THIRD EDITION

PRODUCTION
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OPERATIONS
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MANAGEMENT
R. Panneerselvam
Production and Operations Management

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Production and Operations
Management
Third Edition

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R. PANNEERSELVAM
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Department of Management Studies
School of Management, Pondicherry University
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Puducherry
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New Delhi-110001
2012
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PRODUCTION AND OPERATIONS MANAGEMENT, Third Edition

R. Panneerselvam

© 2012 by PHI Learning Private Limited, New Delhi. All rights reserved. No part of this book may be
reproduced in any form, by mimeograph or any other means, without permission in writing from the
publisher.

ISBN-978-81-203-4555-3

The export rights of this book are vested solely with the publisher.

Twenty-fourth Printing (Third Edition)   February, 2012

Published by Asoke K. Ghosh, PHI Learning Private Limited, M-97, Connaught Circus,
New Delhi-110001 and Printed by Rajkamal Electric Press, Plot No. 2, Phase IV, HSIDC,
Kundli-131028, Sonepat, Haryana.
 Contents

Preface xv
Preface to the First Edition xix

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1. INTRODUCTION 1–19
1.1 Functional Subsystems of Organizations 1
1.1.1 Definition 2
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1.2 Systems Concept of Production 4
1.3 Types of Production System 7
1.3.1 Flow Shop 7
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1.3.2 Job Shop 8
1.3.3 Batch Manufacturing 8
1.3.4 The Project 8
1.4 Productivity 8
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1.5 Strategic Management 10

1.5.1 Corporate Strategies 11
1.5.2 Generic Competitive (or Business Unit) Strategies 13
1.5.3 Functional Strategies 13
1.6 Gross Domestic Product (GDP) and Its Impact 15
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1.7 World Class Manufacturing 17

Objective Type Questions 18
Questions 18
2. PRODUCT DESIGN AND ANALYSIS 20 – 59
2.1 What is Product Design and Analysis 20
2.2 New Product Development—Its Concepts 21
2.2.1 Steps of Product Design 22
2.3 Process Planning and Design 24
2.3.1 Selection of Process 24
2.3.2 Process Selection Decisions 24
2.3.3 Process Planning Design 25
2.3.4 Responsibilities of Process Planning Engineer 26
2.3.5 Steps in Process Planning 27
2.3.6 Case Study 27
2.4 Process Design 30
2.4.1 Process Research 30
2.4.2 Pilot Development 33
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2.4.3 Capacity Consideration 33

2.4.4 Commercial Plan Transfer 33
2.4.5 Enhanced Capacity Using Optimization 34
2.5 Value Analysis/Value Engineering 34
2.5.1 History of Value Analysis/Value Engineering 34
2.5.2 When to Apply Value Analysis 35
2.5.3 Function 36
2.5.4 Aims 37
2.5.5 Value Engineering Procedure 38
2.5.6 Advantages and Application Areas 40
2.6 Standardization 41
2.6.1 Standardization Procedure 42
2.6.2 Advantages of Standardization 42
2.6.3 Application of Standardization 42
2.7 Simplification 43
2.8 Make or Buy Decision 43
2.8.1 Possible Alternatives while Starting for New Products 43

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2.8.2 Criteria for Make or Buy 44
2.8.3 Approaches for Make or Buy Decision 45

2.10.1
2.10.2
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2.9 Ergonomic Considerations in Product Design
2.10 Concurrent Engineering 50
Tools for Concurrent Engineering 51
HRD in Concurrent Engineering 54
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Objective Type Questions 54
Questions 56
CASE STUDY 1: VALUE ANALYSIS—FIRE EXTINGUISHER 58
CASE STUDY 2: BUSINESS PROCESS RE-ENGINEERING 58
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3. CAPACITY PLANNING AND INVESTMENT DECISIONS 60–90

3.1 Capacity Planning 60
3.1.1 Determination of Plant Capacity 60
3.1.2 Capacity Planning Strategies 60
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3.1.3 Equipment Selection 61

3.2 Investment Decisions 63
3.2.1 Interest Formulas 63
3.2.2 Bases for Comparison of Alternatives 71
Objective Type Questions 84
Questions 85
CASE STUDY 1: CAPACITY PLANNING 89
CASE STUDY 2: INVESTMENT DECISION 89
4. FORECASTING 91–114
4.1 Nature and Use of Forecast 91
4.1.1 Factors Affecting Forecast (Demand) 92
4.1.2 Types of Forecasting in Decision Making 92
4.2 Sources of Data 93
4.3 Demand Patterns 93
4.4 Forecasting Models 95
4.4.1 Selection of a Forecasting Technique 95
4.4.2 Measures of Forecast Accuracy 96
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4.4.3 Simple Moving Average Method 98

4.4.4 Weighted Moving Average Method 99
4.4.5 Double Moving Average Method 100
4.4.6 Simple (Single) Exponential Smoothing Method 101
4.4.7 Adjusted Exponential Smoothing Method 102
4.4.8 Linear Regression 104
4.4.9 Semi-average Method 107
4.4.10 Delphi Method 108
Objective Type Questions 109
Questions: 111
CASE STUDY: BETA ATM MACHINES (FORECASTING) 114
5. FACILITY LOCATION 115–158
5.1 Introduction 115
5.1.1 Factors Influencing Plant Location 115
5.1.2 Break-even Analysis 116
5.2 Single Facility Location Problem 120

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5.3 Multifacility Location Problems 124
5.3.1 Model for Multifacility Location Problem 125
5.3.2
5.3.3
5.3.4
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Method of Transformation 125
Model to Determine X-coordinates of New Facilities 126
Model to Determine Y-coordinate 127
5.4 Minimax Location Problem 134
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5.5 Gravity Location Problem 137
5.6 Euclidean-distance Location Problem 139
5.7 Covering Problem 144
5.7.1 Introduction 144
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5.7.2 Total Covering Problem 145

5.7.3 Multiple Objective Partial Covering Problem 147
5.8 Model for Warehouse Location Problem 148
5.8.1 Problem Definition 149
5.8.2 Descriptive Model 149
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5.8.3 Working Mathematical Model 150

Objective Type Questions 151
Questions 153
CASE STUDY: PLANT LOCATION 158
6. PLANT LAYOUT AND MATERIALS HANDLING 159–218
6.1 Introduction 159
6.2 Classification of Layout 159
6.2.1 Advantages and Limitations of Process Layout 161
6.2.2 Advantages and Limitations of Product Layout 161
6.2.3 Advantages and Limitations of Group Technology Layout 161
6.3 Layout Design Procedures 162
6.3.1 Systematic Layout Design Procedure 163
6.3.2 Computerized Relative Allocation of Facilities Technique (CRAFT) 163
6.3.3 CRAFT Procedure 164
6.3.4 Application of CRAFT 165
6.3.5 Automated Layout Design Program (ALDEP) 174
6.3.6 Computerized Relationship Layout Planning (CORELAP) 183
6.3.7 Application of CORELAP 184
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6.4 Algorithms and Models for Group Technology 191

6.4.1 Rank Order Clustering Algorithm (ROC) 191
6.4.2 Bond Energy Algorithm 196
6.4.3 Mathematical Model for Machine-Component Cell Formation 200
6.5 Materials Handling Systems 205
6.5.1 Unit Load Concept 206
6.5.2 Materials Handling Principles 206
6.5.3 Classification of Materials Handling Equipments 206
Objective Type Questions 207
Questions 210
CASE STUDY: PLANT LAYOUT DESIGN 217
7. LINE BALANCING 219–240
7.1 Concept of Mass Production System 219
7.2 Objective of Assembly Line Balancing 220
7.2.1 Generalized Algorithm 220

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7.3 Rank Positional Weight Method 221
7.4 The COMSOAL Algorithm 224
7.5 Model for Assembly Line Balancing 226
7.5.1
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Zero-one Programming Model to Minimize the Number of Workstations 227
7.6 Stochastic Assembly Line Balancing 231
7.7 Case Study 231
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Objective Type Questions 234
Questions 235
CASE STUDY 1: TURBO-CHARGER (ASSEMBLY LINE BALANCING) 238
CASE STUDY 2: HIGH VOLTAGE FUSE (ASSEMBLY LINE BALANCING) 239
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8. LINE OF BALANCE 241–248

8.1 Introduction 241
8.2 Application Areas of LOB 241
8.3 Input to LOB 242
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8.4 Steps of LOB 242

Objective Type Questions 247
Questions 235
9. MATERIALS MANAGEMENT AND INVENTORY CONTROL 249–321
9.1 Integrated Materials Management 249
9.2 Components of Integrated Materials Management 249
9.2.1 Materials Planning 250
9.2.2 Inventory Control 250
9.2.3 Purchase Management 250
9.2.4 Stores Management 250
9.3 Inventory Control 251
9.3.1 Inventory Decisions 251
9.3.2 Costs Trade-off 251
9.4 Models of Inventory 252
9.4.1 Purchase Model with Instantaneous Replenishment and without Shortages 252
9.4.2 Manufacturing Model without Shortages 254
9.4.3 Purchase Model with Shortages (Instantaneous Supply) 256
9.4.4 Manufacturing Model with Shortages 258
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9.5 Operation of Inventory System 259

9.6 Quantity Discount 261
9.7 Implementation of Purchase Inventory Model 265
9.7.1 Fixed Order Quantity System (Q System) 265
9.7.2 Periodic Review System (P System) 265
9.8 Purchasing Management 268
9.8.1 Purchase Systems 268
9.8.2 Special Purchase Systems 269
9.8.3 Aspects of Purchase Management 270
9.8.4 Vendor Evaluation 272
9.8.5 Contract 290
9.9 Stores Management 297
9.9.1 Incoming Materials Control 298
9.9.2 Store Accounting 299
9.9.3 Obsolete Surplus and Scrap Management 299
9.9.4 ABC Analysis 300
9.9.5 XYZ Analysis 305

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9.9.6 VED Analysis 310
9.9.7 FSN Analysis 312
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SDE Analysis 312
Objective Type Questions 313
Questions 316
CASE STUDY: INVENTORY CONTROL 321
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10. AGGREGATE PLANNING AND MASTER PRODUCTION SCHEDULING 322–349
10.1 Aggregate Planning 322
10.1.1 Nature of Aggregate Planning Decisions 322
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10.1.2 Aggregate Planning Strategies 323

10.1.3 Aggregate Planning Methods 324
10.2 Master Production Plan/Schedule 341
10.2.1 Cut-and-Fit Methods 342
Objective Type Questions 343
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Questions 345
CASE STUDY 1: AGGREGATE PLANNING—LAXMI MOTORS LIMITED 348
CASE STUDY 2: AGGREGATE PLANNING—ZIGMA AUTOMOBILE LIMITED 349
11. MATERIAL REQUIREMENTS PLANNING 350–372
11.1 Introduction 350
11.2 Product Structure/Bill of Materials (BOM) 350
11.3 MRP Concept 351
11.3.1 MRP Calculations 353
11.4 Lot Sizing in MRP 355
11.4.1 Illustration to Demonstrate Lot Sizing Methods in MRP 355
11.5 Capacity Requirements Planning 362
11.6 Manufacturing Resource Planning II (MRP II) 363
11.6.1 Implementation Design of MRP II 365
Objective Type Questions 367
Questions 369
CASE STUDY: MATERIAL REQUIREMENTS PLANNING 372
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12. PRODUCTION PLANNING AND CONTROL 373–378

12.1 Introduction 373
12.1.1 Strategic Decisions 373
12.1.2 Tactical Decisions 373
12.1.3 Operational Decisions 373
12.2 Scheduling—An Introduction 376
Objective Type Questions 377
Questions 378
13. SINGLE MACHINE SCHEDULING 379–411
13.1 Introduction 379
13.2 Concept of Single Machine Scheduling 379
13.2.1 Measures of Performance 380
13.3 Shortest Processing Time (SPT) Rule to Minimize Mean Flow Time 381
13.4 Weighted Mean Flow Time 382
13.5 Earliest Due Date (EDD) Rule to Minimize Maximum Lateness 383

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13.6 Model to Minimize Total Tardiness 384
13.7 Introduction to Branch and Bound Technique to Minimize Mean
Tardiness 386
13.7.1
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Branch and Bound Algorithm 388
13.8 Simple Heuristic to Minimize Total Tardiness in Single Machine
Scheduling Problem 395
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13.9 Minimizing the Number of Tardy Jobs 398
13.9.1 Hodgson’s Algorithm to Minimize NT 398
13.10 Introduction to Parallel Processors under Single Machine Scheduling 400
13.10.1 Minimizing Makespan 401
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13.10.2 McNaughton’s Algorithm (to minimize M with m parallel,

identical machines) 401
13.10.3 A Heuristic Procedure for Minimizing Makespan (M) 402
13.10.4 An Integer Programming Formulation 403
13.10.5 Algorithm to Minimize Mean Flow Time with Parallel Identical
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Machines 403
13.10.6 Heuristic for Scheduling n Jobs on Parallel Identical Processors
to Minimize Weighted Mean Flow Time 404
Objective Type Questions 406
Questions 408
CASE STUDY: ALPHA PACKAGING LIMITED 411
14. FLOW SHOP SCHEDULING 412–436
14.1 Introduction 412
14.2 Johnson’s Problem 413
14.3 Extension of Johnson’s Rule 416
14.4 Branch and Bound Technique 417
14.5 CDS Heuristic 427
14.6 Palmer’s Heuristic 430
Objective Type Questions 431
Questions 436
CASE STUDY: LAKSHMI ENGINEERING LIMITED 436
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15. JOB SHOP SCHEDULING 437–455

15.1 Introduction 437
15.1.1 Types of Schedules 438
15.2 Schedule Generation 439
15.3 Heuristic Procedures 440
15.3.1 Priority Dispatching Rules 440
15.4 Two Jobs and M Machines Scheduling 448
Objective Type Questions 449
Question 451
CASE STUDY: ESHWARI ENGINEERING LIMITED 455
16. PROJECT MANAGEMENT 456–495
16.1 Introduction 456
16.2 Phases of Project Management 458
16.3 Guidelines for Network Construction 459
16.3.1 Rules for Network Construction 459

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16.4 Critical Path Method (CPM) 459
16.5 Gantt Chart/Time Chart 464
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Project Evaluation and Review Technique (PERT) 464
Crashing of Project Network 467
16.7.1
16.7.2
General Guidelines for Network Crashing 468
Crashing of Project Network with Costs Trade-off 469
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16.8 Project Scheduling with Constrained Resources 474
16.8.1 Resource Levelling Technique 474
16.8.2 Resource Allocation Technique 477
16.9 Graphical Evaluation and Review Technique (GERT) 479
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16.10 Project Management Softwares 483

16.10.1 InstaPlan III 483
16.10.2 Yojana 484
Objective Type Questions 485
Questions 488
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17. WORK STUDY 496–521

17.1 Introduction 496
17.2 Method Study 496
17.2.1 Steps in Method Study 497
17.2.2 Recording 497
17.2.3 Selected Recording Techniques 499
17.2.4 Examine Step 508
17.2.5 Principles of Motion Economy (Ergonomic Considerations at Work) 508
17.3 Time Study 509
17.4 Work Sampling 514
Objective Type Questions 518
Questions 520
18. QUALITY CONTROL 522–559
18.1 Introduction 522
18.2 Need for Controlling Quality 522
18.3 Definition of a Quality System 523
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18.4 Classification of Quality Control Techniques 524

18.5 Process Capability 524
18.6 Process Variations Distribution 525
18.7 Type of Data 526
18.8 Control Charts 526
18.8.1 Control Charts for Variable 527
18.8.2 Control Charts for Attributes 530
18.9 Acceptance Sampling 534
18.9.1 Operating Characteristic Curve (O.C. Curve) 534
18.9.2 Single Sampling Plan 535
18.9.3 Double Sampling Plan 537
18.9.4 Acceptance Sampling by Variables 541
18.9.5 Nomogram Method for Single Sampling Plan 542
18.10 Six Sigma 548
18.10.1 Approaches for Six Sigma 549
18.10.2 Types of Six Sigma Belts 551
18.10.3 Benefits of Six Sigma 552

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Objective Type Questions 553
Questions 556

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19. MAINTENANCE PLANNING AND CONTROL
Maintenance Objectives 560
560–601

19.2 Types of Maintenance 560

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19.3 Basic Reasons for Replacement (Need for Replacement) 561
19.4 Deterministic Type of Items that Deteriorate with Time 561
19.5 Replacement Problems 563
19.6 Simple Probabilistic Model for Items which Fail Completely 570
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19.7 Determination of Maintenance Crew Size 575

19.7.1 Crew Size Determination Using Analytical Queuing Model 575
19.7.2 Simulation of Maintenance System 576
19.8 Reliability 581
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19.8.1 Reliability Improvement 582

19.8.2 Reliability Calculations 583
19.8.3 Reliability Program 585
19.8.4 Failure Modes, Effects and Criticality Analysis [FMECA] 586
19.9 Information System for Maintenance Management 587
19.9.1 Benefits of Computerized Information System 587
19.9.2 Procedures for Information System Design 587
19.10 Total Productive Maintenance 589
19.10.1 Objectives of TPM 589
19.10.2 Wastes Eliminated in TPM 589
19.10.3 Equipment Maintenance Techniques 590
19.10.4 Benefits of TPM 590
19.10.5 Performance Measures of Maintenance System 591
19.10.6 Pillars of TPM 591
Objective Type Questions 594
Questions 597
 Contents | xiii

20. MODERN PRODUCTION MANAGEMENT TOOLS 602–663

20.1 Just-In-Time Manufacturing 602
20.1.1 Introduction 602
20.1.2 Overview of JIT 602
20.1.3 Basic Principles 603
20.1.4 Universal Problem Solving Sequence 603
20.1.5 Push/Pull Production 603
20.1.6 Kanban Systems—Pull System 604
20.2 Computer Integrated Manufacturing and Flexible Manufacturing System 605
20.2.1 Computer Integrated Manufacturing 605
20.2.2 Flexible Manufacturing Systems (FMS) 607
20.3 Total Quality Management 609
20.3.1 Scope of Total Quality Management 609
20.3.2 Benefits of TQM 610
20.3.3 Fundamental Factors Affecting Quality 610
20.3.4 Quality Control Activities During Product Cycle 611

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20.3.5 Operating Quality Costs 611
20.4 ISO 9000 Series 613
20.4.1 Benefits of ISO 9000 Series 613
20.4.2
20.5 Poka Yoke
20.5.1
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Steps in ISO 9000 Registration 614
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Characteristics of Poka Yoke 615
20.5.2 Levels of Poka Yoke 616
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20.5.3 Classification of Poka Yoke 616
20.5.4 Places Where Poka Yoke Works Well 617
20.5.5 Principles of Poka Yoke 617
20.5.6 Poka Yoke Devices 617
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20.5.7 Steps of Poka Yoke 618

20.5.8 Benefits and Limitations of Poka Yoke 618
20.6 Kaizen 619
20.6.1 Key Elements of Kaizen 620
20.6.2 Classification of Kaizen 621
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20.6.3 Steps of Implementation of Kaizen Blitz 621

20.6.4 Guidelines for Kaizen Team 622
20.6.5 Quick and Easy Kaizen System 622
20.6.6 Benefits of Kaizen 623
20.7 Business Process Reengineering 623
20.7.1 Steps of BPR 623
20.7.2 Applications of BPR 625
20.8 Supply Chain Management 626
20.8.1 Integrated Business Logistics 628
20.9 Lean Manufacturing 634
20.9.1 Steps of Lean Manufacturing 635
20.9.2 Components of Lean Manufacturing 636
20.10 Quality Function Deployment 636
20.10.1 The House of Quality 637
20.10.2 Case Study 639
20.11 Enterprise Resource Planning (ERP) 646
20.11.1 Evolution of Enterprise Resource Planning 646
20.11.2 Benefits of ERP 646
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20.11.3 Seller–Buyer Concept of ERP System 646

20.11.4 Modules of ERP 649
20.11.5 ERP Cost 652
20.11.6 Steps of ERP System Implementation 653
20.11.7 ERP Products 655
Objective Type Questions 657
Questions 662

APPENDIX 665
REFERENCES 667–670
ANSWERS TO SELECTED QUESTIONS 671–691
INDEX 693–700

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 Production And Operations
Management

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