Unit 1
Production Management
1. INTRODUCTION
The systems aspects of manufacturing are more important than ever today. The word manufacturing was originally derived from two Latin words manus (hand) and fact us(make), so that the combination means to make by hand.
In this way, manufacturing was accomplished when the word first appeared in English around 1567. Commercial goods of those times were made by hand. The methods were handicraft, accomplished in small shops and the goods were relatively simple. As many years passed, the products become more complex along with processes. Thus factories were developed with many workers at a single site; the work was organized using machines.
Modern manufacturing enterprises that manage these production systems must cope with the economic realities of the modern world. These realities include the following:
Globalization
International outsourcing
Local outsourcing
Contract manufacturing
Trend toward the service sector
Quality expectations
Operational efficiency
System: It consists of elements or components. The elements or components are interlinked together to achieve the objective for which it exists. Eg: the human body, educational institutions, business organizations.
Transformation process
1. Components of a system: The input, processing, output, and control of a system are called the components of a system.
2. Control: There are two types of control, namely Proactive Control and Reactive Control. There are three types of feedback mechanisms such as feed-forward control, feedback control, and concurrent control.
Types of Production Systems; A production manager will have to choose the most appropriate method for his enterprise. The final decision regarding any particular method of production is very much affecting by the nature of the products and the quantity to produce. The types of Production Systems are grouped under two categories viz., Intermittent production system, and Continuous production system.
Continuous System or Flow System:
Continuous or flow production refers to the manufacturing of large quantities of a single or at most a very few varieties of products with a standard set of processes and sequences. The mass production is carried on continuously for stock in anticipation of demand.
Characteristics of Continuous System:
The following characteristics below are;
- The volume of output is generally large (mass production) and goods are produced in anticipation of demand.
- The product design and the sequence of the operations are standardized i.e. identical products are produced.
- Special purpose automatic machines are used to perform standardized operations.
- Machine capacities are balanced so that materials are fed at one end of the process and the finished product is received at the other end.
- Fixed path materials handling equipment is used due to the predetermined sequence of operations.
- Product layout designed according to a separate line for each product is considered.
Types of Continuous System:
Continuous production is of the following types;
1. Mass Production:
This production refers to the manufacturing of standardized parts or components on a large scale. Mass production system offers economies of scale as the volume of output is large. The quality of products tends to be uniform and high due to standardization and mechanization. In a properly designed and equipped process, individual expertise plays a less prominent role.
2. Process Production:
Production is carried on continuously through a uniform and standardized sequence of operations. Highly sophisticated and automatic machines are used. Process production is employed in the bulk processing of certain materials. The typical processing Industries are fertilizers plants, petrochemical plants, and milk dairies which have highly automated systems and sophisticated controls.
They are not labor-intensive and the worker is just an operator to monitor the system and take corrective steps if called for. On the basis of the nature of the production process, flow production may classify into Analytical and Synthetic Production.
1. Analytical Process: In the Analytical Process of production, the raw material is broken into different products e.g. crude oil is analyzed into gas, Naptha, petrol, etc. Similarly, coal is processed to obtain coke, coal gas, coal tar, etc.
2. Synthetic Process: Synthetic Process of production involves the mixing of two or more materials to manufacture a product, for instance, lauric acid, myristic acid, stearic acid are synthesized to manufacture soap.
Assembly Lines:
Assembly line a type of flow production which is developed in the automobile industry in the USA. A manufacturing unit prefers to develop and employ an assembly line because it helps to improve the efficiency of production. In an assembly line, each machine must directly receive material from the previous machine and pass it directly to the next machine.
Machine and equipment should be arranged in such a manner that every operator has free and safe access to each machine. Space should be provided for free movement of forklifts, trucks, etc. which deliver materials and collect finished products.
Intermittent System:
According to Buffa, Intermittent situations are those where the facilities must be flexible enough to handle a variety of products and sizes or where the basic nature of the activity imposes a change of important characteristics of the input (e.g. change. in the product design). In instances such as these, no single sequence pattern of operations is appropriate, so the relative location of the operation must be a compromise that is best for all inputs considered together.
In the industries following the intermittent production system, some components may be made for inventory but they are combined differently for different customers. The finished product is heterogeneous but within a range of standardized options assembled by the producers. Since production is partly for stock and partly for consumer demand, there are problems to be met in scheduling, forecasting, control, and coordination.
Characteristics of Intermittent System:
The following characteristics below are;
- The flow of production is intermittent, not continuous.
- The volume of production is generally small.
- A wide variety of products are produced.
- General purpose, machines, and equipment are used so as to be adaptable to a wide variety of operations.
- No single sequence of operations is used and periodical adjustments are made to suit different jobs or batches.
- Process layout is most suited.
The intermittent system is much more complex than continuous production because every product has to be treated differently under the constraint of limited resources.
The intermittent system can be effective in situations that satisfy the following conditions:
- The production centers should be located in such a manner so that they can handle a wide range of inputs.
- Transportation facilities between production centers should be flexible enough to accommodate a variety of routes for different inputs.
- It should be provided with the necessary storage facility.
Types of Intermittent System:
Intermittent Production May be of two types;
1. Job Production:
Job or unit production involves the manufacturing of a single complete unit with the use of a group of operators and processes as per the customers order. This is a special order type of production. Each job or product is different from the other and no repetition is involved. The product is usually costly and non-standardized.
Customers do not make a demand for exactly the same product on a continuing basis and therefore production becomes intermittent. Each product is a class by itself and constitutes a separate job for the production process. Shipbuilding, electric power plant, dam construction, etc. are common examples of job production.
Characteristics of Job Production:
- The product manufactured is custom-made or non-standardized.
- The volume of output is generally small.
- Variable path materials handling equipment are used.
- A wide range of general-purpose machines like grinders, drilling, press, shaper, etc. is used.
Advantages of Job Production:
It is flexible and can adapt easily to changes in product design. A fault in one operation does not result in complete stoppage of the process. Besides, it is cost-effective and time-effective since the nature of the operations in a group is similar. There is reduced material handling since machines are close in a cell. The waiting period between operations is also reduced. This also results in a reduced work-in-progress inventory.
The disadvantages of Job Production:
Job shop manufacturing is the most complex system of production e.g. in building a ship thousands of individual parts must be fabricated and assembled. A complex schedule of activities is required to ensure the smooth flow of work without any bottlenecks. Raw materials and work-in-progress inventories are high due to uneven and irregular flow of work. Workloads are unbalanced, speed of work is slow and unit costs are high.
Batch Production:
Batch production pertains to repetitive production. It refers to the production of goods, the quantity of which is known in advance. It is that form of production where identical products are produced in batches on the basis of demand of customers or of expected demand for products.
This method is generally similar to job production except for the quantity of production. Instead of making one single product as in case of job production, a batch or group of products are produced at one time. It should be remembered here that one batch of products may not resemble with the next batch.
It is defined as, The manufacture of a product in small or large batches or lots at intervals by a series of operations, each operation being carried out on the whole batch before any subsequent operation is performed.
The batch production is a mixture of mass production and job production. Under it machines turn out different products at intervals, each product being produced for a comparatively short time using mass-production methods. Both job production and batch production are similar in nature, except that in batch production the quantity of product manufactured is comparatively large.
Advantages of Batch Production:
- The batch production method possesses the following advantages;
- The work is of a repetitive nature.
- There is a functional layout of various manufacturing processes.
- One operation is carried out on the whole batch and then is passed on to the next operation and so on.
- The same type of machines is arranged at one place.
- It is generally chosen where trade is seasonal or there is a need to produce a great variety of goods.
The disadvantages of Batch Production:
Work-in-progress inventory is high and large storage space is required. Due to frequent changes in product design, no standard sequence of operation can be used. Machine set-ups and tooling arrangements have to be changed frequently. The main problem in batch production is the idle time between one operation and the other. The work has to wait until a particular operation is carried out on the whole batch.
Key takeaways |
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2. A production manager will have to choose the most appropriate method for his enterprise. The final decision regarding any particular method of production is very much affecting by the nature of the products and the quantity to produce. The types of Production Systems are grouped under two categories viz., Intermittent production system, and Continuous production system. |
3. Continuous or flow production refers to the manufacturing of large quantities of a single or at most a very few varieties of products with a standard set of processes and sequences. The mass production is carried on continuously for stock in anticipation of demand. |
Intermittent situations are those where the facilities must be flexible enough to handle a variety of products and sizes or where the basic nature of the activity imposes a change of important characteristics of the input (e.g. change. in the product design). In instances such as these, no single sequence pattern of operations is appropriate, so the relative location of the operation must be a compromise that is best for all inputs considered together.
What is Product Development?
Organizations have to come up with new ideas and new designs for their products. This is to maintain its position in the market. Product development is the complete cycle of all such steps. This starts from the conceptualization to the product deployment. The main goal of the product development process is to develop products according to customer requirements.
This will, in turn, increase the market share of the company. But every product might not satisfy all customer demands. So, companies carry out a thorough analysis of their customer base. This helps them to identify their target market and develop products accordingly.
Stages of Product Development
The different stages of product development are:
1) Idea Generation & Screening
This stage involves the search for new ideas about a new product. In most organizations, there is an ideation team that develops the ideas. The employees may choose only a handful of ideas. The R & D team may also develop these ideas. External sources like their distributors and suppliers can also contribute. In most cases, these have to meet client demands.
Here, analysis and filtering of ideas take place. Officials keep the best ones and discard the rest. The companies aim to look for ideas that can be profitable products.
2) Concept development
After selection of an idea, the company has to transform it into a concept. The marketer then creates alternative product concepts from the new concept. The company then compares the different alternatives. They observe whether these alternatives will meet the customer’s needs.
3) Business analysis
Here the officials analyse the sales, profit and costs associated with the product. By this, they are able to understand whether the product is commercially feasible. Moreover, it has to meet the users demands. For this, they conduct market surveys. Sales history of similar products is also analyzed.
Additionally, it is important to identify possible risks. This helps to reduce problems and developmental errors in the future.
4) Product development
If the product idea passes through all the previous stages, it is converted into a tangible product. This helps to check how well it might work in the market. Thus, the R&D team might launch a prototype model of the product concept.
Additionally, the marketing team develops a strategy for distributing the product. The finance team will calculate the finances associated with it. The advertising team will develop a strategy for promoting the product.
5) Test marketing
For obtaining customer feedback, the company launches a prototype. Through this, the officials are able to test different strategies. These include marketing, positioning, advertising, targeting, packaging, and financing. The customer feedback is taken into account.
According to this data, the developers make the required changes and enhancements.
6) Commercialization
After test marketing, the company officials get a basic understanding of how the product might work in real life. So, before the commercialization of the product, all the major decisions are taken. This will include the identification of the target markets. The launch strategies are also prepared. After that, all the departments collaborate and work on the product.
Stage of Classification of New Product Development by a Company!
From the analysis of PLC, it is clear why the companies should launch new products in the market. The prime success factor behind new-product development is unique and superior product.
1) New-to-the-world products:
These types of new products create an entirely new market. For example, introduction of products like laptops and palmtops has created a new market of mobile computing.
2) New product lines:
New products may allow a company to enter an established market for the first time. Philips has developed flat TV to target a new segment of already crowded CTV market.
3) Additions to existing product lines:
New products can supplement a company’s established product lines. For instance, McDonalds introduced pudina flavoured burgers for Indian consumers.
4) Improvements and revisions of existing products:
These are the new products that replace existing products by providing improved performance or greater perceived value. For example,
Microsoft replaced its MS-DOS by Windows as an improved, user-friendly GUI (Graphical User Interface) based operating system. They also updated Windows regularly and launched the versions of Windows 95, 98, 2000 and XP.
5) Repositioning:
Existing products can be targeted to new markets or market segments. For example, Sahara Airlines is revising its fares to target the railway AC 2/3 tier passengers.
6) Cost reductions:
New products may be developed that provide similar performance at lower cost. The mobile service providers like Airtel, Hutch and Reliance India Mobile are introducing new post-paid schemes with low rental and outgoing facility.
What is Product Design?
Product design consists of all the designing activities. These enable the designer to create the look and feel of the product. These include deciding the architecture of the product and choosing the required materials. It is also important to understand the best design that will suit the customer.
The aim is to develop a design that will appeal to target customers. Product design is applied in the following fields:
developing medical equipment
tableware
furniture
electronics
kitchen appliances
jewellery
Stages of Product Design
The various stages of product design are:
1) Ideation
In this process, designers generate ideas for the design. This can originate from internal and external sources. Internal sources include employees, market analysis, research and development and reverse engineering. In reverse engineering, the competitors products are examined. This helps in generating new ideas.
External sources include feedback from customers, the current market trends, and benchmarking. Benchmarking helps in analysing an organisations product. A comparison with the best product in the current market helps in this process.
2) Feasibility study
Here, the officials will carry out the following feasibility studies:
- Market
- Economic
- Technical
- Strategic
- Risk analysis of the product
The performance specifications are then determined for the particular product concept. If they pass the feasibility study, they might get approved for development.
3) Preliminary design
Here the design engineers transform the performance specifications into technical specifications. The procedure involves developing a prototype and testing it. Based on its performance, the designer revises the design and retests it.
4) Testing
The prototype is tested many times before finalisation. It is also tested in actual market surroundings. This is required for gaining feedback from the target customer group.
5) Product launch
After finalization of all decisions, the product is finally launched for the target customers. The entire management, marketing and production team will work together during this phase.
Key Takeaways |
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2. From the analysis of PLC, it is clear why the companies should launch new products in the market. The prime success factor behind new-product development is unique and superior product. |
3. Product design consists of all the designing activities. These enable the designer to create the look and feel of the product. These include deciding the architecture of the product and choosing the required materials. It is also important to understand the best design that will suit the customer. |
Plant location and layout
Plant location refers to the choice of region and the selection of a particular site for setting up a business or factory.
But the choice is made only after considering cost and benefits of different alternative sites. It is a strategic decision that cannot be changed once taken. If at all changed only at considerable loss, the location should be selected as per its own requirements and circumstances. Each individual plant is a case in itself.
Businessman should try to make an attempt for optimum or ideal location.
What is an ideal location?
An ideal location is one where the cost of the product is kept to minimum, with large market share, the least risk and the maximum social gain. It is the place of maximum net advantage or which gives lowest unit cost of production and distribution. For achieving this objective, small-scale entrepreneur can make use of locational analysis for this purpose.
Selection criteria for plant location:
- Natural or climatic conditions.
- Availability and nearness to the sources of raw material.
- Transport costs?
- Access to market
- Availability of Infrastructural facilities
- Availability of skilled and non-skilled labour and technically qualified and trained managers.
- Banking and financial institutions are located nearby.
- Locations with links: to develop industrial areas or business centers result in savings and cost reductions in transport overheads, miscellaneous expenses.
- Strategic considerations of safety and security should be given due importance.
- Government influences: Both positive and negative aspects
Plant layout means the arrangement of equipment, material, etc facilities and services of the plant within the selected work area to achieve the productivity as high as possible.
Plant layout starts with building design and goes up to movement of work table and material handling system.
Objectives of plant layout:
1. Bottleneck Sandpoint of congestion are eliminated by line balancing so that material handling and transportation is minimized.
2. work stations are designed suitably, so that movement made by the workers is minimized.
3. Waiting time of the semi-finished products is minimized.
4. Increase the flexibility for changes in product design and future modification.
5. Utilization of cubic space, that means besides using the floor space, its ceiling height also utilized to accommodate more material in the same space.
6. Improved work methods and reduced production cycle time.
7. To make the workplace safe, ventilated, and free from dust, noise, fume, etc. It leads to satisfaction amongst the workers and thus better employer-employee relations.
8. To increase productivity and product quality with the cost of Production.
Types of Plant layout:
There are four types of Plant layout
1. Process Layout.
2. Production Layout.
3.Combination Layout.
4. Fixed position Layout.
1. Process Layout:
In Process layout keep similar machines and similar operations in one place. In other words, machines are arranged according to their function.
That means all should be in one place, all milling at another and so on. Process layout generally employed for industries engaged in job order production and non-repetitive kind of maintenance or manufacturing activities.
Process layout showing product movements
1. Store room, 2. Inspection department, 3. Broaching section, 4. Milling section, 5. Lethe section, 6. Shaper section, 7. Drill section, 8. Stock room.
Advantages of Process layout:
1. Better utilization of available equipment.
2. Less number of machines is required to do the operation.
3. Workers are dealing with only one type of machines, so product quality will be better.
4. Workers in the one section are not affected by operation carried out in another section.
Disadvantages of Process Layout:
1. For the same amount of production, process layout needs more space.
2. Automatic material handling is difficult.
3. Production control becomes difficult.
4. Raw material has to travel longer distance for being processed to finished goods. This increases material handling and associated costs.
5. It needs more inspection and efficient co-ordination.
2. Product Layout:
Product Layout is also known as line layout. Various operations on raw material are performed in a sequence and machines are placed accordingly the production flow line.
This type of layout is preferable for continuous production, that is, involving a continuous flow in process material towards the finished product stage.
A simple product layout
Advantages of Product Layout:
- Less space required for the same volume of production.
- Material handling is lesser, which reduces time and cost.
- Co-ordination will be better, production planning, and control will easier.
- Less skill workers maybe do the work.
Disadvantages of Product Layout:
- In process layout Specified product determines the layout, a change in product involves major change in layout, thus flexibility in the layout is reduced.
- Rate of production depends upon the output rate of the slowest machine, this leads to excessive idle time of another machine if the production line is not balanced.
- It is difficult to increase production beyond the capacities of the production line
3. Combination Layout:
A combination layout combines the advantages of both process layout and product layout. This days pure process and product layouts are rare.
A combination layout is possible where item is made in different types and size. In such case machinery arrange in a process layout but process grouping is then arranged in the sequence of various types and sizes of the products.
A combination layout for different types and sizes of gears.
F = Blank forging hammers, H = Hobbing machines for cutting gear
HT = Heat treatment furnaces, GF = Gear finishing machines.
Advantages of combination layout:
1. It combines the advantages of both process and product layout.
2.Combination layout can be useful when a number of items are produced in the same sequence but in small numbers and no item justified for individual production line.
4. Fix Position Layout:
In other types of layouts, the product moves past the stationary production equipment, but in fixed position layout, product kept stationary, and equipment moves around it.
Fixed-position layout is applicable in ship building, aircraft manufacturer, etc.
Layout by the fixed position of products.
E=Engines, A/F=Air-frame, Inst=Instruments
Advantages of Fixes Position layout:
1. It is possible to assign one or more skilled workers from the start of a project to finish in order to ensure continuity of work.
2. Involves the least movement of materials, manufacturing of large size product is possible.
3. A number of quite different projects can be taken with the same layout.
Disadvantages of Fixed position layout:
1. It involves a low content of work in progress.
2. It involves high equipment handling costs.
Key Take away: |
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2. Plant layout means the arrangement of equipment, material, etc facilities and services of the plant within the selected work area to achieve the productivity as high as possible. |
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3. An ideal location is one where the cost of the product is kept to minimum, with large market share, the least risk and the maximum social gain. It is the place of maximum net advantage or which gives lowest unit cost of production and distribution. For achieving this objective, small-scale entrepreneur can make use of locational analysis for this purpose. |
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4. Plant location refers to the choice of region and the selection of a particular site for setting up a business or factory. |
Purchasing management is a significant component for any business. Companies recognize the significant cost savings that can arise from effective purchasing decisions and likewise how poor purchasing strategies may result in disaster: A vendor failing to deliver its purchasing order of beef to a hotel, for example, could hamper the business ability to cater an event for 500 people.
Cost Control
Cost control is a critical factor in purchasing management. These managers analyze which suppliers are selling the necessary inputs for production and at what cost. From this information, they review a host of other factors, which include on-time shipments, warranties, industry reputation and length of time in business. Because switching vendors is costly, finding a reliable vendor is important to controlling costs.
Price Stability
An important role of purchasing management is achieving price stability. When the cost of production fluctuates wildly, other departments experience obstacles. For instance, the marketing team does not know what price to charge customers, finance experts cannot estimate profits and accountants cannot determine the companys cash flow. Purchasing managers keep the cost of production stable in a number of ways, one of which is negotiating with vendors to achieve the lowest price and to lock in the value for a lengthy contract. For inputs with volatile prices such as commodities, purchasing managers work with banks to hedge these items in the form of a forward contract. Alan E. Branch, author of International Purchasing and Management, explains that these contracts also shield multinational corporations from the risk of currency fluctuations, which can also affect the cost of production.
Supply Chain Management
Securing the supply chain is another critical role of purchasing managers. Buyers are responsible for ensuring that all of the necessary materials appear on time, intact and of expected quality. If any of these shipments are delayed or of subpar, the effects reverberate throughout the production chain. A shipment of faulty screws, for instance, may cause the finished product to fall apart. In turn, the entire order is jeopardized because of the managements purchasing decision. As explained in a May 2011 Bloomberg article, the explosion of Apples vendor in China caused a possible production loss of 500,000 iPads.
Customer Satisfaction
Purchasing managers play a fundamental role in ensuring customer satisfaction. Managers have this obligation in two ways: quality of product and on-time deliveries. When buyers select high-quality ingredients at lower costs, these cost savings can be issued to the customer. Likewise, poor quality deters customers from returning to the business. Delayed and defective products are other ways customers are affected by the decisions of purchasing managers. Thus, these employees play a critical role in shaping the customers experience with the organization.
Key Takeaway: |
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2. A vendor failing to deliver its purchasing order of beef to a hotel, for example, could hamper the business ability to cater an event for 500 people. |
Reference:
1. Course Notes - National Institute of Technology, Calicut
2. Production and Operation Management - DDCE Utkal University