SYLLABUS

Module I
Introduction: production and operation management as function, nature and scope, decision areas,
Production-systems concept, transformation process, difference between products and services, make or buy
Decisions - Manufacturing in India – issues and challenges - Operations strategy – Strategic, Tactical and
Operations decisions in Operations Management. 5P’s and 9M’s of OM.-Types of Manufacturing Systems,
Concepts and Applications of Computer Integrated Manufacturing, Flexible Manufacturing Systems, Group
Technology and Cellular Manufacturing, Quick Response manufacturing, Concurrent Engineering, FMS.
Concepts of Productivity, Efficiency, Effectiveness, Throughput, OEE - Variables affecting productivity and
throughput improvements, Bottlenecks and its identification - starving and blocking in Production and
assembly lines- synchronization in production and assembly lines.
Module II
Process and Capacity Analysis – planning premises, Capacity planning framework –definitions, measures,
issues, time frame-Design of Manufacturing Process- process types, operations systems. Process-Product
matrix. Design of Service systems. Facility Location - factors, competitiveness. Facility Layouts, Layout
Decisions- types –design; Hybrid layout, Line Balancing & Sequencing –Capacity Planning- Contributions of
Japanese Manufacturing - Kanban, Kaizen, Poka Yoke, JIT, 5S, TPS, Lean Manufacturing- FMS, Lean &
agile Manufacturing - Pull and Push systems, QRM, Elements of JIT manufacturing- Role of Technology in
manufacturing and Services
Module III
Concepts of work and motion Study, Implications on Productivity -Total Quality Management- elements,
tools for TQM, Cost of Quality, ISO Certifications – Quality Standards-Statistical Process Control (SPC),
control charts, Quality circles, Concepts of acceptance sampling - OC curve, Six sigma quality control-
DMAIC methodology, Process capability, Maintenance management – measures, alternatives. Basics of
Maintenance Management – Maintenance Decisions, Total Productive Maintenance (TPM) – overview.
Operations Forecasting: Forecasting methods. -Quantitative and Qualitative approaches- Bench Marking-
Industrial Safety and Security, Work Environment & Ergonomics.
Module IV
Inventory and materials Management-Inventory planning and control for independent demand items-
inventory control systems, Classifications, EOQ, inventory Models- selective control of inventory, Material
handling equipment’s, Managing Vendors; Vendor, Identification, Analysis, Rating and Selection –
Procedure and Criterions, VMI-World class manufacturing practices- Supply chain Management- Concept of
Supply chain, Stages and flows in Supply chain, Terminology in Supply chain management –Supply chain
disruption- Bull Whip effect, components, measures, and design issues. Sourcing and Supply Management -
strategic sourcing, procurement process, Global Sourcing- Concept of outsourcing, examples -mass
customisation,
Module V
Resource planning – Material requirement planning (MRPI), MRPII, Aggregate production planning, CRP,
Bill of Materials, Balanced Scorecard, Master Production Schedule (MPS), Scheduling of operations- flow
shop, job shop, scheduling rules, theory of constraints- synchronous manufacturing, The Drum – Buffer-Rope
(DBR) methodology. Concept of ERP, International Scenario and Indian Scenario. Business Process,
Simulation and Modelling: Concepts and Importance of Business Process Modelling- Industry 4. 0-
Operations 4.0/Ops 4.0- Disruptive Technologies and its impact in Production and Operations area –
Robotics, AI, Machine learning, Autonomous Mobile Robots, IoT and IIoT, Smart Manufacturing, Additive
Manufacturing/3D Printing, Smart factory, Smart Products, Automation, RPA, Augmented and Virtual
Reality- Current topics in Production and Operations Areas-,Case Studies

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Operations Management:
It is the management of systems or process that create products and /or provide services.
Products: Products are physical items produced by business organizations
Services: Activities that provide some combination of time, location, form and psychological value.
Nature of Operations Management:
Operations management is a systematic approach to addressing issue in the transformation process that
converts inputs into useful revenue generating outputs.
• Operations as a system
• Operations as an organisational Function
• Operations as a transformation process
• Operations as a means of crating utility.
The essence of the operations function is to add value during the transformation process. Value added is the
term used to describe the difference between the cost of inputs and the value or price of outputs.

Scope of Operation Management:

• Forecasting
• Capacity Building
• Location Analysis
• Facility Layout
• Scheduling
• Inventory Management
• Quality Management
• Supply Chain Management
• Product Design
Let’s take an example of airline industry:
Forecasting such things as weather and landing conditions, seat demand for flights, and the growth in the
air travel

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Capacity Planning: It is essential; for the airline to maintain cash flow and make a reasonable profit. (Too
many or too few planes, or even the right number of planes but in the wrong places will hurt profits
Location Analysis: It is according to managers decision on which cities to provide service for, where to
locate maintenance facilities, where to locate major and minor hubs.
Facility
Layout: It is
Mr. Sanjay Agarwal most eligible bachelor in Indian aviation, CEO of KFA important in
Tagline of kingfisher air lines: Fly the good times achieving
effective use
of workers and equipment.

Scheduling: Scheduling of planes for flights and for routine maintenance; scheduling of pilots and flight
attendants; and scheduling of ground crews, counter staff, and baggage handlers.
Inventory Management: items such as foods and beverages, first aid equipment, inflight magazine, pillows
and blankets and life preservers.
Quality Management: Its essential in flying and maintenance operations, where the emphasis is on safety,
and important in dealing with customers at ticket counters, check-in, telephone an electronic reservations
and curb services where the emphasis is on efficiency and courtesy.
Product Design: Product design encompass the selection of a process, choice of technology, process flow
analysis and layout of the facilities.
Operation Management and Decision Making:
• What: What resources will be needed and in what amounts?
• When: When will each resource be needed? When should the work be scheduled? When should
materials and other supplies be ordered? When is corrective action needed?
• Where: Where will the work be done?
• How: How will the product or service be designed? How will the work be done (organization,
methods, equipment)? How will resources be relocated?
• Who: Who will do the work?
CASE STUDY: Walmart: Operations Management Decisions
Walmart’s operations management covers a variety of approaches that are focused on managing the supply
chain and inventory, as well as sales performance. The company’s success is partly based on effective
performance in operations management. Specifically, Walmart’s management covers all of the 10 decision
areas of operations management. These decision areas pertain to the issues and concerns that managers face
on a daily basis. Walmart’s application of the 10 decisions of operations management reflects managers’
prioritization of business objectives. In turn, this prioritization shows the strategic significance of the
different decision areas of operations management in Walmart’s business.
The 10 decisions of operations management are effectively applied in Walmart’s business through a
combination of approaches that emphasize supply chain management, inventory management, and sales and
marketing.
Walmart: Operations Management 10 Decision Areas

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 1. Design of Goods and Services. This decision area of operations management involves the strategic
characterization of products. In the case of Walmart, this decision area covers goods and services. As
a retailer, the company offers retail service. However, Walmart also has its own brands of goods,
such as Great Value and Sam’s Choice. The company’s operations management addresses the design
of retail service by emphasizing the variables of efficiency and cost-effectiveness. Walmart is known
for low costs because of its cost leadership generic strategy. To fulfil this strategy, the firm focuses
on maximum efficiency of its retail service personnel. To address the design of goods in this decision
area of operations management, Walmart also emphasizes minimal production costs, especially for
the Great Value brand. For example, the firm’s goods are designed in such a way that they are easy
to mass-produce.
2. Quality Management. This decision area of operations management is applied at Walmart through
three tiers of quality standards. The lower tier specifies minimum quality expectations of the
majority of customers. Walmart keeps this lower tier for most of its brands, such as Great Value. The
middle tier specifies market average quality for low-cost retailers. This tier is applied for the
performance of Walmart employees, especially sales personnel. The upper tier specifies quality
levels that exceed market averages. This tier is applied to only a minority of Walmart’s outputs, such
as goods under the Sam’s Choice brand. The firm addresses the decision area of operations
management for quality management through this three-tier approach that ensures suitable quality in
different areas of Walmart’s organization.
3. Process and Capacity Design. Walmart addresses this decision area of operations management
through behavioural analysis, forecasting, and continuous monitoring. Behavioural analysis of
customers and employees, such as in the stores, serves as basis for Walmart’s process and capacity
design of store processes and capacity, personnel and equipment. Forecasting is the basis for the
firm’s ever-changing capacity design for human resources. Walmart’s HR process and capacity
design evolves as the business grows. Also, to satisfy concerns in this decision area of operations
management, the company uses continuous monitoring. Continuous monitoring of store capacities
informs Walmart’s corporate managers to keep or change current designs.
4. Location Strategy. This decision area of operations management emphasizes efficiency of
movement of materials, human resources and business information throughout the organization. In
this regard, Walmart’s location strategy includes stores located in or near urban centres. The
company’s aim is to maximize market reach. Materials and goods are made available to the
company’s target consumers through strategic warehouse locations. To address the business
information aspect in this decision area of operations management, Walmart uses the Internet. The
company has a comprehensive set of online information systems for real-time reports and
monitoring. Thus, Walmart’s main concern in this decision area is on the location of stores and
related facilities.
5. Layout Design and Strategy. To address this decision area of operations management, Walmart
uses shoppers’ behaviours for the layout design of its stores. The layout design of individual stores is
based on consumer behavioural analysis and corporate standards. For example, Walmart’s placement
of some goods in certain areas of its stores, such as near the entrance/exit, is based on this
behavioural analysis of shoppers. On the other hand, the layout design and strategy for the
company’s warehouses are based on the need to rapidly move goods across the supply chain to the
stores. Walmart’s warehouses have adequate space allocation for the company’s trucks, suppliers’
trucks, and goods. With efficiency, cost-effectiveness, and cost-minimization, the firm satisfies needs
in this decision area of operations management.
6. Human Resources and Job Design. Walmart’s human resource management strategies involve
continuous recruitment. The company suffers from relatively high turnover because of low wages,
which relate to the cost-leadership generic strategy. Nonetheless, continuous recruitment enables
Walmart to address this decision area of operations management. Also, the firm maintains

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 standardized job processes, especially for positions in the stores. Walmart’s training programs
support the need for standardization and service quality standards of the business. Thus, the firm
satisfies concerns in this decision area of operations management even though there are some issues
with turnover.
7. Supply Chain Management. Walmart’s use of information technology and bargaining power over
suppliers successfully addresses this decision area of operations management. The company’s supply
chain is comprehensively integrated with advanced information technology. Supply chain
management information systems are directly linked to Walmart’s ability to minimize costs of
operations. These systems enable managers and vendors to collaborate in deciding when to move
certain amounts of merchandise across the supply chain. Walmart’s operations management
approaches also include wielding the company’s strong bargaining power. Because it is the largest
retailer in the world, Walmart influences suppliers to cooperate in using these systems.
8. Inventory Management. In this decision area of operations management, Walmart’s inventory
management involves the vendor-managed inventory model and just-in-time cross-docking. In
the vendor-managed inventory model, the suppliers access Walmart’s information systems to decide
when to deliver goods based on real-time data on inventory levels. In this way, the company
minimizes stockouts. On the other hand, in just-in-time cross-docking, Walmart minimizes the size
of its inventory, thereby also supporting the firm’s cost-minimization efforts. Such approaches help
maximize the company’s performance in this decision area of operations management.
9. Scheduling. Walmart uses conventional shifts and flexible scheduling. In this decision are of
operations management, the emphasis is on optimizing internal business process schedules. Through
optimized schedules, the company can expect minimal losses linked to excess capacity and related
issues. At Walmart, scheduling in warehouses is flexible and based on current trends. For example,
based on the company’s approaches to inventory management and supply chain management,
suppliers readily respond to changes in inventory levels. As a result, most of Walmart’s warehouse
schedules are not fixed. However, the company generally has fixed conventional shifts for
scheduling of store processes and human resources in sales and marketing. Such fixed scheduling is
needed to optimize human resource expenditure. Still, to fully address this decision area of
operations management, Walmart occasionally changes store and personnel schedules to address
anticipated changes in demand, such as during Black Friday.
10. Maintenance. In addressing maintenance needs, managers must consider maintaining different types
of resources. Walmart effectively addresses this decision area of operations management through
training programs to maintain human resources, dedicated personnel for facility maintenance, and
dedicated personnel for equipment maintenance. The company’s human resource management
provides training programs to ensure that employees are effective and efficient. Walmart’s dedicated
personnel for facility maintenance keep all the firm’s buildings in shape. In relation, the dedicated
personnel for equipment maintenance fix, repair, and clean equipment like cash registers, computers,
cleaning equipment, and others. This combination of maintenance approaches contributes to
Walmart’s effectiveness in satisfying concerns in this decision area of operations management.
Manufacturing and Service Organizations:
Manufacturing organizations are organizations that primarily produce a tangible product and typically
have low customer contact.
E.g.: Volkswagen – largest manufacturing company in the world by revenue.
UNIDO (United Nations Industrial Development Organization): China, US, Japan, Germany and Korea.
Service Organizations are organizations that primarily produce an intangible product, such as ideas,
assistance, or information, and typically have high customer contact.

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E.g., Education, Healthcare, Hospitality, Legal services, Hospitals, colleges, theatres and barber shops are
examples of service organizations in
which the customer is present during
the creation of the service.
E.g., Berkshire Hathway largest
financial service company in the
world by revenue.
Dell Technologies largest IT service
company in the world by revenue.
CHARACTERISTICS OF
MANUFACTURING AND
SERVICE ORGANIZATIONS:

GENERAL MOTORS:
Founder of General Motors: William C
Durant
Headquarters of GM: Detroit, Michigan
CEO of GM: Mary T. Barra
GM greatest return on capital does not
come from selling cars, but rather from
post sales parts and service.

QUASI- MANUFACTURING ORGANIZATIONS are businesses

that have capital intensive and have relatively low customer
contact.
Example: US postal Service
• It provides a service: speedy, reliable delivery of letters, documents, and packages.
• Its output is intangible and cannot be stored in inventory.
• Yet most operations management decisions made at the postal service are similar to those that occur
in manufacturing.
• Cx contact is low, and at any one time there is a large amount of inventory.
• The postal service is capital intensive, having its own facilities and fleet of trucks and relying on
scanners to sort packages and track customers’ orders.
• Scheduling enough workers at peak processing times is a major concern, as is planning delivery
schedules.
• Note that although the output of U.S postal service is a service, inputs include labour, technology and
equipment.
• The responsibility of OM is to manage the conversion of these inputs into the desired outputs
• Proper Management of OM function is critical to the success of the US Postal service.

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Intermittent production system:

TYPES OF MANUFACTURING SYSYTEM:

PRODUCT MANUFACTURING SYSTEM:

In product manufacturing system, company accepts a single, complex order or contract. The order must be
completed within a given period of time and at an estimated cost.
Example: airports, dams, ships and roads, KOCHI metro
JOB SHOP MANUFACTURING SYSTEM:
In job shop manufacturing system, company accepts a contract to produce either one or few units of a
product strictly as pr specifications given by the customer.
Examples: repair shops, tailoring shops and special machine tools.
BATCH MANUFACTURING SYSTEM:
In batch manufacturing system, the production schedule is decided according to specific orders or based
on the demand forecasts.
Example: manufacturing of drugs and pharmaceuticals and medium and heavy machineries.

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CONTINOUS MANUFACTURING SYSTEM:
In the continuous manufacturing system, goods are produced constantly as per demand forecast.
MASS MANUFACTURING SYSTEM:
In mass manufacturing system, company produces different types of products on a large scale and stock
them in warehouses until they are demanded in the market.
Examples: toothpastes, soaps, pens etc.
PROCESS MANUFACTURING SYSTEM:
In process manufacturing system, a single product is produced and stocked in warehouses until it is
demanded in the market.
Example: Steel, cement, paper, sugar
Business organizations have three basic functional areas-
• Finance,
• Marketing and
• Operations.
If a business organizations were a car, operations would be its engine which is the core of what a car does.
Similarly in any BO, operations is the core of what the organization does.
TRENDS IN MANUFACTURING:
• Computer-integrated manufacturing (CIM)
• Flexible manufacturing system (FMS)
• Group Technology
• Cellular manufacturing
• Quick Response Manufacturing (QRM)
• Concurrent Engineering
Computer-integrated manufacturing (CIM) is the manufacturing approach of using computers to control
entire production process. This integration allows individual processes to exchange information with each
part.
• Benefits of CIM: reduced cost (the cost of direct and indirect labour)
• One of the key challenges of CIM is damage prevention.
A flexible manufacturing system (FMS) is a production method that is designed to easily adapt to changes
in the type and quantity of the product being manufactured.
FMS: Two Categories of Flexibility
• Machine Flexibility refers to the system’s ability to produce new types of products, and its ability to
change the order in which operations are executed.
• Routing Flexibility refers to the system’s ability to use two or more machines to perform the same-
task, and the system’s ability to handle large scale changes like significant increase in volume and/or
capability.
Group Technology is a manufacturing technique in which parts having similarities in geometry,
manufacturing process and/or functions are manufactured in one location using small number of machines or
process.
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 Cellular manufacturing involves the use of multiple cells in an
assembly line fashion, Each of these cells is composed od one or
multiple different machines which accomplish a certain task. The
product moves from one cell to the next, each station completing
part of the manufacturing
process.

Concurrent Engineering
is a method of designing and developing products in which the
different stages run simultaneously, rather than consecutively. It
decreases product development time and also the time to market,
leading to improved productivity and reduced costs.

Quick Response Manufacturing (QRM) is a strategy for reducing lead-times across all functions of an
organization. The resulting improvements in speed and responsiveness increase the organization’s agility
and responsiveness, resulting in competitive advantage.

OM SESSION 2:
DEVELOPING AN OPERATION STRATEGY:
Business Strategy: Defines the long-range plans of the company
Operation Strategy: Develops a plan for the operations function focusing on specific competitive priorities
cost, quality, time and flexibility in order to meet the long range plans.
COMPETITIVE PRIORITIES:
They are capabilities that the operations function can develop in order to give a company a competitive
advantage on its market.
• Cost
• Quality
• Time
• Flexibility
COST AS A COMPETIVE STRATEGY:
Competing based on cost means offering a product at a low price relative to the prices of competing
products.
E.g., Walmart, IKEA, Amazon
Southwest Airlines:
• Facilities are streamlined: Only one type of aircraft is used, and flight routes are generally short.
This serves to minimize costs of scheduling crew charges, maintenance, inventories of parts, and
many administrative costs.
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 • Unnecessary costs are eliminated: There ar no melas, printed boarding passes, or seat assignments.
Employees are trained to perform many functions and use a team approach to maximize customer
service.
QUALITY AS A COMPETITIVE STRATEGY:
Quality as competitive priority has two dimensions: high performance design and goods and services
consistency.
E.g., To improve productivity and quality, Tesla invested a lot of money on factories and automation,
instead of outsourcing from parts suppliers, tesla directly participated more in manufacturers. Tesla owns
several Giga factories worldwide.
Tesla supply chain brilliance: Elon musk ambition to make Tesla as “vertically integrated” as possible,
which means developing, manufacturing and selling everything it can – even its own enterprise software.
Tesla is developing the means to manufacture its own battery cells that would help the company offer
cheaper, higher performance EV.
TIME AS A COMPETIVE STRATEGY:
Making time a competitive priority means competing based on time related issues such as rapid delivery and
on time delivery.
E.g., FedEx Time competitive strategy:
To support time strategy, the operation function had to be designed to promote speed. Barcode technology is
used to speed up processing and handling and the company uses its own fleet of airplanes.
FLEXIBILITY AS A COMPETITIVE STARTEGY:
Flexibility as competitive priority is about ability to readily accommodate changes in company’s
environment such as customer needs and expectations.
E.g., Uber strategy: connecting drivers with passengers via their smartphones eliminates the need for Uber to
establish a brick-and-mortar presence in each new city to which thy expand operations, making this a highly
scalable strategy with limited barriers to future growth.
Flexibility for customers: The passengers can simply request to hire a cab based of their choice by
selecting the location of the place they are in and additionally, they can also select the type of cab that they
are looking forward to hire. Also, there is possibility of sharing of cab facility that has been kept available
by Uber.

5 Ps of OPERATIONS MANAGEMENT:

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PRODUCT: The ultimate link between the production and marketing of a company is the product
manufactured by it. A customer demands a product but at the same time, the organization must also be
capable of producing it effectively.
• It is important for the supplier to understand what is acceptable in the eyes of th customer, and what
is not.
• This understanding requires awareness of the value of the purchase from the customer’s perspective.
• In addition to quality, availability is important.
• Products that have a heavy dependence on brand perception are particularly vulnerable to failures,
especially if the failure breaches one or more of the brand values on which the brand is built.

E.g., TISCON (Joy of Building): Thermo Mechanically Treated (TMT) – superior strength to all cement
construction
STRUCTURA (The shape of things to come) – Superior quality structural tubes that provide high
durability and cater to construction needs under architectural, infrastructure, industrial application
SHAKTEE (Live with pride) – Roofing solution for rural homes, factories and office spaces
WIRON automotive infrastructure and power.
AGRICO Superior quality agriculture equipment – from traditional tools to mechanised tools

PROCESS:
There are always number of alternative methods of creating a product. But it is required o select the one best
method which attains the objectives.
• The rapid increase in online trading has meant that the role of processes has increased substantiality.
Many products and service can now be researched, purchased and delivered and even returned
without any human intervention.
• In such situations it is imperative that the processes are clear, easy to use and effective and where
possible are able to recognise a returning customer.
PLANT:
One of the most important assets of production firm is a manufacturing plant. An operational plant allows
continuous production without bottlenecks. On the other hand, the non-operational plant may hamper the
production process.
PEOPLE:
Manpower or people are the biggest assets for manufacturing firms. The production is highly affected by
people/manpower and their hard work.
LTIFR: Lost Time Injury Frequency Rate, the number of lost time injuries occurring in a workplace in a
workplace per 1 million hours worked.
PROGRAMME:
In a manufacturing unit there should be a proper time schedule for implementation and completion of
various programmes. To accomplish different situations, different programmes are organized.

9 M’S OF OPERATIONS MANAGEMENT:

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 • Market (Product)
• Management (Programme)
• Men (people)
• Machines (plant)
• Methods (process)
• Money
• Motivation
• Material
• Messages
MONEY: The increased global competition necessitates huge outlays for raw equipment and process. This
should be rewarded by improved productivity. This is possible by minimizing quality costs associated with
the maintenance and improvements of quality levels.
MOTIVATION: If we fix responsibility of achieving quality with each individual in the organization with
proper motivation techniques, there will not be any problem in producing the designed quality products.
MATERIALS: Selection of proper materials to meet the desired tolerances limit is also an important
consideration. quality attributes like, surface finish, strength, diameter etc., can be obtained by proper
selection of material.
MESSAGES: Messages help in storing and retrieving needed data for manufacturing, marketing and
servicing.
What is the difference between productivity, efficiency and effectiveness?
Productivity: It is generally regarded as a measure of outputs divided by inputs all of the activities that you
get done in a day may be considered your output and the time you put into them are your inputs.
• At the plant level, common input statistics are monetary units, weights or volumes of raw or semi-
finished materials, kilowatt hours of power, and worker hours.
• O/p is simply the rate of which goods are being produced and readied for sale. managing production
levels is part of the control process.
• Productivity growth is important to a business because it control the real income means needed to
meet obligations to customers, suppliers, workers, shareholders and governments.
Efficiency: It is a measure of how well you do these things. If you are able to get more o/p from same i/p,
you are said to have increased efficiency.
Effectiveness: It is a measure of doing the right things. Highly effective individuals and companies act in
ways that move their highest priorities forward on a regular basis.

• Productivity = output/input
• efficiency = Doing things right
• Effectiveness = Doing the right things.

Throughput: It is a measure of a business process flow rate.

essentially, it measures the movements of i/p and o/p within the
production process. Also known as the flow rate.
Throughput formula:

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Inventory = Throughput * Flow Time
Availability * performance * Quality = OEE
OEE is improving. Great job! or is it? Dig a little deeper and the picture is less clear. Most companies would
not want to increase. Availability by 5.0% at the expense of decreasing quality by 4.5%.

FACTORS THAT AFFECT OR INFLUENCE PRODUCTIVITY:

1. Technical factors: Productivity largely depends on technology. Technical factors include proper
location, layout and size of the plant and machinery, correct design of machines and equipment etc.
If the organization uses the latest technology, when its productiveness will be high.
2. Production Factors: Productivity is related to the production factors. The production of all
departments should be properly planned, coordinated and controlled. the right quality raw-materials
should be used for production. Th production process should be simplified and standardized.
3. Organizational Factors: Productivity is directly proportional to the organizational factors.
Authority and responsibility of every individual and department should be defined properly. The line
and staff relationships should also be clearly denied. So, conflicts between line and staff should be
avoided. There should be a division of labour and specialization as far as possible.
4. Personal factors: Productivity of organization s directly related to personnel factors. The right
individual should be selected for suitable posts. After selection, they should be given proper better
working conditions and work environment. they should be properly motivated; financially, non-
financially and with positive incentives.
5. Finance Factors: It is the life- blood of modern business. there should be a better control over both
fixed capital and working capital. there should be proper financial planning. Booth over and
underutilization of capital should be avoided. The management should see that they get proper
returns on the capital which is invested in the business.
6. Management factors: The management of organization should be scientific, professional, future-
oriented, sincere and competent. Managers should possess imagination, judgement skills and
willingness to take risks. they should make optimum use of available resources to get maximum
output to the lowest cost.
7. Government Factors: The management should have a
proper knowledge about the government rules and
regulations. They should also maintain good relations with
the government.
8. Location Factors: Productivity also depends on location
factors such as law and order situation, infrastructure
facilities, nearness to market, nearness to sources of raw
material, skilled workforce etc.

BOTTLE NECK:
A bottle neck is point of congestion in a production system (such as an assembly line or a computer
network) that occurs when workloads arrive too quickly for the production process to handle.
Understanding a Bottleneck:

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 • As an example, assume that a furniture manufacturer moves wood, metal and other raw material into
production, and then incurs labour and machine costs to produce and assemble furniture.
• When production is complete, the finished goods are stored in inventory
• The inventory cot is transferred to cost of goods sold (COGS) when the furniture is sold to a
customer.
• If there is a bottleneck at the beginning of production, the furniture maker cannot move enough raw
materials into the process, which means that machines sit idle and salaried workers are not working
productively, creating a situation of underutilization of resources.
• This increases the cost of production, as well as presents a potentially large opportunity cost, and
may mean that completed goods do not ship to customers on time.
Real world example of bottleneck:
• Tesla founder Elon musk has said the company’s ability to expand its product line up depends
squarely on its ability to produce a large number of batteries.
• To make that happen, in a venture with Panasonic, Tesla opened a massive “Giga factory” near
Reno, Nevada in 2016, which makes the company’s lithium-ion batteries and electric vehicle
subassemblies.
• By mid-2018, the company claimed its factory was already the highest-column battery plant in the
world in terms of gigawatt-hours.
• In order to make a dent in the waitlist for backordered vehicle, tesla says it will need to continue to
invest in and build more Gigafactory’s worldwide.
STARVATION: Starvation occurs when a downstream activity is idle with no inputs to process because of
upstream delays.
BLOCKING: Blocking occurs when an activity becomes idle because the next downstream activity is not
ready to take it.
Synchronization in assembly:
Synchronization is the process of coordinating individual actions of members in a group working in unison,
following a common timeline toward a common group goal. repeatability and predictability are keys to
synchronization.
• In an orchestra, each musician knows how high his or her pitch or tone must be at each instant in
time during the rendition. Lack of synchronization will lead to an imperfect rendition.
• An example of synchronization would be a pin insertion machine based on an X-y gantry system. if
the X and Y axes are not synchronized to the master axis, the pin that needs to be inserted will not
get inserted at eth correct location.
• Accuracy and repeatability are also a priority for glue-dispensing machines, pick-place mechanisms,
vision systems, fluid dispensers and robotic manipulators.

OM SESSION 3:
FACILITY LOCATION:
It is determining the best geographic location for a company’s facility.
Factors Affecting Location Decisions:
• Proximity to sources of supply
• proximity to customers
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 • proximity to source of labour
• community considerations
• site considerations
• Quality of life issues
Why proximity to sources of supply?
Firms need to locate close to sources of supply because of proximity to natural resource and avoiding high
transportation costs.
In some cases, the firm has no choice, such as in farming, forestry or mining operations, where proximity to
natural resources is necessary.
The location may be determined by the perishable nature of goods, such as in preparing and processing
perishable food items.
E.g., Dole pineapple has its pineapple farm and plant in Hawaii for both these purposes.
Tropicana has its processing plant in Florida, near the orange-growing orchards.
Another reason to locate close to sources of supply is to avoid high transportation costs- for example if a
firm’s raw materials are much bulkier and costlier to move than the finished product.
Transporting the finished product outbound is less costly than transporting the raw materials inbound, and
the firm should locate closer to the source of supply.
E.g., A paper mill is an example. Transporting lumber would be much more costly than transporting the
paper produced.
Proximity to Customers:
Locating near the market they serve is often critical for may organizations, particularly service firms.
Service firms typically locate in high-population areas that offer convenient access. examples include retail
stores, fast food restaurants, gas stations, grocery stores, dry cleaners, and flower shops.
Proximity to source of labour
Proximity to an ample supply of qualified labour is important in many businesses, especially those that are
labour intensive.
The company need to consider the availability of a particular type of labour and whether special skills are
required.
Some companies such as those for assembly-line workers, want to be near a supply of blue-collar labour.
Other companies may be looking for the computer or technical skills and should consider locating in areas
with a concentration of those types of workers.
Other factors that should be considered are local wage rates, the presence of local unions, and attitudes of
local workers.
Community Considerations
Many communities’ welcome new businesses, viewing them as providing sources of tax revenues and
opportunities for jobs, and as contributing to overall well-being of the community.
The success of a company at a particular location can be affected by the extent to which it is accepted by the
local community.

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Many communities’ welcome new businesses, viewing them as providing sources of tax revenues and
opportunities for jobs, and as contributing to overall well-being of the community.
Communities do not want businesses that bring pollution, noise and traffic and that lower the quality of life.
extreme examples are a nuclear facility, a trash dump site and an airport.
E.g., Walmart, which often are not accepted by smaller communities, which may view such large merchants
as a threat to their way of life and thus actively work to discourage them from locating there.
Kudankulam Nuclear lant is situated in Koodankulam in the Tirunelveli district of Tamil Nādu.
Spread over 110 acres, the Brahmapuram waste treatment plant is situated around five kilometres away from
Kochi’s Info Park.
Site Considerations:
Site considerations for a particular location include factors such as utility costs, taxes, zoning restrictions,
soil conditions and even climate.
These factors are not too different from those one would consider when purchasing a home or a lot build on.
just as most homeowners consider their purchase to be an investment, so does a business.
Inspectors should be hired to perform a thorough evaluation of the grounds, such as checking for adequate
drainage. Site-elated factors can also limit access roads for trucks and make it difficult for customers to
reach the site.
A special economic zone is an area in which business and trade laws are different from rest of the country.
Quality Of Life Issue:
Another important factor in location decisions is the quality of life a particular location offers the company’s
employees.
Quality of life includes factors such as climate, a desirable lifestyle, good schools and a low crime rate.
The Odd-Even Road Rationing: Under the scheme, cars with licence plates ending in an odd
number and even number are allowed to ply an alternate day. The scheme aims to cut down vehicular
traffic by half, thereby reducing air pollution.
Globalization and location: Cheap labour in countries such as Korea, Taiwan and China have also attracted
firms located there. Often it is cheaper to send raw materials t these countries for fabrication and assembly
and then ship them elsewhere for final consumption than it is to keep the process in this country.
Japanese automobile manufacturers have located in the United States and employed American works, which
has gone a long way toward eliminating negative attitudes about buying Japanese cars. Being in the United
States has also reduced their exposure to currency variations between the dollar and yen.
Another Advantage of global locations is reduction of trade barriers. By producing goods in the country
where customers are located, a company can avoid import quotas.

PROCEDURE FOR MAKING LOCATION DECISIONS:

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CAPACITY PLANNING:
Capacity is the maximum output rate that can be achieved by a facility. The facility may be an entire
organization, a division, or only one machine.
Not having enough capacity would mean not being able to produce enough baked goods to meet sales. The
bakery world often run out of stock, and also customers might start going somewhere else. Also, the bakery
would not be able to take advantage of the true demand available.
On the other hand, if there is too much capacity, the bakery would incur the cost of an unnecessarily large
facility that is not being used, as well a much higher operating costs than necessary.
E.g., A hospital emergency room (ER) exemplifies the challenge of capacity planning. The problem of over-
or under capacity occur in the ER, only with potentially dire consequences. A number of factors contribute
to the capacity of the ER.
1. The number of beds and the amount of space available. If there are not enough beds, patient may
have to wait long period to be examined. Too many empty beds, on the other hand, result in wasted
space.
2. The number of nurses and doctors scheduled to work on a shift. If not enough staff is available,
patien
ts
may
not

• Identify
Step 2 • Evaluate
have
anyon
Dominant • Develop Location e to
Location location Alternatives treat
factors them.
alternatives
The
conse
Step 1 Step 3 quenc
es of
not
havin

17 | P a g e
 g enough capacity can be grave. However, scheduling more staff than needed results in excess
capacity in the form of highly paid professionals not having anything to do.
Design Capacity: It is the
maximum output rate that
can be achieved by a
facility under ideal
• Identify
Step 2 • Evaluate conditions.
Capacity • Develop capacity Effective
Requirements capacity Alternatives
Utilization = actual output rate/ capacity (100%) Capacity
alternatives
: It is the
Utilization effective = actual output rate/ effective capacity (100%)
Step 1 Step 3 maximu
Utilization design = actual output rate/ design capacity (100%) m output
rate that
can be sustained under
normal conditions.
Capacity Utilization simply tells us how much of our capacity we are actually using.
Measuring effectiveness of capacity use:

Best operation level is the volume of output that results in the lowest average unit cost.
Capacity Considerations:
1. Economies of Scale: It is a condition in which the average cost of a unit produced is reduced as the
amount of output is increased
2. Diseconomies of Scale: It is condition in which the cost of each additional unit made increases.
3. Focused Factories: They are facilities that are small, specialized, and focused on a narrow set of
objectives. E.g., The limited and the Gap , with speciality stores such as Limited too, Baby Gap.
4. Subcontractor Network: Another alternative to having a large production facility is to develop a
large network of subcontractors and suppliers who perform a
number of tasks.

Making Capacity Planning Decisions:

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Product-Process Matrix: The product process matrix merges the product lifecycle, which encompasses all
aspects of the product development process-from ideation to a products growth or decline- with the process
life cycle the progression towards a more cost-effective and productive standardized structure.

Line Balancing in Manufacturing:

• Line balancing is a production strategy that
involves balancing operator and machine time to
match the production rate to the Takt time.
• Takt time is the rate at which parts or products
must be produced in order to meet customer
demand.
• For a given production line, if production time is
exactly equal to Takt time, then the line is
perfectly balanced. Otherwise, resources should
be reallocated or rearranged to remove bottle
necks or excess capacity.
• The quantities of workers and machines to each task in the line should be rebalanced to meet the
optimal production rate.
Design of Manufacturing Process:
It is the optimisation of a part, product or component’s design, to create it cheaper and more easily.
E.g., Components with joints can be manufactured using snap fits, an efficient form of fastening two parts
together that saves time and money in production, reduces material costs and improves ease of assembly
with additive manufacturing, the joint can be 3D printed from additional efficiency during production stages.
• DFM can be used in casting where it can enable the casting process and minimise casting defects by
optimising the shape and geometry of products.
• In recent real-life case, DFM was applied to a design for gun sight of a American tank developed by
Texas Instruments Inc. which reduced the number of different parts needed for assembly from 24 to
8 and rapidly decreased the production time.
OM Session 4

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LAYOUT PLANNING: It is deciding on the best physical arrangement of all resources that consume space
within a facility.
Types of Layouts:
• Process Layouts: Layout that group resources based on similar processes or functions.
• Product Layouts: Layout that arrange resources in sequence to allow for an efficient build-up of the
product
• Hybrid Layouts are layouts that combine characteristics of process and product layouts.
• Fixed Position layout is a layout in which the product cannot be moved due to its size and all
resources have to come to the production site.
JUST-IN-TIME (JIT) manufacturing is a methodology aimed primarily at reducing flow times within
production system as well as response time from suppliers and to customers.
Advantages:
• Minimum stock holding costs
• Elimination of waste by avoiding out-of-date or expired products.
• Higher return on investment
• High customer satisfaction.
Disadvantages:
• Zero tolerance for mistakes
• High reliance on outside players like suppliers
• Inability to meet an unexpected increase in orders
• Higher transaction costs.
KAIZEN: change for good
It is a concept referring to business activities that continuously improve all functions and involve all
employees from the CEO to the assembly line workers.
KANBAN: signboard or billboard
It is a lean method to manage and improve work across human systems. This approach aims to manage work
by balancing demands with available capacity ad by improving the handling of system-level bottlenecks.
The 4 principles of Kanban:
1. Visualise workflow
2. Limit work in progress (WIP)
3. Focus on Flow
4. Continuous improvement
Work items are represented visually on a Kanban board allowing team embers to see the stat of every piece
of work at any time.
POKA YOKE: mistake proofing
A poka-yoke is any mechanism in a process that helps an equipment operator avid (yokeru) mistakes (poka)
defects by preventing, correcting or drawing attention to human errors as they occur.
E.g., Many cars will beep or light up, if doors are open while the engine is running or if someone is in the
passenger seat and their seat belt is not fastened.

20 | P a g e
These are examples of warning functions, which alert users to potential errors.
Poka Yoke is also often used in consumer electronics. a sim card which can only fit one way a sim tray
because of its asymmetrical shape.
LEAN MANUFACTURING:
It is a production method derived from Toyota’s 1930 operation model “The Toyota Way”. (Toyota
Production System, TPS)
It is a methodology that focuses on minimizing waste within manufacturing systems while simultaneously
maximizing productivity.
The TPS, and later on the concept of Lean, was developed around eliminating the three of deviations that
shows inefficient allocation of resources.
The three types are Muda (waste), Mura (unevenness), and Muri (overburden).
Mura means unevenness, non-uniformity and irregularity. Mura is the reason for the existence of any of the
waste.
E.g., In a manufacturing line, products need to pass through several workstations during the assembly
process.
When the capacity of one station is greater than the other stations, u will see an accumulation of waste in the
form of overproduction, waiting etc.,
The goal of Lean production system is to level out the workload so that there is no unevenness r waste
accumulation.
Muda means wastefulness, uselessness and futility, which is contradicting value addition.
E.g., Value-added work is a process that adds value to the product or service that the customer is willing to
pay for. There are two types of Muda, Type 1 and Type 2.
Muda Type 1 includes non-value-added activities n the processes that are necessary for the end customer.
Muda Type 2 includes non-value-added activities in the process, but these activities are unnecessary for the
customer. As a result, Muda Type 2 should be eliminated.
Muri means overburden, beyond one’s power, excessiveness, impossible or unreasonableness. Muri can
result from Mura and in some case be caused by excessive removal of Muda (waste) from the process.
E.g., Muri exists when machine or operators are utilized for more than 100% capability to complete a task or
is an unsustainable way.
Muri over a period of time can result in employee absenteeism, illness and breakdowns of machines.
Standardize work can help avoid Muri by designing the work processes to evenly distribute the workload
and not overburdened any particular employee or equipment.

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 i. The first option is to load one
truck with all 6 tons and make
a single trip. However, in this
example, it would be
considered Muri due to the
overburden of the truck. This
excess load can lead to a
breakdown.
ii. The second option is to divide
the transportation with two
trips. One with two tons and
the other with four tons. This
would be considered Mura
since the unevenness of the
arrival of materials to the
customer can lead to problems
at the receiving dock.
iii. The third option is to load two
tons on each truck and make
three trips. Even though this option has no Mura and Muri, it had Musa since the truck would not be
fully loaded on each trip. Each truck can carry up to 3 tons of material and this option makes one
unnecessary trip.
iv. The fourth option is to deliver the materials with two trucks ach with 3 tons. in this Example, this
would be the optimal level that minimizes Muda, Mura, and Muri.
The 8 wastes of lean manufacturing:
• Transport
• Inventory
• Motion
• Waiting
• Over-production
• Over-processing
• Defects
• Unutilized Talent
Agile Manufacturing:
It is a term applied to an organization that
has created the processes, tools, and training
to enable it to respond quickly to customer
needs and market changes while still
controlling costs and quality.
Why is agile manufacturing an effective strategy?
• Consumers love instant gratification. They are increasingly getting used to it and they ar often
willing to pay for it.
• Consumers love choice. They prefer to get a product exactly a they want it.. without compromise.
• Consumers are fickle. Their interests shift and move in unpredictable ways.
Agile manufacturing builds on lean with four key elements:
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 • Modular product design,
• Information technology,
• Corporate partners and
• a knowledge culture.
Agile and Lean:
• Lean manufacturing is generally considered to
be a precursor to agile. many lean practices are
also enablers for agile manufacturing.
• E.g., manufacturing in small batches fact
changeovers and a culture of continuous
improvement are all foundations that pave the
road to agile manufacturing.
• It is quite interesting to see how lean
manufacturing techniques and tools can
provide benefits in areas that extend beyond
the core lean objective (improving productivity
and profitability be relentlessly eliminating
waste.)
• Agility is needed in less predictable environments when volume is low and the need for variability is
high.

Agile is fit Lean is slim

• Being Prepared • Minimal waste
• Speed and flexibility • Neat and efficient
• Fit enough to react appropriately to • Light but not necessarily built to react to
change change.
Both focus on the consumer in different ways

Pull and Push Type:

Push Type: Means Make to Stock in which the production is not based on actual demand.
Pull type means Make to order in which the
production is based on actual demand.
• Kanban is the most well-known approach
for implementing a pull system. The
Kanban card system is used to provide a
sign or signal by the next step in the
process or downstream operation.
• The hot delicious beverage production
process doesn’t commence until an order is
received from a customer. So customers
generates a signal when he or she purchase
a cup of coffee, effectively puling materials
through the coffee making system, thus
called a pull system.

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 • The pull system is also called JIT system because it operates just in time in delivering finish goods,
materials or WIP when it is needed instead of just to accumulate inventory.
• Supply chain models of push type and pull type are opposite in terms of a demand and supply
relationship.
• E.g., Dell pre-orders and stocks up on raw materials and components. however, from this point on
they do not produce their computers until an order is actually placed. They initially “push”, but then
switch to “pull” in the production and assembly.
OM SESSION 5: (Work study and layout planning)
Work study is a means of enhancing the production efficiency (productivity) of the firm by elimination of
waste and unnecessary operations. It is a tool or technique of management involving the analytical study of a
job or operation.
Steps involved in work study:
1. Select the work to be studied and define its boundaries, Maintain Select
2. Record the relevant facts about the job by direct observation and
collect such additional data as may be needed from
appropriate sources. Install Record
3. Examine the way the job is being performed and
challenge is purpose, place sequence and method of
performance.
4. Develop the most practical, comic and effective method,
Define Examine
drawing on the contributions of concerned.
5. Evaluate different alternatives to developing a improved
method comparing the cost-effectiveness of the selected new
Evaluate Develop
method with the current method of performance.’
6. Define the new method, as a result, in clear manner and present it to those concerned,
i.e., management, supervisors and workers.
7. Install the new method as a standard practise and train the persons involved in applying it.
8. Maintain the new method and introduce control procedure to prevent a drifting back to the previous
method of work.
Components of work study:
• Motion Study: It is the systematic study of the human motions used to perform an operation.
Techniques of Motion study:-
o Motion study principles: They are guidelines for designing motion efficient work
procedures.
The guidelines are divided into three categories:
o Principles for use of the body
o principles for arrangement of the workplace
o principles for the design of tools and equipment
Ergonomics is the process of designing or arranging workplaces, products and systems
so that they fit the people who use them.
o Analysis of therbligs: Therbligs are basic elemental motions that make up a job such as
searching, selecting, grasping, holding etc.,
o Micromotion study is use of the motion pictures and slow motion to study motions that
otherwise would be too rapid to analyse

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 o Charts: Motion study analysts often use charts as tools for analysing and recording motion
studies.
.
• Time Study: It may be defined as the art of observing and recording the time required to do each
detailed element of an industrial operations.
Methods of Time Study
o Stopwatch Time study: It is used to develop a time standard based on observations of one
worker taken over a number of cycles.
o Standard Elemental Times: They are time standards derived from a firm’s historical time
data.
o Predetermined Data: They are standards published data based on extensive research to
determine standard elemental times.
o Work Sampling: It is a statistical technique used for determining the proportion of time
spent by workers in various defined categories of activity.
FORECASTING:
It is a statement about the future value of a variable of interest.
Types of forecasting methods:
• Qualitative: Forecast is made subjectively by the forecaster.
Types of quantitative Forecast:
o Executive opinion: It is a forecasting method in which a group of mangers meet and
collectively develop a forecast.
o Market Research: It is an approach that uses surveys and interviews to determine customer
likes, dislikes and preferences and to identify new-product ideas.
o Delphi Method: It Is a forecasting method in which the objective is to reach a consensus
among a group of experts while maintaining their anonymity.
• Quantitative: Based on mathematical modelling.
o Time series model: It assumes that all the information needed to generate a forecast is
contained needed to generate a forecast is contained in the time series of data.
o Causal Model: It assumes that the variable w wish to forecast is somehow related to other
variables in the environment.
Qualitative Quantitative
Characteristics Based on human judgements Based in Mathematics
Strengths Can incorporate latest changes Consistent and objective
in environment and inside
information
Weaknesses Can bias the forecast and Often quantifiable data ate not
reduce forecast accuracy available.

MAINTENANCE MANAGEMENT:
It is a systematic approach to the planning of maintenance activities using decision making tools to improve
the overall efficiency and effectiveness of the operating system.
Requirements for effective maintenance management:
• Catalogues for equipment’s:
• Maintenance Policy: It is developed by the standardization of basic technical tasks through a set of
standard operating procedures.

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 • Troubleshooting Mechanisms: It is a structures approach to identify the root cause of the problem
that needs some correction in a maintenance scenario.
• Fault free analysis: It is a valuable tool for electrical, hydraulic and several other complex systems
where specific physical components can be isolated quickly using circuits.
• Maintenance Information systems: It captures, achieves and analyse maintenance information
using the help of many web-based software packages.
TOTAL PRODUCTIVE MAINTENANCE:
TPM is a holistic approach to equipment maintenance that strives to achieve perfect production No
breakdowns, no small stops or slow running, No defects.
• TPM emphasizes proactive and preventative maintenance to maximize the operational efficiency of
equipment.
• It blurs the distinction between the roles of production and maintenance by placing a strong emphasis
on empowering operators to help maintain their equipment.
• The implementation of TPM program creates a shared responsibility for equipment that encourages
greater involvement by plant floor workers.
• In the right environment this can be very effective in improving productivity.
8 Pillars of TPM:
1. Autonomous Maintenance: Places responsibility for routine maintenance, such as cleaning,
lubricating and inspection, in the hands of operators
2. Focused Improvement: Have small groups of employees work together proactively to achieve
regular, incremental improvements in equipment operation.
3. Planned Maintenance: Schedules maintenance tasks based on predicted and/or measures failure rates.
4. Quality Maintenance: Design error detection and prevention into production processes. aplly root
cause analysis to eliminate recurring sources of quality defects.
5. Early Equipment management: Direct practical knowledge and understanding of manufacturing
equipment gained through TPM towards improving the design of new equipment.
6. Training and education: Fill in knowledge gaps necessary to achieve TPM goals. Applies to
operators, maintenance personnel and managers.
7. Safety, health and environment: Maintain a safe and healthy working environment.
8. TPM in administration: Apply TPM techniques to administrative functions.
BENCHMARKING:
It is a process of measuring the performance of a company’s products, services or processes against those of
another business considered to be the best in the industry, aka “best in class.”
• The point of benchmarking is to identify internal opportunities for improvement.
• By studying companies with superior performance, breaking down what makes such superior
performance possible, then comparing those process to how your business operates, you can
implement changes that will yield significant improvements.
Benchmarking
In Marketing: An airline hires a consultant to benchmark customer service metrics such as customer
satisfaction against key competitors.
In Process: A telecom company implements a new process for provisioning and benchmarks its results
against industry best practices.

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In Services: An ecommerce form benchmarks its average fulfilments and delivery speed against key
competitors.
Types of benchmarking:
• Internal Benchmarking: When measurement and comparison of key operations between teams,
groups and individuals are made within the organisation, the benchmarking is said to be internal.
• External Benchmarking: When measurement and comparison of key operations are made with the
competitors, then it s called as external benchmarking.
OM SESSION 6: (Quality management)
Successful companies understand the powerful impact customer-defined quality can have on business. For
this reason, many competitive firms continually increase their quality standards. E.g., FORD
DEFINING QUALITY:
The definition of quality depends on the point of view of the people defining it. Most consumers have a
difficult time defining quality, but they know it when they see it.
• Conformance to specifications: How well a product or service meets the target and tolerances
determined by its designers.
o E.g., the wait for hotel toom service may be specified as 20 min, but there may be an
acceptable delay of an additional 10 min.
o Also, consider the amount of light delivered by a 60 watt light bulb. If the bulb delivers 50
watts, it does not conform to specification.
• Value for price paid: Quality defined in terms of product or service usefulness for the price paid.
o E.g., suppose that you wish to sigh up for a personal finance seminar and discover that the
same class is being taught at two different colleges at significantly diff tuition rates.
o If you take the less expensive seminar, you will feel that you have received greater value for
the price.
• Fitness for use: How well the product performs its intended function for use.
o E.g., a Mercedes-Benz and Jeep Cherokee both meet a fitness for use definition if one
considers transportation as the intended function.
o However, if the definition becomes more specific and assumes that the intended use is for
transportation on mountain roads and carrying fishing gear, the Jeep Cherokee has a greater
fitness for use.
• Support services provided: Quality defined in terms of support provided after the product or service
is purchased.
o E.g., the quality of a university is judged not only but the quality of staff and course offerings
but also by the efficiency and accuracy of processing paperwork.
• Psychological criteria: A way of defining quality that focuses on judgemental evaluations of what
constitutes product or service excellence.
o E.g., a hospital patient may receive average healthcare, but a very friendly staff may leave
impression of high quality.
o Similarly, we commonly associate certain products with excellence because of their
reputation; Rolex watches and Mercedes-Benz automobiles are examples.
TOTAL QUALITY MANAGEMENT:
• The concept of quality has existed for may years, though its meaning has changed and evolved over
time.

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 • In the early 20th
century, quality
management meant
inspecting products to
ensure that they met
specifications
• In 1940s, during
World War II, quality
became mire statistical
in nature.
• Statistical sampling techniques were used to evaluate quality, and quality control charts were used to
monitor the production process.
• In the 1960’s quality began to be viewed as something that encompassed the entire organization, not
only the production process.
• The meaning of quality for businesses changed dramatically in the late 1970’s
• Since the 1970’s competition based on quality has grown in importance and has generated
tremendous interest, concern and enthusiasm.
• The term used for today’s new concept of quality is total
quality management or TQM.
TQM can be defined as an organization wide effort to develop
systems, tools, techniques, skills and the mindset to establish a
quality assurance system that is responsive the emerging market
trends.
Elements of TQM:
1. Foundation: Ethics, Integrity and trust.
2. Building Bricks: Training, Teamwork and leadership
3. Binding Mortar: Communication
4. Roof: Recognition.
Foundation: -
Ethics: It is the discipline concerned with good and bad in any situation.
E.g., Maggi noodles Recall:
• About the label that claimed no added “Monosodium Glutamate”
Integrity: It implies honesty, morals, values, fairness and adherence to the facts and sincerity.
E.g., Samsung Note 7 recall:
• Serious fire and burn hazards
Trust: It is a by-product of integrity and ethical conduct and fosters full participation of all members.
Building Bricks: -
Training: During the creation and formation of TQM, employees are trained so that thy can become
effective employees for the company.
Leadership in TQM requires the manger to provide an inspiring vision, make strategic directions that are
understood by all and to instil values that guide subordinates.

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Binding Mortar: -
The success of TQM demands communication with and among all the organisation members including
suppliers and customers.
Roof: -
Recognition should be provided for both suggestions and achievements for teams
as well as individuals.
SEVEN TOOLS OF TQM:
• Pareto chart: It underlines the fact that in any process, 80% of problem is
just caused by 20% of few major factors whereas remaining 20% of problem or failure is caused by
80% of many minor factors.
• Check Sheet: A check sheet or tally sheet can be
metrics, structured table or form for collecting data and
analysing them.
• Control chart: It is a statistical chart which helps in
detremining if an industrial process is within control
and capable to meet the customer defined specification
limits.
• Cause-and-effect diagram or fish bone helps in identifying the various causes9 or factors) leading to
an effect (or problem) and
also helps in deriving
meaningful relationship
between them.
o The head of the fish
is the quality proble,
such as damaged
zippers on a garmnt
or broken valves on
a tire.
o The diagram is
drawn so that the
spine of the fish
connects the head to
the possible cause of the problem.
o These causes could be related to the machines, workers, measurement, suppliers, materials
and many other aspects of the production process.
o Each of these possible causes can then have smaller bones addressing specific issues that
relate to each cause
• Histogram: It is a bar graph representing the frequency distribution on each bars to study the density
of data in any given distribution.
• Scatter Diagram: It is basically a statistical tool that depicts dependent variable on Y- axis and
independent
• Stratification: It is a method of dividing data into sub categories and classify data based on group,
division, class or levels that helps in deriving meaningful information to understand an existing
problem.
COST OF QUALITY:

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 • Internal Failure cost: These are incurred to remedy defects discovered before the product or service
is delivered to the customer.
o E.g., One type of internal failure cost is rework, which is the cost of correcting the defective
item. Sometimes the item is so defective that it cannot be corrected and must be thrown away,
and is called scrap, and its cost include all the material, labour and machine cost spent in
producing the defective product.
• External Failure Cost: These are incurred to reedy defects discovered by customers.
o They include everything from customer complaints, product returns and repairs to warranty
claims, recalls, and even litigation costs resulting from product liability issues. a final
component of this cost is lost sales and lost customers.
o E.g., manufacturers of lunch meats and hotdogs whose products have been recalled due o
bacterial contamination have had to struggle to regain consumer confidence.
• Appraisal Cost: These are associated with measuring and monitoring activities to quality.
o They include the cost of inspection, product testing, and performing audits to make sure that
quality standards are being met. also included in this category are the cost of workers time
spent measuring quality and the cost of equipment used for quantity appraisal
• Prevention Cost: These are any expenditures incurred that are intended to minimize the number of
defects in products and services
o They include quality planning costs, such as the costs of developing and implementing a
quality plan. Also included are the costs of product and process design, from collecting
customer information to designing processes that achieve conformance to specifications.
o E.g., a company could invest in training programs for the operators of its production
machinery, to ensure that they understand how to manufacture parts correctly.
QUALITY STANDARDS:
Quality standards are designed to ensure companies meet the minimum requirements to become an integral
part of almost every industry from food to automotive to healthcare.
Quality standards, such as ISO 9001, ISO 14001 and ISO 27001, serve as a framework for businesses.
ISO: International Organisation for Standardization is an international standard-setting body composed of
representatives from various national standards organizations
• Founded on 23 Feb, 1947
• Headquarters: Geneva, Switzerland
• Working in 162 countries
• 3 Official Languages of ISO are English, French and Russian
• ISO 9001is the only standard within the ISO 9000 family to which organizations can certify.
STATISTICAL PROCESS CONTROL;
SPC is an industry standard methodology for measuring and controlling quality during the manufacturing
process.
Advantage of SPC: It emphasizes early detection and prevention of problems, rather than the correction of
problems after they have occurred.
Application of SPC: The application SPC involves 3 main phases of activity:
• Understanding the process and the specification limits
• Elimination assignable sources o variation, so that the process is stable.

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 • Monitoring the ongoing production process, assisted by the use of control charts, to detect significant
changes of mean or variation.

ACCEPTANCE SAMPLING: It uses statistical sampling to determine whether to accept or reject a

production lot of material.
Procedure for acceptance sampling:
• A random sample is taken from a large quantity of items and tested or measured relative to the
quality characteristic of interest.
• If the sample passes the test, the entire quantity of items is accepted.
• If the sample fails the test, either the entire quantity of items is subjected to 100% inspection and all
defective items repaired or replaced or the quantity is returned to the supplier.
E.g., A production line that produces pens rarely produces defective units. When defects occur, usually the
entire lot is impacted because a machine is out of calibration. management decides that testing one pen is
vey lot of 10,000 is sufficient quality control. When a pen is defective, the entire lot is tested and the
problem is immediately escalated to quality assurance.
Two levels of quality are considered in the design of an acceptance
sampling plan.
1. Acceptance Quality level (AQL): The producer of the item
strives to achieve the AQL, which typically is written into a
contract or purchase order. For e.g., a contract might call for a
quality level not to exceed one defective unit in 10000, or an
AQL of 0.0001
2. The quality level desired by the consumer: The 2nd level of
quality is the lot tolerance proportion defective, or the worst
level of quality that the consumer can tolerate.
Risks of Acceptance Sampling:
Because we are not sampling the entire lot, there are 2 types of risk that we must consider:
1. Rejecting a good quality batch, also known as producers’ risk
2. Accepting a poor-quality batch, also known as consumers risk
An operating characteristics curve is a chart that displays the probability of acceptance versus percentage of
defective items (or lots).
SIX SIGMA:
It is a quality management methodology used to help businesses improve current procsses, products or
services by discovering and eliminating defects. The goal is to streamline qulaity control in manufacturing
or business processes so there is little to no variance throughout.
• It was trademarked by Motorola in 1993, but it references the Greek letter sigma, which is a
statistical symbol that represents a standard deviation.
• Motorola used the term because a Six Sigma process is expected to be defect-free 99.99966 percent
of the time- allowing for 3.4 defective features for every million opportunities.
• Six Sigma is specifically designed to help large organizations with quality management.

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The Six Sigma DMAIC project methodology includes five phases, each represented as a letter in the
DMAIC acronym.
• D- DEFINE: Define the problem, the customer, the project requirements and the ultimate goals and
expectations of the customer.
• M- MEASURE: Measure performance of the current process by establishing a data collection plan to
determine defects and gather metrics.
• A-ANALYZE: Analyze the process to establish root cause of variations and defects to identify issues
with the current strategy that stand in the way of the end goal.
• I-IMPROVE: Improve the process by eliminating the root causes of defects through innovative
solutions.
• C-CONTROL: Control the new process to avoid falling into old habits and to ensure it stays on track
OM SESSION 7: (Inventory Management)
Inventory: It is the accounting of items, component parts and raw materials that a company either uses in
production or sells.
E.g., Hospital Inventory: Drugs, surgical supplies, life-monitoring equipment, sheets and pillow
cases and more.
Car Manufacturing: Supplies of raw material, purchased parts, partially finished items, and finished
goods, as well as spare parts fro machine, tools and other supplies.
Super Markets: Fresh and canned foods, packaged and frozen foods, household supplies, magazines,
baked goods, dairy products, produce and other items.
The overall objective of inventory management is to achieve satisfactory level of customer service while
keeping inventory costs withing reasonable bounds.
FUNCTIONS OF INVENTORY:
• To meet anticipated customer demand
• To smooth production requirements
• To decouple operations
• To reduce the risk of stockouts.
• To take advantage of order cycles.
Types of Demand in Inventory Management:
• Independent demand: It is demand for a finished product, such as a computer, a bicycle, or a pizza.
o There is an element of uncertainty of demand in the case of independent demand items.
o E.g., If a company plans to produce 200 cars in a day. It would need 800 wheels, 400
windshield wipers, and 200 braking systems. The no. of wheels windshield wipers, braking
systems and other component parts is dependent upon the quantity of independent demand
item from which it is derived.
• Dependent demand: It is demand for components parts or subassemblies such as microchips in the
computer, the heels on the bicycle, or the cheese on the pizza.
Bills of Materials (BOM): The relationship between independent and dependent demand is depicted in a
bill of materials (BOM), a type of visual diagram that shows the relationship between quantities.
Different Types of Inventory Costs:
• Purchase cost is the amount paid to a vendor or supplier to buy the inventory.
• Holding cost is the cost to carry an item in inventory for a length of time, usually a year.
• Ordering Cost are the cost of ordering and receiving inventory.

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 • Shortage Cost is the cost resulting when the demand exceeds the supply of inventory, often
unrealized profit per unit.
• Setup cost:
Types of Inventories:
• Seasonal Inventory: Organizations carry inventory to meet fluctuations in demand arising out of
seasonality. e.g., Thanksgiving, Halloween
• Decoupling Inventory: Inventory accumulated between two inter-dependent operations as a buffer
against breakdowns or unevenness in machine production rates, thus reducing the ened for output
synchronization
o The automobile company decouples its inventory so engine assembly, seat assemble and final
assemble are separate from one another. This way, if there is any problem or shortage in seat
inventory, the final assemble can continue on without any hiccup.
• Cycle Inventory: Cycle inventory is counting selected stock items weekly, monthly or quarterly
until all stock items are inventoried by the end of the fiscal year.
o E.g., a retailer on hand inventory would include the items on store shelves as well as most of
those in a store room or stock area. over time cycle stock inventory refreshes itself, or turns
over, as new items replace older ones that are sold.
• Pipeline Inventory: It refers to those products that are in the company’s shipping chain that have yet
to reach their ultimate destination.
o A shipment of video game consoles made in Japan can take several days to arrive by
container ship to an American port. If the wholesalers has already purchased the console they
are part of that wholesaler’s inventory until he sells then to his retail store customers. when
the retail store purchases the console from the whole seller, the pipeline inventory goes on
their records,
Safety stock: It describes the level of extra stock that is maintained to mitigate risk of stockouts.
IOT for Inventory Management:
• The dawn of IOT is upon us and it is set to revolutionize many industries including inventory
management.
• A major area of benefit is asset tracking where, instead of using traditional barcodes to scan and
record item data, stock items have RFID tags or GPS sensors which can be registered wirelessly.
• It is then possible to quickly and accurately obtain data and track items from any point throughout
the supply chain.
• The best practices for an inventory management system using IOT are to have as little human
intervention as possible.
• Data collection of the inventory items should be highly-automated so that when each item passes
through a scanner, its presence in inventory is tracked and recorded
INVENTORY CONTROL MODELS:
• Economic order quantity (EOQ): It is the order quantity that minimizes the total holding casts and
ordering costs

𝟐∗𝑫∗𝑺
𝑬𝑶𝑸 = √
𝑯

Where:
D= Annual demand (units)

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 S= Cost per order ($)
H = Holding cost ($) = I*C
C = Cost per unit ($)
I = Holding Cost (%)
𝑸
Annual carrying cost = 𝟐 𝑯

Where:
Q = order quantity in units
H= Holding cost per unit per year
𝑫
Annual ordering cost = 𝑸 𝒔

Where:
D= Demand, usually in units per year
S= order cost per order
𝑸 𝑫
TC= Annual carrying cost +Annual ordering cost = 𝟐 𝑯 + 𝑸 𝒔

𝑸
Length of order cycle = 𝑫

P.1 A local distributor for a national tire company expects to sell approximately 9600 steel-belted radical
tires of a certain size and tread design next year. Annual carrying cost is $16 per tire, and ordering cost is
$75. The distributor operates 288 days a year.
i. What is EOQ?
ii. How many times per year does the store reorder?
iii. What is the length of an order cycle?
iv. What is the total annual cost if the EOQ quantity is ordered?
P.2 An auto parts supplier sells Hardy-brand batteries to car dealers and auto mechanics. the annual demand
is approx. 1200 batteries. The supplier pays $28 for each battery and estimates that the annual holding cost
is 30% of the battery’s value. It costs approximately $20 to place an order (managerial and clerical costs).
The supplier currently orders 100 batteries per month.
i. Determine EOQ?
ii. How many orders will be placed per year using the EOQ?

• Economic Production Quantity (EPQ): It is the quantity of a product that should be manufactured
in a single batch so as to minimize the total cost includes setup costs for the machines and inventory
holding costs.
The economic run quantity is

2𝐷𝑆 𝑝
Qp = √ √𝑝−𝑢
𝐻

where:
p = production or delivery rate

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 u = usage rate

P.1 A toy manufacturer uses 48000 rubber wheels per year for its popular dump truck series. The firm makes
its own wheels, which it can produce at a rate of 8—per day. The toy trucks are assembled uniformly over th
entire year. Carrying cost $1 pr wheel a year. Setup cost for a production run of wheels is $45. the firm
operates 240 days per year. Determine the optimal run size.

VENDOR MANAGEMENT:
It is term that describes the processes organizations use to manage their suppliers which includes activities
such as selecting vendors, negotiating contracts controlling cost, reducing vendor related risks and ensuring
service delivery.
Vender Management Process:
• Establish Business Goals: In order to successfully enlist the aid of a vendor, you need to know
exactly what it is that you’re trying to achieve.
• Chose the best Vendor: You’ll have to weigh the pros and cons of all the vendors and this step
needs to taken after a thorough vetting.
• Manage Vendors: This is the daily activity of monitoring performance and output which involves
lots of communication to offer approvals, disapprovals, changes, feedback and whatever else is
necessary to deepen the relationship.
• Consistently Meet Goals: You want to meet your goals not once or twice, but consistently over the
course of your relationship with the vendor.
Vendor Managed Inventory (VMI) is a business model where the buyer of a product provides information
to a vendor of that product and the vendor takes full responsibility for maintaining an agreed inventory of
the material, usually at the buyer’s consumption location.
Benefits of VMI
• One of the benefits of VMI is that the vendor is responsible for supplying the customer when the
items are needed. That can lead to:
o Removal of safety stock
o Lower inventory Levels
o Reduction in purchasing-related admin costs

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