Industrial Management & Smart Technologies, EC-501

Production Management
Weightage: 1 Short Question + 1½ Essay Question = 18 Marks
3UNIT

INTRODUCTION:
Production planning is a key to success of any kind of company and business. It
involves lot of planning to satisfy every need of a customer which will results in profit.
Every industry or company has a specific kind of plan which varies from each other. The
main objective behind of this planning is to establish production rate which will achieve
management purpose of satisfying customers need.

SELECTION OF SITE (or) PLANT LOCATION

A plant is a place where men, material, machinery etc., are bought together for
manufacturing products. Site Selection is the one of the major consideration for starting
an industry or enterprise.it decides the fate of the business.

Selection of a place or site for locating a plant is one of the most important problem
which is faced by an entrepreneur. In generally a city site is preferable for small plants,
village plants are suitable for larger industries and sub-urban sites are suitable for medium
size industries.
Factors to be considered in the selection of Site:

1. Availability of Raw Material:

 If the raw materials are near to the site it will reduce the cost of transportation
 Regular uninterrupted supply and reduce the cost of storage
2. Near to the markets:
 The finished products should have markets at near places in order to reduce the
transportation costs
 More over market near to the can catch a big share of the market and can render
quick services to the customers
3. Transport Facilities:
 The plant should be located at a place which is connected by road, rail and air for
quick delivery to the respective destinations.
 Depending upon the size of raw material and finished goods a suitable method of
transportation should be use

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 Industrial Management & Smart Technologies, EC-501

4. Availability of Labour:
 The factory should be located near to the place where the skilled and semi-skilled
and unskilled labour and reasonable rates with proper attitude towards work
5. Availability of Power and Fuel:
 It should be located near to the source of power and fuel where they are cheap and
provided with uninterrupted supply
6. Availability of water:
 Depending upon the purpose of use and nature of plant water should be available
in adequate quantity
7. Communication Facilities:
 It should be provided with good communication facility with the other locations
for their promotion
 The place must be connected by postal, telephone and internet facilities
8. Climatic and atmospheric conditions:
 The products to be produced have suitable atmospheric conditions
 For example Bombay, textile and jute industries are located at a place where humid
atmosphere is presented

PLANT LAYOUT
“An arrangement of machines within a factory so that the greatest possible of output
of high quality at the lowest possible total cost be available”. Plant layout should be
flexible for future changes in management policies and techniques or production

Objectives of good plant layout:

1. Utilization of floor space to minimizes the material handling and transportation.

2. Utilize the floor space economically leaving sufficient space for movement of men
and materials
3. To have a space for future expansion.
4. To produce better quality products with minimum cost
5. To minimize production delays and to have proper production control
6. To minimize accidents and have safety for the workers
7. To increase the production capacity

Principles of plant Layout:

They are 6 basic principles of best layout

1. Principle of overall integration:

The best layout is one which integrates the men, material, machinery and
other such factors

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2. Principle of minimum distance:

The best layout is one which men and materials have to move the minimum
distance between operations.
3. Principle of flow:
The best layout is one which arranges the work are for each operation or
process in the same order or sequence that forms assembles the materials
4. Principe of cubic space:
The best layout is one which all the available space both vertical and
horizontal is most economically and effectively used.
5. Principle of satisfaction and safety:
The best layout is one which makes satisfying, pleasant and safety for workers
6. Principle of flexibility:
The best layout is one which can adopted and rearranged at minimum cost
and with least inconvenience.

TYPES OF PLANT LAYOUTS

There are four basic types of plant layouts
1. Product or line layout
2. Process or functional layout
3. Fixed layout
4. Combination layout
I. Product or line layout

Raw Finished
Material Lathe Milling Drilling Assembly Inspection Packing product
Machine Machine Machine Room Room Room

 It is suitable for continuous or repetitive production

 The raw material enters at one end and leaves another end as a finished product
 This layout is arranged for producing one standard product at a time in large volumes
 The above operations are performed on a raw materials are turning, milling, drilling
then the machines are arranged in sequence order
Advantages
I. Less space is required for same volume of production
II. Minimize the handling and transportation time
III. Better utilization of men and machines
IV. Continuous flow of work
V. Quick output
VI. Lower manufacturing cost per unit time
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 Industrial Management & Smart Technologies, EC-501

Disadvantages
I.Initial investment is high
II.Breakdown of one machine leads to complete stoppage o work
III.Production change not possible
IV. Defects in the product is not identified rejections will be more
V. It is difficult to increase the production beyond the capacities of the production
lines
VI. Each worker performs job on particular machine so that he expert on the work
only and he can’t operate other machines

Examples:
Automobile industries, chemical industries, cement, paper, oil refineries industries etc.,
II. Process or functional layout

In this process or functional layout similar machines or similar operations are

arranged at one place, for example all lathe machines are arranged in machine section
and all milling machines are arranged in milling section and all drilling machines are
arranged in drilling section. This process or functional layout is suitable for non-repetitive
kind of operations

Lathe Milling Drilling

Machine 1 Machine 1 Inspection
Machine 1
Raw material Lathe Finished Product
Milling Drilling
Machine 2 Inspection
Machine 2 Machine 2

Machine Milling Drilling Inspection

Shop Section Section section

Advantages
I. Initial capital is low
II. Fewer machines are sufficient
III. Breakdown of one machine does not affect the production
IV. Better utilization of the availability of the available equipment
V. The layout is flexible and it can easily modified according to the our requirement

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Disadvantages

I. Process layout needs more space

II. Total production cycle time is more due to long distance and waiting
III. Inspection of work for each section is necessary as the material passes to the next
department this causes delays
IV. Handling and back tracking machines is too much
V. Work in process inventory is large.
Example:
Electrical application like refrigerators, washing machines and manufacturing
equipment’s
III. Fixed Position Layout
In a fixed position layout, man, machinery, tools and equipment are brought to the
site where the product will be assembled. This type of layout is used in ship building,
construct homes, air crafts satellites etc.,

Advantages
I. It save time and cost involved in movement of work from one workstation to
another workstation.
II. This layout is flexible for changing sequence of operations
III. Several operation carried out simultaneously
IV. Adjustments can be made if shortage of material and manpower by changing of
sequence of operation
Disadvantages
I. It take long time or period to complete the production and is causes investment
cost is high
II. Very large storage space is required to storage the tool and machinery
III. High skilled persons are required
V. Conflict among the working groups due to Several operation carried out
simultaneously
Examples:
Ships, houses, and aircraft etc.,

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PRODUCTION PLANNING AND CONTROL

Production Management refers to the application of management principles (planning,
organizing, directing and controlling) to the production function in a factory.
Production:
Which consist sequence of operation to convert the raw materials into finished goods
Planning:
It is a process of thinking before doing, it anticipates the difficulties and making a fine
product with most economy and quality
Control:
It phase make sure that programmed production is maintained correctly or not

OBJECTIVES OF PRODUCTION PLANNING AND CONTROL

1. To deliver the product to the customer when he wants
2. To promise the delivery in least possible time
3. To make all preparations to manufacture goods within specific time and cost
4. To make available supply of materials, parts and components at the right time
5. To ensure most economical use of plant and equipment by scheduling best
machine utilization
6. To make available materials, machines, tools, equipment and manpower in the
required quality and quantity and at the specified time
7. To ensure production of goods in the required quantities and specified quality at
the pre-determined time
8. To maintain spare capacity to deal with rush orders

PHASES IN PRODUCTION PLANNING AND CONTROL FUNCTIONS

1. Planning Phases
a. Pre- Planning : activity involves product planning and development,
resource planning, plant planning
b. Active Planning : involves planning for quality
2. Action planning
Execute or implementation phase includes dispatching and progressing function
3. Control phase
Includes status reporting material control, tool control, quality control

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RELATION OF PRODUCTION DEPARTMENT WITH OTHER DEPARTMENTS

The aim of the every industry is to produce the quality of products with minimum
cost and gets the maximum profits. So that achieving this goals it co-ordinates with
different departments such as Production, Planning, control, sales, quality, inspection,
maintenance department, personal, control, research and development department

Control Department
It looks after the functions of man, machine and material, so that production can
be right quality at right time with less expansion.
Purchase Department
It looks after the flow of material and maintains delivery schedules from right source
at right place at right time and right material without brake in production
Sales Department
It looks after the supply of finished products to the customer in time and gets further
orders which facilitates further production
Quality control and inspection Department
It control the quality and certification works and to check weather the product is
working under all working conditions
Maintenance Department
Will solve the problems of the day to keep the product in working condition.

Personal Department
Will select the right type of personal and impact the training for effective working
in the production activities
R&D Department
Will assist in improving the quality.

NEED FOR PRODUCTION PLANNING

Production planning is one part of production planning and control dealing with
basic concepts of what to produce, where to produce and how to produce. It involves
taking a long-term view at overall production planning.
Objectives of Production Planning:
1. To ensure right quantity and quality of raw material etc., are available at the time
of the production
2. To ensure capacity utilization is in tune with forecast demand at all time
3. Organization can deliver a product in a time and timely and regular manner
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4. It reduce investment in inventory

Production planning is done at three different time dependent levels
1. Long-range it deals with facility planning, capital investment, location planning etc.,
2. Medium- Range it deals with demand forecast and capacity planning
3. Short-term it deals with day to day operation
Advantages:
1. It decides best method of doing job
2. It saves time and material
3. It decides most economic flow of material and equipment
4. Timing for starting and completion of work
5. Helps to improve the production quality and quantity
6. Helps to minimize the production cost
7. Further achievements can be identified
STAGES OF PRODUCTION PLANNING AND CONTROL

PRODUCTION PLANNING AND CONTROL

ROUTING

SCHEDULING

DISPATCHING

FOLLOW-UP

According to the British standards institute there are four stages

The four stages or steps in production and control are
1. Routing 3. Dispatching
2. Scheduling 4. Follow- up
Initial two steps are related to production planning and last two steps are related to
production control

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Routing
Routing is the first step in production planning and control. “The main objective
of routing is to determine the best and cheapest sequence of operations”. In other words
Routing can be defined as “The process of deciding the path of work and the sequence of
operations”. Routing may determines “what”, “how” and “where” to produce.
Routing fixes in advance:
1. The quantity and quality of the product
2. The man, machines, materials etc., are to be used
3. The type number and sequence of manufacturing operations
4. The place of production
5. The economic lot size of the product is determined
6. Scrap factory at each stage of production is determined
7. Cost of the product is determined
8. Manufacturing forms like production order, job order, route sheet, move orders,
inspection cards, tool tickets, etc., are filled.

Scheduling
Scheduling is the second step in the production planning and control. Schedule
helps to make optimum use of time. Scheduling is also done for material and machine
etc., it is like a time table of production. Time element is given special importance in
scheduling there are different types of schedules they are Master Schedule, Manufacture
schedule
1. Master schedule:
It gives information about all the orders in hand, the orders are received
depending upon their delivery dates. When the shop capacity is full for the present
week the newly acquired orders are carried over to the next week and so on. Besides
master scheduling some of the techniques are employed for scheduling purpose are
Operation Schedule, Order Schedule and Perpetual Schedule.
A.Operation Schedule:
This schedule consist the start time and finish time each operation of the product
during that period or week or month. It gives the information when to start and when
to finish the operation within a given machine or process.
B. Order Schedule:
This schedule gives information about required number of parts to be
manufactured, name of the machines, their set up time, total production time and the
date of completion of the order
C.Perpetual Schedule:

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This schedule shows information about work load or distribution for each section
for the particular work order. It can be made in two types
1. Load analysis Sheet 2. Gantt Load chart

2. Manufacturing Schedule:
This schedule was prepared after the master schedule. It gives the information
regarding tools storage, material storages, machine breakdown, earliest completion
dates and priority of the component

Dispatching
Dispatching is the third step of production planning and control. It is the action,
doing or implementation stage. Dispatching means starting the process of production.
Dispatching includes the following
1. Issue of orders, instructions, drawings etc., for starting the work
2. Maintain the proper records of the starting and completing each job on time
3. Moving the work from one process to another process as per as the schedule
4. Issue of materials, tools etc., which are necessary for actual production
5. Starting the control procedure
6. Recording the idle time of machine

Follow Up
The main aim of the follow up is to report the progress of work daily in each
shop in as prescribed Performa and to investigate the causes of deviation from the planned
Performance and minimize the time delay.
Follow up is done for Material, Job progress and Assembly
Material should be reach the shops in time so that production could be started as per
schedule. Job progress sees that a particular product is passing through all its operations
from raw material to final shape as per as schedule. Assembly shops are responsible for
assembling the various components and the follow up sections sees that all the parts
should remain ready for assembly purpose in required quantity at required time.

BREAK EVEN ANALYSIS

A business is said to be breakeven “when its income equals its expenditure”. In
other words the output or sales at which no profit and no loss is made.
In any industry there are two types of costs they are fixed cost and variable cost
The plotting of breakeven chart is normally two ways

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1. Analytic Approach
2. Statistical Approach or Historical Approach
Analytic Approach:
In this approach we take one single income statement for the firm. If the output
is increased it will increases the expense also. And estimates the amount of increased
spending.
Historical or Statistical Approach:
In this approach series of income statements periods which reflect varying levels
of outputs and costs are taken.

Terms are used in Break Even Analysis

Fixed Cost:
Certain types of expenses will be fixed and will be independent of production.
Even if there is a no production they will have to be incurred. Rent, insurance and
depreciation are some of the expenses which will be fixed for at least certain period. And
it is denoted by a dotted line AB in the graph.
Variable Cost:
Certain expenses changes proportionally with the change in the output of the
products. The direct material and labour involved in manufacturing a product are variable
cost. And it is denoted by the dotted line OC in the graph.
When fixed cost and variable costs are added the total cost will be obtained and
it will be shown by the dark line AD

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At a certain point the output and sales of a factory will make neither profit nor
loss i.e, No loss or no gain the point is known as break-even point. Below this point it
will be loss, and above this point it will be profit.
Margin Safety:
It is the difference between the actual sales and the break even sales of any
business activity.
“Margin of Safety = Actual sales – Break even Sales.”
Contribution:
It is the difference between the selling price and variable cost.
“Contribution = Sales cost – variable cost.”
Profit – Volume (P/V) Ratio or Contribution ratio:
It is the ratio between contribution and sales.
“P/V Ratio = Contribution/Selling Price.”
“The break-even point can be find out by using the formula”
𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕
𝑸=
(𝑺𝒂𝒍𝒆𝒔 𝑷𝒓𝒊𝒄𝒆 − 𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕)
Applications of Breakeven Analysis:
1. To find Safety Margin
2. To find quantity needed to get the profit
3. To find the effects of change in price
4. To find the effects of change in costs
Uses of Breakeven analysis:
1. It helps in the determination of selling price which will give the desired profits.
2. It helps in the fixation of sales volume to cover a given return on capital
employed.
3. It helps in forecasting costs and profit as a result of change in volume.
4. It helps in determination of costs and revenue at various levels of output.
5. It is an aid in management decision-making (e.g., make or buy, introducing a
product etc.), forecasting, long-term planning and maintaining profitability.
6. It reveals business strength and profit earning capacity of a concern without much
difficulty and effort.
Limitations of Break-Even Analysis:
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1. Break-even analysis is based on the assumption that all costs and expenses can be
clearly separated into fixed and variable components. In practice, however, it may
not be possible to achieve a clear-cut division of costs into fixed and variable types
2. It assumes that fixed costs remain constant at all levels of activity. It should be
noted that fixed costs tend to vary beyond a certain level of activity
3. It assumes that variable costs vary proportionately with the volume of output.
4. The break-even analysis does not take into consideration the amount of capital
employed in the business.

Supply Chain Management

Supply chain management (SCM) is the broad range of activities required to plan,
control and execute a product's flow, from acquiring raw materials and production
through distribution to the final customer. In other words a supply chain consist of all
parties involved directly or indirectly in fulfilling a costumer request.
Functions of Supply Chain Management:
1. Supply chain management is a cross-functional approach that includes managing the
movement of raw materials into an organization, certain aspects of the internal
processing of materials into finished goods, and the movement of finished goods
out of the organization and toward the end consumer.
2. The effect is to increase the number of organizations involved in satisfying customer
demand, while reducing managerial control of daily logistics operations.
3. Less control and more supply chain partners lead to the creation of the concept of
supply chain management.
4. The purpose of supply chain management is to improve trust and collaboration
among supply chain partners thus improving inventory visibility and the velocity of
inventory movement,

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PERT AND CPM NETWORKS

Program Evaluation and Review Technique (PERT) and Critical Path Method
(CPM) are tools widely used in project scheduling. Both are based on network diagrams
applicable for both the planning and control aspects of production

Critical Path Method (CPM)

CPM is based on identifying and managing a path of critical activities that determine
the project duration. CPM is frequently used with PERT

Objectives of CPM
1. To find the difficulties in the production process
2. CPM assign time of every activity
3. To find starting and finishing times of work
4. To find the critical activities, critical path and to find maximum duration time of the
project

Advantages of CPM
1. It identifies critical activities which helps to pay more concentration o them
2. It helps the management to achieve better control
3. Planning and scheduling are made more competent
4. Provide better communication and coordination among various departments

Disadvantage of CPM
1. This method is more expensive
2. This method is not adopted statistical analysis in determining the time
3. It operates on the assumption that there is a precise known time that each activity
in the project will take

Applications of CPM
1. Civil construction projects in bridges, buildings
2. Plant maintenance
3. Computer systems
4. Town planning

Construction of CPM Network Diagrams

1. Prepare a list of the activities in the project and their dependence on the activities
2. Draft the network roughly

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3. The estimated of time required for each activity is made considering man power
and equipment available
4. These times estimates are then written on each activity
5. Then scheduling computations are done to get earliest and latest finish times for
each activity
6. Identify the critical path and indicate the amount of slack on non-critical paths
7. Finally estimate the total duration for the completion of the project

PROLEMS ON CPM
By using given data calculate
A. Draw the network diagram C. Find project duration
B. Identify critical path D. Slack for each Activity
1)
Activity 1-2 1-3 1-4 2-4 2-5 3-6 4-6 5-6
Duration in days 6 8 5 3 5 12 8 6

2)
Activity 1-2 1-3 2-4 3-4 4-6 5-6 3-5 6-7 5-7
Duration in days 6 8 12 5 3 9 7 8 4
3)
Activity 1-2 1-3 1-4 2-4 2-5 3-6 4-6 5-6
Duration in days 6 8 5 3 5 12 8 6
4)
Activity 1-2 1-3 1-4 2-5 3-6 3-7 4-6 5-7 6-7 6-8 7-8
Duration in days 6 4 1 5 8 9 3 1 0 8 2

5)
Activity 0-1 1-2 2-3 3-4 2-5 4-5 0-6 5-7 6-7 5-8 7-8
Duration in days 2 4 2 5 1 1 1 8 3 3 5

6)

Activity 1-2 1-3 2-4 3-4 4-6 5-6 3-5 6-7 5-7
Duration in days 6 8 7 12 3 5 7 10 11

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PROGRAM EVALUATION AND REVIEW TECHNIQUE (PERT)

PERT is based on the probability of an event occurring at a specified time. When
used with CPM it is most commonly used project management methodology
Objectives of PERT
1. Describe basic network techniques which includes planning monitoring and
control of projects
2. It is commonly employed for conducting the initial review of a project
3. It helps in decision making
4. It can employed at those places where a project cannot be easily defined in terms
of time or resources required
5. This techniques proves very much advantageous when used for non-repetitive
type of projects, R&D, Prototype production projects etc.,

Advantages of PERT
1. It is a ready helping tool for the managers to make planes
2. It encourage control by exception
3. It enable forward working control
4. It is very much useful for rescheduling the activities
5. This network system creates pressure for action

Limitations of PERT
1. It is costly and time taking technique
2. It is not useful for planning recurring events
3. Estimated time and variance are estimated values
4. Not suitable for some programmers which is not defined clearly

Applications of PERT
1. Project management
2. Decision making
3. Planning and controlling larger projects
4. Research and development
5. Ship building
6. Building of pressure vessels

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Terms in PERT

1. Optimistic Time (to)

It is the shortest possible time in which an activity can be completed if everything
goes exceptionally well. In this all resources are available and no bottleneck (Difficult)
is expected
2. Most Likely Time (tm)
It is the amount of time required to complete an activity under real-life situation
where there may be some bottleneck experienced but quickly resolved without losing
time
3. Pessimistic Time (tp)
It is the longest time required for completion of an activity when unforeseen or
unexpected interruption occur during its completion. It is the longest of all the three
time estimates

4. Average Time or Expected Time (te)

The to, tm and tp are combined statistically to develop the expected time te for an
activity.
𝒕𝒐 + 𝒕𝒎 × 𝟒+ 𝒕𝒑
te =
6

5. Standard deviation (σ)

It is a deviation f the total duration of the project on critical path. It can be
determined with the help of all individual activity standard deviation

𝒕𝒑 − 𝒕𝒐
𝝈=( )
𝟔

6. Variance (V)
Variance of the project can be calculated by squaring the standard Deviation
V= σ2
2
(𝒕𝒑 −𝒕𝒐 )
V=
36

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DIFFERENCE BETWEEN CPM & PERT

S.No CPM PERT
1 It is a technique of planning and It is a method of controlling cost and
control of the time time
2 It is a activity oriented It is an event oriented
3 It is useful for repetitive and non- It is useful for non-repetitive and
complex projects with a certain complex projects with uncertain time
degree of time estimate estimate
4 It is deterministic approach It is probabilistic approach
5 Project duration is fixed and cost is Cost is directly proportional to the
minimum time
6 It is used for construction projects It is used for R & D Programs

PROLEMS ON PERT
By using given data calculate
a. Find expected time for each activity
b. Draw the PERT network diagram
c. Identify critical path
d. Find project duration
e. Find the slack at each event

1)
Activity 1-2 1-3 1-4 2-5 3-5 4-6 5-6
Optimistic Time (to) 2 2 3 2 3 3 4
Mostly likely time (tm) 2 5 5 2 6 6 7
Pessimistic time (tp) 8 8 19 2 15 9 16
2)
Activity 1-2 1-6 2-3 2-4 3-5 4-5 6-7 5-8 7-8
Optimistic Time (to) 2 2 5 1 5 2 3 2 7
Mostly likely time (tm) 5 5 11 4 11 5 9 2 13
Pessimistic time (tp) 14 8 29 7 17 14 27 8 31

3)
Activity 1-2 1-3 1-4 2-5 3-5 4-6 5-6
Optimistic Time (to) 1 1 2 1 2 2 3
Mostly likely time (tm) 1 4 2 1 5 6 6
Pessimistic time (tp) 7 7 8 1 14 10 15
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