SUBJECT- Management Control System CLASS – TYBAF

Chapter - 1

Q1. Value Chain

A value chain is a concept that describes the full range of activities that businesses engage in to bring
a product or service from conception to delivery and beyond. In simple words, it's like a series of steps
that a company takes to create value for its customers.

How it works:

1. Raw Materials: It starts with sourcing raw materials or inputs needed to create a product.

2. Production: Then, the company processes these materials to manufacture the product.

3. Marketing: After that, the product is marketed to potential customers to generate interest.

4. Sales: The product is sold to customers through various channels.

5. Delivery: Finally, the product is delivered to the customer, and after-sales support may be
provided.

Each step adds value to the product, which can ultimately lead to customer satisfaction and profit for
the company. The goal of analyzing the value chain is to identify ways to improve efficiency, reduce
costs, and enhance customer satisfaction.

Example:

A simple breakdown of how McDonald's value chain works:

• An American multinational fast food chain

• founded in 1940
• as a restaurant
• operated by Richard and Maurice McDonald,
• in San Bernardino, California, United States.

1. Inbound Logistics: McDonald's sources high-quality ingredients from suppliers. They have a
strong supply chain to ensure fresh products.

2. Operations: The company uses efficient cooking and preparation methods in their restaurants
to quickly serve customers. They have streamlined kitchen processes to ensure speed and
consistency.

3. Outbound Logistics: McDonald's focuses on delivering food quickly to customers, whether

through counter service, drive-thru, or delivery services. They have efficient systems in place
to manage orders and ensure timely service.

4. Marketing and Sales: McDonald's employs extensive marketing strategies, including

advertising campaigns and promotions, to attract customers. They also adapt their menu to
local tastes while maintaining their core offerings.

5. Service: Customer service is a priority at McDonald's. They aim to provide a friendly and
efficient experience, with initiatives like free Wi-Fi and loyalty programs to enhance customer
satisfaction.

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Q2. Production system.

A production system is a method or process used by businesses to create goods or services. It

encompasses the entire process from acquiring raw materials to delivering the final product to
customers.

GOAL: To efficiently convert inputs (materials, labor, and capital) into outputs (finished products) while
maximizing quality and minimizing costs.

Types of production systems:

1. Continuous Production

• Definition: Continuous production is a manufacturing process that runs 24/7, producing a

constant flow of products without interruption.

• Characteristics: It is highly automated and suitable for producing large quantities of

standardized products, such as chemicals, oil, or electricity.

• Example: Oil refineries or power plants where production runs continuously to meet constant
demand.

2. Mass Production

• Definition: Mass production involves creating large quantities of a single product using
assembly line techniques.

• Characteristics: It focuses on efficiency, speed, and cost-effectiveness, with a high degree of

specialization in tasks.

• Example: Automobile manufacturing, where cars are produced in large numbers using
standardized parts and processes.

3. Batch Production

• Definition: Batch production is a method where goods are produced in groups or batches
rather than in a continuous stream.

• Characteristics: It allows for more variety and flexibility than mass production, as different
batches can produce different products.

• Example: Baking bread in batches, where a bakery might produce several loaves of one type
before switching to another type.

4. Job-Shop Production

• Definition: Job-shop production is a highly flexible manufacturing process that produces small
quantities of customized products.

• Characteristics: It involves skilled labor and allows for a wide variety of products to be made,
often tailored to specific customer requirements.

• Example: A custom furniture workshop that builds unique pieces based on individual customer
specifications.

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Q3. Material Resource Planning (MRP):

Meaning: Material Resource Planning (MRP) is a production planning and inventory control system
used to manage manufacturing processes. It ensures that the right materials are available at the right
time to meet production requirements.

Characteristics:

• Dependent demand: MRP is based on dependent demand, where the demand for one item is
dependent on the demand for another item.

• Time-phased: MRP is a time-phased system, which means it plans and schedules material
requirements over a specific time period.

• Computer-based: MRP is a computer-based system that uses algorithms and data to generate
plans and schedules.

Advantages:

• Improved inventory management: MRP helps reduce inventory levels and minimize
stockouts.

• Better production planning: MRP ensures that production is planned and scheduled
efficiently.

• Reduced lead times: MRP helps reduce lead times by identifying and addressing material
shortages early.

• Increased productivity: MRP optimizes resource utilization, leading to increased productivity.

• Better decision-making: MRP provides accurate and timely data, enabling better decision-
making.

Disadvantages:

• Complexity: MRP systems can be complex and difficult to implement.

• Data accuracy: MRP relies on accurate data, which can be a challenge to maintain.

• Inflexibility: MRP systems can be inflexible and may not adapt well to changes in demand or
supply.

• High implementation costs: Implementing an MRP system can be expensive.

• Requires skilled personnel: MRP systems require skilled personnel to operate and maintain.

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1. Optimised Production Technology (OPT)

1. Definition: A production management approach focused on maximizing efficiency by

identifying and eliminating bottlenecks.

2. A production management approach that focuses on maximizing manufacturing efficiency by

identifying and eliminating bottlenecks in the production process. It emphasizes effective
scheduling, resource allocation, and inventory control to ensure a smooth and continuous flow
of operations.

Example of a Bottleneck in the Production Process:

Imagine a car manufacturing plant where the production process involves several stages: stamping,
welding, painting, and assembly.

• Scenario: The stamping machine can produce 100 car parts per hour, while the welding station
can only handle 50 parts per hour due to its limited capacity and slower operation.

• Bottleneck: In this case, the welding station is the bottleneck. It cannot keep up with the
output of the stamping machine, causing a backlog of parts waiting to be welded.

• Impact: This bottleneck slows down the entire production line, leading to delays in completing
cars, increased lead times, and potential dissatisfaction among customers waiting for their
vehicles.

2. Supply Chain Management (SCM)

1. Definition: Coordination of all activities involved in sourcing, procurement, conversion, and

logistics to deliver products to customers.

2. SCM refers to the systematic coordination and management of all activities involved in the
sourcing, procurement, production, and distribution of goods and services.

3. It encompasses the flow of materials, information, and finances from the initial supplier to the
end customer.

4. Example: A car manufacturer managing parts suppliers, assembly plants, and distribution
networks.

5. Advantages:

• Improved efficiency and reduced costs.

• Enhanced customer satisfaction through timely deliveries.

• Better inventory management.

6. Disadvantages:

• Complexity in managing multiple suppliers and logistics.

• Dependency on external partners can lead to vulnerabilities.

• High initial investment in technology and training.

7. Process:

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 8. Logistics

7. Inventory
Management
6. Procurment

5. Material
Requirement
4. Production Planning
planning
3. Data
collection
2. Analysing
past records
1. Forecasting
customers
demand

3. Customer Relationship Management (CRM)

1. Definition: A strategy for managing a company’s interactions with current and potential
customers, using data analysis to improve relationships.

4. Just In Time (JIT)

1. Definition: An inventory management strategy that aligns production with demand, reducing
waste by receiving goods only as needed.

2. JIT Implementation/ Example:

• Instead of keeping a large inventory of parts stored on-site, the company schedules deliveries
from suppliers to arrive just before they are needed on the assembly line.

5. Total Quality Management (TQM)

• Definition: Total Quality Management is a comprehensive management approach focused on

improving quality and performance in all aspects of an organization. It emphasizes customer
satisfaction, continuous improvement, and the involvement of all employees in the quality
process.

• A management approach focused on long-term success through customer satisfaction and

continuous improvement.

• Example: Toyota Motor Corporation

• Toyota is renowned for its TQM practices, particularly through its Toyota Production
System (TPS). This system emphasizes continuous improvement (Kaizen), respect for
people, and a strong focus on quality at every stage of production.

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 Key Features of TQM at Toyota:

• Employee involvement in decision-making.

• Continuous training and development.

• Use of quality circles for problem-solving.

• Strong emphasis on customer feedback to improve products and services.

1. Elements:

• Continuous improvement (Kaizen).

• Employee involvement.

• Customer focus.

2. Advantages:

• Enhanced product quality.

• Increased customer satisfaction.

• Reduced operational costs.

3. Disadvantages:

• Requires a cultural shift in the organization.

• Can be time-consuming to implement.

• May involve significant training costs.

6. Synchronous Manufacturing

1. Definition: A production approach that synchronizes all aspects of manufacturing to improve

efficiency.

2. The goal is to synchronize the flow of materials, information, and activities throughout the
production system to minimize delays, reduce waste, and improve overall efficiency.

3. Advantages:

• Reduced lead times.

• Lower inventory levels.

• Improved product quality.

• Enhanced flexibility in production.

7. Scrap Management

1. Definition: The process of handling and minimizing waste produced during manufacturing.

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2. It refers to the process of handling waste materials or leftover parts from manufacturing or
production that are no longer useful. This involves collecting, sorting, and disposing of or
recycling scrap materials in an efficient and environmentally friendly way.

3. Ways to Reduce Scrap:

• Implement better training for workers.

• Use quality materials and tools.

• Regular maintenance of machinery.

• Analyze production processes to identify waste areas.

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