Outline of OM Course No: BA 3211: 3rd Year 2nd Term

1. Introduction
Text References
2. Competitiveness, Strategy and
Productivity – Operation Mgt.-W.J. Stevenson
3. Product design
– Operation Mgt. –Jacobs Chase
4. Process design
5. Quality Mgt. and Aquilano.
6. Design of Work System – Operation Mgt. :Frazier
7. Location Analysis
8. Layout Planning
9. Inventory Mgt.
10. Supply chain mgt. Course Teacher: Md. Khashrul Alam
11. Just in Time/Lean Production
System
12. Waiting Line Mgt.
Introduction to Operations Management
i. Meaning
ii. Why study OM
iii. Differentiating features of production system
iv. Scope of Operation Management
v. Operation manager and mgt. process
vi. Operation manager and decision making,
vii. Historical evolution
viii. Recent trends in operation mgt
Meaning

OM involves the planning, coordinating, and

executing all activities that create goods and services.

Operation management: The management of

systems or processes that creates goods and/or
provides service
Operations Management

Create operational systems.

Manage (plan, organize, staff, direct and
control) the activities relating to the production of
goods and/or services with maximum efficiency
(at the lowest cost) and effectiveness (in the
eyes of the customer).
Improve those processes continuously to
create competitive advantage.
 Operations Management

Structural
Elements
Create the
Technology New Product Development
Process
Vertical Integration
Innovation
Capacity
Facilities

> > > > > Manage the

Infrastructural Inputs Conversion Outputs Process
Elements
Quality Management
Planning & Control Evaluate
On
Workforce Improve the
Organization
Time Flexibility Process
Cost Service
Quality
The Operations System

The operations system transforms inputs into

desired goods and services.
EXTERNAL
FACTORS

INPUTS PROCESS OUTPUTS

FEEDBACK
Material flow
Information Flow
 Corporate Strategy

Business Unit Strategy

Competitive Priorities & Positioning

Cost, Quality, Time, Flexibility, Service

Marketing Operations Strategy

Operations Strategy

Management 4 Ps
Structural
Facility Location
Infrastructural
Workforce
~ Place
Product
Capacity
Vertical Integration
Quality
Policies/Procedures
The Context
Price
Process Technology Organizational Structure
Promotion

Execution Processes

Customer Satisfaction (Internal & External) Performance

Market Share Measures
Quality Measures
Cost Measures
Types of Conversions

Physical
Chemical
Locational
Educational
Entertained
Why study OM

Major function of a business

Economic perspectives
The Organization

Organization

Finance Operations Marketing

Operation

Consists of all activities directly related to

producing goods or providing services.
The production function exists both in
manufacturing and service,
Inputs are used to obtain finished goods or
services using one or more transformation
process (storing, transporting, cutting).
Food Processor

Table 1.2
Inputs Processing Outputs
Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
Hospital Process
Table 1.2
Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
Finance

The finance function comprises activities

related to securing resources at favorable
prices and
Allocating those resources throughout the
organization.
Marketing

Marketing consists of selling and/ or promoting

the goods or services of an organization.

makes advertising and pricing decisions.

is also responsible for assessing customer

wants and needs, and for communicating those
to operation and design people.
Differentiating features of production system

▪ We can differentiate production system by three

ways. They are
i. Degree of standardization

ii. Type of operation

iii. Mfg. operation versus service operations

Degree of standardization

Production system produces output that ranges from

highly standardized to highly customize.

Standardized output means that there is a high degree

of uniformity in goods or services. Such as
– radio, television, computer and newspapers.

Customized output means that the product is

designed for a specific case or individual. Such as
– eyeglasses, clothing, surgery, tailoring and etc.
Types of operation

1. Project: a set of activities directed towards a unique

goal, usually large scale, with a limited time frame.
2. Job shop: An organization that renders unit or lot
production or service with varying specifications,
according to customer needs.
3. Batch processing: A system used to produce
moderate volumes of similar items.
4. Continuous processing: A system that produces
highly uniform products or continuous services,
often performed by machine.
 Process-Product Matrix
Product
Each Unique – Commodity–
Wide Variety Little Variety

Consistent
Opportunities Line Flow
for real • Continuous
advantage • Discrete
Flow Batch
Patterns
Job Shop
????
Jumbled Project
 Mfg operation versus Service operations

Characteristic Goods Service

Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Output Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usual
Scope of Operations Management

Operations Management includes:

– Forecasting
– Capacity planning
– Scheduling
– Managing inventories
– Assuring quality
– Motivating employees
– Deciding where to locate facilities
– Supply chain management
– And more . . .
Operation manager and decision-making

There are some approaches of decision-making.

Manager needs to follow the approach to take
decision.
i. Uses of Model

ii. Quantitative approach

iii. Analysis of Trade off

iv. System approach

v. Establishing priorities

vi. Ethics
Models

A model is an abstraction of reality.

– Physical
– Schematic
– Mathematical

What are the pros and cons of models?

Models are beneficial

Easy to use, less expensive

Require users to organize
Increase understanding of the problem
Enable “what if” questions
Consistent tool for evaluation and standardized format
Power of mathematics
Limitations of Models

Quantitative information may be emphasized over

qualitative
Models may be incorrectly applied and results
misinterpreted
Nonqualified users may not comprehend the rules on
how to use the model
Use of models does not guarantee good decisions
Quantitative Approaches

▪It is an attempt to obtain mathematically optimum solution

of a managerial problem.
• Linear programming
• Queuing Techniques
• Inventory models
• Project models
• Statistical models
Examples of waiting line systems
Analysis of Tradeoffs

Operation manager has to take tradeoffs decisions.

▪ Such as selecting a piece of equipment, a manager
must evaluate the merits of extra features relative to
the cost of those features.

Decision on the amount of inventory to stock

Increased cost of holding inventory
Vs.
Tradeoffs
Level of customer service
Systems Approach

▪System is a set of interrelated parts that must

work together.
“The whole is greater than
the sum of the parts.”

Suboptimization
Establishing Priorities :

• Pareto Phenomenon
• A few factors account for a high percentage of
the occurrence of some event(s).
• 80/20 Rule - 80% of problems are caused by
20% of the activities.

How do we identify the vital few?

Ethical Issues
• Financial statements
• Worker safety
• Product safety
• Quality
• Environment
• Community
• Hiring/firing workers
• Closing facilities
• Worker’s rights
Historical Evolution of Operations Management

Industrial revolution (1770’s)

• Craft Production
• Interchangeable parts
• Division of labor
Scientific management (1911)
– Mass production
Human relations movement (1920-60)
Influence of Japanese manufacturers
• Lean Production
Competitiveness, Productivity, Strategy

Meaning of Competitiveness

Productivity meaning

Measures of Productivity

Factors affecting Productivity

Improving Productivity

Bottleneck Operation

Strategy Formulation
Competitiveness:
How effectively an organization meets the
needs of customers relative to others that offer
similar goods or services
Competitiveness

• Compete through the combination marketing and

operation factors
• Marketing
• Customer need and want identifying
• Pricing
• Advertising and Promotion
• Operation
• Product design
• Location
• Quality
• Flexibility
Productivity

Outputs
Productivity =
Inputs
Partial measures
– output/(single input)
Multi-factor measures
– output/(multiple inputs)
Total measure
– output/(total inputs)
Productivity Growth

Productivity Growth =

Current Period Productivity – Previous Period Productivity

Previous Period Productivity

Measures of Productivity

Table 2-4
Partial Output Output Output Output
measures Labor Machine Capital Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them
Examples of Partial Productivity Measures

Table 2-5

Labor Units of output per labor hour

Units of output per shift
Productivity Value-added per labor hour

Units of output per machine hour

Machine machine hour
Productivity
Units of output per dollar input
Capital Dollar value of output per dollar input
Productivity
Units of output per kilowatt-hour
Energy Dollar value of output per kilowatt-hour
Productivity
Example

10,000 Units Produced, Sold for $10/unit

500 labor hours Labor rate: $9/hr

Cost of raw material: $5,000

Cost of purchased material: $25,000

What is the labor productivity?

Example--Labor Productivity

10,000 units/500hrs = 20 units/hour

or we can arrive at a unitless figure

(10,000 unit* $10/unit)/(500hrs* $9/hr) =

22.22
Example--Multifactor Productivity

MFP = Output
Labor + Materials

MFP = (10,000 units)*($10)

(500)*($9) + ($5000) + ($25000)

MFP = 2.90
Determine MFP for the combined input of labor
machine time using the following data
Output=7040 units @ $1.10, labor:$1000, Material
$520 and overhead: $2000
Factors Affecting Productivity

Capital Quality

Technology Management
Other factors Affecting Productivity

Standardization
Use of Internet
Computer viruses
Searching for lost or misplaced items
Scrap rates
New workers
Cuts in health benefits
Other factors affecting Productivity

Safety
Shortage of IT workers
Layoffs
Labor turnover
Design of the workspace
Incentive plans that reward productivity
Improving Productivity

i. Develop productivity measures

ii. Determine critical (bottleneck) operations

iii. Develop methods for productivity improvements

iv. Establish reasonable goals

v. Get management support

vi. Measure and publicize improvements

Don’t confuse productivity with efficiency

Bottleneck Operation

Figure 2-3
Operation 10/hr

Operation 10/hr Bottleneck

Operation 30/hr
Operation 10/hr

Operation 10/hr
Strategy

Strategy and Operation strategy

Strategy Formulation
Must take into account
• distinctive competencies and
• scan the environment
– External: Economical, political, legal competition, market
– Internal: Human resources, Financial resources, Customer
loyalty, Facilities and equipment
Also consider order qualifiers and order winners
Product Design

Meaning
Reasons of product design
Recent trends in PD
Stages of PD
Standardization
Design process
Reliability
Robust Design
Service Design
QFD
Kano model
Design thinking
Product Design

Functional and aesthetic requirements necessary

– to meet the demands of the marketplace and

– at the same time achieve an acceptable rate of return.

Input into PD decisions come primarily from

• marketing,
• engineering and
• manufacturing personnel
Product Design
Trends in Product & Service Design

Increased emphasis on or attention to:

– Customer satisfaction

– Reducing time to introduce new product or service

– Reducing time to produce product

– The organization’s capabilities to produce or deliver the item
– Environmental concerns
– Designing products & services that are “user friendly”
– Designing products that use less material
Product or Service Design Activities: What
does PD do?

Translate customer wants and needs into product and service

requirements

Refine existing products and services

Develop new products and services

Formulate quality goals

Formulate cost targets

Construct and test prototypes

Document specifications
Reasons for Product or Service Design

Economic: low demand, need to reduce cost

Political: safety issues, new regulations.

Social and demographic : population shift

Competitive: new or changed product, promotion

Cost or availability :raw material, labor

Technological: in product components, process

 Social &
Economic Demographic

Political
Liability or
Legal

Competitive Technological
Cost or
Availability
Phases in product development process

1. Idea generation: Customer, Supply chain, Competitor & Research based

2. Feasibility analysis: market analysis(Demand), economical (dc,pc,ptpl)

and technical (capacity, availability & skill)

3. Product specifications:

4. Process specifications:

5. Prototype development:

6. Design review:

7. Market test:

8. Product introduction:

9. Follow-up evaluation:
Reverse Engineering

Reverse engineering is the dismantling and

inspecting of a competitor’s product to discover
product improvements.
Aspects of Product Design

3Rs of PD =Reduce, Reuse, Recycle

Product Life Cycles
Standardization
Designing for Mass Customization
Modular design
Reliability
Robust Design
Concurrent Engineering
Computer-Aided Design
3Rs

Reduce: Value analysis: examining function of a parts and

materials to reduce cost and/or improve performance.

Reuse=Remanufacturing=Refurbishing used products

by replacing worn-out or defective components..

Recycling: Recovering materials for future use..

– cost saving, environmental concern as well as
environmental regulations.
Life Cycles of Products or Services

Saturation

Maturity
Demand

Decline
Growth

Incubation

Time
Standardization:

This is the extent to which there is absence of variety

in a product, service or process.

Standardized products are made in large quantities of

identical items.

Standardized service implies that every customer or

item processed receives essentially the same service
Advantages of Standardization (Cont’d

Lower the production cost and increase

productivity

Reduced time and cost to train employee

Repair and replacement easy

Disadvantages of Standardization

Designs may be frozen with too many imperfections

remaining.

High cost of design changes increases resistance to

improvements.

Decreased variety results in less consumer appeal.

Mass Customization

Mass customization:
– A strategy of producing standardized goods or
services, but incorporating some degree of
customization

– Delayed differentiation: produce but not

completely until customer preference is known

– Modular design
Modular Design

is a form of standardization in which component

parts are subdivided into modules that are easily
replaced or interchanged. It allows:
– easier diagnosis and remedy of failures
– easier repair and replacement
– simplification of manufacturing and assembly
Reliability

Reliability: The ability of a product, part, or

system to perform its intended function under a
prescribed set of conditions
Failure: Situation in which a product, part, or
system does not perform as intended
Normal operating conditions: The set of
conditions under which an item’s reliability is
specified
Improving Reliability

Component design

Production/assembly techniques

Testing

Redundancy/backup

Preventive maintenance procedures

User education

Improve system design

Robust Design

Design that results in products or services that can

function over a broad range of conditions

Some products will perform as designed only with in a narrow

range of conditions, while other products will perform as
designed over a much broader range of conditions, the latter
have robust design.
It can function over a broad range of conditions.

Consider a pair of fine leather boots not made for

trekking through mud or snow. The rubber boots that
have a design that is mere robust than the fine leather
boots.
Taguchi Approach Robust Design

Design a robust product

– Insensitive to environmental factors either in
manufacturing or in use.
Central feature is Parameter Design.
Determines:
– factors that are controllable and those not
controllable
– their optimal levels relative to major product
advances
Concurrent Engineering

Bringing together of engineering design and

manufacturing personnel early in the design
phase
• Problem resolution to conflict resolution

• Us vs. them
 “Over the Wall” Approach

New
Product

Mfg Design
Computer-Aided Design

Computer-Aided Design (CAD) is product design

using computer graphics.
– increases productivity of designers, 3 to 10 times
– creates a database for manufacturing information
on product specifications
– provides possibility of engineering and cost
analysis on proposed designs
Benefits of CAD
Major CAD Soft. Provider
Shigeo Shingo system

Philosophy of Prodcution mgt.

Mr. improvement
Two aspects
– SMED: drastic cut in equipment setup time
– inspection(successive, self and source) and Poka Yoke
– Poka yoke: fail safe procedure- checklist or special
tooling –which prevents workers from making error
and give rapid feedback of abnormalities.
Service Design

• Meaning

• Terminologies of service

• Stages

• Service blueprinting
Service
– Something that is done to or for a customer
Service delivery system
– The facilities, processes, and skills needed to provide a
service
Service package
– The physical resources, explicit service, implicit service
and others
Phases in Service Design

1. Conceptualize
2. Identify service package components
3. Determine performance specifications
4. Translate performance specifications into design
specifications
5. Translate design specifications into delivery
specifications
Service Blueprinting

Service blueprinting

– A method used in service design to describe and analyze

a proposed service

A useful tool for conceptualizing a service delivery

system
Major Steps in Service Blueprinting

1. Establish boundaries
2. Identify steps involved
3. Prepare a flowchart
4. Identify potential failure points
5. Establish a time frame
6. Analyze profitability
 Quality Function Deployment

Quality Function Deployment

– Voice of the customer

– House of quality

QFD: An approach that integrates the “voice of the customer”

into the product and service development process.
The House of Quality

Correlation
matrix

Design
requirements

Customer
Relationship Competitive
require-
matrix assessment
ments

Specifications
or
target values
House of Quality Example

Correlation:
X Strong positive
Positive
X X

Water resistance
Negative

Accoust. Trans.
X

Energy needed

ground needed
X X
* Strong negative

to close door

to open door
resistance
Door seal
Engineering Competitive evaluation

Window
force on
Characteristics

Energy
X = Us

Check
A = Comp. A

level
B = Comp. B
Customer (5 is best)
1 2 3 4 5
Requirements
X AB
Easy to close 7
Stays open on a hill 5 X AB

Easy to open 3 XAB

Doesn’t leak in rain 3 A XB

No road noise 2 X A B

Importance weighting 10 6 6 9 2 3 Relationships:

level to 7.5 ft/lb
Reduce energy

Reduce energy
Reduce force
current level

current level
current level
Strong = 9
to 7.5 ft/lb.
Medium = 3
Maintain

Maintain
Maintain
Target values
to 9 lb.

Small = 1

5 B BA BA
4 X B B BXA X
Technical evaluation 3 A A X
(5 is best) 2 X A
X
1
The Kano Model

Kano Model
Customer Satisfaction

Excitement
Expected
Must Have

Customer Needs
Design thinking

brings together what is desirable from a human point

of view with what is technologically feasible and
economically viable.

It also allows people who aren’t trained as designers

to use creative tools to address a vast range of
challenges.
Design Thinking

‘ is the application of industrial design tools and a

human centered approach, by a multi-disciplinary
team of hybrid individuals, to a given innovation
problem.’
Design Service providers

i. Designworks

ii. WPP

iii. Ogilvy

iv. IDEO

v. Grey

vi. Dentsu

vii. Winch design

Brain storming

Brainstorming is a semi-structured, team-based

method of rapid idea generation.
i. Defer judgment
ii. Encourage wild ideas
iii. Build on the ideas of others
iv. Stay focused on the topic
v. One conversation at a time
vi. Be visual
vii. Go for quantity
Process Analysis

Meaning

Facts of process design

Process analysis
Process

is any part of an organization that takes inputs and

transforms them into output

Process selection
– Deciding on the way production of goods or services
will be organized
Process Types

Variety Batch
– How much
Flexibility Job shop Repetitiv
– What degree
Volume Continuou
– Expected output

30-Nov-
Process Types

Job shop
– Small scale
Batch
– Moderate volume
Repetitive/assembly line
– High volumes of standardized goods or services
Continuous
– Very high volumes of non-discrete goods
Product and Service Processes

Process Type
Job Shop Appliance
repair
Emergency
room
Batch Commercial
baking
Classroom
Lecture
Repetitive Automotive
assembly
Automatic
carwash
Continuous Steel Production
Water
(flow)
purification
Process analysis

Analyzing a process allows some important questions

to be answered, such as
– How many customers can the process handle per hour?

– How long will it take to serve the customer?

– What change is needed in the process to expand capacity?

– How much does the process cost?

Process

Process or operating system : is any part of an

organization that takes input and transforms them
into output of greater value to the organization than
the original inputs.
An automobile assembly plan takes raw materials in
the form of parts and components. These materials,
along with labor, capital, equipment and energy are
transformed into automobiles. The transformation is
called assembly and the output is an automobile.
Process

A process is a collection of tasks connected by a flow

of goods and information that transforms various
inputs into useful output.
A process may have the capability to store both the
goods and information during the transformation
Components
• input
• Output
What goes in process

Tasks :
– Typically involves the addition of some input that makes
the product or service nearly like the desired output
– ie flying an airplane, anesthetizing a patient before an operation.
Flows :
– Two types of flows i.e. flows of goods and information

Difference between flows and tasks is that flows merely

change the position of a goods or service in the process while
a task usually changes its characteristics
Storage; A storage results when no task is being
performed and the goods or service is not being
transported. it is shown by inverted triangles
Process flow chart

Flow chart symbol

Tasks or Storage
operation

decision Flows of material

Process flow diagram

Mc Donald's process

RM= raw material

Place order

RM FG
cook assemble Deliver
Characteristics of process

Three performance characteristics of process are

• Capacity

• Efficiency

• Flexibility
Capacity

is the rate of output from the process

is measured in units of output per unit of time such as

A steel mill will produce some no of tons of steel per

year.

An insurance will process some no of claims per

hour.
Efficiency

is a measure that relates the amount or value of the output of

the process to the amount or value of the input.

Efficiency is widely used to measure physical process.

One common measure of efficiency is utilization

• Utilization is the ratio of input actually used by the process to
create output, to the amount of that input that is available for use

• Utilization= (actual input used/available input)*100

actualinput
Utilizatio n = * 100
availableinput
Flexibility

is a measure of how long it would take to change the

process so that it could produce a different output or

Could use different sets of inputs.

Flexibility is the characteristics that allows a process

to respond to changes in its environment.
Process analysis

Process analysis involves adjusting the capacities

and balance among different parts of the process to
maximize output or minimize the costs with
available resources.
An example of process analysis

The XYZ company supplies a component to several large automobile manufacturers.

This components is assembled in a shop by 15 workers working an eight-hour shift
on an assembly line that moves at the rate of 150 components per hour. Mgt believes
that they could hire 15 more workers for a second shift if necessary. Parts or the final
assembly come from two sources: The XYZ molding dept makes one very critical
part and rest come from outside suppliers .There are eleven Machines capable of
molding the one part done in house, but historically one machine is always being
maintained or repaired at any given time. Each machine requires a full time operator.
The machines can each produce 25 parts per hour. The workers will work overtime
at a 50% increase in their wages. The workforce for molding is flexible, and
currently only six workers are on this job. Four more are available from a labor pool
with in the company.
Process analysis

To analyze a process we need to have a process flow

diagram

Mold parts Purchase parts

Molded parts inventory

Purchased parts inventory

Final assembly

Finished goods
inventory
Process analysis cont.

Once process is described it is useful to measure its

capacity
Molding capacity
=6machine*25parts/hour/machine*8hrs/day*5days/week=
6000 parts/week.
The assembly capacity =
150 components/hour*8hrs/day*5days/week=6000
components/week
We can conclude that the entire process has a
capacity of 6000 components/week and the capacity
of all tasks are balanced.
Process analysis

If XYZ increased to ten machines and ten workers

performing the molding task, it could produce 10000
parts/week. If no change is made in the final
assembly task, however, the entire process still only
has a capacity of 6000 components/week.

Because in the long run the overall capacity can not

exceed the rate of the slowest task.
Facilities Lay out

Meaning

Importance of layout

Reasons of layout

Types of layout

Product layout or line balancing

Layout refers the configuration of departments,work
centers, and equipment with particular emphasis of
movement of work(customer or material) through the
system.
Layout decision are important for three reasons
• Substantial investment
• Long term commitment
• Significant impact on cost and efficiency
Reasons of Layout

Most common reasons are

• Inefficient operation
• Accident or safety
• Introduction of new product
• Change in the volume of output
• Change in machine and equipment
• Change in environmental or legal requirement
Types of Layout

i. Product Layout

ii. Process Layout

iii. Fixed position layout

iv. Combination-Hybrid
Product layout or Line balancing

❑ is the process of assigning tasks to

workstations in such a way that

❑ The workstations have approximately

equal time requirements.
Steps of Line Balancing

i. Draw precedence diagram

ii. Determine workstation cycle time
iii. Determine theoretical minimum workstation
iv. Select assignment rule
i. Prioritize tasks in order of largest following tasks
ii. Prioritize in order of longest task time where ties exist
v. Assign task to workstation
vi. Calculate efficiency
Cycle Time:

Cycle time is the maximum time allowed at each

workstation to complete its set of tasks on a unit

OT
Output rate =
CT

OT = operating time per day

D = Desired output rate

OT
CT = cycle time =
D
Determine the Minimum Number of Workstations Required

( t)
N=
CT

 t = sum of task time

Precedence Diagram

Precedence diagram: Tool used in line balancing to

display elemental tasks and sequence requirements

0.1 min. 1.0 min.

A Simple Precedence
a b Diagram

c d e
0.7 min. 0.5 min. 0.2 min.
 Calculate Percent Idle Time

Idle time per cycle

Percent idle time =
(N)(CT)

Efficiency = 1 – Percent idle time

( t)
Efficiency =
Na * CT

 t = sum of task time

Example:

Task of a product Immediate task Task time(minutes)

a - .2
b a .2
c - .3
d c .6
e b .3
f e, d 1
g f .4
h g .3
i. Draw precedence diagram
ii. Assign Task to workstations
iii. Find out the efficiency
Assuming an eight-hour workday, compute the cycle time needed to obtain an output
of 400 units per day.
Steps to be followed

i. Draw precedence diagram

ii. Determine workstation cycle time
iii. Determine theoretical minimum workstation
iv. Select assignment rule
i. Prioritize tasks in order of largest following tasks
ii. Prioritize in order of longest task time where ties exist
v. Assign task to workstation
vi. Calculate efficiency
Example

a.2 b.2 e.3

f1 g.4 h.3
c.3 d.6
Solution

CT= OT/D= 8*60/400 =1.2

No of workstation= 3.3/1.2=2.66=3

( t)
Efficiency =
Na * CT

 t = sum of task time

Solution to Example

Station 1 Station 2 Station 3 Station 4

a b e
f g h
c d
Example-2

Desired daily output of an assembly line is 360 units, operates 450 minutes
per day. Following table contains info regarding task, time and preceding task
Time in seconds Preceding task/s
A 30 -
B 35 A
C 30 A
D 35 B
E 15 C
F 65 C
G 40 EF
H 25 DG

i. Draw precedence diagram

ii. Balance the line and calculate the efficiency
Quality Management
Quality Management

Meaning
Dimensions of quality
Determinants of quality
The consequence of poor quality
The cost of quality
Quality Gurus
Quality awards
Quality certification:ISO-9000
TQM and its elements
Quality

Quality is the ability of a product or service to

consistently meet or exceed customer expectations.

Quality=performance-expectation>=0
Dimensions(Expectations) of Quality

1. Performance - main characteristics of the product/service

2. Aesthetics - appearance, feel, smell, taste
3. Special Features - extra characteristics
4. Conformance - how well product/service conforms to
customer’s expectations
5. Reliability - consistency of performance
6. Durability - useful life of the product/service
7. Perceived Quality - indirect evaluation of quality (e.g.
reputation)
8. Serviceability - service after sale
Examples of Quality Dimensions

Dimension (Product) (Service)

Automobile Auto Repair
1. Performance Everything works, fit & All work done, at agreed
finish price
Ride, handling, grade of Friendliness, courtesy,
materials used Competency, quickness
2. Aesthetics Interior design, soft touch Clean work/waiting area

3. Special features Gauge/control placement Location, call when ready

Cellular phone, CD Computer diagnostics
player
Dimension (Product) (Service)
Automobile Auto Repair
5. Reliability Infrequency of breakdowns Work done correctly,
ready when promised

6. Durability Useful life in miles, resistance Work holds up over

to rust & corrosion time

7. Perceived Top-rated car Award-winning service

quality department

8. Serviceability Handling of complaints and/or Handling of complaints

requests for information
Determinants of Quality

Ease of
Design
use

Conforms
to design Service
Determinants of Quality (cont’d

Quality of design
– Intension of designers to include or exclude features in
a product or service

Quality of conformance
– The degree to which goods or services conform to the
intent of the designers
Ease of use
Service
The Consequences of Poor Quality

Loss of business
Liability
Productivity
Costs
Costs of Quality

Failure Costs - costs incurred by defective parts/products

or faulty services.
Internal Failure Costs
– Costs incurred to fix problems that are detected before the
product/service is delivered to the customer.

External Failure Costs

– All costs incurred to fix problems that are detected after the
product/service is delivered to the customer.
 Costs of Quality (continued

Appraisal Costs
– Costs of activities designed to ensure quality or uncover
defects

Prevention Costs- to prevent defects from occurring

– All TQ training, TQ planning, customer assessment,
process control, and quality improvement costs
Quality Gurus

Walter Shewahrt

W. Edward Deming

Joseph M. Juran

Philip B. Crossby

Kaoru Ishikawa
 Quality Gurus

 W. Edward Deming
› 14 points i.e.
 constancy of purpose
 Drive out fear
 Breakdown barriers
 Eliminate numeric goals
 Institute modern methods of training on the job
 Cease dependence on mass inspection
 Find problems
 Adopt new philosophy
 Joseph M. Juran
› Trilogy such as
 Quality planning: necessary to establish process that are capable to meet qty std.
 Quality control: necessary to know when corrective action require
 Quality improvement: help to find better way of doing things.
Quality Gurus

Philip B. Crosby
– Do it right the first time
• Top mgt must demonstrate its commitment

• Mgt must be persistent in effort to achieve good quality

• Mgt must spell out what wants in term of quality and

what workers must do to achieve that

• Make it right the first time.

Quality Gurus

Kaoru Ishikawa
– Cause and effect diagram for problem solving
– Quality circle

Walter Shewhart
– Develop methods for analyzing output in a process and to
determine when corrective actions needed.
– Statistical quality Control
Quality Awards

Baldrige Award

Deming Prize
Malcolm Baldrige National Quality Award

1.0 Leadership (125 points)

2.0 Strategic Planning (85 points)
3.0 Customer and Market Focus (85 points)
4.0 Information and Analysis (85 points)
5.0 Human Resource Focus (85 points)
6.0 Process Management (85 points)
7.0 Business Results (450 points)
The Deming Prize

Honoring W. Edwards Deming

Japan’s highly coveted award

Main focus on statistical quality control

Quality Certification

ISO 9000
– Set of international standards on quality management
and quality assurance, critical to international business

Consists of five primary parts numbered as 9000

through 9004
International Standards make things work. They give world-
class specifications for products, services and systems, to
ensure quality, safety and efficiency. They are instrumental in
facilitating international trade.
ISO is an independent, non-governmental international
organization with a membership of 162 national standards
bodies.
ISO International Standards ensure that products and services
are safe, reliable and of good quality.
– For business, they are strategic tools that reduce costs by
minimizing waste and errors and increasing productivity.
– They help companies to access new markets, level the playing field
for developing countries and facilitate free and fair global trade.
ISO 9000

ISO 9001: Model for quality assurance in design, procurement,

production, installation and servicing

ISO 9002:model for quality assurance in production and

installation

ISO9003:Model for quality assurance in final inspection test.

ISO 9000

ISO 9000 and ISO 9004 guidelines for use

ISO 14000

ISO 14000
– A set of international standards for assessing a
company’s environmental performance
Total Quality Management

A philosophy that involves everyone in an organization

in a continual effort to improve quality and achieve
customer satisfaction.

T Q M
The TQM Approach

1. Find out what the customer wants

2. Design a product or service that meets or exceeds customer

wants

3. Design processes that facilitates doing the job right the first
time

4. Keep track of results

5. Extend these concepts to suppliers

Obstacles to Implementing TQM

Lack of:
– Company-wide definition of quality
– Strategic plan for change
– Customer focus
– Real employee empowerment
– Strong motivation
– Time to devote to quality initiatives
– Leadership
Obstacles to Implementing TQM

Poor inter-organizational communication

View of quality as a “quick fix”

Emphasis on short-term financial results

Internal political and “turf” wars

Criticisms of TQM

1. Blind pursuit of TQM programs

2. Programs may not be linked to strategies

3. Quality-related decisions may not be tied to market

performance

4. Failure to carefully plan a program

Elements of TQM

i. Philosophical element
1. Continuous improvement
2. Competitive benchmarking
3. Employee empowerment
4. Team approach
ii. Generic tools
1. Process flow chart
2. Check sheets
3. Cause and Effect Diagram
4. Pareto analysis
5. Run Chart
6. Scatter diagram
7. Control chart
iii. Tools of the QC dept (SQC methods)
1. Sampling plan
2. Process capability
3. Taguchi methods
Elements of TQM( Philosophical)
1. Continuous improvement
2. Competitive benchmarking
3. Employee empowerment
4. Team approach
5. Decisions based on facts
6. Knowledge of tools
7. Supplier quality
8. Champion
9. Quality at the source
Continuous Improvement

Philosophy that seeks to make never-ending improvements to

the process of converting inputs into outputs.

Kaizen: Japanese word for continuous improvement.

Benchmarking Process

Identify a critical process that needs improving….

Identify an organization that excels in this
process….
Contact that organization….
Analyze the data….
Improve the critical process…
Quality at the Source

The philosophy of making each worker

responsible for the quality of his or her work

Jidoka
Basic Quality (generic) Tools

Flowcharts
Check sheets
Histograms
Pareto Charts
Scatter diagrams
Control charts
Cause-and-effect diagrams
Run charts
Check Sheet

Billing Errors Monday

Wrong Account

Wrong Amount

A/R Errors

Wrong Account

Wrong Amount
Histograms
Pareto Analysis

80% problems Number of defects

may be
attributed
to 20%
of causes

Off Smeared Missing Loose Other

center print label
Control Chart

Time sequence chart showing the plotted values of

statistics.
1020
1010 UCL
1000
990
980 LCL
970
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Cause-and-Effect Diagram

Methods Materials
Cause
Cause
Cause
Cause
Cause Cause
Environment Effect
Cause Cause

Cause Cause
Cause Cause

People Equipment
 Run Chart
Time sequence chart showing the plotted values of a characteristics.

0.58
0.56
0.54
Diameter

0.52
0.5
0.48
0.46
0.44
1 2 3 4 5 6 7 8 9 10 11 12
T im e (Ho urs )
Time (Hours)
Quality Circles

Team approach
– List reduction
– Balance sheet
– Paired comparisons
Statistical quality control method

Can be divided into acceptance sampling and process

control.
Acceptance Sampling involves testing a random
sample of existing goods, and decide whether to
accept an entire lot based on the quality of random
sampling.
Process control: involves testing a random sample of
output from a process to determine whether the
process is producing items with in a pre selected
range.
Acceptance sampling: Design of a single sampling plan

A single sample plan is defined by n and c, where n is no of

units in the sample and c is the acceptance number.

c denotes maximum no of defective items that can be found in

the sample before the lot is rejected.

Values of n and c are determined by the interaction of AQL,

alpha, LTPD, and beta
Acceptance Sampling : Design of a single sampling plan

 AQL= acceptable quality level: Lots are defined as high quality if they

contain no more than a specified level of defectives terms AQL

 LTPD= lot tolerance percent defects: Lots are low quality if the

percentage of defective is greater than a specified amount term LTPD.

 Alpha= producer risk of rejecting good quality lot

 Beta= consumer risk of accepting bad quality lot.

 Example

Example: Hi tech purchases circuit board from a vendor. The

vendor produces the board to an AQL of 2 % defective and is
willing to run 5% risk (alpha).Hi tech consider lots of 8% or
more defective LTPD unacceptable and wants to ensure that it
will accept such poor quality lots no more than 10 % of time
(beta).A large shipment has just been delivered. Find the
appropriate sampling plan for the lot.
The parameters of the problem are AQL=.02 alpha=.05, LTPD=.08 and
Beta=.10, We can use the table to find c and n

First divide LTPD by AQL (.08/.02)=4. Then, find the ratio in column 2
that equal to or just grater than the amount. This value is 4.057 which is
associated with c=4

Finally, find the value in column 3 that is in the same row as c=4 and
divide that quantity by AQL to obtain n i.e. n*AQL=1.970 or
n=1.970/.02=98.5

The appropriate sampling plan is c=4 and n= 99

Excerpt from a sampling plan table

c LTPD/AQL n*AQL
0 44.890 .052
1 10.946 .355
2 6.509 .818
3 4.890 1.366
4 4.057 1.970
5 3.549 2.613
Process control procedure

Concerned with monitoring quality while the product or

service is being produced

Objective of process control plans are to provide timely

information on whether currently produced items are meeting
design specification.

And to detect shifts in the process that signal that future

product may not meet specification
Process control with attribute measurements:
Using p chart
Measurement by attributes means taking samples and using a
single decision- the item is good or bad.
Create p charts with an UCL and LCL.

P¯= total no of defects from all samples

no of samples*sample size

Sp=P¯(1-¯P)/n (where n is sample size)

UCL= P¯+z Sp

LCL= P¯- z Sp
P-chart Formulas

p=
 Defects
noofsamples  sample _ size


(
p 1− p )
 orSp = n

UCL/ LCL = p  z 
Process control with attribute measurements: Using p chart

Example: An insurance company were sampled on a daily

basis as a check against the quality performance of that
department. To establish a tentative norm for the dept, one
sample of 100 units was collected each day for 15 days with
these result.
a. A. develop a p chart using 95% confidence interval (1.96 Sp )
b. Plot the 15 sample collected
c. What comments can you make about the process?
Process control with attribute measurements: Using p chart

sample Sample size No of forms with error

1 100 4
2 100 3
3 100 5
4 100 0
5 100 2
6 100 8
7 100 1
8 100 3
9 100 4
10 100 2
11 100 7
12 100 2
13 100 1
14 100 3
15 100 1
Solution

P¯=46/15(100)=.0307

Sp=P¯(1-¯P)/n= .0307(1-.0307)/100= .0003=.017

UCL= P¯+z Sp =.031+1.96*.017=.064

LCL= P¯- z Sp =.031-1.96*.017=-.003 or zero

Solution
b. The defectives are plotted below
Chart Title
0.09
0.08
0.07
0.06
UCL
Axis Title

0.05
0.04
Series1
0.03 Series2
0.02
0.01
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

c. Of the 15 samples 2 were out of the control limits. Since the control
limits were established as 95% or 1 out of 20, we would say that the
process is out of control. It needs to be examined to find the cause of such
wide spread variation.
Design of Work Systems

Job Design
Behavioural approaches to job design
Methods Analysis
Motions Study
Quality of work life
Work Measurement
Compensation
Job Design

Job design involves specifying the content and methods of job

– What will be done
– Who will do the job
– How the job will done
– Where the job will be done
Objectives of job design includes productivity, safety and
quality of work life

Ergonomics :incorporation of human factors in the design of

the workplace. It relates to design of EME
• seeks to prevent common workplace injuries ie back injuries,
repetitive motion injuries…
Behavioral Approaches to Job Design

Job Enlargement
– Giving a worker a larger portion of the total task by
horizontal loading
Job Rotation
– Workers periodically exchange jobs
Job Enrichment
– Increasing responsibility for planning and
coordination tasks, by vertical loading
Methods Analysis

Method Analysis: analysing how a job is done.

The need for methods analysis can come from a

number of different sources:
• Changes in tools and equipment
• Changes in product design or new products
• Changes in materials or procedures
• Other factors (e.g. accidents, quality problems)
Basic procedure in MA

i. Select an operation to study

ii. Document the current method

iii. Analyze the job

iv. Propose new method

v. Install new methods

vi. Follow up implementation

 Figure 7-2
FLOW PROCESS CHART ANALYST PAGE
Job Requisition of petty cash D. Kolb 1 of 2

Details of Method
Requisition made by department head
Put in “pick-up” basket
To accounting department
Account and signature verified
Amount approved by treasurer
Amount counted by cashier
Amount recorded by bookkeeper
Petty cash sealed in envelope
Petty cash carried to department
Petty cash checked against requisition
Receipt signed
Petty cash stored in safety box
Motion Study

Motion study is the systematic study of the human motions

used to perform an operation.

Objective is to eliminate unnecessary motion & to identify

best sequence of motion for maximum efficiency.
Motion Study Techniques

Motion study principles - guidelines for designing motion-efficient

work procedures
• Principles for use of body : curve motion than st. motion
• Principles for arrangement of workplace: Gravity bin and drop
delivery
• Principles for the design of tools and equipment: levers, handles
,wheels should be readily accessible.
Analysis of therbligs - basic elemental motions into which a job
can be broken down.ie search, select, grasp, load transport,
release load etc.
Micro motion study - use of motion pictures and slow motion to
study motions that otherwise would be too rapid to analyze
Charts-FPC,SIPOC etc
Developing Work Methods

• Eliminate unnecessary motions

• Combine activities

• Reduce fatigue

• Improve the arrangement of the workplace

• Improve the design of tools and equipment

Quality of Work Life-Working Conditions

Temperature & Ventilation

Humidity

Illumination Color
Working Conditions (cont’d)
Noise & Vibration Work Breaks

Safety Causes of Accidents

Work Measurement

Determines how long it should take to do a job.

Standard time: is the amount of time it should take a qualified
worker to complete a specified task, working at a sustainable
rate, using given methods...
Most commonly used methods of work measurement are:
• Stopwatch Time Study
• Standard Elemental Times
• Predetermined Time Standards
• Work Sampling
Stopwatch time study
Development of a time standard based on observations of one
worker taken over a number of cycles.

The basic steps in a time study:

1. Define the task to be studied
2. Determine the number of cycles to observe
3. Time the job
4. Compute the standard time
Time study

The job or task to be studied is separated into measurable parts

or elements

Each element is timed individually.

Normal time=observed performance time per

unit*performance rating. NT= OT*PR

Standard time=NT(1+Allowances) or ST= NT*AF

– Allowances personal need such as washroom and coffee breaks,
unavoidable work delays, fatigue (physical or mental)
Good Items to Know & How to Apply Them

Observed Time (OT)

Normal Time (NT)= OT*PR
Performance Rating (PR)
Standard Time (ST)= NT*AF
Allowance Factor (AF)
Example
Step 1. Observe and record times
75.0 75.0

 xi
82.0 82.0
OT = 76.0 76.0
n
OT = Observed Time 90.0 90.0

x i = Sum of recorded times 85.0 85.0

80.0 80.0
n = Number of observations
7.8
86.0 86.0
72.7 (avg.) 82.0 (avg.)
Example

Step 2. Determine Normal Time (NT)

Since our worker was working faster than normal a
judgment call was used to come up with 1.25
NT = OT  PR
NT = 82  1.25
NT = 102 .5

If each element is a discrete unit then use the following equation:

NT =  (x j  PR j )
 Example

Step 3. Determine Standard Time

AF job = 1 + A
1
AFday =
1− A

By the Job
By the Day ST = 102 .5  1.25
AF = 1 + .25 1 ST = 128 .1
AF =
AF = 1.25 1 − .25
AF =
1 ST = 102 .5  1.33
.75 ST = 136 .7
AF = 1.3
Example

A time study analyst timed an assembly operation for 30 cycles, and then
computed the average time per cycle, which was 18.75 minutes. The
analyst assigned a performance rating of 96 and decided that an appropriate
allowance was 15%.Assume the AF is based on the workday. Determine
the following: OT,NT and ST

Solution:
Here OT=average time=18.75 minutes

NT=OT*PR =18.75*.96=18

ST=NT*AF where AF= 1/1-.15=1.176

ST= 18*1.176 =21.17 minutes.

 Team Exercise

Observing Fred's Day

Job 1 Job 2 Job 3 Job 4 Job 5
Day 1 1.75 1.30 1.45 1.30 1.60
Day 2 1.85 1.10 1.50 1.25 1.50
Day 3 1.90 1.25 1.55 1.20 1.45
Day 4 1.80 1.20 1.50 1.30 1.75
Day 5 1.75 1.10 1.50 1.50 1.60
Performance Ratings Allowance Factor
Job 1 1.25 5%
Job 2 1.10
Job 3 1.00
Job 4 0.95
Job 5 0.90
Standard Elemental Times

Time standards derived from a firm’s historical data.

Steps for standard elemental times
1. Analyze the job

2. Check file for historical times

3. Modify file times if necessary

4. Sum elemental times to get normal time

Predetermined time standards

Published data based on extensive research to determine

standard elemental times.
MTM (method time measurement developed by method
engineering council in 1940)
TMU-time measurement unit 1 tmu=.0006 minute
Advantages:
1. Based on large number of workers under controlled conditions
2. Analyst not requires to rate performance
3. No disruption of the operation
4. Standards can be established
Work sampling
Example of work sampling problem

An analyst has been asked to prepare an estimate of the proportion of time

that a turret lathe operator spends adjusting the machine, with a 90%
confidence level. Based on previous experience, the analyst believes the
proportion will be approximately 30%.
• If the analyst uses a sample size of 400 observations, what is the maximum
possible error that will be associated with the estimate.
• What sample size would the analysts need in order to have the maximum
error be no more than 5%.
Solution: here p= .30 and z=1.65 for 90% CI
p (1− P )
e=z n
= 1.65 √.3(1-.3)/400=1.65* √.3*.7/400=.038
n=(z/e)^2 p(1-p)=(1.65/.05)^2 (.3)*(.7)=228.69=229
Compensation

Individual Incentive Plans

Group Incentive Plans
Knowledge-Based Pay System
Management Compensation
Form of Incentive Plan

Accurate
Easy to apply
Consistent
Easy to understand
Fair
Group Incentive Plans
Scanlon Plan
– Encourage reductions in labor costs
Kaiser Plan
– Committees suggest ways of reducing costs
Lincoln Plan
– Profit sharing, job enlargement, and
participative management
Kodak Plan
– Wages/bonus related to profits
Inventory Management

 Inventory meaning
 Independent demand vs. Dependent demand
 Types of inventory
 Functions of inventory
 Objectives of inventory
 Requirements for effective inventory management.
 Inventory model
 Basic EOQ model
 EPQ model
 Quantity discount model
 Re-order model

30-Nov-22
 Single period model
Inventory
Independent Demand
a stock or store of goods

A Dependent Demand

B(4) C(2)

D(2) E(1) D(3)

F(2)

Independent demand is uncertain.

Dependent demand is certain.30-Nov-22
Independent vs dependent

Independent demand – finished goods, items that are

ready to be sold
– E.g. a computer
Dependent demand – components of finished
products
– E.g. parts that make up the computer

30-Nov-22
Types of Inventories

Raw materials & purchased parts

Partially completed goods called work in progress
Finished-goods inventories
– (manufacturing firms)
or merchandise
(retail stores)

Replacement parts, tools, & supplies

Goods-in-transit to warehouses or customers
(Pipeline inventory)
30-Nov-22
Functions of Inventory

To meet anticipated demand

To smooth production requirements
To decouple operations
To protect against stock-outs

To help hedge against price increases

To permit operations
To take advantage of quantity discounts

30-Nov-22
Objective of Inventory Control

To achieve satisfactory levels of customer service

while keeping inventory costs within reasonable
bounds
– Level of customer service
– Costs of ordering and carrying inventory

Inventory turnover: is the ratio of average cost of goods

sold to average inventory investment.

30-Nov-22
Effective Inventory Management

A system to keep track of inventory

A reliable forecast of demand
Knowledge of lead times
Reasonable estimates of
– Holding costs
– Ordering costs
– Shortage costs
A classification system

30-Nov-22
Inventory Counting Systems

Periodic System
Physical count of items made at periodic intervals

Perpetual Inventory System

System that keeps track of removals from inventory
continuously, thus monitoring current levels of each item

30-Nov-22
Inventory Counting Systems

Two-Bin System - Two containers of inventory;

reorder when the first is empty
Universal Bar Code - Bar code
printed on a label that has
information about the item
to which it is attached 0
RFID
21480 23208

30-Nov-22
Key Inventory Terms

Lead time: time interval between ordering and

receiving the order

Holding (carrying) costs: cost to carry an item in

inventory for a length of time, usually a year

Ordering costs: costs of ordering and receiving

inventory

Shortage costs: costs when demand exceeds supply

30-Nov-22
ABC Classification System

Classifying inventory according to some measure of importance

and allocating control efforts accordingly.
A - very important
B - mod. Important High A
C - least important
Annual
$ value B
of items

C
Low
Low High
Percentage of Items

30-Nov-22
Economic Order Quantity Models

Economic order quantity (EOQ) model

– The order size that minimizes total annual cost

Economic production model

Quantity discount model

30-Nov-22
Assumptions of EOQ Model

Only one product is involved

Annual demand requirements known
Demand is even throughout the year
Lead time does not vary
Each order is received in a single delivery
There are no quantity discounts

30-Nov-22
The Inventory Cycle

Q Usage Profile of Inventory Level Over

Quantity rate
on hand

Reorder
point

Receive Place Receive Place Receive

order
Time
order order order order
Lead time 30-Nov-22
Total Cost

Annual Annual
Total cost = carrying + ordering
cost cost

Q + D
TC = H S
2 Q

30-Nov-22
Cost Minimization Goal

The Total-Cost Curve is U-Shaped

Q D
TC = H + S
Annual Cost

2 Q

Ordering Costs

30-Nov-22
Q(Ooptimal order quantity)
Deriving the EOQ

Using calculus, we take the derivative of the total cost

function and set the derivative (slope) equal to zero
and solve for Q.

2DS 2( Annual Demand )(Order or Setup Cost )

Q OPT = =
H Annual Holding Cost

30-Nov-22
Minimum Total Cost

The total cost curve reaches its minimum where the

carrying and ordering costs are equal.

Q = DS
H
2 Q

30-Nov-22
Example

A local distributor for a national tire company expects to sell

approximately 9600 tires of a certain size. Annual carrying
costs are $16 per tire and ordering costs are $75. The
distributor operates 288 days a year.
– What is the EOQ?

– How many times per year does the store reorder?

– What is the length of an order cycle?

30-Nov-22
Solution

EOQ=  2DS/H =  2*9600*75/16 = 300 tires.

Number of orders per year D/EOQ = 9600/300 = 32

Length of order cycle = EOQ/ D = 300/9600 = 1/32

of a year, which is 1/32 *288= 9 days

30-Nov-22
Economic Production Quantity (EPQ)

Production done in batches or lots

Capacity to produce a part exceeds the part’s usage or

demand rate

Assumptions of EPQ are similar to EOQ except

orders are received incrementally during production

30-Nov-22
Economic Run Size

2DS p
Q0 =
H p− u

30-Nov-22
Derivation of EPQ

Annual carrying cost = I max*H/2 ,

Imax= Q(p-u)/p where p = production and u= usage rate and

Q/p is the run time or no of days.

Annual carrying cost=

Set up cost =
As we know the optimum size Q or EPQ occurs in the trade off between
carrying cost and order cost. In other words when
Carrying cost = Order cost.

Q= √ 30-Nov-22
Problem:

A toy manufacturer uses 48000 rubber wheels per year for its popular
truck series. The firm makes its own wheels which it can produce at a rate
of 800 per day. The toy trucks are assembled uniformly over the entire
year. carrying cost is $1 per wheel a year. set up cost for production run of
wheels is $45. The firm operates 240 days per year. Determine each of the
following.

• Optimum run size

• Minimum total annual cost for carrying and setup

• Cycle time for the optimal run size

• Run time.
30-Nov-22
Solutions

D= 48000 wheel per year

S= $45
H= $1 per wheel per year
p= 800 wheels per day
2DS p
u= 48000 wheels per 240 days or 200 wheels per day. Q 0 =
Q = 2*48000*45 * 800/800-200 = 2400 wheels. Where H p− u
TC min = Carrying cost + set up cost = (I max/2)*H + DS/Q
I max= Q(p-u)/p = 2400(800-200)/800 = 1800 wheels.
TC=1800/2*1 +(48000*45)/2400=900+900=$1800
Cycle time= Q/u= 2400 wheels/200 wheels/day= 12 days
Run time=Q/p= 2400/800 wheels per day= 3 days

30-Nov-22
Quantity Discount Model
Price reductions for large orders.
TC=Carrying cost + Ordering cost+ Purchasing cost

TC=QH/2+DS/Q+PD where P= unit price.

The maintenance department of a large hospital uses about 816 cases of liquid cleanser
annually. Ordering costs are $12 and carrying costs are $4 per case a year and the new price
schedule indicate the orders of less than 50 cases will cost $20 per case,50-79 cases will cost
$18 per case, 80-99 cases will cost $17 per case and larger order will cost $16 per case.
Determine the optimum order quantity and the total cost

EOQ=  2DS/H =  2*816*12/4= 70 cases

TC70= QH/2+DS/Q+PD= 70*4/2+816*12/70+18*816=$14968

TC 80= 14154

TC 100= 13325 …. is the lowest so 1000 case is the optimal order size.
When carrying costs are expressed as a percentage of
price …..
Surge electric uses 4000 switches a year. Switches price are as follows 1-
499, 90 cents each:500-999, 85 cents each and 1000 or more 80 cents.
Order cost is $30 and carrying costs are 40% of purchase price per unit.
Determine optimum order qty and TC.
Given D=4000 S=30 H=.40P
Range Unit Price H
1-499 .9 .4*.9=.36
500-999 .85 .4*.85=.34
1000 or more .8 .4*.8=.32
Minimum point=  2DS/H =  2*4000*30/.32=866

But 866 will cost .85 each rather than .8 each,866 is not a feasible. Next try
.85 for each

Minimum point =  2DS/H =  2*4000*30/.34=840 switches– this is

feasible as it falls in .85 per switch range

TC 840= QH/2+DS/Q+PD=840/2*.34+4000/840*30+.85*4000=3686

TC 1000= QH/2+DS/Q+PD=1000/2*.32+4000/1000*30+.8*4000=3480

Thus minimum cost order size is 1000.

When to Reorder with EOQ Ordering

Reorder Point - When the quantity on hand of an item drops to

this amount, the item is reordered

Safety Stock - Stock that is held in excess of expected demand

due to variable demand rate and/or lead time.

Service Level - Probability that demand will not exceed supply

during lead time.

30-Nov-22
Determinants of the Reorder Point

The rate of demand

The lead time

Demand and/or lead time variability

Stock out risk (safety stock)

30-Nov-22
Safety Stock
Quantity

Maximum probable demand

during lead time

Expected demand
during lead time

ROP

Safety stock reduces risk of Safety stock

stockout during lead time
LT 30-Nov-22
Time
Reorder Point

Service level
Risk of
a stockout
Probability of
no stockout
ROP Quantity
Expected
demand Safety
stock
0 z z-scale
30-Nov-22
Problem: when demand and LT are constant

John takes two – a- day vitamins, which are delivered to his

home by a route man seven days after an order is called in. At
what point should John telephone his order in.
Solution:
Usage = 2 vitamin per day
Lead time= 7 days

ROP= Usage* Lead-time = 2 vitamin per day* 7 days = 14 vitamins.

Thus John should reorder when 14 vitamin tablets are left.

30-Nov-22
When demand and LT variability are present

ROP= Expected demand during LT+ ZσdLT

Where Z= no of std deviation and σdLT= std deviation lead time demand
A manager of construction supply house determined from historical records that
demand for sand during lead time averages 50 tons. In addition, suppose the
manager determined the demand during lead time could be described by a normal
distribution that has a mean of 50 tons and std deviation of 5 tons. Assume that
manager is willing to accept a stock out risk of no more than 3%.

Find i, Safety stock ii. What reorder point should be used?

SS=1.88*5=9.4 tons

ROP=50+9.4=59.4
30-Nov-22
Single Period Model

Model for ordering of perishables and other items

with limited useful lives
Shortage cost: generally the unrealized profits per
unit
CS = revenue - cost per unit
Excess cost: difference between purchase cost and
salvage value of items left over at the end of a period
Ce =cost per unit- salvage value

30-Nov-22
Single Period Model

Continuous stocking levels

– Identifies optimal stocking levels
– Optimal stocking level balances unit shortage and
excess cost

Discrete stocking levels

– Service levels are discrete rather than continuous
– Desired service level is equaled or exceeded

30-Nov-22
Optimal Stocking Level

Cs
Service level = Cs = Shortage cost per unit
Cs + Ce Ce = Excess cost per unit
Ce Cs

Service Level

Quantity

So
Balance point
30-Nov-22
Example
Demand varies uniformly between 300 -500 liters per week in Cindy’s
cider bar. Cindy pays 20 cents/liter and charges 80 cents/liter. Unsold cider
has no salvage value. Find the optimal stocking level and its stockout risk
for that quantity
Cs Cs
SL =
Cs + Ce
Ce = $0.20 per unit
Cs = $0.60 per unit Service Level = 75%

Service level = = .6/(.6+.2) Quantity

Service level = .75

Stockout risk = 1.00 – 0.75 = 0.25

30-Nov-22
Problem:

A basket of fruits are delivered weekly to Jenny’s shop.

Demand varies uniformly between 300 kgs and 500 kgs per
week. Jenny pays 20 cent/kg and charges 80 cents/kg . Unsold
fruits has no salvage value and can not be carried over into the
next week due to spoilage. Find the optimal stocking level and
its stock out risk.

30-Nov-22
Solution: When demand is uniform

Cs = revenue per unit - cost per unit = $ .80- $. 20 = $. 60 per unit

Ce = cost per unit – salvage value per unit = $ .20 - $0 = $.20

SL= Cs/Cs+ Ce = .60/.60+.20 = .75

Thus the optimum stocking level must satisfy demand 75 % of the time.
For the uniform distribution, this will be at a point equal to the minimum
demand plus 75% of the difference between maximum and minimum
demands.

So = 300+ .75(500-300) = 300+ .75*200 = 450 kgs.

30-Nov-22
When demand is normally distributed

Demand for the apple juice is approximately normal ,with a mean of 200
liters per week and a std deviation of 10 liters per week. Shortage cost per
week is 60 cents and excess cost is 20 cents per liter. Find the optimal
stocking level for the blend.

SL= Cs/Cs+Ce= .6/.6+.2=.75

So= mean + Z*std. deviation= 200+.675*10=206.75 liters.

30-Nov-22
Operations Strategy

Too much inventory

– Tends to hide problems

– Easier to live with problems than to eliminate them

– Costly to maintain

Wise strategy
– Reduce lot sizes

– Reduce safety stock

30-Nov-22
 Location Planning and Analysis

• Location decision factors

• Plant strategies

• Location analysis models

Macro Level View

I P O

I P O

I P O
Location Decision Factors
Community
Regional Factors Considerations

Multiple Plant Site-related

Strategies Factors
Regional Factors

Location of raw materials

Location of markets
Labor factors
Climate and taxes
Community Considerations
Quality of life
Services
Attitudes
Taxes
Environmental regulations
Utilities
Developer support
Site Related Factors
Land
Transportation
Environmental
Legal
Multiple Plant Strategies

Product plant strategy

Market area plant strategy
Process plant strategy
Comparison of Service and Manufacturing
Considerations

Manufacturing/Distribution Service/Retail
Cost Focus Revenue focus

Transportation modes/costs Demographics: age,income,etc

Energy availability, costs Population/drawing area

Labor cost/availability/skills Competition

Building/leasing costs Traffic volume/patterns

Customer access/parking
Evaluating Locations

Cost-Profit-Volume Analysis
– Determine fixed and variable costs
– Plot total costs
– Determine lowest total costs
Example 1: Cost-Volume Analysis

Fixed and variable costs for

four potential locations

L o c a tio n F ix e d V a r ia b le
C ost C ost
A $ 2 5 0 ,0 0 0 $11
B 1 0 0 ,0 0 0 30
C 1 5 0 ,0 0 0 20
D 2 0 0 ,0 0 0 35
Example 1: Solution
Fixed Variable Total
Costs Costs Costs

A $250,000 $11(10,000) $360,000

B 100,000 30(10,000) 400,000
C 150,000 20(10,000) 350,000
D 200,000 35(10,000) 550,000
Example 1: Solution

$(000)
800 D
700 B
600 C
500 A
400 A Superior
C Superior
300 B Superior

200
0 2 4 6 8 10 12 14 16
100
0 Annual Output (000)
Team Exercise…

Cost-Volume-Profit
Option Fixed Costs Variable Costs
A $100,000 $10/per unit
B $120,000 $8/per unit
C $150,000 $7/per unit
More Evaluating Locations…

Factor Rating
• What about more qualitative factors?

• Factor rating approach can be used for any

decision based on qualitative data
Factor Rating…

Step 1: List the factors

Step 2: Weight the factors
Step 3: Score each site on each factor
Step 4: Total the weighted scores for each location
Factors Weights Some other place Bellingham
Business Climate

Quality of Life

Proximity to higher
education
Totals 1.00
More Evaluating Locations…
Center of Gravity Model

• Linear transportation cost issue

x y=
y i
x= i

n n

x=
xQ i i
y=
yQ i i

Q i Q i

• Weighted center of gravity model locates facility

closest to demand & supply sites with heaviest
annual shipments (reducing distribution costs)
In Summary…
Cost-Profit-Volume
– Decision based on the highest profit
Factor Rating
– Decision based on quantitative and qualitative inputs
Center of Gravity Method
– Decision based on minimum distribution costs
Supply Chain Management

Meaning
Objectives
Supply Chain Design Strategy
Measuring supply chain performance
Business Logistics
Components of business logistics
Make or Buy decision
Supply Chain Mgt.

A supply chain is a system through which

organizations acquires raw material, produce
products, and deliver the products and services to
their customers.
Supply chain management:

is a philosophy that describes how organizations

should manage their various supply chains to
achieve strategic advantage. Supply chain
activities include
• the management of different types of inventory,
• inbound and outbound transportation of goods,
facilities,
• purchasing
• customer service,
• order processing and
• relationship building with supplier and customers.
Typical Supply Chains

Production Distribution
Purchasing Receiving Storage Operations Storage
 Typical Supply Chain for a Manufacturer

Supplier
}
SupplierStorage Mfg. Storage Dist. Retailer
Supplier
Customer
Typical Supply Chain for a Service

Supplier

}
Supplier
Storage Service Customer
Objective of SCM

is to synchronize the requirements of the final

customer with the flow of materials and information
along the supply chain in order to reach a balance
between high customer satisfaction/service and cost.
Supply chain design strategy

Hau Lee characterizes 4 types of SC strategies

i. Efficient SCS

ii. Risk hedging SCS

iii. Responsive SCS ERRA

iv. Agile SCS
Efficient SC

These are SC that utilize strategies aimed at creating

the highest cost efficiency. To achieve
• non value added activities should be eliminated

• Scale economies should be pursued

• Optimization techniques should be deployed

• Most efficient, accurate, and cost effective transmission of info

across supply chain

• Grocery, food, oil, gas use the strategy

Risk Hedging SC

These are SC that utilize strategies aimed at pooling and

sharing resources in a SC so that risks in supply disruption
can be shared

A single entity in SC can be vulnerable to supply disruption

but If there is more than one source then risk of disruptions
are reduced

Increasing safety stock and safety stock with other companies

can reduce that supply disruption
• Common in retailing business
Responsive SC

Strategies aimed at being responsive and flexible to

the changing and diverse needs of the customers.
To be responsive, companies use
• build to-order and
• mass customization

Fashion apparel, computers, popular music use the

strategy
Agile SC

Strategies aimed at being responsive and flexible to

customer needs,
while the risk of supply shortages or disruptions are
hedged by pooling inventory and other capacity
resources
These are the combination of hedge and responsive
supply chain.
Telecom, high end computers, semiconductor use
agile sc strategy.
 Measuring SC performance/Efficiency

Two common measures to evaluate SC efficiency are

• Inventory turn over
• Week-of-supply
Costs of goods sold (CoGS)
Inventory Turnover =
Average aggregate inventory value (AAIV)
AAIV= is the total value of all items held in inventory :includes raw
material, WIP, Finished goods, distribution inventory considered
owned by the company
Weeks of supply

This is a measure of how many weeks’ worth of inventory is in

the system at a particular point in time.

Weeks of supply = (AAIV/CoGS)*52 weeks

CoGS is the annual cost for a company to produce the goods

or services provided to customers

It is sometimes referred to as the cost of revenue

It does not include selling and administrative expenses

Inventory turnover calculation

Dell computer reported the following information in its

1999 annual report

Net Revenue 912150

Cost of revenue 706850
Cost of production material 321150
WIP and Finished goods on hand 1950
Production materials-days of supply 6 days

Inventory Turnover =706850/321150+1950=51.78 turn per

year
Weeks of supply= (11750+1950/706850)*52=1 week
Bullwhip effect

The effect indicates a lack of synchronization among

supply chain member

The variability in demand is magnified as we move

from the customer to the producer in supply chain
Bullwhip Effect

Demand

Initial Final Custome

Supplier

Inventory oscillations become progressively

larger looking backward through the supply chain
Cross-docking

– Goods arriving at a warehouse from a supplier are

unloaded from the supplier’s truck and loaded onto
outbound trucks
– Avoids warehouse storage
CPFR

Collaborative Planning, Forecasting, and

Replenishment
Focuses on information sharing among trading
partners
Forecasts can be frozen and then converted into a
shipping plan
Eliminates typical order processing
Business Logistics

• Refers to the movement of materials and information

within a facility and to incoming and outgoing
shipments of goods and materials in a supply chain

is the process of planning, implementing, and controlling

the efficient, cost effective flow and storage of goods,
services and related information from point of origin to
point of consumption for the purpose of conforming to
customer requirements.
Business Logistics

is a mgt functions that support the complete cycle of

material flow:
• from purchase and internal control of production
materials

• to the planning and control of WIP

• to purchasing, shipping, distribution of the finished

goods.
Materials Movement

Work center Work

Work center
center
Work Storage
center
Storage
RECEIVING

Storage

Shipping
Business Logistics

Three components:

i. the supplier network,

ii. the manufacturing unit and

iii. the customer network.

Supplier network:

The supplier network is made up of the group of suppliers,

both internal and external, that provide goods and services
to an organization.
Management focus is on the inbound flow of goods,
services, and information to the manufacturing unit.
Key issues addressed with in this component include:
• How much material should be ordered and when?
• From whom should the material be ordered?
• Which criteria are appropriate for evaluating suppliers?
• What transport mode and where should material be stored?
Manufacturing unit:

The manufacturing unit is the set of processing steps

used to transform incoming raw material and
components into finished products.
Management focus is on the flow of goods, services
and information through the internal process. Topic
such as
• production planning and control,
• inventory management,
• aggregate planning,
• capacity planning and just in time are related with this component.
Customer network:

It is made up of the group of distribution centers,

wholesalers, retailers, and ultimate customers that
receive finished products from the organization.
Management focus is on the outbound flow of goods,
services and information. This also includes
• demand forecasts,
• finished goods inventories,
• product packaging,
• transportation and customer service.
Various elements of a company logistics function:

The precise list of components may differ from

company to company, but a general list would
include
– transportation,
– facilities,
– procurements and purchasing,
– packaging,
– warehousing and storage,
– inventory planning and control,
– demand forecasting,
– customer service,
– order processing and
– salvage and scrap disposal.
Purchasing:

Is the acquisition of needed goods and services at

optimum cost from competent, reliable sources.
Management should consider followings while taking
Purchasing decision.
Make or Buy decision:

Is deciding whether the company will make some or

all of a product or buy it from suppliers. It is more
economically attractive for the company to make the
item when TC make<TC buy. At the break-even
quantity (B), whether the company makes the item or
buys it from a vendor does not matter. The break
even quantity is easy to express
Make or Buy decision:

TC buy = TC make

C D = FC + (V*D) Here C= unit landed cost, D

= Demand, FC= Fixed cost, VC =Variable cost

C* B= FC +( V* B) Here B= Break even quantity

C*B – V*B =FC

B( C-V)=FC

B = FC/C-V
Make or Buy decision

A manufacturer can either produce a certain part in

house or buy it from an outside vendor. The company
needs 70000 of those parts each year. Consider the
following cost data that have been collected:

Source Fixed cost VC/unit

Make $10125 $12.50
Buy - $14.75
Supplier evaluation:

One of the most important is the reliability of the

supplier in providing on time delivery. Supplier
evaluation criteria are as follows
– Quality of product and services
– Variability of product and services
– Price and terms available
– Responsiveness
– Reliability
– Flexibility
– Technical sophistication
– Management and worker skill, training and attitude
Transportation:

Transportation element typically accounts for one-

half- to two thirds of all logistics costs. There are
three legal forms of transportation namely private,
common and contract carrier.
Five basic modes of transportation:
– rail,
– truck,
– air,
– water and
– pipeline.
Transportation:

Rail shipment usually are low cost but rail time

schedule offer little flexibility.
Truck shipments offer highly flexible schedules,
door-to-door delivery.
Air shipment is expensive but offer speedy delivery.
Air is best suited for the movement high value light
weight items, emergency shipment and perishable
goods.
Transportation:

Water transport is usually the lowest cost per ton mile

but slow and competes primarily with rail roads for
basic bulk commodities and raw materials such as
iron, ore, grains, cement, coal and petroleum product.

The pipeline mode of transport provides effective

point- to point shipment of fluids, and some non-
fluids. Most pipelines today carry petroleum.
Ware housing:

Because of uncertainties in the procurement process

and production companies need ware housing
capability. Some companies own and operate their
ware houses; others use the service of a public ware
house. Warehouse operation includes
– Receive and inspect goods
– Sort and dispatch goods to storage
– Hold goods
– Dispatch the shipment
– Prepare inventory record
Operations Strategy

Too much inventory

– Tends to hide problems

– Easier to live with problems than to eliminate them

– Costly to maintain

Wise strategy
– Reduce lot sizes

– Reduce safety stock

Just in Time

Meaning.
Big JIT and Little JIT.
Waste and its types.
Elements that address minimization of waste.
JIT implementation requirements.
JIT meaning

an integrated set of activities designed to achieve high

volume production
using minimal inventories of raw materials, work in
process, and finished goods.
is also based on the logic that nothing will be
produced until it is needed.
Big JIT and Little JIT

Big JIT
Often termed as lean production.
is the philosophy of operations management
that sees to eliminate waste in all aspects of a firm’s
production activities, human relations, vendor
relations, technology, and the management of
materials and inventories.
Little JIT

Focuses more narrowly on scheduling goods

inventories and
providing services resources where and when needed.
Japanese approach to productivity

Is based on two philosophy ie

– Elimination of waste

– Respect for people

Elimination of waste: Toyota’s Fujio Cho concept

anything other than minimum amount of equipment,

materials, parts, and workers (working time)
which are absolutely essential to production.
Waste to be eliminated

i. Waste from over production

ii. Waste of waiting time.
iii. Transportation waste.
iv. Inventory waste
v. Processing waste
vi. Waste of motion
vii. Waste from product defects
Elimination of waste

Seven elements that address elimination of waste

i. Focused factory network

ii. Group technology

iii. Quality at the source

iv. JIT production

v. Uniform plant loading

vi. Kanban production control system

vii. Minimize set up time

Focused Factory Network

The Japanese build small specialized plants rather

than large vertically integrated manufacturing
facilities.

They find large operations and their bureaucracies

difficult to mange and not in line with their
management style
Group technology:

Instead of transferring from one department to

another to specialized workers, The Japanese consider
all operations required to make a part and group those
machines together.
The group technology cells eliminate movement and
queue (waiting) time between operations,
reduce inventory, and reduce the number of
employees required.
Quality at the source: Jidoka

It means do it right the first time ,

when something goes wrong, stop the process or

assembly line immediately.

Factory workers become their own inspectors,

personally responsible for the quality of their
outputs.
Quality at the source

Quality at the source includes automation or

automated inspection.

Japanese prefer to have quality inspections performed

by automation or robotics because it is faster, easier,
repeatable and suitable for jobs too redundant for a
worker to perform.
JIT production:

JIT means producing what is needed when needed

and no more.
Anything over the minimum amount necessary is
viewed as waste,
because effort and material expended for something
not needed now cannot be utilized now.
The what’s of JIT

What it is What it does

– Mgt philosophy – Attack waste
– Pull system through the – Exposes problems and
plant bottlenecks
What it requires
What it assumes
– Employee participation
– Stable environment
– CI
– TQC
– Small lot size
Uniform plant loading:

Smoothing the production flows to dampen/reduce

the reaction waves that normally occurs in response
to schedule variations is called uniform plant loading.

When a change is made in a final assembly, the

changes are magnified throughout the line and the
supply chain.
The only way to eliminate the problem is to make
adjustments as small as possible by setting a firm
monthly production plan for which the output rate is
frozen .
Kanban production control:

Kanban means “sign” or “instruction” card in

Japanese.
A Kanban control system uses a signaling device to
regulate JIT flows.
The cards or containers make up the Kanban pull
system.
The number of Kanban card sets is
=DL(1+S)/C
where DL Expected demand during lead time and S=
safety stock and C= Size of the container
Some approaches of Kanban

Container system
– Container can be used as signal device
– An empty container on the factory floor visually signals
the need to fill it.
Kanban square
– Some company use marked spaces on the floor or on the
table to identify where material should be stored.
Minimized set up times

Because small lot sizes are the norm, machine setups

must be quickly accomplished to produce the mixed
models on the line.
To achieve set up time reduction, setups are divided
into internal and external activities.
Internal setup must be done while a machine is
stopped.
External set up can be done while the machine is
running.
Respect for people

Respect for people is a key to the Japanese

improvements.
They have traditionally stressed lifetime employment
for permanent positions with in major firms.
Companies try to maintain level payrolls even when
the business condition deteriorates.
Respect for people

Permanent workers (about one third of the total work

forces) have job security
and tend to be more flexible, remain with a company,
and do all they can to helps firm achieve its goal.
Mgt view worker as asset not as human machine
Respect for people

Bottom round mgt: style made up of consensus mgt

by committees or teams.
Quality circle:Volunteer employees meet weekly to
discuss their job and problems
They attempt to device a solution of the problem and
share the solution with mgt.
JIT implementation requirements

It discusses ways to accomplish JIT production. It

follows some steps. They are:
Design flow process:
Total quality control
Stabilize schedule
Kanban Pull
Work with vendor
Reduce inventory more
Improve product design
JIT implementation requirement

a. Kanban Pull: By demand pull, Back flush, reduce

lot sizes.
b. Work with vendors: Reduce lead times, frequent
deliveries, project usage requirements, quality
expectation.
c. Reduce inventory more: Look for other areas:
stores, transit, carousels, conveyors.
d. Improve product design: Standard product
configuration, standardize and reduce number of
parts, process design with product design, quality
expectation.
Design flow process

JIT requires the plant layout to be designed to ensure

balanced work flow with a minimum of work in
process inventory.
This is done by link operations, balance workstations
capacities, emphasize preventive maintenance,
reduce lot size, and reduce setup/ change over time.
Total quality control

TQC is the practice of building quality into the process

and not identifying quality by inspection.
A stable schedule

▪ JIT firms require a stable schedule over a lengthy

time horizon.
▪ This is accomplished by
▪ level scheduling: pull material into final assembly by a
uniform pattern.It allows various element of production
to respond perfectly.
▪ Freeze windows:period of time during which schedule
is fixed and no further changed is possible.
▪ Underutilization of capacity:Is realized when buffer
inventories are removed.
CT2 marks:10 Time:30 minutes.

i. What is TQM? List the elements of TQM. Explain tools for the QC dept.
ii. For a particular component X Alpha has a LTPD of 10 percent. Zenon
corporation, from whom Alpha purchases this component, has an
acceptable quality level in its production facility of 3 percent for
component X. Alpha has a consumer’s risk of 10 percent and Zenon has a
producer’s risk of 5 percent.
– When a shipment of product X is received from Zenon corporation what is the
sample size that the receiving department should test?
– What is the allowable number of defects in order to accept the shipment?

iii. What is line balancing? Explain types of Layout

(any two).