience or customer dissatisfaction
14. Waste of Defecting Customers
A waste that is causing concern to service managers and marketing professionals is the loss of existing customers It costs five times more to acquire a new customer as it does to retain the existing one
Mistake proofing Mistake proofing is a scientific technique for improvement of operating systems including materials, machines and methods with an aim of preventing problems due to human error. The term error means a sporadic deviation from standard procedures resulting from loss of memory, perception or motion.
Defect Vs errors
It is important to understand that defects and errors are not the same thing. A defect is the result of an error, or an error is the cause of defects as explained below. Cause Error Result Defect
Prevention of defects
Cause Machine or human error
Intermediate result Take corrective action
End result
Work Procedure
Detect error
zero defect
Modify work procedure to prevent such errors
Analyse for preventive action
Types of Error
Error in memory of PLAN : Error of forgetting the sequence/ contents operations required or restricted in standard procedures.
Error in memory of EXECUTION : Errors of forgetting the sequence/contents of operations having been finished.
Error in PERCEPTION of type : Error of selecting the wrong object in type or quantity. Error in perception of MOVEMENT : Error of misunderstanding/misjudging the shape, position, direction or other characteristics of the objects. Error in motion of objects. HOLDING : Error in failing to hold
Error in motion of CHANGING : Errors of failing to change the shape , position , direction , or other characteristics of object according to the standard.
Human error provoking situations
Complex design Inadequately written standards Too many parts Mix up Too many steps Specifications or critical conditions Too many adjustments Frequent repetition
Examples of mistake proofing
Finger print ID lock is an excellent example of mistake proofing. There's no need to fumble for your keys in the dark any more. The Fingerprint ID Door Lock is a cylindrical lock combined with a security bolt that will let you into the house using just your finger. It reads your unique fingerprint and only allows entry to prints it recognises.
Gas pumps are equipped with hose couplings that break away and quickly shutoff the flow of petrol.
Automobiles controls have a mistake proofing device to ensure that the key in the on position before allowing the driver to shift out of park ( for automatic gears ).The keys can not be removed until the car is in park.
3.5 inch diskette can not be inserted unless diskette is oriented correctly.This is as far as diskette can be inserted upside-down. The beveled corner of the diskette pushes a stop in the disk drive out of the way allowing diskette to be inserted.This feature,along with the fact that the diskette is not square,prohibit incorrect orientation.
Electronic car locks can have three mistake proofing devices: Ensures that no door is left unlocked. Door automatically locks when car exceeds a predetermined speed Lock wont operate when door is open and engine is running.
New lawn mowers are required to have a safety bar on the handle that must be pulled back in order to start the engine.If you let go of the safety bar,the mowers blade stops in 3 seconds or less.This is an adaptation of thedead man switch from railroad locomotives.

Retail stores use electronic article surveillance to ensure that no one walks away without making payment.

Foundation of Modern Operations Management: Production Viewed As A System Customers

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Foundation of Modern Operations Management: Production Viewed As A System Customers

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Design and Re - design

Receipt and Test of Materials

Suppliers of Materials and Equipment

Tests of Processes , Machines , Methods , Costs

Production Viewed as a System

Foundation of Modern Operations Management

A META Group Study

Evolution of Operations Management Pre Industrial Revolution Era

Evolution of Operations Management Industrial Revolution

The First Steam Machine

Evolution of Operations Management Industrial Revolution

Principles of Scientific Management

Time and Motion Studies

The Moving Assembly Line

Evolution of Operations Management

Evolution of Operations Management

Operations in Todays World

Definition of Operations Management

Physiological Healthcare and Hospitality

The Need for Operations Management in todays World

Objectives of Operations Management

Regional Location Factors

Regional Location Factors

Global Location Factors

Global Location Factors

Retail and service facilities

Location Analysis Techniques

Location Analysis Techniques

Location Analysis Techniques

Location Analysis Techniques

Between 10 15 % of total cost

Location Analysis Techniques

Location Analysis Techniques

Location Analysis Techniques

Location Analysis Techniques

Have hostile relationships with communities 0 25 in close proximity

Which Site qualifies based on the Multiattribute Preference Theory ?

Using Weights ascribed we get

Weight Site 1 0.30 0.20 0.15 0.15 0.10 0.05 0.05 70 80 60 75 65 85 80

Weighted Scores Scores : Site 1 72.00 ; Site 2 79.00 ; Site 3 81.75

Site 1 21.00 16.00 9.00 11.25 6.50 4.25 4.00

Site 2 18.00 18.00 14.25 12.00 9.00 4.50 3.25

Site 3 27.00 15.00 10.50 12.00 9.50 3.25 4.50

Site 3 The preferred location

Typical Attributes that an MNC looks for in a Global Operations Site

Trade Regulations Duties and Tariffs Container Support

Centre of Gravity Technique

Current Location is set as ( 0 , 0 ) on a Cartesian Plane

Distribution Site co-ordinates are computed accordingly

Current Site of Operations

Co-ordinates of New Location ( x , y ) are computed thus (x1)(W1) + (x2)(W2) + (x3)(W3) W1 + W2 + W3

(y1)(W1) + (y2)(W2) + (y3)(W3) W1 + W2 + W3

B 100 500 100

C 250 600 130

Co-ordinates of New Location ( x , y ) are computed thus

(200)(70) + (500)(100) + (600)(130) + (300)(60)

Location of the Warehouse

Load Distance Technique

di = (xi - x)2 + (yi - y)2

Potential Sites Site X Y 1 360 180 2 420 450 3 250 400

B 100 500 100

C 250 600 130

Load Distance = (70)(161.2)+(100)(412.3)+(130)(434.16)+(60)(184.31)

Load Distance = (70)(333.02)+(100)(323.88)+(130)(226.71)+(60)(170)

Load Distance = (70)(206.19)+(100)(180.27)+(130)(200)+(60)(269.25)