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Production Operations Management Ebook

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Chapter 1: Introduction to Production and Operations Management Chapter 2: Strategic Operations Management Chapter 3: Production Processes. This book covers the emerging and important topics related to production and operations management in a systematic way. It covers not only the essentials of. This widely adopted and well-established book, now in its Third Edition, provides the students of management and engineering with the latest.

Manufacturing plants supplying to a specific market area: This type of strategy is useful where market proximity consideration dominates the resources and technology considerations. This strategy requires great deal of coordination from the corporate office.

An extreme example of this strategy is that of soft drinks bottling plants. Plants divided on the basis of the process or stages in manufacturing: Each production process or stage of manufacturing may require distinctively different equipment capabilities, labour skills, technologies, and managerial policies and emphasis. Since the products of one plant feed into the other plant, this strategy requires much centralized coordination of the manufacturing activities from the corporate office that are expected to understand the various technological aspects of all the plants.

Plants emphasizing flexibility: This requires much coordination between plants to meet the changing needs and at the same time ensure efficient use of the facilities and resources.

Frequent changes in the long-term strategy in order to improve be efficiently temporarily, are not healthy for the organization. In any facility location problem the central question is: This is acceptable when it does not violate the basic business and managerial outlines, i.

For example, expansion should not compromise quality, delivery, or customer service. Unless there are very compelling reasons, relocation is not done. The reasons will be either bringing radical changes in technology, resource availability or other destabilization.

All these factors are applicable to service organizations, whose objectives, priorities and strategies may differ from those of hardcore manufacturing organizations.

In Case of Global Location Because of globalisation, multinational corporations are setting up their organizations in India and Indian companies are extending their operations in other countries. In case of global locations there is scope for virtual proximity and virtual factory. Many firms use the communications highway for conducting a large portion of their business transactions. Logistics is certainly an important factor in deciding on a location—whether in the home country or abroad.

Markets have to be reached. Customers have to be contacted. Hence, a market presence in the country of the customers is quite necessary. The location decision need not always necessarily pertain to own operations. Tangible Reasons The trangible reasons for setting up an operations facility abroad could be as follows: Reaching the customer: One obvious reason for locating a facility abroad is that of capturing a share of the market expanding worldwide.

The phenomenal growth of the GDP of India is a big reason for the multinationals to have their operations facilities in our country. An important reason is that of providing service to the customer promptly and economically which is logistics-dependent. Therefore, cost and case of logistics is a reason for setting up manufacturing facilities abroad. Reaching the customer is thus the main objective. The tangible costs could be the logistics related costs; the intangible costs may be the risk of operating is a foreign country.

The other tangible reasons could be as follows: This may be due to lower labour costs, lower raw material cost, better availability of the inputs like materials, energy, water, ores, metals, key personnel etc.

Intangible Reasons The intangible reasons for considering setting up an operations facility abroad could be as follows: Organisational Learning-related Reasons a The firm can learn advanced technology.

For example, it is possible that cutting-edge technologies can be learn by having operations in an technologically more advanced country. Such learning may help the entire product-line of the company. A physical location there may be essential towards this goal. For this reason, it may have to be physically present where the action is. If the firm has a manufacturing plant there, it will have intensive interaction with the suppliers in that country from whom there may be much to learn in terms of modern and appropriate technology, modern management methods, and new trends in business worldwide.

This may help the firm in lobbying with the government of that country and with the business associations in that country. The firm could, thus, reduce its supply risks. Thus, the firm can gather the best of people from across the globe.

If one market goes slow the other may be doing well, thus lowering the overall risk. Managers of both service and manufacturing organizations must weigh many factors when assessing the desirability of a particular site, including proximity to customers and suppliers, labour costs, and transportation costs.

Location conditions are complex and each comprises a different Characteristic of a tangible i. Freight rates, production costs and non-tangible i. Location conditions are hard to measure.

Tangible cost based factors such as wages and products costs can be quantified precisely into what makes locations better to compare.

On the other hand non-tangible features, which refer to such characteristics as reliability, availability and security, can only be measured along an ordinal or even nominal scale. Other non-tangible features like the percentage of employees that are unionized can be measured as well. To sum this up non-tangible features are very important for business location decisions. It is appropriate to divide the factors, which influence the plant location or facility location on the basis of the nature of the organisation as 1.

General locational factors, which include controllable and uncontrollable factors for all type of organisations. Specific locational factors specifically required for manufacturing and service organisations.

Location factors can be further divided into two categories: Dominant factors are those derived from competitive priorities cost, quality, time, and flexibility and have a particularly strong impact on sales or costs. Secondary factors also are important, but management may downplay or even ignore some of them if other factors are more important. Proximity to markets 2.

Supply of materials 3. Transportation facilities 4. Infrastructure availability 5. External economies 7. Government policy 9.

Climate conditions Supporting industries and services Community and labour attitudes Proximity to markets: Every company is expected to serve its customers by providing goods and services at the time needed and at reasonable price organizations may choose to locate facilities close to the market or away from the market depending upon the product. When the downloaders for the product are concentrated, it is advisable to locate the facilities close to the market.

Nearness to the market ensures a consistent supply of goods to customers and reduces the cost of transportation. Supply of raw material: It is essential for the organization to get raw material in right qualities and time in order to have an uninterrupted production. This factor becomes very important if the materials are perishable and cost of transportation is very high.

General guidelines suggested by Yaseen regarding effects of raw materials on plant location are: Nearness to raw material is important in case of industries such as sugar, cement, jute and cotton textiles.

Transportation facilities: Speedy transport facilities ensure timely supply of raw materials to the company and finished goods to the customers. The transport facility is a prerequisite for! There are five basic modes of physical transportation, air, road, rail, water and pipeline. Goods that are mainly intended for exports demand a location near to the port or large airport. The choice of transport method and hence the location will depend on relative costs, convenience, and suitability.

Thus transportation cost to value added is one of the criteria for plant location. Infrastructure availability: The basic infrastructure facilities like power, water and waste disposal, etc. Certain types of industries are power hungry e. The non-availability of power may become a survival problem for such industries. Process industries like paper, chemical, cement, etc. Supply of water in large amount and good quality, and mineral content of water becomes an important factor.

A waste disposal facility for process industries is an important factor, which influences the plant location. Labour and wages: The problem of securing adequate number of labour and with skills specific is a factor to be considered both at territorial as well as at community level during plant location.

Importing labour is usually costly and involve administrative problem. The history of labour relations in a prospective community is to be studied. Prospective community is to be studied. Productivity of labour is also an important factor to be considered. External economies of scale: External economies of scale can be described as urbanization and locational economies of scale.

In the case of urbanization economies, firms derive from locating in larger cities rather than in smaller ones in a search of having access to a large pool of labour, transport facilities, and as well to increase their markets for selling their products and have access to a much wider range of business services.

Location economies of scale in the manufacturing sector have evolved over time and have mainly increased competition due to production facilities and lower production costs as a result of lower transportation and logistical costs. This led to manufacturing districts where many companies of related industries are located more or less in the same area. This high efficient production system was one main factor in the Japanese car industry for being so successful.

Just in time ensures to get spare parts from suppliers within just a few hours after ordering. To fulfill these criteria corporations have to be located in the same area increasing their market and service for large corporations. By looking at capital as a location condition, it is important to distinguish the physiology of fixed capital in buildings and equipment from financial capital.

Fixed capital costs as building and construction costs vary from region to region. But on the other hand buildings can also be rented and existing plants can be expanded. Financial capital is highly mobile and does not very much influence decisions.

Capital becomes a main factor when it comes to venture capital. In that case young, fast growing or not high tech firms are concerned which usually have not many fixed assets.

These firms particularly need access to financial capital and also skilled educated employees. Government policy: The policies of the state governments and local bodies concerning labour laws, building codes, safety, etc.

In order to have a balanced regional growth of industries, both central and state governments in our country offer the package of incentives to entrepreneurs in particular locations.

The incentive package may be in the form of exemption from a safes tax and excise duties for a specific period, soft loan from financial institutions, subsidy in electricity charges and investment subsidy. Some of these incentives may tempt to locate the plant to avail these facilities offered.

Climatic conditions: The geology of the area needs to be considered together with climatic conditions humidity, temperature. Climates greatly influence human efficiency and behaviour. Some industries require specific climatic conditions e. Supporting industries and services: Now a day the manufacturing organisation will not make all the components and parts by itself and it subcontracts the work to vendors.

So, the source of supply of component parts will be the one of the factors that influences the location. The various services like communications, banking services professional consultancy services and other civil amenities services will play a vital role in selection of a location. Community and labour attitudes: Community attitude towards their work and towards the prospective industries can make or mar the industry.

Community attitudes towards supporting trade union activities are important criteria. Facility location in specific location is not desirable even though all factors are favouring because of labour attitude towards management, which brings very often the strikes and lockouts.

Community infrastructure and amenity: All manufacturing activities require access to a community infrastructure, most notably economic overhead capital, such as roads, railways, port facilities, power lines and service facilities and social overhead capital like schools, universities and hospitals.

These factors are also needed to be considered by location decisions as infrastructure is enormously expensive to build and for most manufacturing activities the existing stock of infrastructure provides physical restrictions on location possibilities. They are listed in the order of their importance as follows.

Favourable labour climate 2. Proximity to markets 3. Quality of life 4. Proximity to suppliers and resources 5. Utilities, taxes, and real estate costs 1. Favorable labour climate: A favorable labour climate may be the most important factor in location decisions for labour-intensive firms in industries such as textiles, furniture, and consumer electronics.

Labour climate includes wage rates, training requirements, attitudes toward work, worker productivity, and union strength.

Many executives consider weak unions or al low probability of union organizing efforts as a distinct advantage. After determining where the demand for goods and services is greatest, management must select a location for the facility that will supply that demand. Locating near markets is particularly important when the final goods are bulky or heavy and outbound transportation rates are high. For example, manufacturers of products such as plastic pipe and heavy metals all emphasize proximity to their markets.

Quality of life: Good schools, recreational facilities, cultural events, and an attractive lifestyle contribute to quality of life. This factor is relatively unimportant on its own, but it can make the difference in location decisions.

Operations Management

Proximity to suppliers and resources: In many companies, plants supply parts to other facilities or rely on other facilities for management and staff support. These require frequent coordination and communication, which can become more difficult as distance increases. Utilities, taxes, and real estate costs: Other important factors that may emerge include utility costs telephone, energy, and water , local and state taxes, financing incentives offered by local or state governments, relocation costs, and land costs.

SECONDARY FACTORS There are some other factors needed to be considered, including room for expansion, construction costs, accessibility to multiple modes of transportation, the cost of shuffling people and materials between plants, competition from other firms for the workforce, community attitudes, and many others.

For global operations, firms are emphasizing local employee skills and education and the local infrastructure. Customers usually look about how close a service facility is, particularly if the process requires considerable customer contact.

For example, few people would like to go to remotely located dry cleaner or supermarket if another is more convenient. Thus the influence of location on revenues tends to be the dominant factor. With a warehouse nearby, many firms can hold inventory closer to the customer, thus reducing delivery time and promoting sales. Avoiding areas where competitors are already well established often pays. However, in some industries, such as new-car sales showrooms and fast- food chains, locating near competitors is actually advantageous.

Production and operations management

The strategy is to create a critical mass, whereby several competing firms clustered in one location attract more customers than the total number who would shop at the same stores at scattered locations.

Recognizing this effect, some firms use a follow —the leader strategy when selecting new sites. Retail activity in the area is important, as shoppers often decide on impulse to go shopping or to eat in a restaurant.

Visibility involves distance from the street and size of nearby buildings and signs. His model took into account several spatial factors for finding the optimal location and minimal cost for manufacturing plants. The point for locating an industry that minimizes costs of transportation and labour requires analysis of three factors: The labour distortion, in which more favourable sources of lower cost of labour may justify greater transport distances. Agglomeration and degglomerating.

Also supporting companies, such as facilities that build and service machines and financial services, prefer closer contact with their customers. Degglommeration occurs when companies and services leave because of over concentration of industries or of the wrong types of industries, or shortages of labour, capital, affordable land, etc.

Weber also examined factors leading to the diversification of an industry in the horizontal relations between processes within the plant. Focusing only on the mechanics of the Weberian model could justify greater transport distances for cheap labour and unexploited raw materials.

When resources are exhausted or workers revolt, industries move to different countries. Some of the popular models are: Factor rating method 2. Weighted factor rating method 3. Load-distance method 4. Centre of gravity method 5. Break even analysis 2. Identify the important location factors. Rate each factor according to its relative importance, i.

Assign each location according to the merits of the location for each factor. Calculate the rating for each location by multiplying factor assigned to each location with basic factors considered. Find the sum of product calculated for each factor and select best location having highest total score. Let us assume that a new medical facility, Health-care, is to be located in Delhi.

The location factors, factor rating and scores for two potential sites are shown in the following table. Which is the best location based on factor rating method? Location factor Factor Rating rating Location 1 Location 2 1. Facility utilization 8 3 5 2. Total patient per month 5 4 3 3. Average time per emergency trip 6 4 5 4. Land and construction costs 3 1 2 5. Facility utilization 8 3 24 5 40 2. Total patient per 5 4 20 3 15 month 3.

Average time per 6 4 24 5 30 emergency trip 4. Land and 3 1 3 2 6 construction costs 5. Employee 5 5 25 3 15 preferences Total 96 Total The total score for location 2 is higher than that of location 1. Hence location 2, is the best choice.

The site with the highest weighted score is selected as the best choice. What is the weighted score for these sites?

Which is the best location? Location factor Weight Scores Location 1 Location 2 1.

Facility utilization 25 3 5 2. Total patient km per month 25 4 3 3. Average time per emergency trip 25 3 3 4. Land and construction costs 15 1 2 5. Employee preferences 10 5 3! The objective is to select a location that minimizes the total weighted loads moving into and out of the facility. The distance between two points is expressed by assigning the points to grid coordinates on a map.

An alternative approach is to use time rather than distance. It will receive inbound shipments from several suppliers, including one in Ghaziabad. If the new warehouse were located at Gurgaon, what would be the distance between the two facilities? If shipments travel by truck, the distance depends on the highway system and the specific route taken.

Computer software is available for calculating the actual mileage between any two locations in the same county. However, for load-distance method, a rough calculation that is either Euclidean or rectilinear distance measure may be used.

Euclidean distance is the straight-line distance, or shortest possible path, between two points. Essentially, this distance is the sum of the two dashed lines representing the base and side of the triangle in figure.

The distance travelled in the x-direction is the absolute value of the difference in x-coordinates. Depending on the industry, a load may be shipments from suppliers, between plants, or to customers, or it may be customers or employees travelling to or from the facility.

The firm seeks to minimize its load- distance, generally by choosing a location so that large loads go short distances. To calculate a load-distance for any potential location, we use either of the distance measures and simply multiply the loads flowing to and from the facility by the distances travelled. These loads may be expressed as tones or number of trips per week.

This calls for a practical example to appreciate the relevance of the concept. Let us visit a new Health-care facility, once again. The new Health-care facility is targeted to serve seven census tracts in Delhi. The table given below shows the coordinates for the centre of each census tract, along with the projected populations, measured in thousands. Customers will travel from the seven census tract centres to the new facility when they need health-care. Two locations being considered for the new facility are at 5.

Details of seven census tract centres, co-ordinate distances along with the population for each centre are given below. If we use the population as the loads and use rectilinear distance, which location is better in terms of its total load- distance score? Census tract x, y Population l 1 A 2.

Calculate the load-distance score for each location. Using the coordinates from the above table.

Calculate the load-distance score for each tract. Therefore, the location in census tract F is a better location. This method can be used to assist managers in balancing cost and service objectives.

The centre of gravity method takes into account the locations of plants and markets, the volume of goods moved, and transportation costs in arriving at the best location for a single intermediate warehouse. The centre of gravity is defined to be the location that minimizes the weighted distance between the warehouse and its supply and distribution points, where the distance is weighted by the number of tones supplied or consumed.

The first step in this procedure is to place the locations on a coordinate system.

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The origin of the coordinate system and scale used are arbitrary, just as long as the relative distances are correctly represented. This can be easily done by placing a grid over an ordinary map. The centre of gravity is determined by the formula. Customers will travel from the seven census tract centres to the new facility when they need health- care. Details of seven census tract centres, coordinate distances along with the population for each centre are given below.

To calculate the centre of gravity, start with the following information, where population is given in thousands. Census tract x, y Population l Lx Ly 1 A 2. Using the centre of gravity as starting point, managers can now search in its vicinity for the optimal location. Break even analysis is concerned with finding the point at which revenues and costs agree exactly. The Fig. Break even point is the volume of output at which neither a profit is made nor a loss is incurred.

This will be helpful in identifying the range of production volume over which location can be selected.

Potential locations X, Y and Z have the cost structures shown below. The ABC company has a demand of 1,30, units of a new product.

Three potential locations X, Y and Z having following cost structures shown are available. Select which location is to be selected and also identify the volume ranges where each location is suited? Solve for the crossover between X and Y: From the graph Fig. These costs are influenced by a number of factors as discussed earlier. The various costs which decide locational economy are those of land, building, equipment, labour, material, etc. Other factors like community attitude, community facilities and housing facilities will also influence the selection of best location.

Economic analysis is carried out to decide as to which locate best location. The following illustration will clarify the method of evaluation of best layout selection. From the following data select the most advantageous location for setting a plant for making transistor radios. It is a floor plan of the physical facilities, which are used in production.

The objectives of plant layout are: Streamline the flow of materials through the plant. Facilitate the manufacturing process. Maintain high turnover of in-process inventory. Minimise materials handling and cost. Effective utilisation of men, equipment and space.

Make effective utilisation of cubic space. Flexibility of manufacturing operations and arrangements. Provide for employee convenience, safety and comfort. Minimize investment in equipment. Minimize overall production time. Maintain flexibility of arrangement and operation.

Facilitate the organizational structure. Principle of integration: A good layout is one that integrates men, materials, machines and supporting services and others in order to get the optimum utilisation of resources and maximum effectiveness. Principle of minimum distance: This principle is concerned with the minimum travel or movement of man and materials.

The facilities should be arranged such that, the total distance travelled by the men and materials should be minimum and as far as possible straight line movement should be preferred. Principle of cubic space utilisation: The good layout is one that utilise both horizontal and vertical space.

It is not only enough if only the floor space is utilised optimally but the third dimension, i. Principle of flow: A good layout is one that makes the materials to move in forward direction towards the completion stage, i. Principle of maximum flexibility: The good layout is one that can be altered without much cost and time, i. Principle of safety, security and satisfaction: A good layout is one that gives due consideration to workers safety and satisfaction and safeguards the plant and machinery against fire, theft, etc.

Principle of minimum handling: A good layout is one that reduces the material handling to the minimum. Process layout 2. Product layout 3. Combination layout 4. Fixed position layout 5.

Group layout 2. All machines performing similar type of operations are grouped at one location in the process layout e. Thus, in process layout the arrangement of facilities are grouped together according to their functions. A typical process layout is shown in Fig. The flow paths of material through the facilities from one functional area to another vary from product to product.

Usually the paths are long and there will be possibility of backtracking. Process layout is normally used when the production volume is not sufficient to justify a product layout. Typically, job shops employ process layouts due to the variety of products manufactured and their low production volumes. In process layout machines are better utilized and fewer machines are required.

Flexibility of equipment and personnel is possible in process layout. Lower investment on account of comparatively less number of machines and lower cost of general purpose machines.

Higher utilisation of production facilities. A high degree of flexibility with regards to work distribution to machineries and workers.

The diversity of tasks and variety of job makes the job challenging and interesting. Supervisors will become highly knowledgeable about the functions under their department. Limitations 1. Backtracking and long movements may occur in the handling of materials thus, reducing material handling efficiency. Material handling cannot be mechanised which adds to cost. Process time is prolonged which reduce the inventory turnover and increases the in- process inventory.

Lowered productivity due to number of set-ups. Throughput time gap between in and out in the process time is longer.

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Space and capital are tied up by work-in-process. If the volume of production of one or more products is large, the facilities can be arranged to achieve efficient flow of materials and lower cost per unit. Special purpose machines are used which perform the required function quickly and reliably.

The product layout is selected when the volume of production of a product is high such that a separate production line to manufacture it can be justified. In a strict product layout, machines are not shared by different products. Therefore, the production volume must be sufficient to achieve satisfactory utilisation of the equipment. A typical product layout is shown in Fig. The flow of product will be smooth and logical in flow lines. In-process inventory is less.

Throughput time is less. Minimum material handling cost. Simplified production, planning and control systems are possible. Less space is occupied by work transit and for temporary storage. Reduced material handling cost due to mechanised handling systems and straight flow. The book provides a practical road map, step-by-step, to plan, Maximizing Performance and Maintaining Results, Second The ultimate guide to human-centered design Even the smartest among us can feel inept as we fail to figure out which light switch or oven burner to turn on, or whether to push, pull, or slide a door.

The fault, argues this ingenious-even liberating-book, lies not in ourselves, but in product design that ignores the needs of users and the The ultimate guide to human-centered design Even the smartest among us can feel inept as we Score your highest in Operations Management Operations management is an important skill for current and aspiring business leaders to develop and master. It deals with the design and management of products, processes, services, and supply chains.

Operations management is a growing field and a required course for most undergraduate business majors Score your highest in Operations Management Operations management is an important skill for Learn how you can guard against failure, eliminate surprises, and keep projects on task. A broad general introduction to all essential aspects of logistics and supply chain management, set within the wider business context.

The book uses well-developed pedagogy and numerous case studies, guiding the reader through the subject by retaining a strong focus on the application of theory and practical situations. A broad general introduction to all essential aspects of logistics and supply chain management, set Toggle navigation. New to eBooks. Filter Results. Last 30 days Last 90 days All time. English Only. All PDF Epub. Essentials of Inventory Management Max Muller. Would you also like to submit a review for this item?

You already recently rated this item. Your rating has been recorded. Write a review Rate this item: Preview this item Preview this item. Production and operations management Author: K Aswathappa ; Shridhara Bhat Publisher: Mumbai [India]: Himalaya Pub. House, Chapter 1: Introduction to Production and Operations Management Chapter 2: Strategic Operations Management Chapter 3: Design of Production Systems Chapter 5: Manufacturing Technology Chapter 6: Long-Range Capacity Planning Chapter 7: Facility Location Chapter 8: Facility Layout Chapter 9: Design of Work Systems Chapter Resource Requirement Planning Chapter Shop Floor Planning and Control Chapter Quality Management Chapter Maintenance Management Chapter Introduction to Materials Management Chapter Inventory Management Chapter JustlnTime Systems Chapter Logistics and Supply Chain Management Index Read more Show all links.

Allow this favorite library to be seen by others Keep this favorite library private.Fixed position layout 5. The facilities should be arranged such that, the total distance travelled by the men and materials should be minimum and as far as possible straight line movement should be preferred. This led to manufacturing districts where many companies of related industries are located more or less in the same area. Poornima Anil Kumar and Mrs. You may send this item to up to five recipients.

Useful Basic Tools Chapter 4: Supply of materials 3. The Sales Acceleration Formula. It is relatively easy to assess the effects of thermal conditions, especially when excessive heat or cold is an obvious problem. The distance between two points is expressed by assigning the points to grid coordinates on a map.