DME-III: IM

Production Management
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I I N N D D U U S S T T R R I I A A L L M M A A N N A A G G E E M M E E N N T T
Production Management
Production management is the process of planning, organizing, leading and controlling the activities of
the production function. Manufacturing sector uses term PM while Service sector uses OM.

Production and Operations Management is concerned with conversion of inputs (raw materials etc.)
into outputs (products and services), using the physical resources (machinery etc.) so as to provide
customer satisfaction while also meeting the organizational objectives of effectiveness, efficiency &
adoptability.

Scope of PM: Following are activities under P&O M.
1. Location of facilities
2. Plant Layout & Materials Handling
3. Product Design
4. Process Design
5. Production Planning & Control
6. Quality control
7. Materials Management
8. Maintenance Management.

A plant is a place where men, materials, money, machinery, and methods are brought together for
manufacturing products. Plant location and Plant layout are of fundamental importance to any industry.

Factors Influencing Plant Location
Primary Factors
1. Availability of Raw Material
2. Nearness to Markets for the Finished Product
2. Availability of Fuel and Power
3. Transport Facilities
4. Availability of Labour
5. Availability of Water
Secondary Factors
1. Soil and Climate
2. Industrial Atmosphere
3. Financial & Other Aid
4. Facilities: Housing, Schools, Hospitals,
Recreation
5. Political Stability

Plant Location: Rural vs. Urban
Urban
Advantages Disadvantages
1. Good transport facilities: rail, road, airways 1. Cost of land is very high
2. Availability of markets 2. Construction cost high
3. Availability of skilled labour 3. Availability of space is limited
4. Availability of Power 4. Limited scope for expansion
5. Availability of facilities: 5. Labour charges high
6. Housing readily available 6. Tax rate is high
7. Training facilities available in plenty 7. Labour union problems exist
8. Maintenance units , ancillary units available

Rural
Disadvantages Advantages
1. Good transport facilities: rail, road, airways 1. Cost of land is very low
2. Low Availability of markets 2. Construction cost low
3. Low Availability of skilled labour 3. Plenty of available space
4. Low Availability of Power 4. Scope for expansion
5. Low Availability of facilities: 5. Labour charges low
6. Housing not readily available 6. Tax rate is low
7. Training facilities scarce 7. Labour union problems less
8. Maintenance units , ancillary units not available

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Production Management
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Plant Layout
Layout decisions are concerned with the arrangement of production, support, customer service, and other
facilities used in operation. Layout indicates the physical arrangement of the plant and of the various
parts of the plant. This includes the a) location of equipment within a department or a shop, b)
arrangement of departments upon the site, including offices, warehouse, etc. Thus facility layout is the
overall arrangement of machines, men, materials, material handling, service facilities, passage required
within the workshops etc.

Factors Influencing Plant Layout:
Type of layout depends on
1. Type of product
2. Type of production process
3. Volume of production



Principles of a God Plant Layout
1. Integration of production centre with other
facilities
2. Minimum movement of men and material
3. Smooth & continuous flow of material
4. Cubic space utilization
5. Safe and improved environment
6. Flexibility
Production
Production is defined as the step-by-step conversion of one form of material into another form through
chemical or mechanical process to create or enhance the utility of the product to the user. Thus
production is a value addition process. At each stage of processing, there will be value addition.

Classification of Production System
Production systems can be classified as Job Shop, Batch, Mass and Continuous Production systems.


Job shop production
Job shop production are characterised by manufacturing of one or few quantity of products designed and
produced as per the specification of customers within prefixed time and cost. The distinguishing feature
of this is low volume and high variety of products. A job shop comprises of general purpose machines
arranged into different departments. Each job demands unique technological requirements, demands
processing on machines in a certain sequence.
Characteristics
The Job-shop production system is followed when there is:
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge because of uniqueness.
4. Large inventory of materials, tools, parts.
5. Detailed planning is essential for sequencing the requirements of each product, capacities for
each work centre and order priorities.

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Production Management
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Advantages of job shop production:
1. Because of general purpose machines and
facilities variety of products can be produced.
2. Operators will become more skilled and
competent, as each job gives them learning
opportunities.
3. Full potential of operators can be utilised.
4. Opportunity exists for creative methods and
innovative ideas. Limitations
Limitations of job shop production:
1. Higher cost due to frequent set up changes.
2. Higher level of inventory at all levels and
hence higher inventory cost.
3. Production planning is complicated.
4. Larger space requirements.




Batch production
Batch production is defined by American Production and Inventory Control Society (APICS) as a form
of manufacturing in which the job passes through the functional departments in lots or batches and each
lot may have a different routing. It is characterised by the manufacture of limited number of products
produced at regular intervals and stocked awaiting sales.
Characteristics
Batch production system is used under the following circumstances:
1. When there is shorter production runs.
2. When plant and machinery are flexible.
3. When plant and machinery set up is used for the production of item in a batch and change of set
up is required for processing the next batch.
4. When manufacturing lead time and cost are lower as compared to job order production.

Advantages of batch production:
1. Better utilisation of plant and machinery.
2. Promotes functional specialisation.
3. Cost per unit is lower compared to job-order
production.
4. Lower investment in plant and machinery.
5. Flexibility to accommodate & process number
of products.
6. Job satisfaction exists for operators.


Limitations of batch production:
1. Material handling complex due to longer &
irregular flow
2. Production planning and control is complex.
3. Work in process inventory is higher compared
to continuous production.
4. Higher set up costs due to frequent changes in
set up.


Mass production
Manufacture of discrete parts or assemblies using a continuous process are called mass production. This
production system is justified by very large volume of production. The machines are arranged in a line or
product layout. Product and process standardisation exists and all outputs follow the same path.
Characteristics
Mass production is used under the following circumstances:
1. Standardisation of product and process sequence.
2. Dedicated special purpose machines having higher production capacities and output rates.
3. Large volume of products.
4. Shorter cycle time of production.
5. Lower in process inventory.
6. Perfectly balanced production lines.
7. Flow of materials, components and parts is continuous and without any back tracking.
8. Production planning and control is easy.
9. Material handling can be completely automatic.

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Production Management
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Advantages of mass production:
1. Higher rate of production with reduced cycle
time.
2. Higher capacity utilisation due to line balancing.
3. Less skilled operators are required.
4. Low process inventory.
5. Manufacturing cost per unit is low.

Limitations of mass production:
1. Breakdown of one machine will stop an entire
production line.
2. Line layout needs major change with the changes
in the product design.
3. High investment in production facilities.
4. The cycle time is determined by the slowest
operation.

Continuous production
Production facilities are arranged as per the sequence of production operations from the first operations
to the finished product. The items are made to flow through the sequence of operations through material
handling devices such as conveyors, transfer devices, etc.
Characteristics
Continuous production is used under the following circumstances:
1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final product.
5. Planning and scheduling is a routine action.

Advantages of continuous production:
1. Standardisation of product & process
sequence.
2. Higher rate of production with reduced cycle
time.
3. Higher capacity utilisation due to line
balancing.
4. Manpower is not required for material
handling as it is completely automatic.
5. Person with limited skills can be used on the
production line.
6. Unit cost is lower due to high volume of
production.
Limitations of continuous production:
1. Flexibility to accommodate and process
number of products does not exist.
2. Very high investment for setting flow lines.
3. Product differentiation is limited.







Production Planning & Control (PPC)
Production planning & control refers to advance planning of production activity by setting the exact route
of each item, fixing the starting and finishing dates for each item, giving production orders to shops and
to follow up on the progress as per orders given. The guiding principle is: First Plan Your Work, and then
Work Your Plan.
PPC therefore has two distinct phases production planning and production control. Comparison
between these two concepts is as follows:
Production Planning Production Control
1 Production Planning is a pre-production activity. Production Control will be in action when
production activity begins.
2 Planning involves the collection, maintenance and analysis
of data with respect to time standards, materials and their
specification, machines and their process capabilities.
Control is concerned with communication of their
information and producing reports like output
reports, productivity, rejection rate, etc.
3 Planning is useful to anticipate problems and devising
remedial measures in case problem arises.
Control involves in taking corrective steps in case
of error to match actual performace against
planned performance.
4 Planning is a centralised activity. It includes functions like
materials control, tool control, process planning & control.
Control is a widespread activity. It includes
functions such as dispatching, inspection, etc.
5 Planning sees that all necessary resources are available to
make production at right quality and time.
Control keeps track of activities and sees if
everything is going as per schedule or not.

Routing: is also called process planning of work piece. Routing decides the path or route which the raw
material should follow to get transformed into finished product. It includes:
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a) Fixing the path of travel giving due consideration to layout.
b) Breaking down of operations to define each operation in detail.
c) Deciding the set-up time and process time of each operation.

Loading: Each job should have a unique product identification number. Using this number, the exact
path of the job can be traced and its position can be located at any given time inside the factory. As new
job orders are released, they are assigned to different work centres. This determines the load each work
centre will carry during the period of planning. This assignment of a job to a work centre using its unique
identification number is called Loading.

Scheduling: determines start times, finish times and work assignments for all jobs at each work centre.
Calendar times are specified about the start, progress and finish of job orders. Schedules also provide
detailed information of which employee will work on the job order during which sequence of process on
which work centre.

Dispatching: Routing, loading, scheduling & expediting are the planning tools of production
management. After the planning is done, order has to be issued, with detailed instructions, for work to
begin. This is called dispatching.

Expediting: is a process of tracking a jobs progress and taking special actions to move it through the
different work centres.

Material Handling:
Material handling is the function dealing with the preparation, placing and positioning of materials to
facilitate their movement or storage. Through scientific material handling, considerable reduction in cost
as well as in the production cycle time can be achieved.

Objectives of Material Handling:
1. Minimise cost of material handling.
2. Minimise delays by making available the materials at the point of use at right quantity and at
right time.
3. Increase the productive capacity of the production facilities by effective utilisation of
capacity.
4. Safety in handling.
5. Maximum utilisation of material handling equipment.
6. Prevention of damage to materials.

Principles of Material handling:
1. Gravity principle: utilise gravity to move material whenever possible.
2. Material flow principle: Plan operation sequence and equipment arrangement to optimise
material flow.
3. Motion principle: Equipment designed to transport material should be kept in motion.
4. Dead weight principle: reduce ratio of dead weight to pay load in mobile equipment.
5. Standardisation principle: standardise method, types, size of material handling equipment.
6. Safety principle: provide for safe handling methods and equipment.

Selection of material handling equipment: is based on the following factors:
1. Properties of materials to be handled.
2. Layout of the building.
3. Engineering factors.
4. Cost considerations.
5. Nature of operations.

Types of material handling equipment: based on the path of material, there are two types.
a. Fixed path equipment: which move in a fixed path. E.g. Conveyors, monorail
devices, chutes, pulley drives, overhead cranes, etc.
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b. Variable path equipment: have no restriction in the direction of movement. E.g.
Trucks, forklifts, mobile cranes, industrial tractors, etc.
Based on the function of material handling equipment, there are five types:
1. Conveyors.
2. Industrial trucks.
3. Cranes & hoists.
4. Containers.
5. Robots.


Work Study
Work study is a generic term for those techniques viz., method study and work measurement which
are used in the examination of human work in all its contexts. The purpose of work design is to identify
the most effective means of achieving necessary functions. This work-study aims at improving the
existing and proposed ways of doing work and establishing standard times for work performance. Work-
study forms the basis for work system design.

Method study is the systematic recording and critical examination of existing and
proposed ways of doing work, as a means of developing and applying easier and more
effective methods and reducing costs.

Work measurement is the application or techniques designed to establish the time for a
qualified worker to carry out a specified job at a defined level or performance.

There is a close link between method study and work measurement. Method study is concerned with the
reduction of the work content and establishing the one best way of doing the job whereas work
measurement
1
is concerned with investigation and reduction of any ineffective time associated with the
job and establishing time standards for an operation carried out as per the standard method.



Time Study: is a work measurement technique for recording the times and rates of working for the
elements
2
of a specified job carried out under specified conditions and for analysing the data so as to
determine the time necessary for carrying out the job at the defined level of performance.

Steps in making Time Study:
1. Select the work to be studied.

1
Work measurement is also called Time Study.
2
Element is a distinct part of a specified job selected for convenience of observation, measurement and analysis.
Work cycle is a complete sequence of elements necessary to perform a specified activity or job to yield one unit of
production. It may also include elements which do not occur with every cycle.
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2. Obtain & record all information available about the job, the operator and the working
conditions likely to affect the time study work.
3. Breakdown the operation into elements. An element is a distinct part of a specified
activity composed of one or more fundamental motions selected for convenience of
observation and timing.
4. Measure the time by means of stop watch, taken by the operator to perform each element
of the operation.
5. At the same time, assess the operators effective speed of work relative to the observers
concept of Normal speed. This is called Performance Rating.
6. Adjust the observed time by rating factor to obtain normal time for each element:
Normal time = (Observed time x Performance rating)/100.
7. Add the suitable allowances to compensate for fatigue, personal needs, contingencies,
etc. to give Standard Time for each element.
8. Compute allowed time for the entire job by adding elemental standard times considering
frequency of occurrence of each element.
9. Make a detailed job description describing the method for which the standard time is
established.

Allowances: It is impossible to work throughout the day even though the most effective work methods
have been developed. Allowances must be made for recovery from fatigue, for relaxation, for personal
needs, etc. Allowances are categorised as Relaxation allowances, Interference allowances and
Contingency allowances.

Standard Time: is the time allowed to an operator to carry out the specified task under specified
conditions and defined level of performance. From the figure, it is clear that Standard Time is equal to
Observed Time + Rating factor + Allowances.


Productivity: The concept of production & productivity are completely different. Production refers to
output only. Productivity is the relationship between output and input. Increase in production may or
may not indicate increase in productivity. If production is increased for same input, then productivity has
increased.
Productivity = output/input.
Productivity can be increased under the following conditions:
a. When production is increased without increase in inputs.
b. The same production with decrease in inputs.
c. Rate of increase in output is more compared to rate of increase in inputs.

Factors influencing productivity:
Factors influencing productivity fall under two categories:
1. Controllable factors: (internal factors)
a. Plant & equipment: productivity can be increased by paying proper attention to
utilization, age, modernisation, cost, investments, etc.
b. Technology: innovative and latest technology improves productivity to a great extent.
The various aspects are:
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i. Timely supply of quality inputs.
ii. Production planning & control.
iii. Repairs & maintenance.
iv. Waste reduction.
v. Efficient material handling.
c. Materials & Energy: Efforts to reduce materials and energy consumption brings
considerable improvement in productivity.
d. Human factors: Motivation of employees will influence productivity.
e. Work methods: Work study & industrial engineering techniques and training improve
work methods which in turn enhances productivity.
f. Management style: A dynamic and flexible management style improves productivity.
2. External factors:
a. Natural resources: Manpower, land and raw materials are vital for improving
productivity.
b. Govt & infrastructure: Govt policies have considerable impact on productivity levels of
industries.

Quality: is the totality of characteristics of an entity that bear on its ability to satisfy stated or implied
needs. It is also defined as conformance of a product to requirements or specifications. Quality is
expressed as a variable or as an attribute. When assessment is made using a measurable quantity, such as
dimension (cm, m, ft, etc), then quality is expressed as a variable. When assessment is made in terms of
physical characteristics (such as scratches on a dial as unacceptable finish due to grinding error) that a
human observer may judge by visual inspection, then quality is expressed as an attribute.

Inspection: Quality is assessed through a process of Inspection & Testing. Inspecting is generally done
on some sample components of a batch at some selected locations. Ideally, inspection should be carried
out on all components at every stage of production. However, that is uneconomical.

Purpose of inspection: Inspection is done to:
a. Distinguish good from bad pieces in a lot.
b. Determine if production process is changing.
c. Determine if production process is approaching specification limits.
d. Rate the quality of a product.

Types of inspection:
1. Floor inspection: Inspection is performed at the place of production by patrolling
inspectors who check materials in process at the machine.
2. Centralised inspection: is carried out at a central place which has all the sensitive testing
equipment.
3. 1
st
piece inspection: Only the 1
st
piece of the shift or lot is tested. This is useful when
automatic machines are used for production.
4. Pilot piece inspection: is done immediately after a new design or process is developed.
This is suitable for mass production.
5. Final piece inspection: is done only after all processes are completed. This is widely used
in process industries.

Quality Control: is defined as a system that is used to maintain a desired level of quality in a product or
service. It is a systematic control of various factors that affect the quality of the product.

Steps in quality control:
1. Formulate quality policy
2. Set standards based on customers preference, cost & profit.
3. Select inspection plan & set up procedures for checking.
4. Detect deviations from set standards.
5. Take corrective actions.
6. Fix salvage method for disposing defective parts. (Scrap or re-work).
7. Coordination of quality problems.
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8. Developing quality consciousness both inside & outside the organisation.

Tools & Techniques:
1. Pareto charts.
2. Check sheets.
3. Cause & effect diagrams
4. Scatter diagrams
5. Histograms.
6. Graphs & flow charts.
7. Control charts.

Control chart: is a statistical device that is used in controlling the manufacturing process. It is a kind of
graph used to detect any unusual variation occurring in the production process. As mentioned above,
inspection can be of two types inspection by variables and inspection by attributes. Consequently,
control charts too are of two types variable charts & attribute charts.

Acceptance quality level: is determined for each defect characteristic and denoted in terms of percent
defective, i.e., percent of defective units to the number of units inspected. It is generally expressed as no
of defectives per 100 units. This level will be defined by the management.

Quality reliability: Most of the tools used in QC deal with the time when the product leaves the
production centre. Therefore many companies specify that their product has passed the quality
requirements at the time of start of use. Customers however are bothered about the quality of the
product after it has been used for some time. Will the product fail or continue to perform? This question
is answered by a concept called Quality Reliability. Quality reliability is therefore a measure of the
probability that the product will continue to function after a certain period of time in use.

Quality Assurance: is a method of managing all activities that affect the quality of the product in order
to eliminate faults. This involves not only production operations, but also purchases. While Quality
Control aims at inspection and rejection/correction, Quality Assurance aims at prevention.

Total Quality Management: (TQM)
Here, the objective is to move beyond the exclusive focus on product and go into continuous quality
improvement. Everyone in the organisation is a customer of a process, and in order to achieve quality for
external customers, it is necessary to achieve quality for all internal customers. This requires involvement
of all employees.

Six-sigma quality system: involves:
1. Continuous efforts to reduce variations in process outputs.
2. Measurement, analysis, improvement and control of manufacturing & business process.
3. Commitment from entire organisation for achieving sustained quality development.
The term six sigma refers to the ability of highly capable processes to produce outputs within levels of
3.4 defects per one million testing. After testing & inspecting, the results are plotted as a bell-curve. The
standard deviation () is calculated. The variation of 3 is then calculated. If 99.73% of observed testing
lie within 3, then the process is said to have achieved 6 rating.

Production Management Questions
1 . Name 2 techniques used in Work Study (1)2008,2010
2. Continuous flow of output without interruption is known as ____ production (1) 2007
3. Routing means establishment of a ___ that the raw materials would follow while being processed. (")
4. Who is the apostle of mass production? (1) 2009
5. Mention two demerits of planning a site in rural location. (")
6. Distinguish between Traditional Quality Control and Total Quality Management (1) 2010
7. Distinguish between Product Organization and Service Organization (")
8. Six sigma is a ___ measure of the performance of a process or a product (1) 2006
9. Standard time is the sum of ___ and allowance (")
10 Dispatching indicates movement of raw materials from one section to other one (")
11 Standard time = average time * ____ + other allowances (1) 2007
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12 Productivity of labour depends only on labour (T/F) (1) 2011
13 Dispatching indicates movement of raw material from one section to another (T/F) (1) 2011


1. What factors need to be taken into account for selection of site of a plant? Mention two advantages &
disadvantages of urban & rural location. (10+4) 2008, 2010 Nov
2. What are the basic objectives of production management? Discuss briefly the planning and control functions of
production management. (6+8) 2007
3. Write short notes on (a) Quality level and Quality reliability (b) Layout Planning (7+7) 2009
4. Define Operations Management. In context of OM, elucidate (i) Capacity Planning (ii) Process selection (iii)
Facility Location Planning (2)+(3*4) 2010
5. What are principles of a good plant layout? How does plant layout affect manufacturing cost of an enterprise?
(7+7) 2006
6. What do you mean by productivity? How productivity of a manufacturing concern can be improved? Mention
four management tools most popularly used for Quality Management. (4+6+5) 2005
7. Explain briefly how the techniques of statistical quality control are used in controlling the quality of a product?
State the advantages and limitations of statistical quality control. (7+7) 2005
8. a) What do you mean by productivity? b) What are the basic objectives of production management system? c)
What is Total Quality Management? (2+5+3) 2011