BMT5118

BMT5118
Operations
Operations Management
Management
Unit-II
Unit-II

Dr. A.Vasumathi
Professor, VIT Business School
Vellore Institute of Technology
Vellore – 632014

Cabin: MGB F114

 Designing Operations

Facility Location Analysis

Process Strategy

Facility Layout

Work Measurement

Quality Control

2
 Facility Location
 Business systems utilize facilities like, plant
and machineries, warehouses, etc., while
performing the task of producing products/
services. A proper planning of these facility
location would definitely reduce their cost of
operation and maintenance.

 Facility location decisions are very important

because they have direct bearing on factors
like, financial, employment and distribution
patterns.

3
Reasons for facility location decision

The following events are quite common in any

business venture to take decision on facility
location for its production activities.
Establishment of a new venture
Expansion of existing business
Significant change in existing demand,
supply and marketing locations
Significant change in the cost structure
Government policies

4
 Factors influencing Facility Location
General Factors:
Availability of land for present and future needs and cost
of land, land development and buildings, etc.
Availability of inputs such as labour, raw materials, etc.
Closeness to the market places
Stability of demand
Availability of communication facilities
Availability of necessary modes of transportation like
road, rail, airport and water ways.
Availability of infrastructure facilities such as power,
financial institutions, banks, etc.

5
General Factors: (Contd.)
 Disposal of waste and effluent and their impact on the
environment
 Government support, grant, subsidy, tax structure
 Availability of housing facilities and recreational
facilities
 Demographic factors like population, trained man power,
academic institutions, standard of living, income level,
etc.
 Security, culture of society

6
Specific factors: (Contd.)
A multinational company, desiring to set up plant should
consider the following aspects in addition to the general
factors.
The economic stability of the country and the concern of
the country towards outside investments are to be
considered
The success of operation of the factory depends on the
cultural factors, language and cultural differences which
can present operating, control and even policy problems.
Analysis must be based on the factors like wage rate,
policy, duties, etc.
The company can set up joint ventures with any leading
local giants that will solve many operational problems

7
 General steps in location selection
1. Decide on the criteria to use for evaluating location
alternatives, such as increased revenues or community
service

2. Identify important factors, such as location of markets

or raw materials

3. Develop location alternatives:

a) Identify a country or countries
b) Identify the general region for a location
c) Identify a small number of community alternatives
d) Identify site alternatives among the community alternatives

4. Evaluate the alternatives and make a selection

8
 Factors affecting location decision –
Regional level
Factors Considerations

Location of raw materials Proximity, modes and costs of transportation,

or suppliers quantity available

Location of markets Proximity, distribution costs, target market, trade

practices/ restrictions

Labour Availabilty (general and for specific skills), age

distribution of workforce, work attitudes, union or
nonunion, productivty, wage scales, unemployment
compensation laws

9
 Factors affecting location decision –
Community level
Factors Considerations
Quality of life Schools, churches, temples, mosques, shopping,
housing, transportation, entertainment, recreation
and cost of living
Services Medical, fire, and police

Attitudes Pro/con (Positive/ Negative)

Taxes State/local, direct and indirect

Environment regulation State/ local

Utilities Availability and cost
Development support Bond issues, tax abatement, low-cost loans, grants

10
 Factors affecting location decision –
Site level
Factors Considerations

Land Cost, degree of development required, soil

characteristics and drainage, room for expansion,
parking

Transportation Type (access roads, rail spurs, air freight)

Environment/ legal Zoning restrictions

11
 Location Analysis Techniques

• Location factor rating method

• Centre of gravity technique

• Load distance method

• Break-even analysis

12
 Factor Rating Method
In the location factor rating system,
Factors that are important in the location decision are
identified. Each factor is weighted from 0 to 1 to prioritize the
factor and reflects its importance.
A subjective score is assigned (usually between 0 and 100) to
each factor based on its attractiveness compared with other
locations, and weighted scores are summed.
Decisions typically will not be made based solely on these
ratings, but they provide a good way to organize and rank
factors.

13
 Illustration-1
ABC Manufacturing Company is going to build a new plant to manufacture
roller bearings (used in automobiles and trucks). The site selection team
is evaluating three sites, and they have scored the important factors for
each as follows. They want to use these ratings to compare the
locations.
Scores (0 to 100)
Location Factor
Weight Site 1 Site 2 Site 3
Labour availabilty 0.30 80 65 90
Proximity to suppliers 0.20 100 91 75
Wage rates 0.15 60 95 72
Community environment 0.15 75 80 80
Proximity to customers 0.10 65 90 95
Transport facilities 0.05 85 92 65
Communication service 0.05 50 65 90

14
 Factor Rating Method (Contd.)
Solution: The weighted scores for each site are computed by multiplying the
factor weights by the score for that factor. For example, the weighted score for
‘labour availability’ for site 1 is (0.30) x (80) = 24 points. The weighted scores
for each factor for each site and the total scores are summarised as follows:
Weighted Scores
Location Factor
Site 1 Site 2 Site 3
Labour availabilty 24.00 19.50 27.00
Proximity to suppliers 20.00 18.20 15.00
Wage rates 9.00 14.25 10.80
Community environment 11.25 12.00 12.00
Proximity to customers 6.50 9.00 9.50
Transport facilities 4.25 4.60 3.25
Communication service 2.50 3.25 4.50
Total score 77.50 80.80 82.05

Site 3 has the highest factor rating compared with the other locations; however,
this evaluation would have to be used with other information, particularly a cost
analysis, before making a decision.

15
Centre of Gravity Technique

16
 Centre of Gravity Technique, Ex-5 (Contd.)
XYZ restaurant chain purchases ingredients from four different food
suppliers. The company wants to construct a new central distribution
centre to process and package the ingredients before shipping them to
their various restaurants.The suppliers transport ingredients items in 40
feet truck trailers, each with a capacity 18 MT. The locations of the
four suppliers A,B,C and D (in kilo-meters) and the annual number of
trailer loads that will be transported to the distribution centre are given
in the table.
A B C D
xA = 200 xB = 100 xC = 250 xD = 500
yA = 200 yB = 500 yC = 600 yD = 300
W A = 75 WB = 105 Wc = 135 WD = 60

Using the centre of gravity method, determine a possible location for

the distribution centre.

17
Centre of Gravity Technique, Ex-5 (Contd.)

A B C D
xA = 200 xB = 100 xC = 250 xD = 500
yA = 200 yB = 500 yC = 600 yD = 300
W A = 75 WB = 105 Wc = 135 WD = 60

18
Load-Distance Technique

19
Load-Distance Technique (Contd.)

20
 Load – Distance Technique, Ex.6
XYZ company wants to evaluate three different sites it has
identified for its new distribution centre relative to the
four suppliers identified in example 3. The coordinates of
the three sites under consideration are as follows.

Site 1: x1 = 360, y1 = 180

Site 2: x2 = 420, y2 = 450

Site 3: x3 = 250, y3 = 400

Solution:
First, the distances between the proposed sites (1,2, and
3) and each existing facility (A,B,C, and D), are computed
using the straight-line formula

21
Load – Distance Technique, Ex.6

800

700

600 C (250,600)

500 B (100,500)

400 Site-3 (250,400)

300 D (500,300)

200

100 A (200,200)

100 200 300 400 500 600

22
Load – Distance Technique, Ex.6 (Contd.)

23
Load – Distance Technique, Ex.6 (Contd.)
Next, the formula for load distance is computed for each
proposed site:

LD (site 1) = (75x161.2)+(105x412.3)+(135x434.2)+(60x184.4)
= 1,25,063
LD (site 2) = (75x333)+(105x323.9)+(135x226.7)+(60x170)
= 99,789
LD (site 3) = (75x206.2)+(105x180.3)+(135x200)+(60x269.3)
=77,555

Since site 3 has the lowest load-distance value, it would be

assumed that this location would also minimize
transportation costs.

24
 Break - Even Analysis
 The term “Break – Even Analysis” refers to a
system of determination of that level of
activity where total cost equals total selling
price.
 However, in the broader sense, it refers to
that system of analysis which determines the
probable profit at any level of activity.
 The relationship between cost of production,
volume of production, profit and sales value is
established by break – even analysis.

25
 Break – Even Chart
Sales

Profit
Total Cost (TC)

Break – even
Variable Cost (VC)
Sales

Fixed Cost (FC)

Loss

BEP (Q*))
Production quantity
26
 Break-Even Analysis (Contd.)
The main objectives of break even analysis is to find the cut
off production volume from where a firm will make profit, Let
s = selling price per unit
v = variable cost per unit
FC = fixed cost per period
Q = volume of production
The total sales revenue (S) of the firm is given by following formula:

The total cost of the firm for a given production volume is given as:
TC = Total variable cost + Fixed cost

27
Break-Even Analysis (Contd.)
Profit = Sales - (Fixed cost + Variable costs)

The formulae to find the break even quantity and break even sales quantity:

Fixed cost
Break Even Quantity =
Selling price /unit – Variable cost /unit
FC
= ( in units)
s-v

28
 Break-Even Analysis (Contd.)

The contribution is the difference between the sales and the variable costs. The margin
of safety (M.S) is the sales over and above the break - even sales. The formulae to
compute these values are:

29
 Profit Volume Ratio (P/V Ratio)
P/V ratio is a valid ratio which is useful for further analysis. The different formulae for the P/V ratio are
as follows:

Contribution Sales - Variable costs

P/V ratio = =
Sales Sales

The relation ship between BEP and P/V ratio is as follows:

Fixed cost
BEP =
P/V ratio

The following formula helps us find the Margin of Safety (M.S) using the P/V ratio
Profit
M.S =
P/V ratio

30
 Advantages Break - Even Analysis
Break Even Analysis is useful for a manager in the following way:
It helps him in forecasting the profit fairly accurately
It is helpful in setting up Flexible budgets, since on the basis of Cost
Volume Profit relationship, one can ascertain the costs, sales and profits
at different levels of activity.
It assists in performance evaluation for purpose of management
control
It helps in formulating price policy by projecting the effect which
different price structures will have on costs and profits.
It helps in determining the amount of overhead cost to be charged at
various levels of operations, since overhead rates are generally pre -
determined on the basis of a selected volume production.

31
 Illustration 2.4

Break-Even Analysis:

A manufacturer of motor cycles buys side box at Rs.240

each. In case the company makes it within the factory, the
fixed and variable costs would be Rs.3,00,000 and Rs.90 per
side box respectively. Should the manufacturer make or buy
the side box if there is demand for 2,500 side boxes?

32
 Illustration 2.4
Solution:

Selling price/unit (P) = Rs.240

Variable cost/unit (VC) = Rs.90
Fixed cost (FC) = Rs.3,00,000

BEP = 300000/(240-90) = 2000 units

Since the demand (2500 units) is more than the break even
point, the company can manufacture the side boxes.

33
 Break Even Analysis - Location

A generalized methodology for locational break-even analysis is

given below:

Determine all relevant costs for each of the locations

Classify the costs for each location into annual fixed costs (FC)
and variable cost per unit (v)
Compute the break even quantity for each site conditions

Select the location with the lowest total annual cost (TC) at the
expected volume of sale per year.

34
 Break Even Analysis, Ex-3 (Contd.)

Potential locations A, B and C have the cost structure shown

below for manufacturing a product expected to sell for Rs.2700
per unit. Find the most economical location for an expected
volume of sale of 5000 units per year.

Facility Fixed Variable

Cost/Year, Rs Cost/Unit, Rs
A 60,00,000 1,500
B 70,00,000 500
C 50,00,000 2,000

35
 Break Even Analysis, Ex.3 (Contd.)
For each site find the total cost using the following formula:
TC = Fixed Cost + (Variable Cost/ unit) x Quantity
Break-Even Quantity = Fixed Cost / (Selling price/unit – Variable cost/unit)
Selling price = Rs.2,700 per unit. Expected volume to sell = 5,000 units

Variable Break Even

Location Fixed Cost Total Cost,Rs Contribution, Rs
cost/ Unit Quantity

A 60,00,000 1500 13500000 1200 5,000

B 70,00,000 500 9500000 2200 3,182
C 50,00,000 2000 15000000 700 7,143

From the above table, it is clear that the total cost and break even quantity to
produce for the location B is the minimum. Hence, it is to be selected for locating
the plant.

36
 Cost Analysis , Ex.4
There are two sites considered for locating a plant. The details
are given in the following table

Cost of Items Site 1 Site 2

Raw materials and other supplies 1,50,000 1,30,000
Fuel and power 60,000 58,000
Water 5,000 7,000
Labour and supervisor 1,60,000 1,25,000
Land and building 12,00,000 12,19,000
Distribution expense 1,50,000 1,40,000
Freight incoming 1,10,000 1,20,000
Taxes 4,000 2,000

Find the best site for locating the plant

37
 Cost Analysis , Ex.4 (contd.)
Cost of Items Site 1 Site 2
Raw materials and other supplies 1,50,000 1,30,000
Fuel and power 60,000 58,000
Water 5,000 7,000
Labour and supervisor 1,60,000 1,25,000
Land and building 12,00,000 12,19,000
Distribution expense 1,50,000 1,40,000
Freight incoming 1,10,000 1,20,000
Taxes 4,000 2,000
Total cost, Rs 18,39,000 18,01,000

The cost of site-2 is less than that of the site -1 by Rs.38,000;

hence it is to be selected the site-2 for locating the plant.

38
 Product Design and Analysis
In any business venture, product design is the first step
immediately after accepting the concept of a product.
In the process of product design, one has to critically
analyze different design features with relevance to places
of use, substitute materials, and carefully plan equipment
alternatives for manufacturing the product.
Product design has direct bearing on plant layout and in-
process materials flow.
Therefore the purpose of product design and analysis is to
determine and specify products that will be profitable to
manufacturers and distributors and will give human
satisfaction.
The various aspects in product design are: Design for
Function, Design for Manufacturing and Design for Selling

39
 Product Design and Analysis (Contd.)
Design for Function: A product must perform the function which
its customer expects it to do. The factors which are to be
considered for functional design are strength and wearability of
the product and its components.

Design for Manufacturing: A product design that solves the

functional problem smoothly, but is impossible to manufacture, is
of no use. Attention must be given to materials, fastening devices
etc., while designing a product. Making use of standard parts is
an important aspects of product design.

Design for Selling: A product that functions well and is easy to

make, but is wanted by no one is of no avail. It makes no
difference whether the product is a pen or CNC machine, it has
to sell itself to the customers. The features like, appearance and
convenience, depending on the customers, needs, are to be
considered.

40
 Modules of product design and analysis
Product design may be classified into design for new
products (new product development) and design for
modifications of existing products. A careful analysis of
the product attributes would reduce obsolescence and
extend product’s life.

The following are the various aspects of product design and

analysis:
Process planning and design
Value analysis/ Value engineering
Standardization and simplification
Make or buy decision
Ergonomic considerations in product design
Concurrent engineering

41
 Process Planning and Design
The following six factors influence process selection:
 Market conditions
 Capital requirement
 Labour
 Management skills
 Raw materials
 Technology

The process engineer should therefore,

• Determine the method of manufacturing a product
• Establish the sequence and the type of operations
involved
• Select the tools and equipment required
• Analyze how the manufacturing of the product will fit
into the facilities

42
Process Characteristics Matrix

43
Responsibilities of Process Planning Engineer
1. Recommending design changes: Process engineer should
always aim to propose some changes in the given product
design in view of minimizing the cost.
2. Interpretation of
• Part print analysis
• Symbols
3. Gathering the fundamental details of product design
• Dimensional tolerances
• Type of finish
• Production rate
• Production volume
• Scrap losses
• Down time
• Design changes

44
 Responsibilities of Process Planning Engineer (Contd.)
4. Selection of proper machinery with allied tooling based on
• Required machine capability
• Set-up time
• Practical lot size
• Quality of parts
• Cost and type of tooling
5. To study the effect of engineering changes upon existing tooling
6. Tooling data: Process engineer must have updated knowledge on
new and modern tools. He must be in a position to adopt new
tooling based on economic considerations
7. To obtain the sequence of operations: Once an analysis of product
design, overall facilities and machine capabilities are over, the
best sequence is established and forwarded for approval.
8. To decide the inspection equipment in order to meet the desired
quality

45
 Steps in Process Planning
1. Analyze the part drawing to get an overall picture
of what is required
2. Make recommendations to or consult with product
engineers on product design changes
3. List the basic operations required to produce the
part to the drawings or specifications
4. Determine the most practical an economical
manufacturing method and the form or tooling
required for each operation
5. Devise the best way to combine the operations and
put them in sequence
6. Specify the gauging required for the process

46
 Criteria for Make
1. The finished product can be made cheaper by
the firm than by outside suppliers
2. The finished product is being manufactured only
by a limited number of outside firms which are
unable to meet the demand.
3. The part has an importance for the firm and
requires extremely close quality control
4. The part can be manufactured with the firm’s
existing facilities and similar to other items in
which the company has manufacturing
experience.

47
 Criteria for Buy
1. Requires high investments on facilities which are
already available at suppliers place
2. The company does not have facilities to make it and
there are more profitable opportunities for investing
company’s capital.
3. Existing facilities of the company can be used more
economically to make other parts.
4. The skill of personnel employed by the company is not
readily adaptable to make the part.
5. Patent or other legal barriers prevent the company
for making the part
6. Demand for the part is either temporary or seasonal.

48
 Approaches for Make or Buy Decision

Types of analysis followed in make or buy

decision are:
1.Simple Cost Analysis
2.Break-Even Analysis
3.Economic Analysis

49
 Illustration 2.1
An automobile company has extra capacity that can be used to
produce gears that the company has been buying for Rs.300
each. If the company makes the gears, it will incur materials
cost of Rs.90 per unit, labour costs of Rs.120 per unit, and
variable overhead costs of Rs.30 per unit. The annual fixed
cost associated with the unused capacity is Rs.2,40,000.
Demand over the next year is estimated at 4,000 units.
a) Would it be profitable for the company to make gears?
b) Suppose the capacity could be used by another department
for the production of some agricultural equipment that would
cover its fixed and variable cost and contribute Rs.90,000 to
profit. Which would be more advantageous, gear production or
agricultural equipment production?

50
 Illustration 2.1
Solution: (Part-1)

Cost to make:
Variable cost/unit = Material + Labour + Overhead
= Rs.90 + Rs.120 + Rs.30 = Rs.240
Total variable cost = 4000 units x Rs.240 = Rs.9,60,000
Total Cost = Fixed cost + Variable cost
= Rs.2,40,000 + 9,60,000 = Rs.12,00,000

Cost to Buy:
Purchase cost = 4000 units x Rs.300 = Rs.12,00,000
Total Cost = Fixed cost + Purchase cost
= Rs. 2,40,000 + 12,00,000 = Rs.14,40,000
Therefore, cost of making the gears is less than that of buying from
outside. Hence, making the gears is advantageous.

51
 Illustration 2.1
Solution: (Part-2)
Case-1: Make the gears within the company
Case-2: Buy the gears from outside supplier and utilize the existing capacity
of the company to manufacture agricultural equipment.

Cas e - 1 Cas e - 2
Tot al variable cost , Rs 960000 1200000
Fixe d cos t , Rs 240000 0
Tot al cost , Rs 1200000 1200000

Cont ribut ion t o prof it , Rs 0 90000

Ne ttable
From the re le vant
it is cos t , Rs
clear 1 2 0cost
that the net 0 0 0 0of 1the
1 1 0case-2
000 is less than that
of the case-1. Hence, it is advisable to produce agricultural equipment using
the existing capacity of the company and buy the gears from a supplier.

52
 Illustration 2.2

Simple Cost Analysis:

A company has extra capacity that can be used to produce a

sophisticated fixture which it has been buying for Rs.900
each. If the company makes the fixtures, it will incur
materials cost of Rs.300 per unit, labour costs of Rs.250 per
unit, and variable overhead costs of Rs.100 per unit. The
annual fixed cost associated with the unused capacity is
Rs.10,00,000. Demand over the next year is estimated at
5,000 units. Would it be profitable for the company to make
fixture?

53
 Illustration-2.3
A factory manufacturing fans has the capacity to
produce 250 fans per annum. The variable cost of a
fan is Rs.400 which is sold for Rs. 500. Fixed
overheads, are Rs 12,000 per annum. Let us calculate
the break – even points for output and sales. Also
show what profit will result if output is 90 % of
capacity?

Solution:
Contribution per fan is Rs 500 – Rs 400 = Rs 100

54
1 Contd.2.3
Break-even Point for Output

We know, Fixed costs = Rs.12,000 and Contribution per unit = Rs.100

Break-Even Point for Sales

BEP (for sales) = Output x Selling price per unit

= 120 x Rs. 500 = Rs. 60,000

55
 2 Contd. 2.3
Profit at 90% of the capacity has been calculated as follows:
Factory Capacity = 250 fans
Output at 90% capacity = 225 fans
Break-even point = 120 fans

Profit on 225 fans = Rs.100 x (225-120) = Rs.10,500/-

Since fixed over heads will be recovered in full at the break-even

point; the entire contribution beyond the break even point will be
profit.

56
 Illustration 2.4

Break-Even Analysis:

A manufacturer of motor cycles buys side box at Rs.240

each. In case the company makes it within the factory, the
fixed and variable costs would be Rs.3,00,000 and Rs.90 per
side box respectively. Should the manufacturer make or buy
the side box if there is demand for 2,500 side boxes?

57
 Illustration 2.4
Solution:

Selling price/unit (P) = Rs.240

Variable cost/unit (VC) = Rs.90
Fixed cost (FC) = Rs.3,00,000

BEP = 300000/(240-90) = 2000 units

Since the demand (2500 units) is more than the break even
point, the company can manufacture the side boxes.

58
 Illustration 2.5

Break-Even Analysis:

A manufacturer of TV buys TV cabinet at Rs.500 each. In

case the company makes it within the factory, the fixed and
variable costs would be Rs.4,00,000 and Rs.300 per cabinet
respectively. Should the manufacturer make or buy the
cabinet if the demand is 1,500 TV cabinets?

59
 Illustration 2.6
There are three alternatives available to meet the demand of
a particular product. They are as follows:
i.Making the product using process A
ii.Making the product using process B
iii.Buying the product
The details are as follows:
Cost Elements Making using Making using Buy
Process A Process B
Fixed cost/ year 100,000 300,000 ---
Variable cost/ unit 75 70 ---
Purchase price/unit --- --- 80

The annual demand make for the product is 10,000 units

60
 Illustration 2.6 (Contd.)

Questions:

a)Should the company make the product using process A or

process B or buy it?

b)At what annual volume should the company switch from

buying to making using process A?

c)At what annual volume should the company switch from

process A to B?

61
 Illustration 2.6 (Contd.)
Solution:
(a)Compute the annual cost for each alternative
Annual cost of process A = FC+(VC x Volume)
= 100000+(75x10000)
= Rs.8,50,000
Annual cost of process B = 300000+(70x10000)
= Rs.10,00,000
Annual cost of buying = Purchase price/unit x Volume
= 80 x 10000 = Rs.8,00,000
Since, the annual cost of buy option is minimum among all the
alternative costs, the company should buy the product.

62
 Illustration 2.6 (Contd.)
Solution:

(b) Let Q be the volume at which the company switches from buying
to making, using process A.
Hence, total annual cost of process A ≤ Total annual cost of Buying

1,00,000 + Q x 75 ≤ Q x 80
1,00,000 ≤ 5Q
5Q ≥ 1,00,000
Q ≥ 20,000 units

Thus, if the volume of production is more than 20,000 units the

company should switch from buying to making option using process A.

63
 Illustration 2.6 (Contd.)
Solution:

(c) Let Q be the volume at which the shift from making using process
A to make using process B is preferable.

TCA ≥ TCB
1,00,000 + 75Q ≥ 3,00,000 + 70Q
5Q ≥ 2,00,000
Q ≥ 40,000 units

Thus, if the production volume is more than 40,000 units, the

company can shift from process A to process B

64
Purchase Model without Shortage
1) Only one product is involved.
2) Annual demand requirements are known.
3) Demand is spread evenly throughout the
year so that the demand rate is reasonably
constant.
4) Lead time is known and constant.
5) Each order is received in a single delivery.
6) There are no quantity discounts.

65
 Economic Order Quantity
Let D be the annual demand in units
Co be the ordering cost/ order
Cc be the carrying cost/unit/year
P be the purchase price per unit
Q be the order size
𝑫
The number of orders/year =
𝑸

𝑸
Average inventory = 𝟐
𝑫
Cost of ordering/year = 𝑸
𝒙 ۱‫ܗ‬

𝑸
Cost of carrying/year = 𝒙𝑪𝒄
𝟐

Purchase cost /year = D x P

66
Economic Order Quantity (Contd.)

67
Manufacturing Model without Shortage

68
 Illustration 2.7
Alpha industry estimates that it will sell 12,000
units of its product for the forthcoming year. The
ordering cost is Rs.100 per order and carrying cost
per unit per year is 20 per cent of the purchase
price per unit. The purchase price per unit is Rs.
50. Find
1) Economic order quantity (EOQ)
2) No. of orders per year
3) Time between successive orders
Solution:
D = 12,000 units/year
Co = Rs. 100/order
Cc=Rs. 50 x 0.2 = Rs. 10/unit/year

69
 Illustration 2.7 (Contd.)

EOQ, Q = 2x100x12000
10
= 490 units

No. of orders = D/Q = 12000/490 = 24.49

Time between orders = Q/D = 490/12000

= 0.04 years = 0.48 months
= 15 days

70
 Illustration 2.8

Economic Analysis:

An item has a yearly demand of 1,000 units. The different

costs in respect of make and buy are as follows. Determine
the best option.

Buy, Rs Make,
Rs

Item cost/ unit 6.00 5.90

Procurement cost/ order 10.00 ---
Set-up cost/ set-up --- 50.00
Annual carrying cost/item/year 1.32 1.30
(22% of item cost)
Production rate/year in units 6,000

71
Illustration 2.8 (Contd.)

72
Illustration 2.8 (Contd.)

73
 Illustration 2.9

Economic Analysis:

An item has a yearly demand of 2,000 units. The different

costs in respect of make and buy are as follows. Determine
the best option.

Buy, Rs Make,
Rs

Item cost/ unit 8.00 5.00

Procurement cost/ order 120.00
Set-up cost/ set-up 60.00
Annual carrying cost/item/year 1.60 1.00
Production rate/year in units 8,000

74
 Facility Layout
Layout refers to the configuration of departments,
work centers, and equipment, with particular emphasis
on movement of work (materials or customers) through
the system.

Layout decisions are important for three basic

reasons:
1. They require substantial investments of money
and effort.
2. They involve long-term commitments, which
makes mistakes difficult to overcome; and
3. They have a significant impact on the cost and
efficiency of operations.

75
 Objectives of Layout Design
The main objective of layout design is to facilitate a
smooth flow of work, material, and information through the
system. Supporting objectives generally involve the
following:

1.To facilitate attainment of product or service quality

2.To use workers and space efficiently
3.To avoid bottlenecks
4.To minimize material handling costs
5.To eliminate unnecessary movement of workers or
materials
6.To minimize production time or customer service time
7.To design for safety.

76
 Types of Layout
The three basic types of layout are product, process,
and fixed-position.
Product layouts are most conducive to repetitive
processing, (Assembling of mobile phone)
Process layouts are used for intermittent processing,
(Machine shop) and
Fixed-position layouts are used when projects
require layouts (Production of aircrafts) .

Cellular layouts (Mineral water production) and flexible

manufacturing systems (CNC machine shop) are
combined layouts.

77
 Product Layouts - Advantages
1. A high rate of output
2. Low unit cost due to high volume. The high cost of specialized
equipment spread over many units.
3. Labor specialization, which reduces training costs and time,
and results in a wide span of supervision.
4. Low material-handling cost per unit. Material handling is
simplified because units follow the same sequence of
operations. Material handling is often automated.
5. A high utilization of labor and equipment.
6. The establishment of routing and scheduling in the initial
design of the system. These activities do not require much
attention once the system is operating.
7. Fairly routine accounting, purchasing, and inventory control.

78
 Product Layouts - Disadvantages
1. The intensive division of labor usually creates dull, repetitive jobs
that provide little opportunity for advancement and may lead to
morale problems and to repetitive stress injuries.
2. Poorly skilled workers may exhibit little interest in maintaining
equipment or in the quality of output.
3. The system is fairly inflexible in response to changes in the volume of
output or changes in product or process design
4. The system is highly susceptible to shutdowns caused by equipment
breakdowns or excessive absenteeism because workstations are highly
interdependent.
5. Preventive maintenance, the capacity for quick repairs, and spare-
parts inventories are necessary expenses
6. Incentive plans tied to individual output are impractical since they
would cause variations among outputs of individual workers, which
would adversely affect the smooth flow of work through the system.

79
 Process Layouts - Advantages
1.The systems can handle a variety of processing
requirements

2.The systems are not particularly vulnerable to

equipment failures

3.General-purpose equipment is often less costly

than the specialized equipment used in product
layouts and is easier and less costly to maintain

4.It is possible to use individual incentive systems

80
 Process Layouts - Disadvantages
1. In-Process inventory costs can be high if batch
processing is used in manufacturing systems.
2. Routing and scheduling pose continual challenges
3. Equipment utilization rates are low
4. Material handling is slow and inefficient, and more costly
per unit than in product layouts.
5. Job complexities often reduce the span of supervision
and results in higher supervisory costs with product
layouts.
6. Special attention necessary for each product or
customer (e.g., routing, scheduling, machine setups) and
low volumes result in higher unit costs than with product
layouts.
7. Accounting, inventory control, and purchasing are much
more involved than with product layouts

81
 Fixed Position Layouts
In fixed-position layouts, the item being worked on
remains stationary, and workers, materials, and
equipment are moved about as needed.
Fixed-position layouts are used in large construction
projects (buildings, power plants, dams), shipbuilding,
and production of large aircraft and space mission
rockets.
Because of the many diverse activities carried out on
large projects and wide range of skills required,
special efforts are needed to coordinate the
activities, and the span of control can be quite
narrow.

82
 Cellular Layouts
Cellular layouts attempt to combine the flexibility of a
process layout with the efficiency of a product layout.
Based on the concept of group technology (GT), dissimilar
machines or activities are grouped into work centers, called
cells, to process families of parts or customers with similar
requirements. The cells are arranged in relation to each
other so that material movement is minimized. Large
machines that cannot be split among cells are located near
to the cells that use them, that is, at their point of use.
The layout of machines within each cell resembles a small
assembly line. Thus, line-balancing procedures, with some
adjustment, can be used to arrange the machines within
the cell. The layout between cells is a process layout.

83
 Cellular Layouts (contd.)
Advantages:
Reduced material handling and transit time.
Reduced setup time.
Reduced work-in-process inventory
Better use of human resources.
Easier to control.
Easier to automate.

Disadvantages:
Inadequate part families
Poorly balanced cells.
Expanded training and scheduling of workers.
Increased capital investment.

84
 Flexible Manufacturing System
A flexible manufacturing system (FMS) consists of numerous
programmable machine tools connected by an automated material
handling system and controlled by a common computer network.

An FMS combines flexibility with efficiency. Tools change

automatically from large storage holders at each machine, which
hold hundreds of tools. The material-handling system (usually
conveyors or automated guided vehicles) carries work-pieces on
pallets, which can be locked into a machine for processing. Pallets
are transferred between the conveyor and machine automatically.
Computer software keeps track of the routing and processing
requirements for each pallet. Pallets communicate with the
computer controller by way of bar codes or radio signals. Parts
can be transferred between any two machines in any routing
sequence. With a variety of programmable machine tools and large
tool banks, an FMS can produce thousands of different items as
efficiently as a thousand of the same item.

85
 Service Layouts
1. Warehouse and Storage Layouts: Frequency of order is an
important consideration; items that are ordered frequently
should be placed near the entrance to the facility. Other
considerations include the number and widths of aisles, height
of storage racks, rail and/or truck loading and unloading, and
need to periodically make a physical count of stored items.,
2. Retail Layouts: The retail layouts such as department stores,
supermarkets, and specialty stores, designers must take
account the presence of customers and opportunity to influence
sales volume and customer attitudes through carefully designed
layouts.,
3. Office Layouts: Office layouts are undergoing transformations
as the flow of paperwork is placed with increasing use of
electronic communications. Another trend is to create an image
of openness; office walls are giving way to low-rise partitions,
which also facilitate communication among workers.

86
 Work Measurement
Job design determines the content of a job, and
methods analysis determines how a job is to be
performed.
Work measurement is concerned with determining the
length of time it should take to complete the job. Job
times are vital inputs for
capacity planning,
workforce planning,
estimating labour costs,
scheduling,
budgeting, and
designing incentive systems.

87
 Work Measurement
A standard time is the amount of time it should take
a qualified worker to
complete a specified task,
working at a sustainable rate,
using given methods,
tools and equipment, raw material inputs, and
workplace arrangement.
Work measurement methods:
1)Stopwatch time study
2)Standard elemental times
3)Predetermined time standard
4)Work sampling

88
 Work Study
Work study deals with the techniques of
(i) method study and (ii) work measurement,
which are employed to ensure the best possible
use of man, machine and material resources in
carrying out a specified activity.

Work study has two broad areas:

Method Study
Time Study

89
 Work Study (contd)
Work study is concerned with finding better ways of
doing work and avoiding waste in all its forms. As such
the objective of work study is to assist management
to obtain the optimum use of the man, machine and
material resources available to the organization for
the accomplishment of the work upon which it is
engaged.
The objective has three aspects:
1.The most effective use of plant and machineries
2.The most effective use of man power
3.The evaluation of human work

90
 Method Study

Method study is concerned with finding the facts

about a situation and after a critical examination
of these facts, developing a new and better
method of doing that work. It is defined as the
existing and proposed ways of doing work and the
development and application of easier and more
productive methods.

91
 Time Study
Time study is concerned with the establishment
of time standards for a qualified worker to
perform a specified job at a defined level of
performance.

Method study must precede time study before

any attempt is made to measure and set
standards for the various jobs concerned.

92
 Areas of application of method study
 Improved layout of office, and working areas of
factories
 Improved layout design of plant and machineries
 Improved use of materials, plant, equipment and
manpower
 Most effective handling of materials
 Improved flow of work
 Standardization of methods and procedures
 Improved safety standards
 Better working conditions

93
 Selecting an Operation to Study

Method study/ analysis will be part of an overall

program to increase productivity and reduce
costs. Some general guidelines for selecting a job
to study are to consider jobs that:
1)Jobs have a high labour content
2)Jobs are done frequently
3)Jobs are unsafe, tiring, unpleasant and/or noisy
4)Jobs are designated as problems (e.g Quality
issues, Processing bottlenecks., etc.)

94
 Steps in Method Study
1. Select: Select the work to be studied
2. Record: Record all the relevant facts of the
present (or proposed) method by direct
observation.
3. Examine: Examine the facts critically in sequence,
using special critical examination sheet.
4. Develop: Develop the best method i.e the most
practical, economic and effective method, under
prevailing circumstances
5. Install: Install that method as standard practice
6. Maintain: Maintain that standard practice by
regular routine check

95
 Flow Process Chart
Flow process charts are used to review and critically
examine the overall sequence of an operation by focusing on
the movements of the operator or the flow of materials.
These charts are helpful in identifying nonproductive parts
of the process (e.g delays, temporary storage, distance
traveled).

The symbols used in constructing a flow process chart are:

A large circle indicates an operation
An arrow indicates a transportation
A triangle indicates a storage
A large capital D indicates a delay
A square indicates an inspection

96
 Stopwatch Time Study
Stopwatch time study was formally introduced by
Frederick Winslow Taylor in the late 19th
century. It is especially appropriate for short
and repetitive tasks.

Stopwatch time study is used to develop a time

standard based on observations of one worker
taken over a number of cycles. That is then
applied to the work of all others in the
organization who perform the same task.

97
 Stopwatch Time Study (contd.)

The basic steps in a time study are the following:

1)Define the task to be studied, and inform the

worker who will be studied.
2)Determine the number of cycles to observe.
3)Time the job, and rate the worker’s
performance.
4)Compute the standard time.

98
 Standard Elemental Times

Standard elemental times are derived from a

firm’s own historical time study data. Over the
years, a time study department can accumulate a
file of elemental times that are common to many
jobs.

After a while, many elemental times can be

simply retrieved from the file, eliminating the
need for analysts to go through a complete time
study to obtain them.

99
 Standard Elemental Times (contd.)
The procedure for using standard elemental times
consists of the following steps:

1)Analyse the job to identify the standard elements.

2)Check the file for elements that have historical
times, and record them. Use time study to obtain
others, if necessary.
3)Modify the file times if necessary (explained below).
4)Sum the elemental times to obtain the normal time,
and factor in allowances to obtain the standard time.

100
 Predetermined Time Standard
Predetermined time standards involve the use of
published data on standard elemental times. A
commonly used system is methods-time-measurement
(MTM), which was developed in the late 1940s by the
Methods Engineering Council. The MTM tables are
based on extensive research of basic elemental
motions and times.

To use this approach, the analyst must divide the job

into its basic elements (reach, move, turn, disengage),
measure the distances involved (if applicable), rate
the difficulty of the element, and then refer to the
appropriate table of data to obtain the time for that
element.

101
 Predetermined Time Standard (Contd)
A high level of skill is required to generate a
predetermined time standard. Analysts generally take
training or certification courses to develop the necessary
skills to do this kind of work.

Among the advantages of predetermined time standards are

the following:
1)They are based on large numbers of workers under
controlled conditions.
2)The analyst is not required to rate performance in
developing the standard.
3)There is no disruption of the operation.
4)Standards can be established even before a job is done.

102
 Work Sampling
Work sampling is a technique for estimating the
proportion of time that a worker or machine
spends on various activities and the idle time.

Unlike time study, work sampling does not require

timing an activity, nor does it even involve
continuous observation of the activity. Instead,
an observer makes brief observations of a worker
or machine at random intervals and simply notes
the nature of the activity. The resulting data are
counts of the number of times each category of
activity or non-activity was observed.

103
 Work Sampling (Contd)
Although work sampling is occasionally used to set
time standards, its two primary uses are in (1)
ratio-delay studies, which concern the percentage
of a worker’s time that involves unavoidable
delays or the proportion of time a machine is
idle, and (2) analysis of non-repetitive jobs.

Non-repetitive jobs typically involve a broader

range of skills than repetitive jobs, and workers
in these jobs are often paid on the basis of the
highest skill involved. Therefore, it is important
to determine the proportion of time spent on the
high-skill level.

104
 Work Sampling (Contd)
For example, a secretary may do word processing, file,
answer the telephone, and do other routine office work. If
the secretary spends a high percentage of time filing
instead of doing word processing, the compensation will be
lower than for a secretary who spends a high percentage of
time doing word processing. Work sampling can be used to
verify those percentages and can therefore be an important
tool in developing the job description.

Work sampling estimates include some degree of error. Hence,

it is important to treat work sampling estimates as
approximations of the actual proportion of time devoted to a
given activity. The goal of work sampling is to obtain an
estimate that provides a specified confidence not differing
from the true value by more than a specified error.

105
Steps of Time Study

106
Steps of Time Study (Contd.)

107
 Illustration 12

The time study engineer of a company was asked to fix the

standard time of making a spindle using a lathe. The data of the
time study are shown in Table. The performance rating of the
worker is 105 per cent. Find the standard time for the spindle by
assuming an allowance percentage of 10 per cent.

Cycle Time in Minutes Frequency

36 1
37 3
38 3
39 2
40 1

108
 Illustration 12 (Contd.)

Cycle Time in Minutes Frequency Performance Rating

36 1
37 3
38 3 105%
39 2
40 1

109
Steps for Work Sampling Method

110
Steps for Work Sampling Method (Contd.)

111
 Illustration 13
A job consists of two operations and both are performed by the
same operator. The time study engineer decided to conduct work
sampling to fix the standard time for the job. The effective
shift time is 450 minutes and the number of acceptable units of
the job produced is 15. The details of the observations of the
work sampling are shown in Table. Determine the standard time
of the job by assuming allowance of 10 per cent.

Work Element Frequency of Performance Performance Rating

1 20 90%
2 30 110%

112
 Illustration 13 (Contd.)
Effective shift time = 450 min
Total number of observation = 50
Calculations to find the standard time of the job are summarized:

Work Element
1 2
Percentage of working (20/50)x100 =40% (30/50)x100=60%
Actual time spent in minutes for 15 units 450x0.40 = 180 450x0.60=270
Actaual time spent per unit in minutes 180/15 = 12 270/15 = 18
Normal time in minutes 12 x 90% = 10.8 18 x 110% = 19.8
Standard time in minutes 10.8/(1-0.10)=12 19.8/(1-0.10)=22
Standard time of the job/unit in minutes 12+22=34

The standard time of the job per unit = 34 min

113
 Illustration 14
A job consists of three work elements and all are performed by
the same operator. An analyst conducted work sampling to
determine the standard time for the job. The duration of the
study is one shift with 400 minutes of effective time. The
details of observations are summarized in Table. The total
number of acceptable units produced during the study period is
150 units. Determine the standard time by assuming allowance of
10 per cent.

Work Element Frequency of Performance Rating

Number Performance
1 70 80%
2 80 120%
3 50 110%

114
 Illustration 15
In a binding press, binding of large size books consists of the
following operations:
1.Stitching of the pages
2.Trimming the book
3.Cover making
4.Joining the book with the cover and finishing

The first operation is carried by Mr.Ramesh and the rest of the

operations are performed by Mr.Suresh. It is decided to use
conventional time study technique for the first operation and work
sampling method for the rest of the operations. The effective time
available per shift is 480 minutes and the number of acceptable
book binding done during this period is 8. The details of the time
study data of the first operation are shown in Table 1. The
performance rating of Mr.Ramesh is 105 percent. The details of
the work sampling data are shown in Table 2.

115
 Illustration 15 (Contd.)

Table 1: Time Study Data of Operation 1

Cycle time 18 19 20 21 22
Frequency 2 3 5 4 1

Table 2: Work Sampling Data

Operation Frequency of Performance Performance Rating
2 7 120%
3 21 125%
4 22 95%

Find the standard time of the entire job of book binding per
book by assuming an allowance of 10 per cent to all
operations.

116
 Illustration 15 (Contd.)

Cycle Time in Minutes Frequency Performance Rating

18 2
19 3
20 5 105%
21 4
22 1

117
 Illustration 15 (Contd.)
Determination Standard Time for the Operations 2 to 4:
Work Element
2 3 4
Percentage of working (7/50)x100 =14% (21/50)x100=42% (22/50)x100=44%
Actual time spent in minutes for 8 units 480x0.14 = 67.2 480x0.42=201.6 480x0.44=211.2
Actaual time spent per unit in minutes 67.2/8 = 8.4 201.8/8 = 25.2 211.2/8=26.4
Normal time in minutes 8.4x120%= 10.08 25.2 x 125% = 31.5 26.4x95%=25.08
Standard time in minutes 10.8/(1-0.10)=11.2 31.5/(1-0.10)=35 25.08/(1-0.10)=27.87
Standard time of the job/unit in minutes 11.2+35+27.87 = 74.07

The standard time of the job per minute = (1) + (2 to 4)

= 23.26+74.07 = 97.33 minutes

118
 Illustration 16
A product line producing burgers has five stations in series whose
individual capacities per shift are stated in the following table.
The actual output of the line is 500 burgers per shift. Find:
a)the system capacity, and
b)the system efficiency

Station No 1 2 3 4 5
Individual
capacity/ shift 600 650 650 550 600
Solution:
System Capacity is 550 units/shift (i.e) at the station No.4
bottleneck operation

System Efficiency = (Actual Output/System Capacity) x 100

=(500/550) x 100 = 90.9%

119
 Quality
Broadly defined, quality refers to the ability
of a product or service to consistently meet
or exceed customer requirements or
expectations.

Different customers will have different

requirements, so a working definition of
quality is customer-dependent.

120
 Product Quality
Product quality is often judged on eight dimensions of
quality:
1.Performance —main characteristics of the product.
2.Aesthetics —appearance, feel, smell, taste.
3.Special features —extra characteristics.
4.Conformance —how well a product corresponds to
design specifications.
5.Reliability —dependable performance.
6.Durability —ability to perform over time.
7.Perceived quality —indirect evaluation of quality
(e.g., reputation).
8.Serviceability —handling of complaints or repairs.

121
 Product Quality - Car (Contd.)
Performance: Everything works - fit and finish,
ride, handling, acceleration
Aesthetics: Exterior and interior design
Features: Convenience - Placement of gauges
High tech - GPS system
Safety: Anti-skid, airbags
Conformance: Car matches manufacturer’s
specifications
Reliability: Infrequent need for repairs
Durability: Useful life in kilo-meters, resistance to
rust
Perceived quality: Top-rated
Serviceability: Ease of repair

122
 Consequences of Poor Quality
Some of the major areas affected by quality are:
 Loss of business.
 Liability.
 Productivity.
 Costs.

Cost of Quality:
1.Prevention costs
2.Appraisal and control costs
3.Internal failure costs
4.External failure costs

123
 Cost of Quality

1.Prevention costs include costs of quality

training, design reviews, and other
activities aimed at preventing errors.
The cost of quality planning is a
prevention cost.

2.Appraisal and control costs relate to

the evaluation of products and
processes, including product reviews,
audits, tests, and inspections.

124
 Cost of Quality (Contd.)

3. Internal failure costs are costs associated

with nonconformities identified by the
producer, such as the cost of scrap, rework,
and retest.

4. External failure costs are costs incurred after

delivery to a client and include cost for
replacements, warranty repairs, liability, and
lost sales as a result of a damaged reputation.
All of these costs are associated with failures
identified by the customers.

125
 Need for Controlling Quality
In the absence of quality, the following will result:
Dissatisfied customers due to increased maintenance
and operating costs of products/ services
Increased rework cost while manufacturing
products/providing services
Difficulty in maintaining consistency in quality
Reduced life time of the products/services
Reduced flexibility with respect to usage of
standard spare parts.

126
 Processes of Quality Management
Quality management consists of quality planning, quality
assurance and quality control.
Quality planning is a process to guide future quality activities; it
sets the requirements and standards to be met, as well as the
actions necessary to meet those requirements and standards.
Quality assurance is the process to perform the planned quality
activities and to ensure that the processes necessary to meet
the quality standards and products requirement.
Quality control is the process to ensure that quality assurance
activities are being performed (or have been performed)
according to approved quality plans, and that product/service
requirements and standards are being met. In the event that
unsatisfactory performance or nonconformities (defects) are
identified, the causes must be determined and eliminated.

127
 Quality Planning

Quality planning should provide confidence that everything

necessary to ensure quality has been thought through.

It has two aspects:

(1) establishing quality management procedures and policies
for the entire organization; and
(2) establishing a quality plan as part of the master plan
(Master schedule material planning) in manufacturing
process.

128
 Quality Assurance
Quality assurance relates to the execution of the quality
management plan. It reduces the risks related to not
meeting desired features or performance requirements of
deliverables.

1.Activities performed in a specific product/service to

ensure that requirements are being met and that the
product/ service is being produced/ provided according to
the quality plan.

2.Activities that contribute to the continuous improvement

of current and future products/services, and to the
quality management maturity of the organization.

129
 Quality Control
Quality control is the on-going process of monitoring and
appraising work, and taking corrective action so as to achieve
the planned quality outcomes. The process also verifies that
quality assurance activities are being performed according to the
quality plan, and that product requirements and specifications
are being met.
Whenever nonconformities are uncovered, the causes are
determined and eliminated. In the same way that the quality
plan should be integrated with other aspects of manufacturing
process, quality control should be integrated with the other
aspects of master schedule material planning. Quality control
cannot happen in isolation; it must be integrated with production
planning, cost control, inventory control, and risk control. It is a
responsibility of the production manager.

130
 Statistical Quality Control
Statistical quality control (SQC) deals with decisions
related to the functions of specification, production or
inspection. A manufacturing process is in statistical
nature. A process will never produce two pieces of a
product with exact dimensions. One can see variations
which will distinguish each part. As the process is
continuous to produce products, it is possible to setup a
frequency distribution for variations.

The measurement data in SQC can be classified into

variable data and attribute data. Variable data are
continuous in nature and are measurable on a sliding scale.
Examples of variable data are: dimension, voltage, weight,
etc. Attribute data are discrete in nature and can be
binary. An example of attribute data is an accept/reject
test of a shaft using “Go/No Go” gauges.

131
Quality Control Techniques

132
 Setting up a Control Procedure
In establishing basic procedures for the operation of quality
control programme, the manufacturer must take the following
preliminary steps:
1.Select the quality characteristics that are to be controlled
(including the limits variation)
2.Analyze the production process to determine the kind and
location of probable causes of irregularities
3.Determine how the inspection data are to be collected and
recorded, and how they are to be sub-divided.
4.Choose the statistical measures that are to be used in the
chart

A control chart consists of three horizontal lines:

1)A central line (CL) to indicate the desired standard or level of
the process
2)Upper control limit (UCL)
3)Lower control limit (LCL)

133
 Specimen of the control chart
Qulaity
Scale
Out of Control
U.C.L ●
●
● ●
3+Sigmas
●
Average ●
●
●
3-Sigmas
●
L.C.L

● Out of Control

1 2 3 4 5 6 7 8 9 10
Sample (Sub-Group) Number

134
 Three-sigma rule
In statistics, the 68–95–99.7 rule, also known as
the empirical rule, is a shorthand used to remember
the percentage of values that lie within a band around
the mean in a normal distribution with a width of two,
four and six standard deviations, respectively; more
accurately, 68.27%, 95.45% and 99.73% of the
values lie within one, two and three standard
deviations of the mean, respectively. In mathematical
notation, these facts can be expressed as follows,
where X is an observation from a normally
distributed random variable, μ is the mean of the
distribution, and σ is its standard deviation.

135
136
x̅ Charts

137
Sample Weight of each can (4 cans in each
number sample, n = 4) X ̅
(1) (2)
1 15 12 13 20
2 10 8 8 14
3 8 15 17 10
4 12 17 11 12
5 18 13 15 4
6 20 16 14 20
7 15 19 23 17
8 13 23 14 16
9 9 8 18 5
10 6 10 24 20
11 5 12 20 15
12 3 15 18 18
13 6 18 12 10
14 12 9 15 18
15 15 15 6 16
16 18 17 8 15
17 13 16 5 4
18 10 20 8 10
19 5 15 10 12
20 6 14 12 14 138
Sample Weight of each can (4 cans in each Total eights of Sample Sample
number sample, n = 4) X ̅ 4 cans Mean Range
(1) (2) (3) (4)
1 15 12 13 20 60 15.0 8
2 10 8 8 14 40 10.0 6
3 8 15 17 10 50 12.5 9
4 12 17 11 12 52 13.0 6
5 18 13 15 4 50 12.5 14
6 20 16 14 20 70 17.5 6
7 15 19 23 17 74 18.5 8
8 13 23 14 16 66 16.5 10
9 9 8 18 5 40 10.0 13
10 6 10 24 20 60 15.0 18
11 5 12 20 15 52 13.0 15
12 3 15 18 18 54 13.5 15
13 6 18 12 10 46 11.5 12
14 12 9 15 18 54 13.5 9
15 15 15 6 16 52 13.0 10
16 18 17 8 15 58 14.5 10
17 13 16 5 4 38 9.5 12
18 10 20 8 10 48 12.0 12
19 5 15 10 12 42 10.5 10
20 6 14 12 14 46 11.5 8
Total 263.0 211 139
x̅ Charts

140
 X-bar Chart

U.C.L = 20.84
20

X-bar
weight ●
● ●
15 ● ● ● C.L (X-bar) = 13.15
● ●
●
● ●
● ●
● ● ●
10 ● ● ●
●

L.C.L = 5.46
5

0
2 4 6 8 10 12 14 16 18 20
Sample Number (Each Sample includes 4 cans)

141
 R Charts

From table, value of D3 and D4 for n=4 are 0 & 2.282

respectively

Since all the points are falling within control limits the process
is in a state of control and hence there is nothing to worry.

142
 R Charts
25
U.C.L = 24.08

20

●
X-bar
weight
15 ● ●
●
● ● ● ●

C.L (R-bar) = 10.35

10 ● ● ● ●
● ●
● ● ●

● ● ●
5

0 L.C.L = 0
2 4 6 8 10 12 14 16 18 20
Sample Number (Each Sample includes 4 cans)

143
 Illustration 17
A food company puts mango juice into cans
advertised as containing 1000 gm of the juice. The
weights of the juice drained from cans immediately
after filling for 20 samples are taken by a random
method (at an interval of every 30 minutes). Each
of the samples includes 4 cans. The samples are
tabulated in the following table. The weights in the
table are given in units of 15gm in excess of
1000gm. For example, the weight of juice drained
from the first can of the sample is 1015gm which
is in excess of 1000gm, excess being 15gm (1015-
1000=15). Construct an X-bar & R chart to control
the weights of mango juice for the filling.

144
 Illustration 18

n A1 B2 B4

10 1.03 0.28 1.72

145
x̅ Charts

146
 Control Chart for C
Assume that 20½ litre milk are selected at random from a
process. The number of air bubbles (defects) observed
from the bottles is given in the table [ c= No.of air bubble
(defects) in each bottle]. Draw a control chart for the
below data.
Bottle Number Bottle Number
Defects C Defects C
(Sample Order) (Sample Order)
1 4 11 3
2 5 12 5
3 7 13 4
4 3 14 3
5 3 15 4
6 5 16 5
7 6 17 3
8 2 18 7
9 4 19 6
10 8 20 13
Total number of defects 100
147
C - Charts

148
 C - Charts
No. of
defectives
15

Danger sign
●
U.C.L = 11.708

10

●
● ●
● ●
5 ● ● ● C.L (C-bar) = 5

● ● ●
● ● ● ● ●
● ● ● ●

0 L.C.L = 0
2 4 6 8 10 12 14 16 18 20
Sample Number

149
 Control Chart for P
The following table gives the inspection data on completed spark
plugs (2000 spark plugs in 20 lots of 100 each)

Number Number
Lot Number Lot Number
Defectives Defectives
1 5 11 4
2 10 12 7
3 12 13 8
4 8 14 2
5 6 15 3
6 5 16 4
7 6 17 5
8 3 18 8
9 3 19 6
10 5 20 10
Construct an appropriate control chart

150
 P - Chart
Number Fraction Number Fraction
Lot Number Lot Number
Defectives Defectives Defectives Defectives
1 5 0.05 11 4 0.04
2 10 0.10 12 7 0.07
3 12 0.12 13 8 0.08
4 8 0.08 14 2 0.02
5 6 0.06 15 3 0.03
6 5 0.05 16 4 0.04
7 6 0.06 17 5 0.05
8 3 0.03 18 8 0.08
9 3 0.03 19 6 0.06
10 5 0.05 20 10 0.10
Total 120

151
p - Charts

152
 p - Charts

Fraction
defective
0.15

0.14

0.13 U.C.L = 0.131

0.12 ●
0.11

0.1 ● ●
0.09

0.08 ● ● ●
0.07 ●
0.06 ● ● C.L (p-bar) = 0.06

0.05 ● ● ●
0.04 ● ● ●
0.03 ●● ●
0.02
0.01
0 L.C.L = 0
2 4 6 8 10 12 14 16 18 20
Lot Number

153
 Control Chart for P
An inspector counted the number of defective monthly billing
statements of a company telephone in each of 20 samples. Using the
following information, construct a control chart that will describe
99.74 percent of the chance variation in the process when the
process is in control. Each sample contained 100 statements.

Number Number
Sample Sample
Defectives Defectives
1 7 11 8
2 10 12 12
3 12 13 9
4 4 14 10
5 9 15 16
6 11 16 10
7 10 17 8
8 18 18 12
9 13 19 10
10 10 20 21

154
Questions?

155
Thank You and All the
Very Best!