Production & Operations Management Set 2

8/3/2019 Production & Operations Management Set 2

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Business Administration MBA Semester 2

MB0044 Production & operations Management - 4 Credits

(Book ID: B1133)

Assignment Set- 160 Marks

Note: Each question carries 10 Marks. Answer all the questions.


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1. Take an example of any product or service industry and explain the factors

considered while taking the decision on plant location.

What is plant location?

Plant location refers to the choice of region and the selection of a particular site for

setting up a business or factory. But the choice is made only after considering cost and

benefits of different alternative sites. It is a strategic decision that cannot be changed

once taken. If at all changed only at considerable loss, the location should be selected

as per its own requirements and circumstances. Each individual plant is a case in itself.

Businessman should try to make an attempt for optimum or ideal location.

Example of an Automobile company

To locate an automobile company or plant many thing should be consider. For an automobile

plant automated flaw lines, automated assembly lines, flexible manufacturing systems, global

transition rapid prototyping. Building manufacturing flexibility things are necessity.

About the automated flow lines we can say it is a machine which is linked by a transfer system

which moves the parts by using and handling machines which are also automated, we have an

automated flow line.

Human intervention is needed to verify that the operations are taking place according to

standards. When these can be achieved with the help of automation and the processes are

conducted with self regulation, we will have automated flow lines established.

In fixed automation or hard automation, where one component is manufactured using services

operations and machines it is possible to achieve this condition. We assume that product life

cycles are sufficiently stable to interest heavily on the automate flow lines to achieve reduces

cost per unit.


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Product layouts are designed so that the assembly tasks are performed in the sequence they are

designed at each station continuously. The finished item comes out at the end of the line.

In automated assembly lines the moving pallets move the materials from station to station and

moving arms pick up parts, place them at specified place and system them by pursuing, riveting,

& crewing or even welding. Sensors will keep track of there activities and move the assembles to

the next stage.

The machines are arranged in a sequence to perform operations according to the technical

requirements.

The tools are loaded, movements are effected, speeds controlled automatically without the need

for workers involvement.

The flexibility leads to better utilization of the equipments. It reduces the numbers of systems

and helps in reduction of investment as well as a space needed to install them. One of the major

concerns of modern manufacturing systems is to be able to respond to market.

Prototyping is a process by which a new product is developed in small number so as to determine

the suitability of the materials, study the various methods by which it is manufactured, type of

machinery required and develop techniques to over come problems that my be encountered when

full scale manufacture is undertaken.

Prototypes do meet the specification of the component that enters a product and performance can

be measured on these.

It helps in reforming the design and any shortcomings can be rectified at low cost.

Flexibility has three dimensions in the manufacturing field. They are variety, volume and time.

There demands will have to be satisfied. In that sense they become constraints which restrict the

maximization of productivity. Every business will have to meet the market demands of its

various products in variety volumes of different time.


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Flexibility is also needed to be able to develop new products or make improvements in the

products fast enough to cater to shifting market needs.

Manufacturing systems have flexibility built into them to enable organization meet global

demand. You have understood how the latest trends in manufacturing when implemented help

firms to stay a head in business.

.

.

LOCATIONAL ANALYSIS

Locational analysis is a dynamic process where entrepreneur analyses and compares

the appropriateness or otherwise of alternative sites with the aim of selecting the best

site for a given enterprise. It consists the following:

(a) Demographic Analysis: It involves study of population in the area in terms of total

population (in no.), age composition, per capita income, educational level,

occupational structure etc.

(b) Trade Area Analysis: It is an analysis of the geographic area that provides

continued clientele to the firm. He would also see the feasibility of accessing the

trade area from alternative sites.

(c) Competitive Analysis: It helps to judge the nature, location, size and quality of

competition in a given trade area.

(d) Traffic analysis: To have a rough idea about the number of potential customerspassing by the proposed site during the working hours of the shop, the traffic

analysis aims at judging the alternative sites in terms of pedestrian and vehicular

traffic passing a site.


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(e) Site economics: Alternative sites are evaluated in terms of establishment costs

and operational costs under this. Costs of establishment is basically cost incurred

for permanent physical facilities but operational costs are incurred for running

business on day to day basis, they are also called as running costs.

SELECTION CRITERIA

The important considerations for selecting a suitable location are given as follows:

a) Natural or climatic conditions.

b) Availability and nearness to the sources of raw material.

c) Transport costs-in obtaining raw material and also distribution or marketing

finished products to the ultimate users.

d) Access to market: small businesses in retail or wholesale or services should be

located within the vicinity of densely populated areas.

e) Availability of Infrastructural facilities such as developed industrial sheds or sites,

link roads, nearness to railway stations, airports or sea ports, availability of

electricity, water, public utilities, civil amenities and means of communication are

important, especially for small scale businesses.

f) Availability of skilled and non-skilled labour and technically qualified and trained

managers.

g) Banking and financial institutions are located nearby.

h) Locations with links: to develop industrial areas or business centers result in

savings and cost reductions in transport overheads, miscellaneous expenses.

i) Strategic considerations of safety and security should be given due importance.

j) Government influences: Both positive and negative incentives to motivate an

entrepreneur to choose a particular location are made available. Positive includes

cheap overhead facilities like electricity, banking transport, tax relief, subsidies and

liberalization. Negative incentives are in form of restrictions for setting up


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industries in urban areas for reasons of pollution control and decentralization of

industries.

k) Residence of small business entrepreneurs want to set up nearby their homelands

One study of locational considerations from small-scale units revealed that thenative place or homelands of the entrepreneur was the most important factor.

Heavy preference to homeland suggests that small-scale enterprise is not freely mobile.

Low preference for Government incentives suggests that concessions and incentives

cannot compensate for poor infrastructure.

SIGNIFICANCE

From the discussion above, we have already learnt that location of a plant is an

important entrepreneurial decision because it influences the cost of production and

distribution to a great extent. Therefore, an appropriate location is essential to the

efficient and economical working of a plant. A firm may fail due to bad location or its

growth and efficiency may be restricted.


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2. What is Business Process? Explain with an example as to why a business

process is to be modeled.

The process steps are the activities that you and the store personnel do to complete the

transaction.eg. "If you have ever waited in line at the grocery store, you can appreciate

the need for process improvement. In this case, the "process" is called the check-out

process, and the purpose of the process is to pay for and bag your groceries. The

process begins with you stepping into line, and ends with you receiving your receipt and

leaving the store. You are the customer (you have the money and you have come to

buy food),and the store is the supplier.

In this simple example, we have described a business process. Imagine other businessprocesses: ordering clothes from mail order companies, requesting new telephone

service from your telephone company, developing new products, administering the

social security process, building a new home, etc. Business processes are simply a set

of activities that transform a set of inputs into a set of outputs (goods or services) for

another person or process using people and tools.

You may see business processes pictured as a set of triangles as shown below. The

purpose of this model is to define the supplier and process inputs, your process, and the

customer and associated outputs. Also shown is the feedback loop from customers.


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Business Process Improvement

"Improving business processes is paramount for businesses to stay competitive in

today's marketplace. Over the last 10 to 15 years companies have been forced to

improve their business processes because we, as customers, are demanding better and

better products and services. And if we do not receive what we want from one supplier,

we have many others to choose from (hence the competitive issue for businesses).

Many companies began business process improvement with a continuous

improvement model. This model attempts to understand and measure the current

process, and make performance improvements accordingly.

The figure below illustrates the basic steps. You begin by documenting what you do

today, establish some way to measure the process based on what the customers want,

do the process, measure the results, and then identify improvement opportunities based

on the data you collected. You then implement process improvements, and measure the

performance of the new process. This loop repeats over and over again, and is called

continuous process improvement. You might also hear it called business process

improvement, functional process improvement, etc."

[2] [Six Sigma Software, BPR Online Learning Center]

"This method for improving business processes is effective to obtain gradual,

incremental improvement. However, over the last 10 years several factors have

accelerated the need to improve business processes. The most obvious is technology.

New technologies (like the Internet) are rapidly bringing new capabilities to businesses,

thereby raising the competitive bar and the need to improve business processes

dramatically.


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Example - BPM added value

An example could be the actions involved in processing a customer order from an

internet-based mail order company.

Starting with a customer placing an order (the customer need)

send IT-based information to the warehouse

stock picking

packing and recording

sending the appropriate IT-based information to the distribution hub

sending IT-based information to the accounts department

generation of an invoice

allocation and organisation of shipment for the vehicle drivers

delivery of the item and invoicing (the customer need fulfilled).

This is a simple 'high-level' example. In practice each part or sub-process (for example,

stock-picking) may require a 'low-level' BPM of its own.


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3. What is Value Engineering? Explain briefly its origins and objectives.

Value Engineering is a conscious and explicit set of disciplined procedures designed to

seek out optimum value for both initial and long-term investment. First utilized in the

manufacturing industry during World War II, it has been widely used in the construction

industry for many years.

Value Engineering (VE) is not a design/peer review or a cost-cutting exercise. VE is a

creative, organized effort, which analyzes the requirements of a project for the purpose

of achieving the essential functions at the lowest total costs (capital, staffing, energy,

maintenance) over the life of the project. Through a group investigation, using

experienced, multi-disciplinary teams, value and economy are improved through the

study of alternate design concepts, materials, and methods without compromising the

functional and value objectives of the client.

The Society of American Value Engineers (SAVE) was formed in 1959 as a professional

society dedicated to the advancement of VE through a better understanding of the

principles, methods, and concepts involved. Now known as SAVE International, SAVE

has grown to over 1,500 members and currently has over 350 active Certified Value

Specialists (CVS) in the U.S. Requirements for registration as a CVS were developedby SAVE at the request of the U.S. General Services Administration in the early 1970's.

VE can be applied at any point in a project, even in construction. However, typically the

earlier it is applied the higher the return on the time and effort invested. The three main

stages of a project and VE's application are described below.

Planning

At the Planning stage of development, there are additional benefits to be derived from a

Value Engineering Workshop. An independent team can:

Review the program

Perform a functional analysis of the facility
http://value-eng.org/http://value-eng.org/


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Obtain the owner/users definition of value

Define the key criteria and objectives for the project

Verify/validate the proposed program

Review master plan utility options (e.g. Central Utility Plant versus individual

systems)

Offer alternative solutions (square footage needs per function, adjacency

solutions, etc.)

Verify if the budget is adequate for the developed program

The benefits are tremendous.

Any changes to the program at this stage have very little if any impact on

schedule and A/E time and redesign costs.

The project will be developed with fewer changes, redesigns, and a greater

understanding by all parties of what the final function and space allocations will

be.

An independent team can bring a fresh outside view of alternate solutions from

other similar projects.


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Design

This is the stage that most VE participants are used to becoming involved, when the

design has at least made it to the schematic stage. Most government agencies require

at least one VE session at the design stage on projects over a certain $ size. The

primary tool available to the VE team is the Workshoptypically a 40-hour session (or

less for smaller or less complex projects).

The Workshop is an opportunity to bring the design team and client together to review

the proposed design solutions, the cost estimate, and proposed implementation

schedule and approach, with a view to implementing the best value for the money. The

definition of what is good value on any particular project will change from client to client

and project to project.

Methodology and Approach

During the actual Workshop portion of the VE study, the five-step Job Plan is followed,

as prescribed by SAVE International:

The VE Job Plan follows five key steps:

1. Information Phase

2. Speculation (Creative) Phase

3. Evaluation (Analysis) Phase

4. Development Phase (Value Management Proposals)

5. Presentation Phase (Report/Oral Presentation)

These five key steps are described as follows:

1. Information Phase:

At the beginning of the VE Study, it is important to:


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Understand the background and decisions that have influenced the development

of the design through a formal design presentation by the design A/E.

Analyze the key functional issues governing the project. The functions of any

facility or system are the controlling elements in the overall VE approach. This

procedure forces the participants to think in terms of function, and the cost and

impacts associated with that function.

Define Owner's objectives and key criteria governing the project.

Determine Owner's definition of Value.

2. Speculation (Creative) Phase:

This step in the VE study involves the listing of creative ideas.

The VE Team thinks of as many ways as possible to provide the necessary

function within the project areas at a lesser initial or Life-Cycle Cost which

represent improved value to the client.

Judgment of the ideas is prohibited.

The VE Team is looking for quantity and association of ideas, which will be

screened in the next phase of the study.

Many of the ideas brought forth in the creative phase are a result of work done inthe function analysis. This list may include ideas that can be further evaluated

and used in the design.

3. Evaluation (Analysis) Phase:

In this phase of the Project, the VE Team, together with the Client and/or Users,

Defines the criteria to be used for evaluation.

Analyses and judges the ideas resulting from the creative session. Ideas found to

be impractical or not worthy of additional study are discarded. Those ideas that

represent the greatest potential for cost savings and value improvement are

developed further. A weighted evaluation is applied in some cases to account for

impacts other than costs (such as schedule impacts, aesthetics, etc.).


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4. Development Phase:

During the development phase of the VE study, many of the ideas are expanded

into workable solutions. The development consists of:

Description of the recommended design change.

Descriptive evaluation of the advantages and disadvantages of the proposed

recommendation.

Cost comparison and LCC calculations.

Each recommendation is presented with a brief narrative to compare the original

design method to the proposed change.

Sketches and design calculations, where appropriate, are also included in this

part of the study.

5. Presentation Phase:

The last phase of the VE Study is the presentation of the recommendations in the

form of a written report. A briefing/oral presentation of results is made to the Client

and Users, as well as the Design Team representatives. The recommendations, the

rationale that went into the development of each proposal, and a summary of key

cost impacts are presented at that time so that a decision can be made as to which

Value Management proposals will be accepted for implementation and

incorporation into the design documents.

In addition to the monetary benefits, a VE Workshop provides a valuable opportunity for

key project participants to come together, then step aside and view the project from a

different perspective. The VE process therefore produces the following benefits:

Opportunity to explore all possible alternatives

Forces project participants to address "value" and "function"

Helps clarify project objectives

Identifies and prioritizes Client's value objectives

Implements accepted proposals into design

Provides feedback on results of the study


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Construction

During this phase value engineering is still possible through the use of Value

Engineering Change Proposals (VECP). Contractors can be provided monetary

incentives to propose solutions that offer enhanced value to the owner, and share in the

financial benefits realized. Clearly the owner must consider contractor-generated

proposals very carefully, from a life-cycle perspective and a liability perspective. The

A/E team must be brought in to the decision-making process to agree to the proposed

change as not having any negative impact on the overall design and building function.

The evaluation of a VECP is treated similarly to any change order during construction,

with issues such as schedule and productivity impacts being considered along with the

perceived cost savings generated.

Conclusion

In the final analysis, Value Engineering is not only beneficial, but essential because:

The functionality of the project is often improved as well as producing

tremendous savings, both initial and Life-Cycle Cost.

A "second look" at the design produced by the architect and engineers gives the

assurance that all reasonable alternatives have been explored.

Cost estimates and scope statements are checked thoroughly assuring that

nothing has been omitted or underestimated.

Assures that the best value will be obtained over the life of the building.


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4. Discuss the difference between work study and motion study. Explain with an

example.

Work Study:

Work study is conducted when a job is done on a machine or equipment. This study

helps in designing the optimum work method and standardization of the wok method. It

helps to utilize man and machine and accomplish a higher productivity. This study gives

an opportunity to the workmen to learn the process of study thus making them able to

offer them suggestions for improving the method.

This encourages the workmen participation and also helps in alignment with principle of

continuous improvement and helps the organization in the long run.

Motion Study/ Method Study:

Motion study refers to a group of techniques under the wider group of techniques called

method study. While Method study is used for design and improvement of any type of

work methods, motion study concentrates only on work involving manual activities.

Motion study consists of careful analysis of body motions used in doing a job to assist in

eliminating and reducing ineffective or wasteful movement and reduce the total timetaken for performing the work.

Motion study helps in simplification and standardisation of method by a systematic

approach as described above. This approach ensures that the new methods make work

easier as well as more effective. The care taken in documentation and installation of

methods also promotes standardization by ensuring that all workmen adopt the same

method

Difference between Work Study and Motion Study

Work study includes a wide field of measurement tools and techniques. Motionstudy or method study is concerned with analysing individual human motions (likeget object, put object) with a view to improving motion economy.


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Work study compromises of work measurement and method study while methodstudy focuses on the methods deployed and development of better methods.

Motion study involves use of a systematic approach involving the following steps:

Understanding the general nature of existing method of performing work.

Studying the existing method in detail analysing and timing in detail each and every

motion. This involves use of many alternative techniques such as simple motion study,

micro motion study, two handed process chart, SIMO, Cycle graph, chronocycle graph,

and memo-motion study.

Record the facts.

Develop alternative improved methods. Evaluate and compare alternative method. This

step leads to identification of the best method.

Define and document the new improved method method.

Install the new method. Where required this involves provision of standard tools andworking environment, It also includes training of the workmen in new methods of

working.

Maintain the new method.


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5. Time taken by three machines on five jobs in a factory is tabulated below in

table below. Find out the optimal sequence to be followed to minimise the

idle time taken by the jobs on the machines.

Job Machine 1

(M1)

Machine 2

(M2)

Machine 3

(M3)

A 6 8 7

B 4 5 3

C 5 5 7

D 3 4 6

E 4 3 4


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6. List the seven principles of SCM. Discuss Bullwhip effect, its effects and

countermeasures.

Seven principles of SCM are:

Group customer by needs- Effective SCM groups, customer by distinct service needs,

regardless of industry and then tailors services to this particular segment.

Customize the logistic network- In designing their logistics network; companies need to

focus on the service requirement and profit of the customer segments identified.

Listen to signals of market demand and plan accordingly- Sales and operations

planners must monitor the entire supply chain to detect early warning signals of

changing customer demand and needs. This demand driven approach leads to more

consistent forecast and optimal resource allocation.

Differentiate the product closer to the customer- companies today no longer can afford

to stock pile inventory to compensate for possible forecasting errors. Instead, they need

to postpone product differentiation in the manufacturing process closer to actual

consumer demand. This strategy allows the supply chain to respond quickly and cost

effectively to change in customer needs.

Strategically manage the sources of supply- by working closely with their key suppliers

to reduce the overall costs of owning materials and services; SCM maximizes profit

margins both for themselves and their suppliers.

Develop a supply chain wide technology strategy- as one of the cornerstones of

successful SCM information technology must be able to support multiple levels of

decision making. It also should afford a clear view and ability to measure the flow of

products, services and information.

Adopt channel spanning chain performance measures- Excellent supply chain

performance measurement system do more than just monitor internal functions. They

apply performance criteria to every link in the supply chain-criteria that embrace both

service and financial metrics.


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what is meant by bullwhip effect and how it could be prevented

An unmanaged supply chain is not inherently stable. Demand variability increases as

one moves up the supply chain away from the retail customer, and small changes in

consumer demand can result in large variations in orders placed upstream. Eventually,

the network can oscillate in very large swings as each organization in the supply chain

seeks to solve the problem from its own perspective. This phenomenon is known as the

bullwhip effect and has been observed across most industries, resulting in increased

cost and poorer service.

Causes of the Bullwhip Effect

Sources of variability can be demand variability, quality problems, strikes, plant fires,

etc. Variability coupled with time delays in the transmission of information up the supply

chain and time delays in manufacturing and shipping goods down the supply chain

create the bullwhip effect. The following all can contribute to the bullwhip effect:

Overreaction to backlogs

Neglecting to order in an attempt to reduce inventory

No communication up and down the supply chain

No coordination up and down the supply chain

Delay times for information and material flow

Order batching - larger orders result in more variance. Order batching occurs in

an effort to reduce ordering costs, to take advantage of transportation economics

such as full truck load economies, and to benefit from sales incentives.

Promotions often result in forward buying to benefit more from the lower prices.

Shortage gaming: customers order more than they need during a period of short

supply, hoping that the partial shipments they receive will be sufficient.

Demand forecast inaccuracies: everybody in the chain adds a certain percentage

to the demand estimates. The result is no visibility of true customer demand.

Free return policies


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Countermeasures to the Bullwhip Effect

While the bullwhip effect is a common problem, many leading companies have been

able to apply countermeasures to overcome it. Here are some of these solutions:

Countermeasures to order batching - High order cost is countered with

Electronic Data Interchange (EDI) and computer aided ordering (CAO). Full truck

load economics are countered with third-party logistics and assorted truckloads.

Random or correlated ordering is countered with regular delivery appointments.

More frequent ordering results in smaller orders and smaller variance. However,

when an entity orders more often, it will not see a reduction in its own demand

variance - the reduction is seen by the upstream entities. Also, when an entity

orders more frequently, its required safety stock may increase or decrease; see

the standard loss function in the Inventory Management section.

Countermeasures to shortage gaming - Proportional rationing schemes are

countered by allocating units based on past sales. Ignorance of supply chain

conditions can be addressed by sharing capacity and supply information.

Unrestricted ordering capability can be addressed by reducing the order size

flexibility and implementing capacity reservations. For example, one can reserve

a fixed quantity for a given year and specify the quantity of each order shortly

before it is needed, as long as the sum of the order quantities equals to the

reserved quantity.

Countermeasures to fluctuating prices - High-low pricing can be replaced with

every day low prices (EDLP). Special purchase contracts can be implemented in

order to specify ordering at regular intervals to better synchronize delivery and

purchase.

Countermeasures to demand forecast inaccuracies - Lack of demand

visibility can be addressed by providing access to point of sale (POS) data.Single control of replenishment or Vendor Managed Inventory (VMI) can

overcome exaggerated demand forecasts. Long lead times should be reduced

where economically advantageous.

Free return policies are not addressed easily. Often, such policies simply must

be prohibited or limited.


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Notes on motion study

Motion study refers to a group of techniques under the wider group of techniques called method

study. While Method study is used for design and improvement of any type of work methods,

motion study concentrates only on work involving manual activities.

Motion study consists of careful analysis of body motions used in doing a job to assist in

eliminating and reducing ineffective or wasteful movement and reduce the total time taken for

performing the work. Motion study involves use of a systematic approach involving the

following steps:

Understanding the general nature of existing method of performing work.

Studying the existing method in detail analysing and timing in detail each and every

motion. This involves use of many alternative techniques such as simple motion study,

micro motion study,two handed process chart, SIMO, Cycle graph, chronocyclegraph,

and memo-motion study.

Record the facts. Develop alternative improved methods. Evaluate and compare alternative method. This

step leads to identification of the best method.

Define and document the new improved method method.

Install the new method. Where required this involves provision of standard tools and

working environment, It also includes training of the workmen in new methods of

working.

Maintain the new method.

Motion study helps in simplification and standardisation of method by a systematic approach as

described above. This approach ensures that the new methods make work easier as well as more

effective. The care taken in documentation and installation of methods also promotesstandardization by ensuring that all workmen adopt the same method.

333

Liketime study, motion study is also useful tool to increase the efficiency. Here, we are defining it. You

know that workers can do any work with many ways or method. But to choose the best way out of

alternatives is called motion study. For this, cost accountant has to maintain the data of all the activities

of workers. With this study, productivity can be enlarged and inefficiency and wastage can be

diminished.

In motion study, we first of all, note the activities of laborers in work place. With the help of stop watch

equipment, spending time on per activity is noted. After this, we have to take decision of activities which

we have to stop. This study or analysis determines prime method of doing any activity in factory.

Sometime software engineer can make the work design relating to workplace arrangement and

adjustable chair for workplace.
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Benefits of Motion Study

1. It grows the ability of workers because apply of good methods, using of good tools

and stopping of unnecessary activities.

2. Life of machine can be increased.

3. It reduces exhaustion of workers.

4. It decreases labor cost due to less wastage in factory or plant.

Production & Operations Management Set 2

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