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Production and Operation Management

Sandeep Ghatuary
Kolhan University
Semiester - 2

Production and Operation Management Introduction to production and operations management

Production/operations management is the process, which combines and transforms various resources used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organization. Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs into the required (products/services) having the requisite quality level. The set of interrelated management activities, which are involved in manufacturing certain products, is called as production management. If the same concept is extended to services management, then the corresponding set of management activities is called as operations management.

CONCEPT OF PRODUCTION - Production function is that part of an organization, which is concerned with the
transformation of a range of inputs into the required outputs (products) having the requisite quality level. 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. Edwood Buffa defines production as a process by which goods and services are created. Some examples of production are: manufacturing custom-made products like, boilers with a specific capacity, constructing flats, some structural fabrication works for selected customers, etc., and manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.

PRODUCTION MANAGEMENT - Production management is a process of planning, organizing, directing and


controlling the activities of the production function. It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization. E.S. Buffa defines production management as, Production management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications, in the amount and by the schedule demanded and out of minimum cost.

Objectives of Production Management - The objective of the production management is to produce goods services of right quality and quantity at the right time and right manufacturing cost. 1. RIGHT QUALITY - The quality of product is established based upon the customers needs. The right quality is not necessarily best quality. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements. 2. RIGHT QUANTITY - The manufacturing organization should produce the products in right number. If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to shortage of products.

Production and Operation Management

3. RIGHT TIME - Timeliness of delivery is one of the important parameter to judge the effectiveness of production department. So, the production department has to make the optimal utilization of input resources to achieve its objective. 4. RIGHT MANUFACTURING COST - Manufacturing costs are established before the product is actually manufactured. Hence, all attempts should be made to produce the products at pre-established cost, so as to reduce the variation between actual and the standard (pre-established) cost.

Concept of Operations - An operation is defined in terms of the mission it serves for the organization, technology it employs and the human and managerial processes it involves. Operations in an organization can be categorized into manufacturing operations and service operations. Manufacturing operations is a conversion process that includes manufacturing yields a tangible output: a product, whereas, a conversion process that includes service yields an intangible output: a deed, a performance, an effort. Distinction between Manufacturing Operations and Service Operations - Following characteristics can be considered for distinguishing manufacturing operations with service operations: 1. Tangible/Intangible nature of output 2. Consumption of output 3. Nature of work (job) 4. Degree of customer contact 5. Customer participation in conversion 6. Measurement of performance. Manufacturing is characterized by tangible outputs (products), outputs that customers consume overtime, jobs that use less labour and more equipment, little customer contact, no customer participation in the conversion process (in production), and sophisticated methods for measuring production activities and resource consumption as product are made. Service is characterized by intangible outputs, outputs that customers consumes immediately, jobs that use more labour and less equipment, direct consumer contact, frequent customer participation in the conversion process, and elementary methods for measuring conversion activities and resource consumption. Some services are equipment based namely rail-road services, telephone services and some are people based namely tax consultant services, hair styling.

OPERATIONS MANAGEMENT

- Managing operations can be enclosed in a frame of general management function as shown in Figure below Operation managers are concerned with planning, organizing, and controlling the activities which affect human behaviour through models. 1. PLANNING (Activities that establishes a course of action and guide future decision-making is planning.) The operations manager defines the objectives for the operations subsystem of the organization, and the policies, and procedures for achieving the objectives. This stage includes clarifying the role and focus of operations in the organizations overall strategy. It also involves product planning, facility designing and using the conversion process. 2. ORGANIZING (Activities that establishes a structure of tasks and authority.) Operation managers establish a structure of roles and the flow of information within the operations subsystem. They determine the activities required to achieve the goals and assign authority and responsibility for carrying them out. 3. CONTROLLING (Activities that assure the actual performance in accordance with planned performance.) To ensure that the plans for the operations subsystems are accomplished, the operations manager must exercise control by measuring actual outputs and comparing them to planned operations management. Controlling costs, quality, and schedules are the important functions here. 4. BEHAVIOUR - Operation managers are concerned with how their efforts to plan, organize, and control affect human behaviour. They also want to know how the behaviour of subordinates can affect managements planning, organizing, and controlling actions. Their interest lies in decision-making behaviour. 5. MODELS - As operation managers plan, organize, and control the conversion process, they encounter many problems and must make many decisions. They can simplify their difficulties using models like aggregate

Production and Operation Management

planning models for examining how best to use existing capacity in short-term, break even analysis to identify break even volumes, linear programming and computer simulation for capacity utilization, decision tree analysis for long-term capacity problem of Facility expansion, simple median model for determining best locations of facilities etc

Definition - Production and Operations Management ("POM") is about the transformation of production and operational inputs into "outputs" that, when distributed, meet the needs of customers.

The process in the above diagram is often referred to as the "Conversion Process". There are several different methods of handling the conversion or production process - Job, Batch, Flow and Group POM incorporates many tasks that are interdependent, but which can be grouped under five main headings: 1. PRODUCT - Marketers in a business must ensure that a business sells products that meet customer needs and wants. The role of Production and Operations is to ensure that the business actually makes the required products in accordance with the plan. The role of PRODUCT in POM therefore concerns areas such as: Performance Aesthetics Quality Reliability Quantity Production costs Delivery dates 2. PLANT - To make PRODUCT, PLANT of some kind is needed. This will comprise the bulk of the fixed assets of the business. In determining which PLANT to use, management must consider areas such as: Future demand (volume, timing)

Production and Operation Management

Design and layout of factory, equipment, offices Productivity and reliability of equipment Need for (and costs of) maintenance Health and safety (particularly the operation of equipment) Environmental issues (e.g. creation of waste products) 3. PROCESSES - There are many different ways of producing a product. Management must choose the best process, or series of processes. They will consider: Available capacity Available skills Type of production Layout of plant and equipment Safety Production costs Maintenance requirements 4. PROGRAMMES - The production PROGRAMME concerns the dates and times of the products that are to be produced and supplied to customers. The decisions made about programme will be influenced by factors such as: Purchasing patterns (e.g. lead time) Cash flow Need for / availability of storage Transportation 5. PEOPLE - Production depends on PEOPLE, whose skills, experience and motivation vary. Key people-related decisions will consider the following areas: Wages and salaries Safety and training Work conditions Leadership and motivation Unionization

BENEFITS DERIVED FROM EFFICIENT PRODUCTION MANAGEMENT


Consumer benefits from improved industrial Productivity, increased use value in the product. Products are available to him at right place, at right price, at right time, in desired quantity and of desired quality. Investors: They get increased security for their investments, adequate market returns, and creditability and good image in the society. Employee gets adequate Wages, Job security, improved working conditions and increased Personal and Job satisfaction. Suppliers: Will get confidence in management and their bills can be realized without any delay. Community: community enjoys Benefits from economic and social stability. The Nation will achieve prospects and security because of increased Productivity and healthy industrial atmosphere.

FUNCTIONS OF PRODUCTION MANAGEMENT DEPARTMENT


The functions of Production Management depend upon the size of the firm. In small firms the production Manager may have to look after production planning and control along with Personnel, Marketing, Finance and Purchase functions. In medium sized firms, there may be separate managers for Personnel, marketing and Finance functions. But the production planning and control and Purchase and stores may be under the control of Production management department. In large sized firms the activities of Production Management is confined to the management of production activities only. As such, there are no hard and fast rules or guidelines to specify the function of Production Management, but in the academic interest we can mention some of the functions, which are looked after by the Production Management department. They are: Materials: The selection of materials for the product. Production manager must have sound Knowledge of materials and their properties, so that he can select appropriate materials for his product. Research on materials

Production and Operation Management

is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes. Methods: Finding the best method for the process, to search for the methods to suit the available resources, identifying the sequence of process are some of the activities of Production Management. Machines and Equipment: Selection of suitable machinery for the process desired, designing the maintenance policy and design of layout of machines are taken care of by the Production Management department. Estimating: To fix up the Production targets and delivery dates and to keep the production costs at minimum, production management department does a thorough estimation of Production times and production costs. In competitive situation this will help the management to decide what should be done in arresting the costs at desired level. Loading and Scheduling: The Production Management department has to draw the time table for various production activities, specifying when to start and when to finish the process required. It also has to draw the timings of materials movement and plan the activities of manpower. The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available. Routing: This is the most important function of Production Management department. The Routing consists of fixing the flow lines for various raw materials, components etc., from the stores to the packing of finished product, so that all concerned knows what exactly is happening on the shop floor. Dispatching: The Production Management department has to prepare various documents such as Job Cards, Route sheets, Move Cards, Inspection Cards for each and every component of the product. These are prepared in a set of five copies. These documents are to be released from Production Management department to give green signal for starting the production. The activities of the shop floor will follow the instructions given in these documents. Activity of releasing the document is known as dispatching. Expediting or Follow up: Once the documents are dispatched, the management wants to know whether the activities are being carried out as per the plans or not. Expediting engineers go round the production floor along with the plans, compare the actual with the plan and feed back the progress of the work to the management. This will help the management to evaluate the plans. Inspection: Here inspection is generally concerned with the inspection activities during production, but a separate quality control department does the quality inspection, which is not under the control of Production Management. This is true because, if the quality inspection is given to production Management, then there is a chance of qualifying the defective products also. For example Teaching and examining of students is given to the same person, and then there is a possibility of passing all the students in the first grade. To avoid this situation an external person does correction of answer scripts, so that the quality of answers is correctly judged. Evaluation: The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives. This is necessary for setting up the standards for future. Whatever may be the size of the firm; Production management department alone must do Routing, Scheduling, Loading, Dispatching and expediting. This is because this department knows very well regarding materials, Methods, and available resources etc. If the firms are small, all the above-mentioned functions (i to x) are to be carried out by Production Management Department. In medium sized firms in addition to Routing, Scheduling and Loading, Dispatching and expediting, some more functions like Methods, Machines may be under the control of Production Management Department. In large firms, there will be Separate departments for Methods, Machines, Materials and others but routing, loading and scheduling are the sole functions of Production Management.

Nature and Scope of Operations Management - Operations management is often used along with production
management in literature on the subject. It is therefore, useful to understand the nature of operations management .Operations management is understood as the process whereby resources or inputs are converted into more useful products .A second reading of the sentence reveals that, there is hardly any difference between the terms produ7ction management and operations management .But, there are a least two points of distinction between production management and operations management .First, the term production management is more used for a system where tangible goods are produced .Whereas ,operations management is more frequently used where various inputs are transformed into tangible services .Viewed from this perspective, operations management will cover such services

Production and Operation Management

organization as banks ,airlines ,utilities ,pollution control agencies super bazaars, educational institutions ,libraries ,consultancy firm and police departments, in addition ,of course ,to manufacturing enterprises. The second distinction relates to the evolution of the subject. Operation management is the term that is used now a days .Production management precedes operations management in the historical growth of the subject the two distinctions notwithstanding, the terms production management and operations management are used interchangeably.

Scope of Production and Operation Management - The scope of production and operations management is indeed
vast .Commencing with the selection of location production management covers such activities as acquisition of land, constructing building, procuring and installing machinery, purchasing and storing raw material and converting them into saleable products. Added to the above are oth other er related topics such as quality management, maintenance management, production planning and control, methods improvement and work simplification and other related areas. 1. Facility Location - Selecting appropriate location for the production 2. Plant layouts and material handling - Deciding upon the machines, equipment and necessary devices which could lead to effectual and desired production in the most economic way. Preparation of plan layout for the establishment of machines in the required sequence. Storage Storage of material and handling it in most effective way to avoid the wastage and delivery at the work centers as and when required. 3. Product design - Designing the product and conceive the idea about its production. 4. Process design - Determination of the production production process which is most relevant and efficient in the given state of affairs. 5. Production and planning control - Planning the production and its various aspects how, when and where producing a particular product or its assembly will be done. 6. Quality control - Controlling the production and ensuring the quality by setting the check points and taking the periodic measurements of the current performance. 7. Materials management - Managing the inventories of raw material, semi semi-finished finished and finished goods in a way that neither excessive money may block in this non non-productive productive operation nor the required material. 8. Maintenance management - Analysis the deviations and formulating the corrective measures to stay in track with planned quality, time-schedule schedule and predet predetermined cost schedules.

Production and Operation Management LAYOUT -

In manufacturing, facility layout consists of configuring the plant site with lines, buildings, major facilities, work areas, aisles, and other pertinent features such as department boundaries. While facility layout for services may be similar to that for manufacturing, it also may be somewhat differentas is the case with offices, retailers, and warehouses. Because of its relative permanence, facility layout probably is one of the most crucial elements affecting efficiency. An efficient layout can reduce unnecessary material handling, help to keep costs low, and maintain product flow through the facility. Firms in the upper left-hand corner of the product-process matrix have a process structure known as a jumbled flow or a disconnected or intermittent line flow. Upper-left firms generally have a process layout. Firms in the lower right-hand corner of the product-process matrix can have a line or continuous flow. Firms in the lower-right part of the matrix generally have a product layout. Other types of layouts include fixed-position, combination, cellular, and certain types of service layouts. 1. PROCESS LAYOUT - Process layouts are found primarily in job shops, or firms that produce customized, low-volume products that may require different processing requirements and sequences of operations. Process layouts are facility configurations in which operations of a similar nature or function are grouped together. As such, they occasionally are referred to as functional layouts. Their purpose is to process goods or provide services that involve a variety of processing requirements. A manufacturing example would be a machine shop. A machine shop generally has separate departments where general-purpose machines are grouped together by function (e.g., milling, grinding, drilling, hydraulic presses, and lathes). Therefore, facilities that are configured according to individual functions or processes have a process layout. This type of layout gives the firm the flexibility needed to handle a variety of routes and process requirements. Services that utilize process layouts include hospitals, banks, auto repair, libraries, and universities. Improving process layouts involves the minimization of transportation cost, distance, or time. To accomplish this some firms use what is known as a Muther grid, where subjective information is summarized on a grid displaying various combinations of department, work group, or machine pairs. Each combination (pair), represented by an intersection on the grid, is assigned a letter indicating the importance of the closeness of the two (A = absolutely necessary; E = very important; I = important; O = ordinary importance; U = unimportant; X = undesirable). Importance generally is based on the shared use of facilities, equipment, workers or records, work flow, communication requirements, or safety requirements. The departments and other elements are then assigned to clusters in order of importance. Advantages of process layouts include: Flexibility. The firm has the ability to handle a variety of processing requirements. Cost. Sometimes, the general-purpose equipment utilized may be less costly to purchase and less costly and easier to maintain than specialized equipment. Motivation. Employees in this type of layout will probably be able to perform a variety of tasks on multiple machines, as opposed to the boredom of performing a repetitive task on an assembly line. A process layout also allows the employer to use some type of individual incentive system. System protection. Since there are multiple machines available, process layouts are not particularly vulnerable to equipment failures. Disadvantages of process layouts include: Utilization. Equipment utilization rates in process layout are frequently very low, because machine usage is dependent upon a variety of output requirements. Cost. If batch processing is used, in-process inventory costs could be high. Lower volume means higher per-unit costs. More specialized attention is necessary for both products and customers. Setups are more frequent, hence higher setup costs. Material handling is slower and more inefficient. The span of supervision is small due to job complexities (routing, setups, etc.), so supervisory costs are higher. Additionally, in this type of layout accounting, inventory control, and purchasing usually are highly involved. Confusion. Constantly changing schedules and routings make juggling process requirements more difficult. 2. PRODUCT LAYOUT - Product layouts are found in flow shops (repetitive assembly and process or continuous flow industries). Flow shops produce high-volume, highly standardized products that require highly standardized, repetitive processes. In a product layout, resources are arranged sequentially, based on the routing of the products. In theory, this sequential layout allows the entire process to be laid out in a straight line, which at times may be totally dedicated to the production of only one product or product version. The flow of the line can then be subdivided so that labor and equipment are utilized smoothly throughout the operation. Two types of lines are used

Production and Operation Management

in product layouts: paced and unpaced. Paced lines can use some sort of conveyor that moves output along at a continuous rate so that workers can perform operations on the product as it goes by. For longer operating times, the worker may have to walk alongside the work as it moves until he or she is finished and can walk back to the workstation to begin working on another part (this essentially is how automobile manufacturing works). On an unpaced line, workers build up queues between workstations to allow a variable work pace. However, this type of line does not work well with large, bulky products because too much storage space may be required. Also, it is difficult to balance an extreme variety of output rates without significant idle time. A technique known as assemblyline balancing can be used to group the individual tasks performed into workstations so that there will be a reasonable balance of work among the workstations. Product layout efficiency is often enhanced through the use of line balancing. Line balancing is the assignment of tasks to workstations in such a way that workstations have approximately equal time requirements. This minimizes the amount of time that some workstations are idle, due to waiting on parts from an upstream process or to avoid building up an inventory queue in front of a downstream process. Advantages of product layouts include: Output. Product layouts can generate a large volume of products in a short time. Cost. Unit cost is low as a result of the high volume. Labor specialization results in reduced training time and cost. A wider span of supervision also reduces labor costs. Accounting, purchasing, and inventory control are routine. Because routing is fixed, less attention is required. Utilization. There is a high degree of labor and equipment utilization. Disadvantages of product layouts include: Motivation. The system's inherent division of labor can result in dull, repetitive jobs that can prove to be quite stressful. Also, assembly-line layouts make it very hard to administer individual incentive plans. Flexibility. Product layouts are inflexible and cannot easily respond to required system changesespecially changes in product or process design. System protection. The system is at risk from equipment breakdown, absenteeism, and downtime due to preventive maintenance. 3. FIXED-POSITION LAYOUT - A fixed-position layout is appropriate for a product that is too large or too heavy to move. For example, battleships are not produced on an assembly line. For services, other reasons may dictate the fixed position (e.g., a hospital operating room where doctors, nurses, and medical equipment are brought to the patient). Other fixed-position layout examples include construction (e.g., buildings, dams, and electric or nuclear power plants), shipbuilding, aircraft, aerospace, farming, drilling for oil, home repair, and automated car washes. In order to make this work, required resources must be portable so that they can be taken to the job for "on the spot" performance. Due to the nature of the product, the user has little choice in the use of a fixed-position layout. Disadvantages include: Space. For many fixed-position layouts, the work area may be crowded so that little storage space is available. This also can cause material handling problems. Administration. Oftentimes, the administrative burden is higher for fixed-position layouts. The span of control can be narrow, and coordination difficult. 4. COMBINATION LAYOUTS - Many situations call for a mixture of the three main layout types. These mixtures are commonly called combination or hybrid layouts. For example, one firm may utilize a process layout for the majority of its process along with an assembly in one area. Alternatively, a firm may utilize a fixed-position layout for the assembly of its final product, but use assembly lines to produce the components and subassemblies that make up the final product (e.g., aircraft). 5. CELLULAR LAYOUT - Cellular manufacturing is a type of layout where machines are grouped according to the process requirements for a set of similar items (part families) that require similar processing. These groups are called cells. Therefore, a cellular layout is an equipment layout configured to support cellular manufacturing. Processes are grouped into cells using a technique known as group technology (GT). Group technology involves identifying parts with similar design characteristics (size, shape, and function) and similar process characteristics (type of processing required, available machinery that performs this type of process, and processing sequence). Workers in cellular layouts are cross-trained so that they can operate all the equipment within the cell and take responsibility for its output. Sometimes the cells feed into an assembly line that produces the final product. In some cases a cell is

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formed by dedicating certain equipment to the production of a family of parts without actually moving the equipment into a physical cell (these are called virtual or nominal cells). In this way, the firm avoids the burden of rearranging its current layout. However, physical cells are more common. An automated version of cellular manufacturing is the flexible manufacturing system (FMS). With an FMS, a computer controls the transfer of parts to the various processes, enabling manufacturers to achieve some of the benefits of product layouts while maintaining the flexibility of small batch production. Some of the advantages of cellular manufacturing include: Cost. Cellular manufacturing provides for faster processing time, less material handling, less work-in-process inventory, and reduced setup time, all of which reduce costs. Flexibility. Cellular manufacturing allows for the production of small batches, which provides some degree of increased flexibility. This aspect is greatly enhanced with FMSs. Motivation. Since workers are cross-trained to run every machine in the cell, boredom is less of a factor. Also, since workers are responsible for their cells' output, more autonomy and job ownership is present.

Facility Location
What does Facility location mean?
Facility location is actually a term used in operation management, facility location or location analysis is done so that the better uses of the location can be understood. The company by understanding the materials and production process done nearby the location can save ample time in production process and also save a lot in terms of transportation cost. And also the company can find out optimum position for the location of the company so that all the factors that are needed will be not a long distance from the company.

Some of the benefits in location analysis include:


You get a thorough knowledge of all the factors involved in the production, and ways through which the materials that are needed in the production can easily be accessed. When you do a proper location analysis for your facility you will also come across alternate substitute materials that are readily available and will cost less. You can save a lot on transportation cost for materials, labour, import and export. The materials will be available at a comparatively low cost. The best way to get a task done is by finding out ways through which the task can be done. Location analysis helps you in those aspects. Allows to you differentiate between practical positions to place your facility. Like for example, you cannot build a hazardous facility in a residential area. Gives you access to cheap labour, and needed raw materials like water electricity and many more. Helps in a smooth running of an organization, by seeing to that all that is possibly needed is readily and easily available. Also has very easy access to production, distribution and sale of the products. Allows you to outperform your competitors facilities Once you have found the optimal location then you will very easily overcome all the issues that you are likely to face and have a smooth running of an organization. When you plan accordingly, you will also be prepared to face some minor hindrances.

Material Handling
Expressed in simple language, materials handling is loading, moving and unloading of materials. To do it safely and economically, different types of tackles, gadgets and equipment are used, when the materials handling is referred to as mechanical handling of materials. Since primitive men discovered the use of wheels and levers, they have been moving materials mechanically. Any human activity involving materials need materials handling. However, in the field of engineering and technology, the term materials handling is used with reference to industrial activity. In any industry, be it big or small, involving manufacturing or construction type work, materials have to be handled as raw materials, intermediate goods or finished products from the point of receipt and storage of raw materials, through production

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processes and up to finished goods storage and dispatch points. A material handling as such is not a production process and hence does not add to the value of the product. It also costs money; therefore it should be eliminated or at least reduced as much as possible. However, the important point in favors of materials handling is that it helps production. Depending on the weight, volume and throughput of materials, mechanical handling of materials may become unavoidable. In many cases, mechanical handling reduces the cost of manual handling of materials, where such material handling is highly desirable. All these facts indicate that the type and extent of use of materials handling should be carefully designed to suit the application and which becomes cost effective. Based on the need to be of optimum design and application specific to different type of industries, materials handling can be as diverse as industries them self. Some definitions are: The American Materials Handling Society is: Materials handling is the art and science involving the moving, packaging and storing of substances in any form Materials handling is the movement and storage of materials at the lowest possible cost through the use of proper methods and equipment. Materials handling is the moving of materials or product by any means, including storage, and all movements except processing operations and inspection. Materials handling is the art and science of conveying, elevating, positioning, transporting, packaging and storing of materials. All the functions of materials handling have been referred to which are conveying, elevating, positioning, transporting, packaging and storing. Storage or warehousing is very much a part of materials handling. Materials handling uses different equipment and mechanisms called Materials Handling Equipment.

The essential requirements of a good materials handling system may be summarized as:
Efficient and safe movement of materials to the desired place. Timely movement of the materials when needed. Supply of materials at the desired rate. Storing of materials utilizing minimum space. Lowest cost solution to the materials handling activities

Functional scope of materials handling within an industry covers the following:


Bulk materials as well as unit materials handling. Bulk handling is particularly relevant in the processing, mining and construction industries. Unit materials handling covers handling of formed materials in the initial, intermediate and final stages of manufacture. Industrial packaging of in-process materials, semi finished or finished goods, primarily from the point of view of ease and safety of handling, storage and transportation. However, consumer packaging is not directly related to materials handling. Handling of materials for storage or warehousing from raw materials to finished product stage.

IMPORTANCE OF MATERIALS HANDLING The foremost importance of materials handling is that it helps productivity
and thereby increases profitability of an industry. Many enterprises go out of business because of inefficient materials handling practices. In many instances it is seen that competing industries are using same or similar production equipment, and one who uses improved materials handling system stays ahead of their competitors. A well designed materials handling system attempts to achieve the following: Improve efficiency of a production system by ensuring the right quantity of materials delivered at the right place at the right time most economically. Cut down indirect labour cost. Reduce damage of materials during storage and movement. Maximize space utilization by proper storage of materials and thereby reduce storage and handling cost. Minimise accident during materials handling.

Production and Operation Management


Reduce overall cost by improving materials handling. Improve customer services by supplying materials in a manner convenient for handlings. Increase efficiency and sale ability of plant and equipment with integral materials handling features.

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Material Handling Principles


A principle is a general rule, fundamental, or other statement of an observed truth. The Material Handling Principles are fundamental truths of material handling that have been found to exist. The "principles" of material handling are often useful in analyzing, planning and managing material handling activities and systems. At the very least they form a basic foundation upon which one can begin building expertise in material handling. These principles that serve as a starting point to identifying potential problems and assessing need are: Orientation Principle - Study the system relationships thoroughly prior to preliminary planning in order to identify existing methods and problems, and physical and economic constraints, and to establish future requirements and goals. Flexibility Principle - Use methods and equipment which can perform a variety of tasks under a variety of operating conditions. Planning Principle - Establish a plan to include basic requirements, desirable options, and the consideration of contingencies for all material handling and storage activities. Simplification Principle - Simplify handling by eliminating, reducing, or combining unnecessary movements and/or equipment. Systems Principle - Integrate those handling and storage which are economically viable into a coordinated system of operation including receiving, storage, production, assembly, packaging, warehousing, shipping, and transportation. Gravity Principle - Utilize gravity to move material wherever possible, while respecting limitations concerning safety, product damage, and loss. Unit Load Principle - Handling product in as large a unit load as practical. Safety Principle - Provide safe material handling equipment and methods which follow existing safety codes and regulations in addition to accrued experience. Space Utilization Principle - Make effective utilization of all cubic space. Computerization Principle - Consider computerization in material handling and storage systems when circumstances warrant for improved material and information control. Standardization Principle - Standardize handling methods and equipment wherever possible. Layout Principle - Prepare an operational sequence and equipment layout for all viable systems solutions, and then select the alternative system which best integrates efficiency and effectiveness. Ergonomic Principle - Recognize human capabilities and limitations by designing material handling equipment and procedures for effective interaction with the people using the system. Cost Principle - Compare the economic justification of alternative solutions in equipment and methods on the basis of economic effectiveness as measured by expense per unit handled. Energy Principle - Include energy consumption of the material handling systems and material handling procedures when making comparisons or preparing economic justifications. Maintenance Principle - Prepare a plan for preventive maintenance and scheduled repairs on all material handling equipment. Environmental Principle - Minimize adverse effects on the environment when selecting material handling equipment and procedures. Reliability Principle - Provide reliable and dependable material handling equipment from manufacturers who have demonstrated quality and longevity in the industry. Mechanization Principle - Mechanize the handling process where feasible to increase efficiency and economy in the handling of materials. Accessibility Principle - Readily have access to the knowledge, expertise, professionalism, and industry leadership.

Production and Operation Management Production planning and control in mass production

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Henry Ford is considered the father of modern mass production. His Ford motor company was the first to start assembly line production of vehicles. Mass production, as the name suggests follows the concept of assembly line. The task or the production process is broken down or divided into simplest possible components. These components are the grouped to follow production procedures. Assembly line consists of work stations or arrangement of labor and equipment in a sequence. At each work station, a pre decided task is completed. This facilitates the production in large quantities. On an assembly line, the materials move continuously at a uniform average rate. At different work stations, a portion of work is done. Industries such as toys, automobiles, televisions, and computers are all assembly line productions. Assembly line productions can be manual or through conveyor belts carrying materials at a pre decided rate so that there is sufficient time at each work station to perform the allotted task. The conveyor belts are of belt type, chain type, overhead type or screw type

Mass production - Only one type of product or maximum 2 or 3 type of products are manufactured in large quantities and much emphasis is not given to retail consumer orders. Standardization of products, processes, materials, machines, uninterrupted flow of materials is the main characteristics of this system. Example: - petrochemical industry, cement industry, steel industry, sugar industry, cigarette industry etc. APPROPRIATENESS OF MASS PRODUCTION - Mass production pertains to a large quantity of production with standardized products having more or less the same features. This single standard product is manufactured on a continuous basis over a period of time. The determining factor is the demand on the basis of which continuous or batch type production is chosen. Features of mass production system
It includes manufacturing of high volume standardized products. There is a smooth flow material from one work station to another workstation. Production time of production unit as a whole is short (i.e. because of specialization principle). Closely spaced work station reduces material handling. Production planning and control is simple. Work in progress inventory is less. Production planning and control is possible under mass production only with the help of line balancing.

Production planning and control in mass production - It is usually far simpler than in a job or batch production.
Extensive effort is required for detailed planning before production starts, but both scheduling and control need not be elaborate usually. The output is either limited by available capacity or regulated within given limits to conform to production targets, based on periodic sales forecasts.

Planning problems in mass production - Setting the rate of production from line and arranging the various production centers on the line accordingly Line balancing helpful in equalizing output rates from various work points in mass production line and in reducing idle time of labour Process Production planning and control in mass production (with example)
1. Define the tasks e.g. a, b, c, d, g, h. 2. Identify precedence relationships/ requirements or draw precedence diagram for these task. 3. Calculate minimum number of work station required: Minimum no of work station = maximum allowable cycle time per unit / time allowed at a work station per unit =say 380 seconds/ unit 90 seconds / unit = 4.22 stations = 5 station 4. Assign task to different stations on some basis or principle or rule. One such rule is longest operation time (LOT) rule giving top priority to task that has longest operation time. Steps: -

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LOT (1) first assigns the task that takes most time to the first station while maintaining precedence requirement. LOT (2) after assigning a task determines how much time the station has left to contribute. LOT (3) if station can contribute more time, assign it a task requiring as much time as possible while maintaining precedence otherwise return to LOT (1) and continue same steps until all task have been assign to different station. 5. Evaluate effectiveness and efficiency (Effectiveness if desired capacity is achieved) (Efficiency- labour utilization) Calculation of labour utilization efficiency for proposed 90 second lines. 6. Seek further improvement by changing time.

Advantages of Mass Production:


1. There is a smooth flow of material from one work station to the next. 2. There are in built inventories at each work station because output of one work station becomes the input of the next. 3. Production time is shorter in assembly line productions. 4. The material is more efficiently handled since work stations are spaced closely together. 5. There is no special expertise required for the staff. Training cost is lesser. 6. Production planning and control is simpler.

Disadvantages of Mass Production:


1. Since the proper functioning of all the machines is required in an assembly line production, maintenance is a challenge. 2. Assembly lines are rigid inflexible set ups. Any change in the design layout proves difficult. 3. The production speed is determined by the slowest machine. 4. Assembly line set ups are capital intensive since they require installation of specific types of machines

DESIGN OF AN ASSEMBLY LINE: The assembly line balancing aims to minimize the idle time of machines. It means the
reduction in the number of operators to perform a task. The entire assembly is divided into parts. An assembly line may follow any of the following models: 1. Modular Production: Such a model is followed to introduce variety in the mass production system. In such a system, a minimum number of parts or processes are developed and produced. These are called modules. They can be combined in a different ways to offer variety. 2. Group Technology: In a group technology plant layout, parts required in a particular operation are put under different groups. Machines are arranged in such a way that each machine is assigned to the production of one group. 3. Automation: Machines, material and control are integrated in such a system.

Example of Mass production systems: Production of biscuits in a factory can be taken as an example of mass
production. At every stage a particular operation is performed using a specific machine. As is shown below, packs of identical biscuits are produced in an industrial unit Stage: 1: MIXING: Flour + fat + sugar + bicarbonate + additives Stage: 2: MOULDING: Dough is laminated in a laminator Stage: 3: GAUZE ROLLS: Laminated dough is cut as per size and shape Stage: 4: BAKING: Biscuits cut into shapes are baked in the oven Stage: 5: COOLING: Biscuits are cooled in conveyors once they are baked Stage: 6: PACKAGING: The final product is then packed into pouches and cartons

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Production planning and control in batch production


Job shops perform an array of jobs and each job is different. In job shop production predictions of demand for products is not possible. In a job shop different jobs are performed with a prescribed set of operations and the time taken by each operation. The equipment for job shop productions are divided for use in different departments. The requirement of each machine is different based on the operation to be performed for a particular job. The job shop is waiting line system in the respect that when a job is finished from one machine, it waits in line to enter the next machine because there are earlier jobs in line too. Vice versa, the machines also wait for jobs while running idly. So, a proper system of planning and control has to be in place for optimizing the job shop production.

Batch production - A variety of products are made but volume is not too large, to demand a separate line for each
product. Here, items are processed in lots or batches and a new batch is undertaken for production only when the production on all items of a batch is complete. In fact, batch type production can be considered as an extension of job type system. The best example of batch type system is of chemical industry, where different medicines are manufactured in batches. Other example includes production of machines tools and printing press etc. this type of production generally adopted in medium size enterprises. It is a stage in between job production and mass production.

Production planning and control in batch production - Batch production is the manufacture of a number of identical articles either to meet a specific order or to satisfy the continuous demand. The decisions regarding jigs and fixtures are dependent on the quantities involved in the production batch. Aspects of job shop production:
1. The proper sequencing and prioritizing is must for such production to avoid confusion and wastage. 2. The scheduling should be done based on the estimated time taken by each job. 3. The running time of a machine should be calculated while it is performing an operation

The performance of a facility is measured by following standards:


1. The average time taken by each job 2. The total processing time 3. The mean of the number of jobs completed before stipulated time and the jobs completed after the stipulated time 4. The mean waiting time of each job 5. The average of number of jobs to be done in a unit

Production and Operation Management


The factors affecting a job shop unit are as follows:
1. 2. 3. 4. Total number of jobs to be done Total number of machines required Manufacturing facilities Evaluation and assessment of efficiency of men and machines

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Batch production can be three types namely:


A batch produced only once. A batch produced repeatedly at irregular intervals, when the need arises. A batch produced periodically at known intervals, to satisfy continuous demand.

Planning problems in batch production: - Two problems that may arise in batch production are:
Due to the size of the batch. Due to scheduling of production. If larger batch size: - more inventory carrying cost and low set up cost. If smaller batch size: - low inventory carrying cost and more set up cost.

The solution to these problems depends on whether the production is governed by:
External customer order: - if it is the case of external customer orders, the customer order size usually determines the batch sizes. The timing will also depend on the delivery dates specified by the customers. Whether the plant is producing for internal consumption (i.e. a sub assembly used in the final product): - if it is for internal consumption, both batch size and the production scheduling problems are matters for internal management decisions. The problems of optimal batch size has to take into account the set up costs which are involved, before each production runs and the inventory carrying cost incurred, when the finished product is held in stock. The batch size determines the length of the production run and affects both the production schedule and batch size considerations of other products. Points considered in PPC for batch production 1. Inventory carrying cost: - It consist of: Cost of capital Space cost Material handling cost Obsolescence, spoilage or deterioration cost. Insurance cost Cost of general administration 2. Set up cost (ordering cost): - It consist of Cost of time spent in setting up the equipment and organizing the labour for manufacturing batch (cost of idle time i.e. when material is not available on time). Any cost associated with rearrangement or arrangement (i.e. pay of workers) Cost due to rejects, scrap, rework generated during a set up. Variable cost of administration paper work. 3. Planning and implementing economic batch size is the key focus. 4. Economic or optimal batch size: - it is such quantity at which total cost of carrying inventory and set up is minimum. Determination of economic batch quantity Let, A= annual demand; Q= manufacturing batch quantity; P= production rate; R= consumption rate; T= production cycle time; T*= small time within the production cycle (t), in which manufacturing is completed. Cc= inventory carrying cost/ unit/ per period Cp = set up cost/ batch ACp 2EBQ = Cc (p-r)/p (p-r) Peak inventory level during any cycle = t*A/QSet up cost = Cp QInventory cost = Cc (p-r) 2p

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Characteristics of PPC function in batch production

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Before issuing manufacturing orders, need for new raw materials and tools, overloading and under loading of particular machines or work centers must be anticipated. As products are diversified and several orders are handled simultaneously in different wok centers, scheduling and follow up becomes a different task. Dispatching has to be done efficiently to avoid delays and bottlenecks in the production process.

Job shop productions: case 1 - First we will study the case where n number of jobs are performed by a single machine. In such a case prioritizing and scheduling is very important because the jobs are waiting in line to be completed. The objective is to improve the average idle time, waiting time, the work in process time. The shortest processing time (SPT) is aimed for in a job shop production. Job shop production: case 2 - In such a scenario, n number of jobs are performed by two machines M1 and M2. The processing time on both the machines is calculated. The minimum time to complete a job is also stipulated. Then a sequence is worked out to line the jobs on both the machines in such a way that the target of maximum production in minimum time is achieved. Prioritizing rules for job shops: The job which has the shortest processing time is selected. Manufacturers may also
put the job which has the earliest delivery due date first in line. First come first serve rule may be applied to cut any slack or wastage. So it depends on the manufacturer's priorities and the master schedule.

Examples of job shop productions: They include paint shops, machine tool factories and specialty restaurants. Given
below is a brief outline of the paint manufacturing process, In this, paints are manufactured in a variety of colors and even patterns and the machines used are the same for all the jobs which are done. First a color pigment is selected. Then a brightener is added to it to bring out its texture. Next, binder and plasticizer is added which will make it stick to the wall. Lastly, additives and water is added to improve its consistency Conclusion - In case of batch production, raw materials are converted into components or parts for stock but they are combined according to the customer orders. The products are manufactured usually in large batches. Every batch differs from others, but all units within a batch are identical. A number of heterogeneous finished products are manufactured with in a limited range of options. Therefore, PPC in intermittent manufacturing is a mixture of those used in process industry and job order production.

BATCH PRODUCTION
If a design was to be manufactured by batch production several hundred would be made on a production line. Each person/machine on the production line would complete one part of the product and then it would be passed on to the next person/machine. Many items in your home will have been manufactured by batch production - can you name any ?

CASE STUDY - BICYCLE MANUFACTURE Modern bicycle manufacture is component based. The company buys parts
such as pedals from other manufacturers and puts the bicycle together on a production line. This is typical of a company manufacturing through batch production. Usually a company will manufacture a certain number of a particular model of bicycle (two to three thousand at a time) and then move on to another model. In each of the boxes of the flow chart shown below, write the key words representing each stage. 1. The tube for the bicycle frame is cut to size. One person will do this job and they cut enough tube for a batch of several hundred bikes in a week. The tubes are set up in a jig which holds the frame together. The frame travels along the production line and the joints are preheated to save time. A gas torch is used to weld the frame together.

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2. After welding the frames and the front forks need cleaning in the Grit-Blaster. This shoots tiny particles of sand, at high speed, at the frame and cleans away the residue left behind by the welding process. All frames are checked to ensure that they are straight. Small adjustments can be made at this stage. 3. The frames are now ready for painting. This is done by using a fine spray which covers every part of the frame with paint. The frame then moves down the production line into a special oven which bakes the paint giving it a tough finish. The wheels are assembled by hand and they are individually tested in a machine which automatically tensions each spoke to ensure that they are perfectly straight. 4. The frames are machined so that other parts such as the handle bars and the bottom bracket (pedals) can be attached. People operate the machine tools but they need some training before they can use the machines safely and efficiently. The bicycles are now ready for the shops where they will be viewed by customers and agents. Agents will buy batches of bicycles for large stores. 5. Before sending the bicycles to the shops, agents view them and suggest changes for the next batch. This helps the manufacturer improve the design and production of bicycles.

Maintenance management
Maintenance Management is an orderly and systematic approach to planning, organizing, monitoring and evaluating maintenance activities and their costs. A good maintenance management system coupled with knowledgeable and capable maintenance staff can prevent health and safety problems and environmental damage; yield longer asset life with fewer breakdowns; and result in lower operating costs and a higher quality of life.

The Objectives of Maintenance Management


Computer based maintenance management can increase plant availability and reduce overall maintenance costs. John Hook ham describes some of the essential elements that are needed in such systems for maximum effectiveness. Maintenance management can be considered as the direction and organisation of resources to control the availability of equipment. The tasks associated with maintenance can be divided into three main areas; 1. Work Management - Work management is concerned with the logistics of organizing maintenance and has the following objectives: To identify, control and co-ordinate the resources (labour, spare parts, materials and tools) that are required to completer the maintenance tasks; To ensure that job priorities are correctly allocated; To locate plant failures or potential failures and provide an appropriate response. 2. Plant Condition Control - Close monitoring and control of the overall plant condition is necessary to achieve a high level of plant availability. Its long-term objectives are: To highlight maintenance engineering problems by monitoring plant performance, diagnosing causes and providing effective solutions; To adapt maintenance policy as production requirements change. This should not be restricted to changes in preventive maintenance but should encompass re-design and the application of condition monitoring techniques where appropriate. 3. Cost Control - The third activity, cost control, is normally operated as part of a companys budgetary and expenditure control system, primarily for job costing. To achieve the improvements in maintenance effectiveness and efficiency, the maintenance manager must make use of all of the available management tools.

Types of Maintenance
Routine - ongoing maintenance activities such as cleaning washrooms, grading roads and mowing lawns, which are required because of continuing use of the facilities; Preventive - periodic adjustment, lubrication and inspection of mechanical or other equipment to ensure continuing working condition; Major projects such as floor replacement, re-roofing, or complete re-painting which are performed once every few years; and Emergency - unexpected breakdowns of assets or equipment. These are unpredictable or reactive type of maintenance and are more difficult to schedule than the above three categories.

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Preparing a Maintenance Plan - Depending on the application and design of a maintenance system, the format and steps of preparing a maintenance plan can vary. The key steps in preparing a typical maintenance plan are: 1. Prepare an asset inventory - identifying the physical features (e.g., area, material, etc.) of all assets (e.g., schools, roads, etc.) which require maintenance; 2. Identify maintenance activity and tasks - defining the type of maintenance task (activity) to be performed on each asset and what work should be done under each activity, e.g. Activity: cleaning. Work to be performed: clean chalk boards, vacuum carpets, etc.; or, Activity: Preventive Maintenance (Shingle roof). Work to be performed: Inspect attic space for signs of dampness caused by leaks in roof. Inspect roof for loose, torn, folded or missing shingles. Repair or replace shingles as required. Inspect flashings eaves troughs and down spouts, and caulk or replace as required. Visually check soffit and facia for loose or damaged materials; 3. Identify the frequency of the task - determining how often the activities should be performed (frequency of service); this is important particularly in preventive type of maintenance. Emergency or reactive types of repairs are unpredictable, but with good preventive maintenance, the frequency of emergency situations occurring may be reduced; 4. Estimate the time required to complete the task - indicating how long each task should take to complete; 5. Develop an annual work schedule - planning what time the maintenance work for the entire year should take place; 6. Prepare and issue a work order - identifying what, when, where and by whom maintenance work is to be done; and 7. Determine a Budget - determining the costs for all maintenance activities by calculating labour hours, material, equipment, and contracting costs.

Production and Operation Management Work Study - The pioneering technique of improving value for money and productivity Work Study - Meaning and Definition:

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One of the most important techniques, which are frequently employed by all management personnel, is work study. It introduces the most effective method of working. Work study has proved to be the most effective tool in the hands of management. Every industry is facing problems concerning the efficiency at all levels and so a systematic attempt is needed to eliminate unnecessary work and the make remaining work easier. Thus productivity would automatically be increased. It is therefore, necessary to have a constant effort to reduce the waste in every phase of production. So, that there is a surplus available for division to develop good life. According to the ILO, work study is a term used to embrace the techniques of method study and work measurement, which are employed to ensure the best possible use of human and material resources in carrying out s specified activity. According to British Standards Institute, work study is a generic term for those techniques, particularly method study and work measurement, which are used in the examination of human work in all its contexts and which lead systematically to the investigation of all factors which affect the efficiency and economy of the situation being renewed, in order to effect improvement. Thus, the work study of human works in all aspects in order to improve productivity. It is a systematic and analytical study of work process and work methods with the objective of increasing efficiency and reducing costs. Work study helps to reduce waste through standardization of qualitative and quantitative element of the job.

Work study - The generic term used for those techniques, particularly method study and work measurement, which are used in the examination of human work in all its context and which lead systematically to the investigation of the facts which affect efficiency and economy of the situation being reviewed, in order to effect improvement Methods engineering - That body of knowledge concerned with the analysis of the methods and the equipment used in performing a job, the design of an optimum method and the standardisation of the proposed methods. Also frequently referred to as Work Study Industrial engineering - Concerned with the design, improvement and installation of integrated systems of men, materials and equipments to improve productivity Method study/ Methods Analysis/ Operations Analysis - 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
Objectives of work study
To analyse the present method of doing a job, systematically in order to develop a new and better method To measure the work content of a job by measuring the time required to do the job for a qualified worker and hence to establish standard time. To increase the productivity by ensuring the best possible use of human, machine and material resources and to achieve best quality product/ service at minimum possible cost To improve operational efficiency

Basic work study procedure


Select the job or process or the operation to be studied Record all relevant facts about the job or process or operation Examine critically all the recorded facts Develop the new method Measure the work content and establish the standard time Define the new method Install the new method Maintain the new method

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The purpose of work study is to determine the best or most effective method of accomplishing a necessary operation or function
Both time study and motion study resulted from the integration of concepts and practices developed by F W Taylor and by Frank and Lillian Gilbreth. Concerned with the systematic analysis and improvement of manually controlled work situations Time study is a quantitative analysis leading to the establishment of a time standard Motion study is a qualitative analysis of a work station leading to the design or improvement of an operation / activity The greatest production results when each worker is given a definite task to be performed in a definite time in a definite manner. Dr. Frederick W. Taylor

Work Study has major branches


1. Method study 2. Work measurement

Work Design or Work System Design - Systematic investigation of contemplated and present work systems in order
to formulate, through the ideal system concept, the easiest and most effective systems and methods for achieving the necessary functions/goals/ purposes

Benefits of work study


Increased productivity and operational efficiency Reduced manufacturing costs Improved work place layout Better manpower planning and capacity planning Fair wages to employees Better working conditions to employees Improved work flow Reduced material handling costs Provides a standard of performance to measure labour efficiency Better industrial relations and employee morale Basis for sound incentive scheme Provides better job satisfaction to employees

- Work methods analysis or method study is a scientific technique of observing , recording and critically examining the present method of performing a task or operation with the aim of improving the present method and developing a new and cheaper method. It is also known as method improvement or work improvement. Detailed study of the manual and /or body motions used in a work-task or at one work area often involving comparative analysis of right hand and left hand motions (Part of method study) It encompasses the study of work processes, working conditions and equipments and tools to carry out the job. Method study may be understood as 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 methods analysis or method study is a scientific technique of observing, recording and critically examining the present method of perfo0rming a task or job or operation with the aim of improving the present method and developing a new and cheaper method. It is also known as methods improvement or work improvement. It encompasses the study of work processes, working conditions and equipments and tools used to carry out the job.

Method Study or Motion Analysis Method study or methods analysis

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Definition According to British Standard Institute, Method study may be understood as 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 method and reducing costs. According to Alford and Beatty, Motion study consist of dividing work into the most fundamental elements possible; studying these elements separately and in relation to one another and from these studied elements, when timed, building methods of least waste. The purpose of motion study is to design as improved method which eliminates unnecessary motions and employs human efforts more productively. In doing so the principles of motion economy proves to be very helpful.

Objectives of method study


To study the existing proposed method of doing any job, operation or activity To develop an improved method to improve productivity and to reduce operating costs To reduce excessive material handling or movement and thereby reduce fatigue to workmen To improve utilization of resources To eliminate wasteful and inefficient motions To standardize work methods or processes, working conditions, machinery, equipments and tools.

Seven steps of carrying out method study


Define existing method Record existing method Examine existing method Develop new method Define new method Install new method Maintain new method

Different recording techniques


Outline process charts Flow process chart - man type, material type, equipment type Two handed process chart Multiple activity chart - using time scale Simo chart - using time scale flow diagrams String diagrams Cycle graph Chrono cycle graph Travel chart

Method study can be applied to any field of work, but the most important areas where it pays rich dividends are:
Improved layout of office, working areas or factory Improved design of plant and equipment Improved use of material, plant, equipment, and manpower Most effective handling of material Improved flow of work Standardization of methods and procedures Improved safety standards Better working conditions

Production and Operation Management


Improved achievement with less effort Productive and effective utilization of human effort Economy of expenditure

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Factors facilitating Method study


High operating cost High wastage & scrap Excessive movement of materials and workmen Excessive production bottlenecks Excessive rejections and rework Complaints about quality Complaints about poor working condition Increasing number of accidents Excessive use of overtime

Advantages of method study


Work simplification Improved working method ( cheaper method) Better product quality Improved work place layout Improved equipment design Better working conditions Better material handling Improved work flow Less fatigue to the operator Optimum utilization of all resources Higher safety to work men Shorter production cycle time Higher job satisfaction Reduced material consumption and wastages Reduced manufacturing cost and higher productivity

Work Measurement
Work measurement goes hand in hand with method design. Whereas the method design are directed towards the study of the components of a single or multiple operation of a system. It is a technique by which the actual time consumed in performing an operation is computed and ultimately serves as suitable time standard. It is the study of work content of a job so as to lay down a fair days work. It seeks provide a quantitative assessment of the human work in a specified job and to establish the proper time for the effective performance of that job. Work measurement has been defined as the application of techniques designed to determine the time required by or defined level of performance to do a specified job. The time is called standard or allowed time. The application of techniques designed to establish the time for a qualified worker to carry out a specified job at a defined level of performance. A qualified worker is one who is accepted as having the necessary physical attributes, possessing the required intelligence and the education and having acquired the necessary skill and knowledge to carry out the work in hand to satisfactory standards of safety, quantity and quality. - ILO According to British Standard Institute, The application of techniques designed to establish the time for a qualified worker to carry out a specified job at a defined level of performance. Qualified worker is a representative average of those workers. Who are fully trained and able satisfactorily to perform any and all phases of work involved, in accordance with the requirement of the job under consideration?

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Normal pace is the effective rate of performance of conscientious, self paced, qualified worker when working neither fast nor slow and giving due considerations to physical, mental or visual requirements of the specific job. Specific job is in the best possible method of a job under consideration.

Conceptual framework for carrying out work measurement


Qualified worker - qualified worker is one who accepted as having the necessary physical attributes, who possess the required intelligence and education and who has acquired the necessary skills and knowledge to carry out the hand to satisfactory standards of safety, quantity and quality. Standard rating - rating is the assessment of the worker's rate of working relative to observes concept of rate corresponding to standard pace (or Standard rate). Standard Performance (pace or rate) - It is rate of output which a qualified worker will naturally achieve without over exertion as an average over the working day or shift, provided that he knows and adheres to the specified method and provided that he is motivated to apply himself to his work. the time taken to achieve the standard performance by the qualified worker is called "standard time".

Work simplification
Involves improvement in work methods or work flow initiated and developed by workers or supervisors on the job as a result of methods training and /or economic incentives. It is an organized use of common sense to find and apply better ways of doing any work at lesser cost.

Time study
Times study is concerned with the determination of the amount of time required to perform a unit of work. It consists of process of observing and recording the time required to perform each element of an operation so as to determine the reasonable time in which the work should be completed. Definition According to ILO, Time study is a work measurement techniques for recording the times and rates of working for the elements of a specified job carried out under specified conditions and for analyzing the data so as to obtain the time necessary for carrying out the job at a defined level of performance. A technique of work measurement used for determining accurately as possible from a limited number of observations, the time necessary to carry out a given activity at a defined standard of performance. A stop

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watch is used for the purpose of recording the actual time taken by the worker under observation to perform various elements of the work or task.

Use of Time Study: The utility of the time study comes in:
Determining the work content and thereby setting wages and incentive Arriving at cost standards per unit of output for the various jobs used for cost control and budgeting for deciding on sales price. Comparing the work efficiency of different operators Arriving at job schedules for production planning purposes Manpower planning Aiding in the method study Product design by providing basic data on costs of alternative materials and methods required to manufacture the product.

Synthesis method
In many industries the work done is of a repetitive nature that is the product is produced in large numbers or in batches of varying sizes at irregular intervals. Even when the products are made only once, it is done by operations which are frequently used in the factory. In such cases it is not necessary to carry out time study techniques. Synthetic techniques are used where standard time is computed by adding various elemental times which constitute the work. Standard data is made available for most of the known elemental operations such as for preparatory, setting, manipulating, removing, clearing, tool positioning, holding and tightening. The data should be stored in a library in such a manner for easy reference when required for estimating scheduling or any other purpose. These standards cannot be transferred to other factories as they refer to the particular conditions prevailing in a specific workshop at a given factory.

Advantages of Synthesis method


Reduction in the number of time studies and consequently in the cost of running the time study department. Reduction in time required to issue a time standard for a job Consistency in the time standards.

LOB technique consists of five main stages, all utilizing graphic aids:
A graphical representation of the delivery objective. A chart of the production program showing the sequence and duration of all activities required to produce a product. A progress chart of the current status of component completion. A line of balance draw to show the relationship of component progress to the output needed to meet the delivery schedule. Analysis of progress.

Work Sampling
Work sampling is a commonly used industrial engineering technique designed to estimate how resources such as people, machines, facilities, or equipment are being utilized. The objective of work sampling is to assess the workforce utilization of a selected portion of an organization's operations. If an operation is to be audited, work sampling is a low cost alternative to continuous monitoring, just as sampling in the audit context is a low cost alternative to 100 percent evaluation of an account. The cost of continuous monitoring of an entire operation is generally prohibitive, and work sampling can yield a reasonably accurate estimate at a fraction of that cost.

Work sampling studies are used by auditors to evaluate a contractors labor utilization. When performing a
work sampling study, the auditor makes a specified number of observations of contractor personnel involved in the

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operation being audited. Each observation is classified according to type of activity, the activity types being specified prior to sampling. Using information gathered during the study, the auditor can estimate the percentage of time that the workers actually spend in each activity. With minimal specialized training, an auditor can identify various worker actions and determine whether a contractors management practices yield reasonable and acceptable levels of working activity. Work sampling may disclose underutilized workers, poor work practices, overstaffing, inadequate training, inefficient plant layout, excessive delays (caused by poor planning, material scheduling, or tooling), or other deficiencies. Definition 1. Work sampling is broadly defined as the application of statistical sampling techniques to the study of work activities. In the audit context, work sampling is typicallyused to estimate the proportion of workers' time that is devoted to different elements of work activity. Work sampling is also known as activity sampling. It can be also used to estimate equipment or vehicle utilization. 2. For DCAA applications, the observed activities are grouped into one of two main classifications: working or nonworking. The working classification can be subdivided into desirable or undesirable. Hands-on activities like assembling, machining, drawing, designing, etc., are desirable work related efforts, while waiting for material handlers to move parts, talking to supervisor, activities. Nonworking activities include unnecessary delays, needless walking, non business conversations, personal time, etc. These activities may be broken down further to help identify contributing factors. The degree of detail will depend on the overall objectives of sampling, the type of work environment, and the sampling plan.

Characteristics of work sampling study - The study of work sampling has some general characteristics related to the
work condition. One of them is the sufficient time available to perform the study. A work sampling study usually requires a substantial period of time to complete. There must be enough time available (several weeks or more) to conduct the study. Another characteristic is multiple workers. Work sampling is commonly used to study the activities of multiple workers rather than one worker. The third characteristic is long cycle time. The job covered in the study has relatively a long cycle time. The last condition is the non-repetitive work cycles. The work is not highly repetitive. The jobs consist of various tasks rather than a single repetitive task. However, it must be possible to classify the work activities into a distinct number of categories.

Steps in conducting a work sampling study - There are several recommended steps when starting to prepare a work sampling study Define the manufacturing tasks for which the standard time is to be determined. Define the task elements. These are the defined broken-down steps of the task that will be observed during the study. Since a worker is going to be observed, additional categories will likely be included as well, such as "idle", "waiting for work", and "absent". Design the study. This includes designing the forms that will be used to record the observations, determining how many observations will be required, deciding on the number of days or shifts to be included in the study, scheduling the observations, and finally determining the number of observers needed. Identify the observers who will do the sampling. Star the study. All those who are affected by the study should be informed about it. Make random visits to the plant and collect the observations. After completing the study, analyze and present the results. This is done by preparing a report that summarizes and analyzes all data and making recommendations when required. Planning the Work Sample
1. At the outset, prepare an audit program with audit steps for the preparation of a sampling plan. Be sure to dedicate adequate time and resources to the sampling plan. General steps are as follows: Develop audit objective and define the universe. Establish familiarity with contractor's operation.

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Choose either the group or individual sampling method. Obtain necessary data from contractor (such as organization charts, plant layouts, and shift schedules). Determine activity classifications for workers being audited. Design observation forms to accumulate and summarize data. Conduct a probe to evaluate classifications, estimate nonworking activity, evaluate observation areas, as well as any other required area or activity. Establish audit dates and duration. Estimate sample size and select audit staff. Prepare team folders containing such items as schedules, observation forms, and plant layouts. Train audit team observers. Estimate the consideration factor. 2. The sequence and steps may be altered to fit specific situations as particular audits evolve or may be tailored to suit uniquely different audits.

Defining Audit Objective, Universe, and Work Sampling Method


1. The auditor should begin by defining the audit objective. List various reasons for considering work sampling, such as excessive walking, idleness, and poor use of resources. Define the universe (area, population, and work periods) to be studied. These two steps will help clarify and focus the audit. As a part of the audit objective, develop a precise statement of purpose. Data accumulation and savings computations hinge on a precisely defined objective. 2. The auditor should become familiar with the target universe. Information sources include facility layouts, organization charts, department charters, product lines, process sheets, and occupation codes. Gather information about support service functions and areas including test labs, CAD/CAM rooms, technical libraries, tool cribs, stock rooms, production/quality control points, and setup and maintenance areas. 3. Choose either the individual or group sampling method. In individual sampling, for each observation, a worker is randomly selected from the defined population. The activities of the entire defined population are determined based on an analysis of the activities of the randomly selected workers. The advantages of the individual method are as follows: Individual sampling allows detailed scrutiny of employee work activities. The observation consists of only one individual worker at a time. Any missing worker in the sample must be accounted for. Individual sampling adapts readily to detailed classification of activities. This aids in the analysis of nonworking activities. In group sampling, for each observation, the activities of groups of workers from the defined population are recorded. The advantages of the group method are as follows: Group sampling requires, at maximum, less than half the time to conduct each observation round. Seeking specific individuals is time consuming. Group sampling is less disruptive to the work force because individuals are not singled out for sampling and, unlike individual sampling; no follow-up action to account for missing workers is required. Therefore, discussions with supervisors or coworkers to trace whereabouts of individuals are avoided. With group sampling, the potential for worker-induced bias is reduced. Workers are not forewarned, as is likely when specific individuals are sought. 4. Select the appropriate sampling plan and selection procedure. The sampling plan can be either simple or stratified, and random sample selection procedure can be either unrestricted or restricted. Restricted sample selection generally takes the form of systematic sampling. For a general discussion of random sample selection procedures geared to audit sampling. The concepts are fully applicable to work sampling. Systematic sample selection in work sampling generally is most useful in setting the time when rounds will be made. A fixed time interval between one observation and the next is established. The time interval must be large enough to give the sampler adequate time to make a round at one location and move to the next. The starting time, the time of the first observation, is selected randomly and can be anywhere between a specified minimum and maximum starting time. The difference between the minimum and

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maximum starting times must equal the fixed time interval the subsequent observations are to be made. Subsequent rounds must be made at fixed intervals from the randomly selected starting time. A stratified sampling plan consists of subdividing the universe into strata, which are essentially separate smaller universes. Either simple or systematic selection can be used on the individual strata. There are various reasons for stratification. As discussed in I-400, it enables the sampler to control the number of sample observations that are drawn from specified subsets (strata) of the universe. In group sampling, stratification can yield sample results that are more precise than those of simple random samples of the same sample size. This would be the case when certain areas of activity can be expected to have exceptionally high variation (or wide fluctuation) in nonproductive activity from one observation to the next. If stratification is done, the strata should be well defined and the conclusions based on the sample from each stratum should be limited to that stratum.

Predetermined Motion Time System ( PMTS )


Predetermined motion time system is defined as a work measurement technique by which normal or basic times are established for basic human motions and these time values are used to build up the time for a job at a defined level of performance. It is a work measurement technique that involves observing or thinking through a job, recording job elements, recording pre established motion units, and calculating a performance standard. PMTS is an improvement over motion study because, besides affording detailed analysis of the motion it makes it possible to set a measure of the time that a series of motion ought to take.

Inventory Management
Inventory Management must be designed to meet the dictates of market place and support the companys Strategic Plan. The many changes in the market demand, new opportunities due to worldwide marketing, global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control. Inventory Management system provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities and communicate with customers. Inventory Management does not make decisions or manage operations; they provide the information to managers who make more accurate and timely decisions to manage their operations. INVENTORY is defined as the blocked Working Capital of an organization in the form of materials. As this is the blocked Working Capital of organization, ideally it should be zero. But we are maintaining Inventory. This Inventory is maintained to take care of fluctuations in demand and lead time. In some cases it is maintained to take care of increasing price tendency of commodities or rebate in bulk buying. Inventory Management and Inventory Control must be designed to meet the dictates of the marketplace and support the company's strategic plan. The many changes in market demand, new opportunities due to worldwide marketing, global sourcing of materials, and new manufacturing technology, means many companies need to change their Inventory Management approach and change the process for Inventory Control. Despite the many changes that companies go through, the basic principles of Inventory Management and Inventory Control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good Inventory Management and Inventory activities have not changed. The Inventory Management system and the Inventory Control Process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers. Inventory Management and the activities of Inventory Control do not make decisions or manage operations; they provide the information to Managers who make more accurate and timely decisions to manage their operations.

Production and Operation Management


The basic building blocks for the Inventory Management system and Inventory Control activities are:
Sales Forecasting or Demand Management Sales and Operations Planning Production Planning Material Requirements Planning Inventory Reduction

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Materials management
Materials management can deal with campus planning and building design for the movement of materials, or with logistics that deal with the tangible components of a supply chain. Specifically, this covers the acquisition of spare parts and replacements, quality control of purchasing and ordering such parts, and the standards involved in ordering, shipping, and warehousing the said parts.

Material Planning functions and objectives


1. Translation of the sales projections into long term requirements. 2. On the basis of updated production plan adjusted to the latest sales demand the materials accordingly. 3. To project the facilities required for the materials management. 4. Setting up of consumption standards, for working out requirements. 5. To perform value analysis to determine the intrinsic worth of materials. 6. To keep inventories as low as possible. 7. To procure parts as & when needed by the production/assembly schedule. 8. To decide where to make or buy to adjust

Factor that affect the Material Planning - There are many factors, which influence the activity of material planning.
These factors can be classified under two categories as macro factors and micro factors. 1. Macro factors: Some of the micro factors which affect material planning, are price trends, business cycles Govt. import policy etc. 2. Micro factors: Some of the micro factors that affect material planning are plant capacity utilization, rejection rates, lead times, inventory levels, working capital, delegation of powers and communication.

Materials Management Campus Planning and Building Design


Materials management plans and designs for the delivery, distribution, storage, collection, and removal of occupantgenerated streams of materials and services. It is usually an additional service that is offered as part of a campus planning process or a building design project. It is most beneficial for university, health care, and corporate environments. Materials management looks at the planning and design considerations needed to support the efficient delivery and removal of goods and services that support occupant activity. The streams of occupant-generated materials and activity include mail, office supplies, lab supplies, food, special deliveries, custodial services, building supplies, waste and recycling, and service calls. A materials management plan may include planning guidelines or full design for the following: Truck delivery and service vehicle routes, to reduce vehicle / pedestrian conflict Loading docks and delivery points, to increase accommodation and reduce queuing and vehicle idling Recycling, trash, and hazardous waste collection and removal, to increase waste diversion and reduce costs Service equipment and utility infrastructure relocation or concealment, to improve aesthetics and realize landscaping goals Regulatory and operation planning

Production and Operation Management


Benefits

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THE effective materials management plan builds from and enhances an institutional master plan by filling in the gaps and producing an environmentally responsible and efficient outcome. An institutional campus, office, or housing complex can expect a myriad of benefits from an effective materials management plan. For starters, there are long-term cost savings, as consolidating, reconfiguring, and better managing a campus core infrastructure reduces annual operating costs. An institutional campus, office, or housing complex will also get the highest and best use out of campus real estate. An effective materials management plan also means a more holistic approach to managing vehicle use and emissions, solid waste, hazardous waste, recycling, and utility services. As a result, this means a greener, more sustainable environment and a manifestation of the many demands today for institutions to become more environmentally friendly. In fact, thanks to such environmental advantages, creative materials management plans may qualify for LEED Innovation in Design credits. And finally, an effective materials management plan can improve aesthetics. Removing unsafe and unsightly conditions, placing core services out of sight, and creating a more pedestrian-friendly environment will improve the visual and physical sense of place for those who live and work there.

Just-in-time Just-in-Time (JIT) is a production strategy that strives to improve a business'

return on investment by reducing inprocess inventory and associated carrying costs. Just in Time production method is also called the Toyota Production System. To meet JIT objectives, the process relies on signals or Kanban between different points in the process, which tell production when to make the next part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality. Quick notice that stock depletion requires personnel to order new stock is critical to the inventory reduction at the center of JIT. This saves warehouse space and costs. However, the complete mechanism for making this work is often misunderstood. For instance, its effective application cannot be independent of other key components of a lean manufacturing system or it can "...end up with the opposite of the desired result." 1. Environmental concerns - During the birth of JIT, multiple daily deliveries were often made by bicycle. Increased scale has required a move to vans and Lorries (trucks). Cusumano (1994) highlighted the potential and actual problems this causes with regard to gridlock and burning of fossil fuels. This violates three JIT waste guidelines: Timewasted in traffic jams Inventoryspecifically pipeline (in transport) inventory Scrapfuel burned while not physically moving 2. Price volatility - JIT implicitly assumes a level of input price stability that obviates the need to buy parts in advance of price rises. Where input prices are expected to rise, storing inventory may be desirable. 3. Quality volatility - JIT implicitly assumes that input parts quality remains constant over time. If not, firms may hoard high quality inputs. As with price volatility, a solution is to work with selected suppliers to help them improve their processes to reduce variation and costs. Longer term price agreements can then be negotiated and agreed-upon quality standards made the responsibility of the supplier. Fixing up of standards for volatility of quality according to the quality circle 4. Demand stability - Karmarker (1989) highlights the importance of relatively stable demand, which helps ensure efficient capital utilization rates. Karmarker argues that without significantly stable demand, JIT becomes untenable in high capital Supply Stability 5. Supply Stability - In the U.S., the 1992 railway strikes caused General Motors to idle a 75,000-worker plant because they had no supply.

JIT Implementation Design - Based on a diagram modeled after the one used by Hewlett-Packards Boise plant to
accomplish its JIT program. 1. F (Design Flow Process)

Production and Operation Management


F Redesign/relay out for flow L Reduce lot sizes O Link operations W Balance workstation capacity M Preventive maintenance S Reduce setup Times Q (Total Quality Control) C worker compliance I Automatic inspection M quality measures M fail-safe methods W Worker participation S (Stabilize Schedule) S Level schedule W Establish freeze windows UC Underutilize Capacity K (Kanban Pull System) D Demand pull B Back flush L Reduce lot sizes V (Work with Vendors) L Reduce lead time D Frequent deliveries U Project usage requirements Q Quality expectations I (Further Reduce Inventory in Other Areas) S Stores T Transit C Implement carrousel to reduce motion waste C Implement conveyor belts to reduce motion waste P (Improve Product Design) P Standard production configuration P Standardize and reduce the number of parts P Process design with product design Q Quality expectations

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2.

3.

4.

5.

6.

7.

Benefits - Main benefits of JIT include:


Reduced setup time. Cutting setup time allows the company to reduce or eliminate inventory for "changeover" time. The tool used here is SMED (single-minute exchange of dies). The flow of goods from warehouse to shelves improves. Small or individual piece lot sizes reduce lot delay inventories, which simplifies inventory flow and its management. Employees with multiple skills are used more efficiently. Having employees trained to work on different parts of the process allows companies to move workers where they are needed. Production scheduling and work hour consistency synchronized with demand. If there is no demand for a product at the time, it is not made. This saves the company money, either by not having to pay workers overtime or by having them focus on other work or participate in training. Increased emphasis on supplier relationships. A company without inventory does not want a supply system problem that creates a part shortage. This makes supplier relationships extremely important. Supplies come in at regular intervals throughout the production day. Supply is synchronized with production demand and the optimal amount of inventory is on hand at any time. When parts move directly from the truck to the point of assembly, the need for storage facilities is reduced.

Production and Operation Management Materials Requirement Planning

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Material Requirements Planning) an information system that determines what assemblies must be built and what materials must be procured in order to build a unit of equipment by a certain date. It queries the bill of materials and inventory databases to derive the necessary elements.

What Does Materials Requirement Planning - MRP Mean?


One of the first software based integrated information systems designed to improve productivity for businesses. A materials requirement planning (MRP) information system is a sales forecast-based system used to schedule raw material deliveries and quantities, given assumptions of machine and labor units required to fulfill a sales forecast. MRP was the earliest of the integrated information systems dealing with improvements in productivity for businesses with the use of computers and software technology to provide meaningful data to managers. With the advent of such systems, production efficiency could be greatly improved. As the analysis of data and the technology to capture it became more sophisticated, more comprehensive systems were developed to integrate MRP with other aspects of the manufacturing process.

Benefits of MRP Manufacturing Requirements Planning


The MRP system outputs a variety of information that can be used by the company, both for the planning side and the management side of the factory operations. These outputs include order release notices for the placement of orders that may have been planned by the MRP simulator system. The capacity and master schedule need to be managed correctly to help reduce the workload and maximize the effectiveness. Management has a big responsibility in this and how they choose to plan ahead and how effective they are, will in turn effect their decisions on the right approach and how effective the MRP system is. If certain areas become stressed and overloaded, jobs may end up being pushed back past their due date and end up being late. Planning is very important to help the company become more efficient, reduce costs and increase profits. Information systems are a competitive tool when running alongside traditional stock control systems. A computerized MRP system is reliant on the fact that the demand for low-level components is brought about from the production of an end product of which the production level is planned. The system itself will make it easy to put together the production schedule saving vast amount of money that would otherwise be spent on labour time to do the same activity. MRP does not take into account the level of capacity of what can or cannot be handled by the shop floor. MRP is best used in manufacturing companies with products that have lots of assemblies and is based on what is to be sold, working backwards from a delivery date, using the just in time concept (JIT). If the MRP system is controlled and designed well, inventory levels can be reduced, by reducing the amount of work-in-progress (WIP). An MRP system improves customer service by reducing the amount of late orders, creates higher levels of productivity, and helps the company respond to changes in demand much quicker. If MRP is implemented correctly it has many benefits that will help improve productivity etc continuously. Here is a summary of the benefits below: Reduced Inventory with fewer (none) shortages Improved Customer Service Improved Direct Labour Productivity Reduced Purchasing Cost Reduced Traffic Cost Reduced Obsolescence Reduced Overtime Having the numbers to run the business Having accountability throughout the organisation Improved Quality of Life

Production and Operation Management Definition and Explanation of Direct Materials Budget:

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Direct materials budget is prepared after computing production requirements by preparing a production budget. Direct materials budget or materials budgeting details the raw materials that must be purchased to fulfill the production requirements and to provide for adequate inventories. The required purchases of raw materials are computed as follows:
Raw materials needed to meet the production schedule Add desired ending inventory of raw materials Total raw materials needs Less beginning inventory of raw materials Raw materials to be purchased XXXX XXXX -------XXXX XXXX -------XXXX ======

Preparing a budget of this kind is one step in a company's overall material requirements planning (MRP). MRP is an operations management tool that uses a computer to help manage materials and inventories, The objective of material requirements planning (MRP) is to ensure that the right materials are on hand, in the right quantities, and at the right time to support the production budget. Example of Direct Materials Budget: Following is the direct materials budget for Hampton Freeze Inc. Hampton Freeze, Inc. Direct Materials Budget For the Year Ended December 31, 2009 Quarter 1 Required production in cases (see production budget page) Raw materials needed per case (pounds) 14,000 15 ----------Production needs (pounds)
1

2 32,000 15 ----------480,000 54,000

3 36,000 15

4 19,000 15

Year 101,000 15

----------- ----------- ----------540,000 285,000 1,515,000 28,500 22,500 22,500

210,000 48,000

Add desired ending inventory of raw material

------------ ------------ ------------ ------------ -----------Total needs Less beginning inventory of raw materials 258,000 21,000 534,000 48,000 568,500 307,500 1,537,500 54,000 28,500 21,000

------------ ------------ ------------ ------------ -----------Raw materials to be purchased Cost of raw materials per pound 237,000 $0.20 486,000 $0.20 514,000 279,000 1,516,500 $0.20 $0.20 $0.20

------------ ------------ ------------ ------------ ------------

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Cost of raw materials to be purchased

$47,400

$97,200 $102,900 55,800 $303,300

======= ======= ======= ======= ======= Percentage of purchases paid for in the period of the purchase Percentage of purchase paid for in the period after purchase 50% 50% 50% 50%

Schedule of Expected Cash Disbursement for Materials


2 Accounts payable, beginning balance 3 First-quarter purchase 4 Second-quarter purchases 5 Third-quarter purchase 6 Fourth-quarter purchase

$25,800 23,700 $23,700 48,600 $48,600 51,450

$25,800 47,400 97,200 $51,450 102,900 27,900 27,900 ----------

---------Total cash disbursement $49,500

----------

----------

----------

$72,300 $100,050 $79,350 $301,200

1 Ten percent of the next quarter's needs. For example, the second-quarter production needs are 480,000 pounds.

Therefore, the desired ending inventory for the first quarter would be 10% 480,000 pounds = 48,000 pounds. The ending inventory of 22,500 pounds for the quarter is assumed
2 Cash payments for the last year's fourth-quarter materials purchases. 3 $47,500 50%; $47,500 50%. 4 $97,200 50%; $97,200 50%. 5 $102,900 50%; $102,900 50%. 6 $55,800 50%. Unpaid fourth quarter's purchases appear as accounts payable on the company's end of year

balance sheet

Explanation of the Direct Materials Budget for Hampton Freeze Inc. - The only raw materials include in this budget is high fructose sugar, which is the major ingredient in popsicles (finished goods of Hampton Freeze Inc.)

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other than water. The remaining raw materials are relatively insignificant and are included in variable manufacturing overhead. As with finished goods, management would like to maintain some minimum inventories of raw materials as cushion. In this case, management would like to maintain ending inventories of sugar equal to 10% of the following quarter's production needs. The first line in the direct materials budget contains the required production for each quarter, which is taken directly from the production budget (see production budget page). Looking at the first quarter, since the schedule of production budget calls for the production of 14,000 cases of popsicles (finished goods of Hampton Freeze Inc.) and each case requires 15 pounds of sugar, the total production needs are for 210,000 pounds of sugar (14,000 cases 15 pounds per case). In addition, management wants to have ending inventories of 48,000 pounds of sugar, which is 10% of the following quarter's needs of 480,000 pounds. Consequently the total needs are for 258,000 pounds (210,000 pounds for the current quarter's production plus 48,000 pounds for the desired ending inventory). However, since the company already has 21,000 pounds in beginning inventory, only 237,000 pounds of sugar (258,000 pounds 21,000 pounds) will need to be purchased. Finally, the cost of the materials purchases is determined by multiplying the amount of raw materials to be purchased by the cost per unit of the raw materials. In this case, since 237,000 pounds of sugar will have to be purchased during the first quarter and sugar costs $0.20 per pound, the total cost will be $47,400 (237,000 pounds $0.20 per pound). As with the production budget, the amounts listed under the year column are not always just the sums of the quarterly amounts. The desired ending inventory of raw materials for the year is the same as the desired ending inventory of raw materials for the fourth quarter. Likewise the beginning inventory of the raw materials for the year is the same as the beginning inventory of raw materials for the first quarter. Direct materials budget is usually accompanied by a schedule of expected cash disbursements for raw materials. This schedule is needed to prepare the overall cash budget. Disbursement of raw materials consists of payments for purchases on account in prior periods plus any payments for purchases in the current budget period. Direct materials budget in our example includes such a schedule of expected cash disbursements. Ordinarily, companies do not immediately pay their suppliers. At Hampton Freeze Inc. the policy is to pay for 50% of purchases in the quarter in which the purchase is made and 50% in the following quarter, so while the company intends to purchase $47,400 worth of sugar in the first quarter, the company will only pay for half, $23,700, in the first quarter and the other half will be paid in the second quarter. The company will also pay $25,800 for sugar acquired in the previous quarter, but not yet paid for. This is the beginning balance in the accounts payable. Therefore, the total cash disbursements for sugar in the first quarter are $49,500--the $25,800 payment for sugar acquired in the previous quarter plus the $23,700 payment for sugar acquired during the first quarter.

Budget Planning - Budget planning is the process by which a company or individuals evaluate their earnings and
expenses and project their monetary intakes and outtakes for the future. The goal is to lay out all necessary components and brainstorm future goals. Budget planning may be completed in one meeting or it may take weeks of evaluating available data to finalize. 1. Revenues - Revenues are earnings from sales, less the cost of goods sold. In a personal budget, it is wages. During the budget planning process, use historical data, such as wage stubs and prior year financial statements, to set a baseline, then consider the future. Do you anticipate an increase? What costs will be associated with this increase? For example, if you intend to produce more widgets, how many man hours will it take and how much will materials cost to earn the extra revenue? 2. Expenses - The second half of the budget is expenses. Begin with the expenses for the previous year, then adjust for increased usage, streamlining and inflation. This is a good time to negotiate new contracts with vendors and to look for ways to achieve cost savings. Remember to budget for unexpected expenses, such as repairs and gifts. Remember to allow for entertainment and annual expenses, such as insurance premiums and winter snow removal. 3. Call to Action - Use the budget planning process to set goals and stress the importance of living within a budget. Have everyone involved in the process commit to working toward a successful financial year. Follow up periodically with feedback. Compare actual results for the month or quarter to the budget. Where did you succeed and where did you fail? Use the information to improve your future budgeting. A budget is only useful when it is actively put to use.

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4. Conservative Forecasting - Forecasting future income and expenses should be conservative in nature. This means any amounts that you are estimating; you should overestimate expenses and underestimate income slightly. Think of it as a realistic but worse-case scenario. It is much easier to find ways to spend extra money than it is to replace income that is not earned. Combine this with a possible high debt-to-income ratio or a bad credit score and you may be headed for bankruptcy. 5. Flexibility - Budgets are designed for flexibility. As you find out actual numbers, such as wage increases received after the budget is finalized, update the budget going forward. The more accurate you maintain the budget, the more use you will get out of it. Be ready to revisit the budget planning process periodically and consider budgeting for more than a year in the future. A five-year plan can help you keep focused on long-term goals.

Purchasing management
Purchasing management is the management of purchasing process, and related aspects in an organization. Because of production companies purchase nowadays about 70% of their turnover, and service companies purchase approximately 40% of their turnover, purchasing management is one of the most critical areas in the entire organization and needs intensive management. Purchasing management also covers the areas of outsourcing and in sourcing. Models used to aid purchasing managers include the Newsboy model as well as the Order up To (OUT) model.

Purchasing Process - Purchasing Process includes as usual 8 main stages as follows:


1. 2. 3. 4. 5. 6. 7. 8. 9. Requisitioning Approving Studying Market Making Purchase Decision Placing Orders Receipting Goods and Services Received Accounting Goods and Services Receiving Invoices and Making Payment Debit note in case of material defect

Purchasing Management Process - Purchasing Management Process consists usually of 3 stages:


1. Purchasing Planning - Purchasing Planning may include steps as follows: Creating purchasing projects and tasks Providing related information (files, links, notes etc.) Assigning purchasing tasks to employees Setting task priorities, start/finish dates etc. Assigning supervisors Setting reminders Control and evacuations 2. Purchasing Tracking - Purchasing Tracking consists of: Checking task's status and/or history of changes Receiving status notifications Sorting, grouping or filtering tasks by current status Highlighting overdue tasks, 3. Purchasing Reporting - Purchasing Reporting includes: Comparing actual and estimated values Calculating purchasing task and project statistics Sorting, grouping or filtering tasks by attributes Creating charts to visualize key statistics and KPIs

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How to Earn More Money as a Purchasing Manager Being a purchasing manager is a busy and sometimes stressful job. The job of a purchasing manager can be very involved and time-consuming. Therefore, it is important to get paid for the work you do. If you are doing your job to the best of your ability, you may feel its time to get some more money for your hard work. If this is your case, you will want to try some of these suggestions to help you earn more money in your field. The most important thing you can do to earn more money as a purchasing manager is do your job thoroughly and effectively. It is important to always be aware of the bottom line and ensure you are making decisions that positively affect the company and the money that it makes. You will also want to make sure that you are conscious of the image that you give for your company. Though you dont have to be liked by everyone per se, being a team player and getting along with your coworker, both your superiors and your subordinates, is important to keeping a high morale in the workplace. Everyone knows high morale equals high performance. You will also want to make sure you stay ahead of what is happening in your field. Purchasing management trends are always changing. Knowing what is hot and what is not in the field of purchasing management can make you very marketable within your field and therefore make you a valuable asset to your company. When you are valuable your company will likely pay you accordingly to keep you on their team.

Total quality management


TQM is an integrative philosophy of management for continuously improving the quality of products and processes. It is used around the world. TQM functions on the premise that the quality of products and processes is the responsibility of everyone who is involved with the creation or consumption of the products or services offered by an organization. In other words, TQM capitalizes on the involvement of management, workforce, suppliers, and even customers, in order to meet or exceed customer expectations. Considering the practices of TQM as discussed in six empirical studies, Cua, McKone, and Schroeder (2001) identified the nine common TQM practices as cross-functional product design, process management, supplier quality management, customer involvement, information and feedback, committed leadership, strategic planning, crossfunctional training, and employee involvement. Total quality management is a management system for a customer focused organization that involves all employees in continual improvement of all aspects of the organization. TQM concepts are an integrative system that uses strategy, data, and effective communication to integrate the quality principles into the culture and activities of the organization. A core concept in implementing TQM is Demings 14 points, a set of management practices to help companies increase their quality and productivity: 1. Create constancy of purpose for improving products and services. 2. Adopt the new philosophy. 3. Cease dependence on inspection to achieve quality. 4. End the practice of awarding business on price alone; instead, minimize total cost by working with a single supplier. 5. Improve constantly and forever every process for planning, production and service. 6. Institute training on the job. 7. Adopt and institute leadership. 8. Drive out fear. 9. Break down barriers between staff areas. 10. Eliminate slogans, exhortations and targets for the workforce. 11. Eliminate numerical quotas for the workforce and numerical goals for management. 12. Remove barriers that rob people of pride of workmanship, and eliminate the annual rating or merit system. 13. Institute a vigorous program of education and self-improvement for everyone. 14. Put everybody in the company to work accomplishing the transformation. The term Total Quality Management has lost favor in the United States in recent years: Quality management is commonly substituted. Total Quality Management, however, is still used extensively in Europe.

Production and Operation Management


Principles of TQM

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1. Is Customer focused: whatever you do for quality improvement, remember that ONLY customers determine the level of quality, whatever you do to foster quality improvement, training employees, integrating quality into processes management, ONLY customers determine whether your efforts were worthwhile. 2. Insure Total Employee Involvement: This done after you removes fear from work place, then empower employee ... you provide the proper environment 3. Process Centered: Fundamental part of TQM is to focus on Process thinking. 4. Integrated system: All employees must know business mission and vision must monitor the process. An integrated business system may be modeled by MBNQA or ISO 9000. 5. Strategic and systematic approach: Strategic plan must integrate quality as core component. 6. Continual Improvement: Using analytical and creative thinking in finding ways to become more effective. 7. Fact Based Decision Making: Decision making must be ONLY on data, not personal thinking or situational. 8. Communication: Communication strategy, method and timeliness must be well defined.

TQM Implementation Approaches - No one solution is effective for planning and implementing TQM concepts in all
situations. Following are generic models for implementing total quality management theory: 1. Train top management on TQM principles. 2. Assess the current: Culture, customer satisfaction, quality management system. 3. Top management determines the core values and principles to be used and communicate them. 4. Develop TQM master plan based on steps 1, 2, 3. 5. Identify and prioritize customer needs and determine products or service to meet those needs. 6. Determine the critical processes to produce those products or services. 7. Create process improvement teams. 8. Managers should support effort by planning, training, time.... to the team. 9. Integrate changes for improvement in daily process management and standardizations take place. 10. Evaluate progress against plan (step 8) and adjust as needed. 11. Constant employee awareness and feedback on status are provided and a reward/ recognition process is established.

Strategies to develop TQM


1. TQM elements approach: Take key business process and use TQM Tools to foster improvement. e.g.: quality circles, statistical process control, taguchi method, quality function deployment. 2. The guru approach: Using the guides of one of the leading quality thinker. 3. Organization model approach: The organization use Benchmarking or MBNQA as model for excellence. 4. Japanese total quality approach: Companies want to get Deming prize use Deming principles.

Production and Operation Management ISO 9000

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Meaning of ISO - ISO means international standard organisation. In business environment, ISO word is so famous and International organisation provides standards to those business organizations that fulfill its conditions. It has authority to issue certificate of quality management and quality environment. There are large numbers of business organisation who satisfy the conditions. They have ISO certificate. ISO (International Organization for Standardization) is the world's largest developer and publisher of International Standards. This organisation has made by participation of all countries .Its central secretariat is in Geneva, Switzerland. It is NGO which helps to promote business by providing them solution of quality problems. Meaning of ISO 9000 - This is the latest version of International organisation for standardization which gives to those organisation who satisfy the following condition It fulfills the quality requirements of customers. It fulfills regulatory requirements. Customers satisfaction Continual improvement in quality management. Records should show how and where raw materials and products were processed, to allow products and problems to be traced to the source. You need to test and document whether the product meets design requirements, regulatory requirements and user needs. Effectiveness of the ISO system being implemented depends on a number of factors, the most significant of which are:
1. Commitment of Senior Management to monitor, controls, and improve quality. Organizations that implement an ISO system without this desire and commitment, often take the cheapest road to get a certificate on the wall and ignore problem areas uncovered in the audits. 2. How well the ISO system integrates into their business practices. Many organizations that implement ISO try to make their system fit into a cookie-cutter quality manual rather than create a manual that documents existing practices and only adds new processes to meet the ISO standard when necessary. 3. How well the ISO system focuses on improving the customer experience. The broadest definition of quality is "Whatever the customer perceives good quality to be". This means that you don't necessarily have to make a product that never fails; some customers will have a higher tolerance for product failures if they always receive shipments on-time, or some other dimension of customer service. Your ISO system should take into account all areas of the customer experience, the industry expectations, and seek to improve them on a continual basis. This means taking into account all processes that deal with the three stakeholders (your customers, your suppliers, and your organization), only then will you be able to sustain improvements in your customer experience. 4. How well the auditor finds and communicates areas of improvement. While ISO auditors may not provide consulting to the clients they audit, there is the potential for auditors to point out areas of improvement. Many auditors simply rely on submitting reports that indicate compliance or non-compliance with the appropriate section of the standard, however, to most executives; this is like speaking a foreign language. Auditors that can clearly identify and communicate areas of improvement in language and terms executive management understands allows the companies they audit to act on improvement initiatives. When management doesn't understand why they were non-compliant and the business implications, they simply ignore the reports and focus on what they do understand.

Advantages of ISO - It is widely acknowledged that proper quality management improves business, often having a
positive effect on investment, market share, sales growth, sales margins, competitive advantage, and avoidance of litigation. The quality principles in ISO 9000:2000 are also sound, according to Wade and also to Barnes, who says that "ISO 9000 guidelines provide a comprehensive model for quality management systems that can make any company competitive implementing ISO often gives the following advantages:

Production and Operation Management


Create a more efficient, effective operation Increase customer satisfaction and retention Reduce audits Enhance marketing Improve employee motivation, awareness, and morale Promote international trade Increase profit Reduce waste and increase productivity.

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Problems of ISO
A common criticism of ISO 9001 is the amount of money, time and paperwork required for registration. According to Barnes, "Opponents claim that it is only for documentation. Proponents believe that if a company has documented its quality systems, then most of the paperwork has already been completed." ISO 9001 is not in any way an indication that products produced using its certified systems are any good. A company can intend to produce a poor quality product and providing it does so consistently and with the proper documentation can put an ISO 9001 stamp on it. According to Seddon, ISO 9001 promotes specification, control, and procedures rather than understanding and improvement. Wade argues that ISO 9000 is effective as a guideline, but that promoting it as a standard "helps to mislead companies into thinking that certification means better quality, . [undermining] the need for an organization to set its own quality standards." Paraphrased, Wade's argument is that reliance on the specifications of ISO 9001 does not guarantee a successful quality system. While internationally recognized, most US consumers are not aware of ISO 9000 and it holds no relevance to them. The added cost to certify and then maintain certification may not be justified if product end users do not require ISO 9000. The cost can actually put a company at a competitive disadvantage when competing against a non ISO 9000 certified company. The standard is seen as especially prone to failure when a company is interested in certification before quality. Certifications are in fact often based on customer contractual requirements rather than a desire to actually improve quality. "If you just want the certificate on the wall, chances are, you will create a paper system that doesn't have much to do with the way you actually run your business," said ISO's Roger Frost. Certification by an independent auditor is often seen as the problem area, and according to Barnes, "has become a vehicle to increase consulting services." In fact, ISO itself advises that ISO 9001 can be implemented without certification, simply for the quality benefits that can be achieved.[ Another problem reported is the competition among the numerous certifying bodies, leading to a softer approach to the defects noticed in the operation of the Quality System of a firm. Abrahamson argued that fashionable management discourse such as Quality Circles tends to follow a lifecycle in the form of a bell curve, possibly indicating a management fad

Acceptance sampling
Acceptance sampling uses statistical sampling to determine whether to accept or reject a production lot of material. It has been a common quality control technique used in industry and particularly the military for contracts and procurement. A wide variety of acceptance sampling plans are available.

What is Acceptance Sampling?


Contributions of Dodge and Romig to acceptance sampling -Acceptance sampling is an important field of statistical quality control that was popularized by Dodge and Romig and originally applied by the U.S. military to the testing of bullets during World War II. If every bullet was tested in advance, no bullets would be left to ship. If, on the other hand, none were tested, malfunctions might occur in the field of battle, with potentially disastrous results. Definition of Lot Acceptance Sampling - Dodge reasoned that a sample should be picked at random from the lot, and on the basis of information that was yielded by the sample, a decision should be made regarding the

Production and Operation Management

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disposition of the lot. In general, the decision is either to accept or reject the lot. This process is called Lot Acceptance Sampling or just Acceptance Sampling. "Attributes" (i.e., defect counting) will be assumed - Acceptance sampling is "the middle of the road" approach between no inspection and 100% inspection. There are two major classifications of acceptance plans: by attributes ("go, no-go") and by variables. The attribute case is the most common for acceptance sampling, and will be assumed for the rest of this section. Important point - A point to remember is that the main purpose of acceptance sampling is to decide whether or not the lot is likely to be acceptable, not to estimate the quality of the lot. Scenarios leading to acceptance sampling - Acceptance sampling is employed when one or several of the following hold: Testing is destructive The cost of 100% inspection is very high 100% inspection takes too long Acceptance Quality Control and Acceptance Sampling It was pointed out by Harold Dodge in 1969 that Acceptance Quality Control is not the same as Acceptance Sampling. The latter depends on specific sampling plans, which when implemented indicate the conditions for acceptance or rejection of the immediate lot that is being inspected. The former may be implemented in the form of an Acceptance Control Chart. The control limits for the Acceptance Control Chart are computed using the specification limits and the standard deviation of what is being monitored (see Ryan, 2000 for details). An observation by Harold Dodge In 1942, Dodge stated: "....basically the "acceptance quality control" system that was developed encompasses the concept of protecting the consumer from getting unacceptable defective product, and encouraging the producer in the use of process quality control by: varying the quantity and severity of acceptance inspections in direct relation to the importance of the characteristics inspected, and in the inverse relation to the goodness of the quality level as indication by those inspections." To reiterate the difference in these two approaches: acceptance sampling plans are one-shot deals, which essentially test shortrun effects. Quality control is of the long-run variety, and is part of a well-designed system for lot acceptance. An observation by Ed Schilling Schilling (1989) said: "An individual sampling plan has much the effect of a lone sniper, while the sampling plan scheme can provide a fusillade in the battle for quality improvement." Control of product quality using acceptance control charts - According to the ISO standard on acceptance control charts (ISO 7966, 1993), an acceptance control chart combines consideration of control implications with elements of acceptance sampling. It is an appropriate tool for helping to make decisions with respect to process acceptance. The difference between acceptance sampling approaches and acceptance control charts is the emphasis on process acceptability rather than on product disposition decisions.

Safety Management Systems


Safety Management System (SMS) is a term used to refer to a comprehensive business management system designed to manage occupational safety and health elements in the workplace. It is a systematic, explicit and comprehensive process for managing safety risks. As with all management systems, a safety management system provides for goal setting, planning, and measuring performance. A safety management system is woven into the fabric of an organization. It becomes part of the culture, the way people do their jobs.

There are three imperatives for adopting a safety management system for a business - these are ethical, legal
and financial There is an implied moral obligation placed on an employer to ensure that work activities and the place of work to be safe, there are legislative requirements defined in just about every jurisdiction on how this is to be achieved and there is a substantial body of research which shows that effective safety management (which is the reduction of risk in the workplace) can reduce the financial exposure of an organisation by reducing direct and indirect costs associated with accident and incidents. To address these three important elements, an effective SMS should: Define how the organisation is set up to manage risk. Identify workplace risk and implement suitable controls.

Production and Operation Management


Implement effective communications across all levels of the organisation. Implement a process to identify and correct non-conformities. Implement a continual improvement process.

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Basic Safety Management Components


Since there are many models to choose from to outline the basic components of a safety management system, the one chosen here is the international standard promoted by the International Labour Organisation (ILO). In the ILO document ILO-OSH 2001 Guidelines on Occupational Safety and Health Management Systems, the safety management basic components are: Policy Organizing Planning and Implementation Evaluation Action for Improvement Although other SMS models use different terminology, the process and workflow for safety management systems is always the same; 1. Policy - Establish within policy statements what the requirements are for the organisation in terms of resources, defining management commitment and defining OSH targets 2. Organizing - How is the organisation structured, where responsibilities are and accountabilities defined, who reports to whom and who is responsible for what. 3. Planning and Implementation - What legislation and standards apply to our organisation, what OSH objectives are defined and how are these reviews, hazard prevention and the assessment and management of risk. 4. Evaluation - How is OSH performance measured and assessed, what are the processes for the reporting of accidents and incidents and for the investigation of accidents and what internal and external audit processes are in place to review the system. 5. Action for Improvement - How are preventative and corrective actions managed and what processes are in place to ensure the continual improvement process?

Contents of a safety plan - Employers developing a Safety Plan need to consider their particular workplace and
organizational needs to ensure the plans relevance. As a minimum, the Safety Plan should: include your OHS Policy signed by senior management; detail key staff and the organizational structure responsible for the management of safety; identify hazards associated with the work; explain methods of hazard identification including checklists and other methods to be used; detail risk assessment and control measures; list instruction and training and experience of the contractors employees; include the types of records that will be kept and who is to keep them; state the monitoring and safety requirements that will be used; identify safety meetings and the means of resolving safety issues; reference or include written work procedures, and include emergency procedures.

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